Further Diversification

Discussion in 'Share Investing Strategies, Theories & Education' started by Sam Gallon, 16th Aug, 2017.

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  1. Sam Gallon

    Sam Gallon Member

    Joined:
    24th Apr, 2017
    Posts:
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    Location:
    Brisbane
    I understand the importance of diversification and feel I have done a pretty good job so far.

    I currently have $10k invested in CMC with the following
    20% in VTS (US Market)
    20% in VAS (AU Market)
    20% in VAP (AU Real estate)
    20% in VEU (All world ex US)
    20% in ALU (AU Tech company)

    I don't have a large amount of money so haven't diversified in BONDs, commodities yet, but just wanted another opinion.

    My goal is to grow my assets at a steady rate.
    Have I missed any markets, areas that I should be aware of?
    Would I be better off reducing the percentages in certain areas, like Real estate for example to maximize returns, reduce risk etc.

    Any feedback would be most appreciated.
     
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  2. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    1,461
    Location:
    QLD
    now you are asking tough questions .

    which part of the market will be affected the most ( and the least ) ??

    as i understood the GFC ( from reading about it , i wasn't a market participant back then )

    the global markets rushed for US dollars ( presumably to service debt and margin calls )

    then precious metals started to recover earlier than most .

    BUT this time a lot of debt is at low interest rates ( so far )

    so will it be different , say liquidity squeeze ( or credit crunch )

    one school of thought suggests having available cash ( say in a holding account or short term deposits )

    this does not suit me , but might be good for you ( say build up some cash reserves , rather than sell down )

    now on problem i see is you have ( except for ALU ) tried to follow the market ( not 'beat it , nor resist the bad times ) ( but with only 5 holdings it is very hard to get fancy )

    one way to lock in some gains would be to participate in the DRP schemes ( VAS has one for sure , i hold VAS and participate in the DRP )

    if going for safety ( for your net investment ) how about a boring LIC , i went for BKI and IBC but LICs like MLT , AFi and ARG , have plenty of fans as well

    good luck , IT IS A TOUGH GAME you are playing in ( expect some bumps and bruises )
     
  3. Hodor

    Hodor Well-Known Member

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    Given your desire for broad diversification consider looking at a boglehead 3 fund portfolio. Below is an example using Vanguard as you seem to favour them.
    1 is domestic market (VAS)
    2 is international (VTS + VEU)
    3 is bonds (VGB or VAF from memory)

    Can be as simple as equal weighting the above and using inflows to maintain balance. Some prefer to actively reweighting the portfolio every 6 to 12 months, the tax implications and expenses are prohibitive IMO.

    Given the low return on bonds currently some boglehead investors are underweight bonds. There arguments on both sides as to which way to go.

    The Australian market has a lot of miners/mineral companies so I wouldn't want to add to commodities.

    If you own or plan to own a home do you want to have further exposure to this property with VAP?
     
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