The Purpose of the Yield Project

I was first exposed to the world of FIRE – Financial Independence Retire Early in late 2018. Reading and listening to the likes of Aussie Firebug and ChooseFI. Ever since then it has been a mild obsession with the world of investing, finance and financial independence and just how simple it can be to quit the rat race. We are quickly closing in on the gap not aiming to retire but to retire from a high income job that comes with stress and no sleep and moving to something more fitting to myself. We are now approaching our financial independence goal and now looking to increase our passive income. We are at the ripe age of early 30’s and like many people the thought of selling the portfolio to create income just does not seem appealing, and so Yield Project was born. The nest egg will continue to grow and produce dividends but a portion of our savings/investment rate will be allocated to high income assets. We don’t plan to ever sell down the portfolio as it will need to last us 45 years.

Our portfolio has chopped and changed many times just like most people when we first grasped the concept and instilled the habits. From LIC’s, REITS, Fixed Income and individual stocks. Two holdings we have kept from the start and still hold today is the Betashares A200 – ASX top 200 capital weighted index approximately 200 stocks and Vanguard VGS – MSCI World Cap weighted approx 1500 stocks. These two have vastly outperformed any other holdings we held, and goes to show their is truth to the tried and tested buying broad based diversified index funds. Our only addition now is IVV investing in my partner’s name for tax purposes. 

Lesson learnt, don’t go against the tried and tested. I have short changed myself tens of thousands if not hundred’s by just not buying the standard SP500/total stock market, the index that started it all with Jack Bogle. If you are comfortable with sequence of returns risk there is no other asset you would need to hold. The SP500 makes a lot of their income from global investments outside the US, this is the reason it is such a power house. 

But, we are all human. Sometimes we need to have some sort of return during long periods of neutral or bear markets, even if it isn’t the most efficient way to invest. So we are going to allocate a small percentage of our portfolio, not exceeding past 15%, to high yield income investments and want to document this process then you can see if this method is for you! The purpose for the income ideally is for us to cover a larger portion of living expenses, sort of a short term insurance. This allows us to keep the large index compounding machines ticking and topped up with regular income during bear markets. I don’t expect it to beat the index, not even close after the tax payable, but we do require the portfolio to allow us to pay our expenses.