It’s nearly the end of the year already!

So it's a great time to reflect on how markets have fared in 2024, and also share how my own investments have been ticking along.

My last portfolio update was back in May , and in this one, I’ll share:

• How our investments have been going
• Current wealth breakdown + dividend income
• Review of property and share markets
• What I’m doing right now + future plans

As usual, these articles are simply to share, because I know how valuable and interesting it is to read about what others are doing with their own money.

So, nothing here is a recommendation; please do your own research before investing in anything, and reach out to a financial advisor if needed. That being said, I hope you enjoy the article 🙂

Current wealth breakdown

In the below image, you’ll see the breakdown of where the Strong Money Australia’s household’s wealth is currently parked.

I don’t share the actual numbers for privacy reasons, but this gives you a general sense of things.

By the way, that pink portion is 1% cash. So, what’s changed from last time?

Our shares allocation has dropped from 50% to 44%. And our investment property equity (labelled IP Equity) and home equity have each increased by 6% and 2% respectively.

Did I sell shares? Nope. This is purely as a result of Perth’s current housing boom. Our remaining investment properties, and our home, have risen in value quite a lot this year.

For those curious how I figure this out, I simply check the realestate.com value estimates (which often aren’t too bad), and also recent similar sales as a gauge to come up with a decent guesstimate of my own.

In reality, you only ever know the true value of a property when you sell it. And that number could end up being a good bit different from your estimate (higher or lower).

For those who may be new to my situation, I provided an explainer in the previous edition of these updates . I also went into detail about my finances in an episode of Aussie FIRE, which you can check out here.

The short version is, we’re still transitioning from property to shares, with three to offload in the next couple of years. Then we’ll have a simple income-producing share portfolio with no hassles or headaches :)

So that chart will look very different in just a few short years – the IP Equity portion is likely to be non-existent!

We keep very little cash, and don’t add to super (other than Mrs SMA’s part-time employer contributions). Instead, the focus is continuing to build the share portfolio. I’m also a tiny shareholder in Pearler, which is essentially a ‘passion’ investment.

Now, let’s do a quick look at how shares and property have performed in 2024.

Share market update

Since my update earlier this year, markets have kept cruising along, mostly uninterrupted.

Here are the year-to-date returns for the two most common markets that locals care about. Of course, you may invest in other markets and individual holdings too, but the US and Aussie indexes give us a good barometer for how things are going.

Here are the figures from the end of October:

• ASX 300, measured by VAS: 10.8% (plus franking of say 1.5%)
• S&P 500, measured by IVV: 25.6%
  

Once again, a truly phenomenal year from the US market – but markets can fluctuate at any time.

As I keep saying, people have been predicting lower returns and yelling ‘overvalued’ for much of the last 10 years. I guess they’ll be right eventually. But the big tech companies continue to find ways to grow revenue and earnings at high rates.

They could turn out to be overvalued right now – certainly, shares don’t look cheap. But I don’t know how things are going to pan out, so my approach is to simply dollar-cost average and diversify.

Property market update

No finance article is complete without talking about the national sport of Australia: home prices.

I also discuss it here because property is still relevant to my strategy of transitioning fully from property to shares. I feel like I’ve been talking about that forever… but in just a few short years, the process will finally be complete.

Here’s the change in home prices over the last 12 months across the country, according to a recent CoreLogic report :

Fortunately for us, Perth is continuing its strong run, with Adelaide and Brisbane also posting high price growth. Not much of note across the rest of the country on these numbers.

Price growth is expected to slow from here, as housing supply in Perth starts to pick up. But after a full decade of going nowhere, plus ongoing solid population growth, it could take a while for things to even out and supply to fully catch up.

Now you can see why our investment property allocation changed by quite a bit, even though we haven’t really done anything (and even bought shares during the year!).

Rents have also grown a fair bit here in Perth, and nationwide for that matter.

While that sucks for renters, it’s helpful for investors. There’s some ‘catchup’ at play here too. In the decade leading up to Covid, average rental growth was very slow – often non-existent – across many of the capitals.

Despite the recent increases, it hasn’t matched the massive jump in interest rates. Especially in our situation, as two loans just finished their fixed term and went from 2.3% to 6.4% (I know, get your violins out for the property investor).

That’s an extra $30,000 per year in interest, as of August, so we haven’t really been able to invest since that kicked in. So, I’m quite looking forward to offloading at least one property to reduce our outgoings and free up cashflow to buy shares (next year most likely).

Investment income and share portfolio

Now that we’ve collected another financial year’s worth of info, I’m able to update the following chart.

This shows the dividends received from our share portfolio, and it includes franking credits .

As I was guessing in the earlier update this year, we finally cracked the $50k mark!

I actually don’t think we’ll make much progress this financial year since we aren’t able to invest much right now. The main reason for that is simply the big increase in interest rates I mentioned.

This will change late next year after we sell a property, but until then, we’ll likely just add small amounts here and there (if at all). I’m also considering adding to super with the property proceeds to reduce the CGT hit, but still tossing up between retaining access to the money vs tax savings.

If you’re wondering why the big spike in dividends in 2023 (and I don’t blame you, it looks odd!), here’s the explainer:

The 2022 figures would have been much higher, but we sold a huge chunk of shares during that year to buy a house. We then sold an investment property and transferred that loan to our current home, giving us a huge pile of cash to invest.

This is a strategy called security substitution which I wrote about here. At the same time, we also decided to become ‘fully invested’ and invest the remaining cash in our offset account, whereas we were drip-feeding the money in before, which I wrote about here.

As for what our share portfolio looks like right now, here it is:

Nothing has changed since earlier this year. REITs went up a little as they bounced back from their lows. And VGS is slightly higher as its capital growth outpaced VAS.

We continue to slowly diversify more into international shares. As for the REITs, these are two holdings I’ve held since they got hammered after Covid. I am planning to sell these at some point to simplify further, but I haven’t quite decided when.

I’m beginning to think I should do that sooner rather than later. Reason being, I’m going to have capital gains to declare from property sales in the next couple of financial years. So, the longer I wait to sell these REITs, the more likely there’ll be additional taxes to pay from the sale.

They do feel a little too cheap at this stage to sell, but I’ve developed a strong bias towards simplicity that is hard to resist.

Current actions and future plans

I’ve basically covered this already, but we’ll continue investing whatever surplus cash we have into shares.

That might turn out to be not much at all, which is perfectly fine. We’ll just have to be patient until late next year. Why ‘late next year’?

That’s when the property we’ll sell first has its lease expire. That way, we can sell it to either a homebuyer or an investor. If we sell mid-lease, we can basically only sell it to an investor. Very few people want to buy a home and have to wait 6 months before they can move in!

How are we deciding which property to sell, given they’re basically in the same market?

Easy – the one with the most equity in it. That's what gives us the most cash with which to add to our share portfolio.

As regular readers know, I enjoy seeing the income from the portfolio get bigger. And alongside that, I’m also trying to donate more to charity each year. The streak has been going a few years now, and currently looks like this:

It’s kind of exciting to think what it might look like in 20 years.

By the way, the point of this isn’t to say “look how nice I am” – it’s just something finance and wealth-related that I find motivating. If you’re curious about where it goes, it’s mostly wildlife conservation and animal-related charities.

Final thoughts

Notice how in these updates I don’t really talk about the economy, or market forecasts?

That’s because these things don’t really give you practical and useful information to build your financial life on. Things change, and you need to adapt. The one expert who’s right this time will be wrong next time.

Eventually, you realise it’s all down to you and the decisions you make. That doesn’t mean you aren’t affected by outside forces – of course you are. But you don’t let them derail you from your path.

They are simply winds that shake you as you climb the mountain. You might stumble a little or get tired. But regardless of what’s going on, never forget the direction you’re going and the ‘why’ that keeps you pushing on.

I wish you all the best for your wealth goals in 2025.

As always, happy long-term investing!

Dave’s best-selling book Strong Money Australia is available on Amazon. Listen to the audiobook on Spotify or Audible.