July 2024 Portfolio Update
Sunday 4th August 2024
The Art of Subtraction
Last month, I discussed the concept of Financial Independence (FI). But what happens when you actually achieve FI? Do we park the breaks on our work lives, pack it all in and spend the rest of our days binging netflix, taking long walks and going to the beach?
Don’t get me wrong, that all sounds great, but the reality is going to be a little different. We might take extended breaks from work - mini retirements if you like - but it is very likely that what will really happen, is we will work a little, holiday a little and do a little of nothing in between.
Variety after all, is the spice of life. Burn out, working too hard, losing the work-life battle is no fun - but equally, too much spare time is a bad thing too.
Back in 2013, my wife and I spent 19 days in Antiparos in the Greek Islands. Between 2010 - 2013 I visited around 30 countries, and without doubt my favorite place was Antiparos (Galway was second FYI!). But I can honestly say that after 19 days on the island, my wife and I could not wait to get back to some sort of proper routine. We were islanded out!
Once we hit the second half of our FI journey, and as we move closer to the finish line, we are able to start to make improvements to our life’s as we see the light at the end of the tunnel. As much as we have envisioned how life might be, the reality is, that life will be much the same as it is now - but without the horrible stuff!
You see, the real power with FI, is the ability to say no. To walk away from that toxic job, or say no to attending that 4pm Friday meeting, or the power to stop worrying about being late for that 9am meeting.
In July, I had 23 days off work - I took a three week mini retirement. It was fantastic to have such a long break from work again (I also did this in December last year). I actually found it easier going back to work this time around - my FI end date is getting closer and as I make improvements to account for that, the grind of work is slowly wearing away.
I do need to ensure that I continue to push on and make my work day easier. I made the mistake earlier this year of taking on another project, that I have somewhat regretted doing in the end. It was needless and added a whole heap of extra unnecessary stress. And ironically, when one reflects on what I achieved from it, it boosted my monthly savings from €5,000 to €7,500 for a six month period. This is going to sound terrible, but is adding €15,000 to my portfolio of €600,000 at this stage really going to make much of a difference? It might see me hit FI sooner by a few months, but fundamentally, it isn’t enough to make such a difference. We are well on track to hit FI in 2025, and there really isn’t much need to grind it out - a nice smooth ride is a far better outcome from here!
The Art of Subtraction is about making gradual, incremental changes to improve your life in anticipation of FI. It's a slow burn towards retirement, where you progressively remove the unnecessary and the unpleasant. As you slowly subtract the negatives, you create space for more of what you love, leading to a more fulfilling and balanced life both before and after reaching FI. Bring it on, I say!
Comparing my Stock Return VS Property Returns
During July, I decided to investigate my stock returns VS the rest of my portfolio (mainly property), to check if my decision to invest in property was the right one. I have been reflecting a lot recently about the fact that I chased property for the higher returns, but I felt it was time to check 6.5 years in if that decision was the right one.
Back in 2021-22, there were large discussions at the time in the Limerick FI WhatsApp Group about property VS stocks. Some on the group tried to make the point that with depleting natural resources, Climate Change, high inflation, global conflicts, that it was unlikely we were ever going to see the stock market see bull markets of 2009 - 2022 again. Infact, the conclusion was that anything over 4-5% was really optimistic! Property on the other hand, well this was a no brainer - the ability to leverage, to produce long term cash flow etc, sure, why not!
Back then, none of us knew that AI was just around the corner, inflation was going to find a way to flatten out and life, well, it was just going to go on as normal. Since the end of 2022, the stock market has been doing very well.
So I couldn’t help wonder, how my stock returns compared to the rest of my portfolio. Of course, this isn’t a perfect comparison. My returns would have been slightly different had I continued making contributions to my stock portfolio, but we can at least get an idea. There is also a pretty significant difference between my actual returns and that of the S&P 500. This is likely something which is underestimated - but broker fees, exchange rates and having slightly different funds that the raw S&P500 do make a big difference long term.
So here it is, here is how my portfolio would have looked give or take, had I invested in 100% stocks rather than in other assets (including property and a good few bad investments early on - peer to peer, forex and the like):
| Year | Money Added | S&P500 Return | My Sharemarket Return | Total | Actual |
|---|---|---|---|---|---|
| 2018 | €36,006.86 | -6.24% | -9.64% | €32,535.30 | €41,252.14 |
| 2019 | €18,195.79 | 28.88% | 14.47% | €58,071.56 | €62,544.93 |
| 2020 | €69,463.34 | 16.26% | 6.22% | €135,465.15 | €125,549.27 |
| 2021 | €54,000.00 | 26.89% | 21.26% | €229,753.63 | €221,789.02 |
| 2022 | €120,000.00 | -19.44% | -15.64% | €295,053.57 | €342,734.85 |
| 2023 | €85,422.00 | 24.23% | 20.47% | €458,350.79 | €498,900.39 |
| 2024 | €50,700.00 | 16.48% | 14.89% | €584,848.45 | €618,121.93 |
So yes, I am ahead of where I would have been had I been in 100% stocks, however not by as much as I would have thought. And when you make some other conditions - such as the non-passive nature of property (changing toilet seats, dealing with late night phone calls and chasing rent etc), stocks start to look OK! As it is, I am around €33,000 ahead of where I would have been had I been 100% stocks, so OK, maybe the non passive nature of property makes it worth it for that extra €33,000. And as I mentioned last month in my property update, the property valuations I have used are on the conservative side. However, the other big consideration for stocks is that I would have been able to use my pension far more effectively. For example, I could have built a 50:50 portfolio - half in a pension and half outside - withdrawing from the non-pension half first before pension age. This would have allowed me to make larger contributions, as I would have been able to make contributions tax free!
Obviously the sharemarket has had a good 18 month period, so these numbers might look very different in a correction. The other consideration is that it seems unlikely we will see a change in trend in the Irish property market over the next 12-24 months - but how will the sharemarket perform - who knows!
The point I am trying to make here - don’t think that you need to be in property to hit FI - build a plan, make consistent monthly contributions to the portfolio and let the rest work itself out.
July 2024 Portfolio Update
We had a new tenant move into one of our properties in July. The previous tenant moved out as they moved overseas. We listed the property on Daft and had over 150 applications inside the first four days. It really is heartbreaking when having to try to pick one tenant amongst that many applications. We have a good process however, and went through it and in the end, have been happy with our new tenants.
We contributed another €7,500 to our portfolio and we made another additional repayment on the first mortgage we are trying to clear, the balance on that mortgage is now around €47,000. Overall, it was a good month for our properties though stocks were down slightly.
Here are the overall portfolio numbers:
| Portfolio Summary (as at 31st July 2024) | |
|---|---|
| Opening Balance | €608,251.06 |
| New Contributions | €7,500.00 |
| Portfolio Growth | €2,370.87 |
| Closing Balance | €618,121.93 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Capital Gain + Dividend Income from Equities | €-1,210.26 |
| Real Estate Income + Capital Gain | €3,567.01 |
| Interest on Cash Savings | €14.12 |
| Total Growth | €2,370.87 |
| % Return | 0.39% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 31st July 2024) | ||
|---|---|---|
| Equities (Stocks) | €176,359.99 | 28.53% |
| Real Estate | €439,622.31 | 71.12% |
| Cash | €2,139.63 | 0.35% |
| Total | €618,121.93 | 100.00% |
2024 Year to Date Returns
Here is a summary of my year to date returns for 2024.
| 2024 Year to Date Growth Report | |
|---|---|
| Opening Balance | €498,900.39 |
| New Contributions | €50,700.00 |
| Equities Capital Gains + Dividends | €22,875.44 |
| Real Estate Capital Gains + Rental Income | €45,582.59 |
| Interest on Cash Savings | €63.51 |
| Closing Balance | €618,121.93 |
| Portfolio Return | €68,521.54 |
| % Return | 12.47% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2024 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €392,567.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €136,722.72 |
| Equities Capital Gains + Dividends | €51,412.44 |
| Interest on Cash Savings | €63.51 |
| Other** | -€3,864.73 |
| Closing Balance | €618,121.93 |
| Lifetime Portfolio Return | €184,333.94 |
* In 2020, some of the new contributions came in the form of an equity release, as we turned our primary residence into a buy to let and purchased a new home to live.
** In 2018 & 2019 I made several bad investments in peer to peer lending, forex trading and unregulated investments, which resulted in losses overall.