There is a lot going on in the world and many investors are anxious. I’m starting to see a lot more commentary about raising cash and cutting equity exposure. The justification for this approach is simple – Trump is scary, markets will drop, and there will be plentiful opportunities in the future.
I understand why this argument is resonating with investors. I could make a compelling case to follow this approach. Yet when I get anxious, I always try and ground myself with what I’m trying to accomplish as an investor. In my case, it is to create a growing stream of passive income.
That is what this list of picks represents. And this isn’t an academic exercise for me. I own 11 out of 12 of these picks. The only exception is Soul Patts which is on my watchlist. Despite everything going on in the world, I’m focused on me and what I’m trying to accomplish. That is a strategy that requires patience and consistency.
Maybe the ‘go to cash’ advocates are making the right move to accomplish their goals. Maybe they aren’t thinking about what they are trying to accomplish and just reacting to the news cycle. It isn’t really any of my business.
My advice to all investors is to focus on what you are trying to accomplish and the best way to do that. There aren’t many investment goals that are best served by playing the short-term market timing game.
My Original Premise
I had two long-term goals for the shares and ETFs I included on my list on June 20th 2024:
- Growth-oriented picks: Target average income growth of 10% per year.
- High-yield picks: Target average income growth of 8% annually.
This income growth comes from a combination of dividend reinvestment and dividend growth. I used these assumptions to calculate results:
- Equal weighted portfolio: Each pick allocated $10,000. For US holdings, the AUD/USD rate on June 20 made this $6,654 USD.
- Dividend reinvestment: Dividends reinvested at the closing price on the payment date.
- Income calculations: Based on dividend totals over the 12 months preceding June 20 and April 1 respectively.
Early Results
Things are going well. Although it’s an extremely short time-period, income increased by 8.90% in constant currency terms after nine months—above my goal. In local currency, income rose 11.84%, reflecting the weaker AUD.
Since this is a long-term portfolio, I’m more focused on constant currency trends rather than short-term FX movements.
How Are Individual Picks Performing?
Aurizon is the only pick where total income has fallen. Both dividends paid were down year-on-year, due to weaker grain volumes, cost inflation, and bad debt provisions. However, analysts still forecast a ~8% CAGR in earnings over five years.
Other picks performed better:
- American Tower: Recently raised its dividend, shares up 17.53% YTD.
- CSL: Raised their dividend by 15%.
- Soul Patts and Contract Energy: Both raised dividends by 10%.
- Brookfield Infrastructure: Raised quarterly dividend by just over 6%.
Portfolio Performance
While I’m focused on income, portfolio value is also important. The current environment favours defensive income plays.
Total return: 15.52%
Comparison: S&P 500 up 9.36% (AUD terms), ASX 200 up 2.93% in the same period.
There will be environments where defensive portfolios underperform, but Q1 2025 was favourable. This isn't about timing markets or rotating portfolios—it’s about consistent investing aligned with long-term goals.
Final Thoughts
This is how I invest all the time. I know from experience that there will be underperforming periods. But I’m focused on growing passive income—and in that respect, this strategy is working well. That’s what matters to me.
