March 2021: 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 stop working; it is much more than that. It’s about living a more intentional life.

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I haven’t made a Journey To Financial Freedom update since December. So you would think there would be a lot to write about. In reality- passive index investing is just that- passive and not very interesting. It just ticks along.

And to be honest- that is the issue sometimes. I’m quite interested in investing and markets. I have to actively remind myself to stick to the passive plan and not waver from it. To ignore the headlines about soaring stock prices and the gains people have had- which can create a certain level of FOMO. A few weeks later, I usually vindicated with the eventual fall in the value of a particular stock. During all this time- my passive index funds have just been ticking along.

I did have some questions about having my portfolio heavily weighted to the NZ and US markets, especially regarding the high level of debt that these countries have now. So I did sit down and look through my entire portfolio to see the actual country distribution.

I have never really figured out what the best mix between countries is- and to be honest; I don’t think anyone can tell you specifically. For instance- some American investors suggesting you should only have around 20% exposure to international shares- which I think is quite low. I know that I am comfortable having between 70 to 80% international and 20 to 30% tied to New Zealand. That might the home country bias coming through- but hey- I’m happy with that.

My portfolio has changed over time. From over 70% peer to peer in 2017 to 40% in world equities. Here’s a look at how my portfolio diversification has changed over time.

The problem is that the World Equity part of the above graph is vague. It’s basically including all the world fund and lumping them together. My Vanguard Intl Shares Select Exclusions Index Fund –both hedged and un-hedged, AMP Capital all country global share fund, and Kernel’s S&P global 100. For the most part- these funds tend to have high exposure to the US.

So I looked at all my fund and investments and tallied which country they are invested in. And then, I get the following pie graph as of March 2021.

This shows that I am heavily invested in the US and NZ- since the US makes a large proportion of my total world funds, and my NZ section includes my shares in Genesis and part of the Australasian property fund.

The main question was: Do you want to move away from the US because of the high debt levels and money printing and look more towards emerging markets for your investments. And is that even possible with ETFs? ( I know that Smartshares does an Emerging market EFT which is a Vanguard Emerging EFT.)

That is what I am going to be reading up about in the next while. Do I need more exposure to emerging markets? Let me know what you think and what your diversity strategies are below.


Do you know how much you pay in fees?

I tend to bang on about Kiwisaver. And recently, I’ve been bringing it up in conversions with friends and family. It’s been surprising to hear two things. One is the number of people who are not in Kiwisaver. Arguably, many of my friends seem to be self-employed and don’t see the benefit of Kiwisaver since they are their own employer- but they are missing out on the government contribution by not joining.

And two- nobody seems to know how much they are paying in fees. One friend was happy to be with Fisherfunds Kiwisaver since “they were performing ok and I have only paid like around $150 in fees for the last 6 years”. I had to break it to them that it would the fees would be more like $150 a year- but they were adiment that it was $150 for 6 years.

I then thought about it for a while and realized that I’m a hypocrite. I know the percentage fee that I pay on my Kiwisaver (0.59%) and the annual $30 membership, but I don’t actually know how much in total dollars. You might be the same- so I’m assigning you and me some homework. Go and find how much you paid in fees in dollar terms for the year ending 31 March 2021– your welcome to report back in the comments. My end of year statement for my Kiwisaver has not been created yet, so ill report back once it has been published. For the financial year 2020, I was charged $60.44. It’s quite low because I only joined Superlife in August 2019


Investment Update

Happy New Financial Year

It’s the beginning of a new financial year. So that means doing tax returns. Luckily- most of that is done for me. Kernel will sort out my tax for all the funds I hold with them. They will pay my tax responsibilities from any cash held in my Kernel wallet. Investnow will also do all the hard tax work for me, and again take my tax out of my Investnow transactional account- They will even calculate my FIF obligations for when I fill out my IR3. So overall- not a very stressful process for me as a DIY investor.

Above is my portfolio value over time. January and February were negative months for me, but March has been a strong positive month. In either case- the March 2020 crash has become a blip with 8 out of 12 months being positive in the last year.

Performance

It’s been a phenomenal March for returns- my Genesis Energy shares returned 35.99% with 8.8% dividends for a total of 44.81%! Then again- I would have had a similar performance with just buying the NZX50 (Blue), for which Sharesight has benchmarked my Genesis shares against (Yellow).

And I’m under no illusion that these returns will likely not continue over the next few years. Regression to the mean- which is not a law, but a statistical tendency, tells me that I might see some volatility, or at least lower returns, in my portfolio as it tends back to the long term mean rate.

  • InvestNow: 31.86 %
  • Kernel: 10.22 %
  • Genesis Energy: 44.81 %
  • Kiwisaver: 34.03 %
  • Lending Crowd: 11.44 %
  • Harmoney: 10.11 %

InvestNow: Returns from assets I hold are after fees and before tax for the last 12 months. Kernel Wealth: Internal rate of return since inception. 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.


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3 thoughts on “March 2021: Journey to Financial Freedom update”

  1. Hi there, great site. Just wondering what you use to create the charts that track your portfolio (in particular the black graph in this post)? – Cheers!

    Reply
  2. such great information.that I will collect from this article…I must say through this article.. A big change is coming on my way so this is the best one to systematically doing
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    Reply

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