April Update

Written 03 May 2024 by Yield Project

Intro

A couple months into building the portfolio we are almost at the point of buying all the funds and companies that have been on our watchlist for a while. In April we added two new assets, a company and an active managed fund. All of March dividends were re-invested. The major indexes are down this month with the SP500 dropped around 3% and the Nasdaq almost 5%. As long term investors this doesn’t bother us at all and we did however reduce our cash holding to buy up more SP500 and A200 in our core portfolio due to the slight discounts.

Purchases

For the two purchases this month we bought a company and an actively managed fund. Both assets have been on our watchlist for an extremely long time and previously we only didn’t buy because we were loading up on our index fund portfolio.

PL8

For this month’s first purchase we bought Plato Income Maximiser Fund. Listed on the ASX with the ticket PL8 they boast a strong monthly income performance. Currently the dividend is 0.55c per share. Total performance is inline with the ASX 200 index at around 10.1% p.a. The dividends come fully franked with a trailing yield of 5.45% + franking credits. Since inception the income yield is around 7.6% p.a.

Something to keep in mind is even though the performance is similiar to the ASX index there is a little bit more tax being paid as this fund is income targeting. The management fee is high at 0.8%. The income has been trending upwards however there is a low period during Covid in 2020 where the income dropped which is expected. The fund data is only available to 2017 so not the widest data set to look at.

SOL

This is one we have always wanted in our portfolio Washington H Soul Pattinson and Company. The dividend yield is not where we want it and is lower than the rest of our portfolio coming in at 2.8% + franking. But what we do like is the quality and track record of SOL.

Income

Income for total of April stands at $43. From previous month that is around triple the return however that’s only because we don’t have too much invested just yet. At around the 50$ mark the income becomes significant. At $600 per year it is enough to pay at least 1 major bill. Or is enough to pay for take away for a month or 8 takeaway coffees. Current yield is at 6.9% not including franking credits. This is pretty much where we want to sit for our ideal yield target. We are already running a fairly high risk portfolio and don’t want to risk capital erosion so we won’t chase a much higher yield.

Other Investments

Core

Our core portfolio which consists of IVV, VGS and A200 is currently down around 4%, we are with hold the amount in this portfolio purely because we want it seperate to Yield Project, every one knows index investing works so there isn’t a whole lot to comment on it, plenty of FI bloggers out there on that topic. We currently have a split of 30% Aus to 70% International and looking to even that out over the next couple of years to 50/50. The 70% international holding has been great to grow the portfolio but since we don’t plan to sell down our investments once we hit FI it won’t serve us well. We may even stretch it to a 60% Aus holding. Our core portfolio is sitting at a yield of 3.4% which effectively means we will need twice that amount that we would compared to the Yield Project portfolio.

Alternative

One investment class that has really gained our interest is something called co-operative farming and is provided on a platform by a group called IIF. Basically farmers raise capital for their harvest’s and is usually sought from private investors and banks. IIF brings this method to the average person. Below is a snapshot of one part of the portfolio and basically we have bought ginger, cherries and some baby cos lettuce. These all have a fixed term sort of like a bond. At the end of the term your capital and interest is paid to you. This is alot higher risk than stocks so you are also rewarded with a higher return. For example the cherries which are due in 11 months is paying a 19% return. We think it’s great, supporting our farmers and getting a great return. Will be adding more to this over time.

Listening

This month recommended podcast to listen to is from Aussie Firebug interviewing an old legend in the space Peter Thornhill. Peter advocates for investing in LIC’s and re-investing the dividends. This method of investing has been around a long time and even though he may not advocate for ETF index funds it is still a great strategy to reach financial independence.

READING

Nothing to write about in this space. Extremely slow reader so still getting through the Power of Now. Highly recommend. It’s to work on what actually matters and stop thinking about the things that don’t. But going on a previously read book by Peter Thornhill he has a book called Motivated Money. Extremely good read, explains the power of LIC’s over the long term. In short after a decade or two of investing in the classis LIC’s such as Argo, AFIC and Whitefield you end up with a high yield of almost 10%. This is because over time the old school LIC’s increase their dividends and so after two decades the income you are receiving is now 50-100% higher for the cost basis of the share bought 20 years ago. A little hard to explain but definitely worth a read.

Conclusion

Tracking well on our portfolio goal, currently yielding 6.9% without calculating franking credits. The passive income will slowly grow and be able to cover more day to day expenses. Couple with our core index fund portfolio we will have great capital and income growth over time.

April Update

Intro

Purchases

PL8

SOL

Income

Other Investments

Core

Alternative

Listening

READING

Portfolio Overview.

Expenses Covered.

Income Schedule.

Blog Updates.

Articles.