March 2020: Journey to Financial Freedom update

Welcome to Passive Income NZ, my Journey to Financial Independence. Every month I share how I am tracking towards financial freedom by providing you with an update of where my portfolio is at and how far I am from financial freedom, and how my spending is tracking. My definition of financial freedom is not really the same as everyone definition. It’s not to just stop working, it is much more than that. It’s about living a more intentional life.

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I know that many people are in dire straights right now dealing with this entire situation. And I know that we are in a very fortunate position- I don’t mean to gloat about that or anything with my investment update. I thought I would continue doing them to try and keep some normality. For the last month, it seems I’ve been reading about one thing only- and I suspect that will continue.

Back in January, I said that I would be putting my monthly investment updates on hiatus for a while. How everything has changed in just two months.

Two months ago, we were stepping on a plane to go backpack for 6 months through South America (hence the hiatus on my investment updates). Sure- at that stage we did hear about COVID-19, or coronavirus as it was known back then, but we hoped it would peter out like bird flu or SARS, when the virus would ultimately have mutated into a less harmful strain.

At that stage, we were a little worried about it- but we had planned this trip for several years. It took some serious negotiation to get the time off work, and serious hard work saving the money. We didn’t like the idea of cancelling very much.

But- as you all know, COVID-19 didn’t peter out. And with countries, boarders, flights, and accommodation closing and cancelling all around us- all in the matter of 48 hours I might add, we figured we better leave and head back home.

So that’s how I ended up back in New Zealand. In 14 days quarantine. And then a little over a week later we moved to level 4 lockdown. So we’ve been locked down for 3 weeks now.

On the bright side- my garden is looking better than ever. Any many of the small maintenance issues around the house have been dealt with. I’ve had more time to listen to Podcasts including Cooking the Books, and the NZ Every Day Investor.

This time has also been good for catching up with people- not in person obviously- but on the phone. I’ve decided I will try and ring at least one friend or family member every day and try to have a real chat with them. Both to keep my sane and to see how they have been doing.

Oh, and I did get a call from my real estate investing friend (worth checking out our debate on real estate investing if you’re not up to speed). He was checking in on us to see how we were doing- ultimately though, I knew he had rung to ask about how my shares were doing. We did end up having a chat about them.

Honestly, I think this debate about shares and real estate is flawed. See the problem is that we can log on to our apps and platforms, or KiwiSaver providers and see the “value” of our shares at any time. But when it comes to property- there is nowhere you can log on and check the instantaneous value. So in a way, you don’t see the up and down swings in real estate very much.

You might say, oh the share market has dropped 30%. But I bet if you tried to sell your house right now- I mean during this lockdown- and I really mean you need to sell it fast- the value of that property will no doubt be down by 30%- given the fact that no one can view it or anything.

I’d probably go beyond that and say there would be no way in hell you could even sell it any time soon- even with taking a significant loss. Just not possible. But I can always sell my shares at a click of a button.

What I’m trying to say is that the current value of your shares doesn’t matter at all- just like the current value of your home or investment properties. The value of your shares is only important when you sell them.

Anyway- we discussed all this and he was still convinced that his leveraged property investment scheme was better off than me investing in the share market. Even when he’s had to have discussions with his bank trying to put some of his mortgages onto repayment holiday periods (don’t even get me started on mortgage “holidays”- they’re anything but a holiday. Sure- they are a lifeline if you really need to free up cash flow, just remember they will cost you significantly more in the long run).


Investment Update

I’ve been continuing to invest on InvestNow- even with the drop in the sharemarket and knowing that cash is king during times like these.

That’s because I subscribe to a long term investing strategy using dollar-cost averaging.

My job is still going, and my partners is too- for the time being. So we are in a fortunate position to still be making money. And during the lockdown, our expenses have gone down significantly. Less money spent on fuel for travelling, can’t spend money on going out or takeaways. So with lower expenses and about the same income- we can preserve our emergency fund for now and have extra money left over for investing.

It might seem strange to invest right now. Many people have been suggesting that the market is going to drop further. Who knows really- they might be right. But if I stop now- I am not going to be buying low. And so my dollar cost average will remain high. Which in essence mean I will have only bought high. Totally defeats the purpose of dollar-cost averaging.

The funds that I am currently invested in remain the same- still room for improvement and simplification;

  • Vanguard International Shares Select Exclusions Index Fund
  • Vanguard Intl Shares Select Exclusions Index Fund – NZD Hedged
  • AMP Capital NZ Shares Index Fund
  • AMP Capital Australasian Property Index Fund
  • AMP Capital All Country Global Shares Index Fund
  • Smartshares – US 500 Fund (NS) (USF)

I still have some money sitting in Smartshares US 500 Fund (USF), which overlaps quite a bit with my Vanguard investments but has a slightly higher fee of 0.34% to Vanguards 0.20%. I also need to have a deeper look at the AMP capital global share fund.

Portfolio November 2019

Asset allocation

New Zealand Personal Finance and Investing blog, all about Money budgeting debt credit cards and insurance for Kiwis NZ
  • Australasian Shares: 20% (-6%)
  • International Shares: 37% (+5%)
  • US shares: 4%
  • Total Shares: 60%
  • Kiwisaver: 12% (N/A)
  • Peer to Peer Lending: 10% (N/A)
  • Listed Property: 14% (-1%)
  • Bonds: 0% (-1%)
  • Cash: 4% (+3%)
New Zealand Personal Finance and Investing blog, all about Money budgeting debt credit cards and insurance for Kiwis NZ
New Zealand Personal Finance and Investing blog, all about Money budgeting debt credit cards and insurance for Kiwis NZ

Performance

Below is the change I have seen in my annual investment returns since January. There are some scary numbers amongst them- but at the end of the day- I’m invested for the long term. There is far more to worry about in the world right now than some temporary dips in returns.

  • InvestNow: -9.29% (-33.66%)
  • Genesis Energy: -10.97% (-37.79%)
  • Kiwisaver: -19.21% (-27.57)
  • Lending Crowd: 11.47% (-0.01%)
  • Harmoney: 10.30% (+0.02%)

InvestNow: Returns from assets I hold are after fees and before tax for the last 12 months. Genesis Energy: Returns from capital gain and dividends in the last year. Calculated using Sharesight. Kiwisaver: Performance for the last year after fees and after-tax and membership fees. Lending Crowd: Net average return (NAR) is a calculated annualised return for your investment portfolio that’s calculated monthly on the 1st day of each month. Harmoney: Realised Annual Return (RAR) is a measure of the actual rate of return on funds invested in the Harmoney platform.

Goals

Road to 100K by December 2019

I managed to reach my goal back in December, but now the value has dropped- I’m not there anymore. With so much uncertainty in the world at the moment, I’ve decided to try and reach that goal again.

New Zealand Personal Finance and Investing blog, all about Money budgeting debt credit cards and insurance for Kiwis NZ

Reduce my reliance on my car

My goal of reducing my reliance on my car is going great- I don’t really use it much at all these days. Once a week supermarket shop and that’s it. Sure, I’ll be starting work again next week. I hope to use my bike for the entire week as there are only a few cars on the road- it’s going to be quite enjoyable!

Anyway- I hope you everyone is doing ok and keeping busy!


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2 thoughts on “March 2020: Journey to Financial Freedom update”

    • Yes I am glad that I started diversifying away from P2P. In real terms it’s only about halved in value from before- I’ve just started investing more into index funds.

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