Irish Financial Independence & Personal Finance Podcast

March 2021 Portfolio Update

Sunday 11th April 2021

Last month I reported that my passive income had covered my expenses for February when mixed with my portfolio income. This has an unusual outcome as a result....

As the month wore on, I started to take stock at my day to day work. I have often moaned on the podcast that I no longer enjoy software development. As my passive income started to increase, my dependency on client work suddenly wasn't there as much - so I decided to review my current clients.

I decided that I was going to keep the clients that made me happy - keeping the clients that I liked working with and where I enjoyed the coding side of their projects. I decided I would stop working for any clients that either added stress, made me unhappy or the coding side just didn't bring me joy.

This resulted in me dropping around 20% of my current client base.

You wouldn't believe what happened. My productivity went through the roof, I started getting up earlier to start work and working later. I wasn't tired anymore and any ill feeling about Monday's went away very quickly. Because I was working more efficiently and turning around solutions for my existing clients, they sent me more work. Even though I had less clients, I was now busier than before.

For one month, my passive income had given me an opportunity to reflect on what was important work wise beyond money - and I was able to make changes, which has ultimately led me to enjoy work for the first time in many years, and as a result, be more productive and make more money as a result.

I've even started learning new programming languages recently and taking new opportunities outside my normal comfort levels, because I am loving work again....

Tony Robbin's will often say that it isn't until you no longer need to work that you will start to enjoy work - and I can definitely say first hand that there is truth in that.

Passive Income Update

I mentioned last month that the passive income for February was likely an outlier, and this has proven to be true. I learned first hand that passive income isn't something that can truly be relied on long term. I am going to cover this in more detail in episodes 69 and 70 of the podcast.

The Forex Broker that I had been recommending as part of Treaty FX changed their commission structure with one weeks notice. The majority of my passive income blew up over night! This just goes to show that passive income is great for generating additional income and increasing your income, but it should not be relied on as a means to retire early long term.

It was pretty frustrating, as years of hard work had gone into generating the passive income and I had finally started to see some significant benefits. It was one of those times, when you think the world is against you - what are the odds that the passive income finally grows to a significant amount, only for it to be taken away so quickly by a simple rule change that I had no control over.

Thankfully, with my new focus as a software developer, my disappointment was somewhat short lived. I am now fully focused on becoming FI through portfolio income alone, and as a result, I won't be recording my passive income any longer in my portfolio updates. I will be covering more of this on episode 70 of the podcast - I still think passive income is an important way to build wealth, but it shouldn't be depended on as a means of early retirement.

Start Up Investment - Gone Bust

In 2017 I started working for an Australian based client that was a growing start up. At some point in early 2018 I decided to invest around €1,800 into the company - I liked that I was involved first hand and wanted to have some upside if the company did well.

Over the next 18 months, the company did well, and at one point was valued over double at the rate that I had bought in at. Unfortunately three weeks ago, I found out that the company's fortunes had turned around (another competitor had a new product and had beaten them to the market), and the company was moving into voluntary liquidation.

I have talked on the podcast in the past about some of my foolish investments early on in my investment days, and this was one of them. I still have a few more left - some investments in private companies and peer to peer investments turned bad since COVID hit that I am still waiting to see the final outcome.

Thankfully, as I continue to pump new capital into safer investments (namely equities through my pension), these foolish investments are not as prominent in the portfolio - however I am going to start recording a percentage of good investments, VS foolish investments to highlight what percentage of my portfolio I may lose in the long term.

Things like equities and property may go up and down in price, but as a long run investor, in the event of a market crash, we can be patient and wait for a recovery. This is a very different type of investment to say a peer to peer lending loan - that once turns bad, will likely never be recovered. Likewise, an investment in a start up or private company may return 10x or even 100x (take Revolut as a good example), but a start up investment is more likely to go bust - unless you are fortunate enough to speculate on the right company. My advise to anyone chasing FIRE, is stick to investments that you know will be there in 30,40 50 years time - not investments that promise high returns, but are more likely to go bust - especially if the investment isn't regulated.

In saying this, I do welcome the odd bit of speculation (my investment in Bitcoin is one such example), but keep it to a very small percentage of your overall portfolio - say 1%.

Let's head over to the numbers:

Portfolio Report

Portfolio Summary (as at 31st March 2021)
Opening Balance€161,088.35
Cash Introduced€4,000.00
Portfolio Capital Gain + Income€1,268.59
Closing Balance€166,356.94

I use the 4% rule to calculate how much I could withdraw from my portfolio. This rule basically says, that if one were to withdraw 4% of their portfolio per year, that it is very likely that they would out live their portfolio. There are some critic's that dispute this and say the number should be lower, but I am happy to work off the 4% rule at this stage.

Based on the 4% rule, my investment portfolio now produces a monthly income of €554.52 (166,356.94 ÷ 25 ÷ 12). My target goal to become FI is €2,000 per month (meaning I need an overall portfolio of €600,000). Based on my current portfolio value, this means I am 28% on the way to FI!

Portfolio Capital Gain + Income Report

This is a strange report, because I group capital gains and income together. Because we are ultimately withdrawing 4% (either via income or selling assets), it doesn't really matter how the portfolio grows. Therefore, this report records the changes based on asset types within the portfolio for the month:

Monthly Portfolio Capital Gain + Income Report
Capital Gain + Dividend Income from Equities€3,116.71
Property Income€76.34
Peer to Peer Lending Income€4.99
Cryptocurrency Capital Gain€413.66
Loss from Start Up Investment€-2,343.11
Total Change€1,268.59

Even though I lost money through the start up investment going bust, equities had such a strong month, the loss was largely cancelled out.

Our investment property had a water leak and annual insurance was due for the property, thus the overall profit for the investment property was minimal for March.

I also moved a significant amount of cash (around €14,000) to index funds in early March, as well as finally purchased more Cryptocurrency to grow the asset to approx 1% of my portfolio value.

Portfolio Breakdown

The table below shows the breakdown of my portfolio into the various asset classes:

Portfolio Asset Breakdown (as at 31st March 2021)
Shares & Equities€69,347.2441.69%
Business Venture Equity (Start Up Investments)€10,416.616.26%
Peer to Peer Lending€1,773.391.07%

Good VS Foolish Investments

As mentioned, I will start recording the good VS foolish investments. Foolish investments are bad investments I made early on, where I find myself not in a position to cash the investments out. I have no evidence yet to suggest that I won't see a return from these investments, so for now, they remain as part of my portfolio, until such a time that I am able to cash out, or the investment gets written off. These investments are a mix of bad peer to peer lending loans and investments in private companies. These foolish investments are all unregulated investments.

Good vs Foolish Investments (as at 31st March 2021)
Good Investments€142,791.9485.83%
Foolish Investments€23,565.0014.17%

Passion Projects

Finally, it isn't all just about money! I also work on projects because I want to make positive changes to the world! Here are some projects I am part of:

The Irish FIRE Podcast

I launched The Irish FIRE Podcast in June 2019. While I did run ads back on the podcast when it first launched, these days I run the podcast as a passion project. The podcast shares my story on my journey towards financial independence.

An Dúlra Co-Op

An Dúlra Co-Op is an Irish initiative hoping to make a positive difference, by establishing Irish native woodlands. Irish residents can become shareholders of the co-op and become part owners of newly established Irish forests. I co-founded the co-op in September 2020. We are still looking for new investors, so definitely check it out!

Portfolio Tracker

Portfolio Tracker is designed for those who are pursuing financial independence and are looking for a software that will add accountability to your FI journey. Portfolio Tracker is a simple, flexible investment software that will allow you to see the growth of your portfolio over time, without being complicated to maintain. Click here to track your own portfolio.

Hockey Clubs

I helped co-found four new hockey clubs in North Munster, introducing over 300 children to the game of hockey. Interested in your children playing hockey? Feel free to bring them along to any of the following hockey clubs - Castletroy Hockey Club, Ennis Hockey Club, Nenagh Hockey Club and Thurles Hockey Club.

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