ETF Ive finally rejigged my portfolio to indexing

......

No worries,

Dan

PS Speak to an FPA registered Financial Planner before making an investment decision.

 

Thanks Dan. That's good news about wraps.

Regarding the 750k, I meant I would need to borrow 750k if I was to reach DFA's minimum $1m investment when going direct - although I read most of their PDS and they can still reject you even if you have the $1m minimum. Plus it is $1m per investment option, so you can't diversify fully.

I was just looking for a way of avoiding using a wrap, but I guess I should look at the cloud's silver lining with the investment options, tax reporting, etc.

 

Hi Dreads,

I get it now Most wraps are cost effective from upwards of $100,000 and have discounts which kick in as your balance gets larger.

Depending on which wrap you use, you do have the flexibility of accessing other wholesale funds (for less than the usual wholesale mandate of $1m, saying that, I know a few fundies who let "wholesale" investors have more than $50k), shares, term deposits and cash accounts as well as the reporting benefits.

Cheers,

Dan

 

Hi Dkmc

How has the above fared over these years?

 

because I have a shortened time frame (arguably less than 10 years )
and needed growth , i went for

VAS -Vanguard ASX top 300 (DRP) (+ 19%)
VHY -Vanguard high yield (DRP) (+ 30%)
SYI - SPDR high yield (DRP) (+ 32%)
QFN - Betashares ASX200 fin. (DRP) (+ 28%)
IEM - iShares emerging markets (+ 3%)
SLF - SPDR ASX 200 property (REIT) ( +31%)

( in approximate in order of current value )
(DRPed when available)
of course buying at the RIGHT price is a big help

yes i do hold other equities , however having "professionals " looking after some of your investments isn't entirely foolish (IMO)

cheers and good luck !!

 

Hi TS,

It appears that you are doubling up on some asset classes, (asx300) and not using others, (US market, EU, Govt bonds, Corp Bonds, Foreign Reits).


Johny.

 

yes deliberately , as i see more global instability to come and many nations/blocs over-valued , as since i should have cash available at the next correction , i was waiting to see if value revealed itself (for example how do you pick Japan (ETFs) v Taiwan (ETFs))

possibly Korea would be my next choice .

but have been buying shares in companies BASED in NZ, Indonesia, Singapore ... still trying to find an Indian company worthy on my cash ,

plenty of shares with "interests" overseas .

have only been in this investing game nearly 3 years , so had a late start , so am looking for the GFC (part B)

cheers !!

 

After an earlier trial I set up a couple of Index Funds in 2012, basically

• Australian
• US
• World (ex-US)
• Bonds

And rebalanced quarterly with new funds over the last 2 years according to my asset allocation. This AA saw me buy some of the funds above on dips which outperformed previous purchases percentage wise

Plus Dividends

I had also been trading with CBA in my play money fund

 

In 2011 I set up my core portfolio using ETF's:

• 50% Australia (STW)
• 30% All World ex US (VEU)
• 15% US total market (VTS)
• 5% BRIC (IBK)

I haven't rebalanced but need to e.g. VTS has outperformed (not including dividends which I don't reinvest) and now makes up 20% of the total. I would also like to have a small allocation in small caps but there wasn't anything available at the time. In hindsight I wish I had bought VAS instead of STW (they lowered the fees on VAS but too late for me). And a broader emerging markets fund instead of IBK (I was considering IEM at the time). IBK is the only one that has gone backwards and if I get around to it I'll sell while I can realise a capital loss and replace it with a broader emerging markets fund. Also allocate 5-10% to a small caps fund which I'm sure would be available now. Maybe allocate a small amount to an internally geared fund.

I would maybe prefer to get something like the Vanguard High Growth Fund (unlisted index fund with similar asset allocation to what I have plus some small caps, property, bonds and fixed interest) but I just think it's too expensive (0.9% for the first $50k plus the spreads). Also would prefer if it didn't have the property and income assets. It would be easier though not having to rebalance etc.

I also use CBA to speculate with my play money but haven't done much trading with it so far. My defensive allocation is cash in an account offset against my home mortgage. If I can save some more to keep a buffer I'll probably use some as a deposit to buy an IP.

 

Hi Sav

I've done similar with CBA

Re: Emerging markets, they seem to be short rather than long term plays with a fair bit of volatility

Here's the emerging markets index (EEM) over the past two years compared to the S&P 500 index

link

A simple 3 fund looks good

 

Hi Sav,

You don't like Bonds. Any reason why?



Johny.

 

Hi Redwing

I know emerging markets are a lot more volatile, but my understanding is they will potentially offer higher returns in the long term. On your comparison chart, if you change it from 2 to 5 years emerging were in front for more than half the period. If you change it to the 'max' period which looks about 10 years the emerging start looking very attractive. Of course the trade-off is much higher risk/volatility. I'm in for the very long term, not geared and I don't panic-sell so I'm comfortable with volatility. I only have 5% in that allocation anyway but when I get around to rebalancing I might add some small caps for the same reason.

Yes a simple 3 fund does look good. The simpler/less funds the better especially for someone like me lazy to rebalance or change things. So far I just can't help myself to include the extra ones to try to maximise my returns. I suspect at some stage I will revert to something along the lines of a 'lazy' 3 fund portfolio. Unless someone offers a low fee fund with these type of asset allocations built in.

 

Hi Johny

Bonds are fine. I see them as lower volatility/lower return than more aggressive asset classes like shares and property. I don't hold them for now as my timeframe is very long and instead I have cash in an offset account which is very liquid. (This is maybe not the best approach, I do remember that graph in 'a random walk on wall street' showing with a small allocation to bonds the long term returns are increased along with lower volatility. But I want to have some liquid buffer cash, and the rest invested aggressively) Similarly I don't hold REITS because I have my home.

 

I wonder what the splits were on those charts?

Splits: Jun 9, 2005 [3:1], Jul 24, 2008 [3:1]

VEU (World ex US) is what I use compared here longer term

Are you looking at Aussie small caps Sav?

 

How is it all travelling now dkmc?

I see you visited 29-12-13

 

Is dkmc still about?

 

I gather the OP is no longer around, but I found this thread very interesting especially comments around the time of the GFC, and I have much in common with it. I also was a long time investor in retail managed funds (CFS, perpetual, MLC, etc). Thanks Paul Clitheroe! Actually the strategy worked quite well I think and these investments were cost effective 15+ years ago when I entered them. However I lost track and was quite gobsmacked last year when I discovered the index ETF world. I did my own research, finding many of the same resources as dkmc... bogleheads etc, and reaching the same conclusion of passive index investing... I wish I found this earlier it might have saved me a lot of time ! But sometimes too the journey is more important than the outcome.

So I did my own "re-jig" last year. Quitting all the long-held managed funds and replacing it with a portfolio of approx. 15 ASX blue chips and 4 ETFs. For defensive assets, I don't hold much in Bonds, just use high interest accounts and have some small FI exposure in super. Will re-assess this in future, but am a bit concerned still about QE and unconventional central bank actions so will likely focus towards Aus bonds.

It was tempting to keep it simple with share ETFs only, but my thinking was since the ASX is so concentrated and I basically intend to buy and hold forever, I might as well just buy CBA, BHP, TLS, WBC, WES, etc, as core/base holdings, underneath the ASX index ETF's. Even the 0.15-0.25% MER can add up over 30+ years ! When I started getting all the shareholder correspondence / dividend, I had further second thoughts about the simplicity of a 3-4 fund ETF portfolio, but anyhow it's done now so will stick with it and see how the experiment works out over the long-term for these direct holdings vs index...

As for the ETF's I am using VAS/IOZ for ASX and went with VTS/VEU for global shares.

I took advantage of one of the online broker offers (e.g. 20 free trades) to implement this Equities portfolio changeover with nil brokerage cost for the new purchases. I also used my cash to effect the changeover with no market timing risk, i.e. basically I sold my managed funds (before the 3pm cutoff) and bought equivalent value of shares/ETF on the same day (between 4pm and the close). I wanted to avoid an unlucky timing effect, e.g. 2-3% market jump in between selling and re-purchasing. Clearly this could go either way but you know murphy's law.

Anyway, that's my story in case it helps anyone - FFA

 

Hi FFA,

You are going to have fun at tax time!

A simple vanguard World ex au, Australia and Australian Bonds rebalanced yearly is easy to manage.

Or add small caps and Reits.

How are you going to track your portfolio?


Johny.