Sound Strategy or have I lost the plot?

Discussion in 'Share Investing Strategies, Theories & Education' started by Strawbs, 21st Feb, 2018.

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  1. Strawbs

    Strawbs Member

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    Hi All,
    My approach to investing concentrates on the share markets along with being somewhat conservative and taking a very long-term, 15-year, lens before I will look to start to use these investments as part of my wider retirement strategies, so I consider myself a ‘boring investor”. Further, I lean towards using LIC’s and ETF’s to form the backbone of the portfolio (given the diversification that can be achieved from such) but to keep things interesting, and so I can have some fun researching, I also play around with a few direct holdings as well.

    A breakdown of my holdings is:
    • ARGO, AFIC, iShares S&P 500 (IVV) and BetaShares Nasdaq (NDQ): 20% on each security for 80% in total.
    • The remaining 20% is spread around 15 other holdings.

    When buying additional units (I use a LOC to undertake a reasonably large purchase every 6-months), I “reset” the allocation to ensure the above spread is maintained.

    I acknowledge this is an open question but thought I would ask: What do people think of this approach? Have I lost the plot?

    To confirm: I use a Discretionary Trust for the above but not really looking for advice/comments on this, more just on the allocation/approach.

    Cheers,
    Strawbs.
     
    Last edited by a moderator: 21st Feb, 2018
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  2. twisted strategies

    twisted strategies Well-Known Member

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    my investment time-frame differs markedly from yours , ( so 'what i would do ' would be a meaningless debate )

    given you have chosen a 'core ' ( ARGO, AFIC, iShares S&P 500 (IVV) and BetaShares Nasdaq (NDQ) ) and have a cash injection strategy

    would say using the DRP with ARG and AFI work in your favour better than re-balancing .

    i am not in favour of re-balancing portfolios as an automatic response , i find the good investments grow at their own pace ( and apart from sensible profit-taking , to fit YOUR goals ) and i would let them grow .)

    if interested in a 'balanced investment maybe MVW ( please research carefully ) has a place in your smaller holdings ( i think the current price is too high , but you may decide differently )

    might i suggest in the future less re-balancing and more 'cherry-picking ' of 'fair value ' investments

    if you are prepared to do the research maybe some ( individual ) interest-bearing securities would give you some income stability

    ( DYOR )

    looks like a nice frame-work so far , but does it have enough flexibility for the volatile times ahead ??? ( imo ) boring is one thing , but unresponsive a different thing

    cheers
     
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  3. PeterT

    PeterT Active Member

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    Strawbs, I like your approach: 80% core plus 20% soup. If there is a component of your portfolio that you are tempted to be a bit more active with, then I think it is important to partition it, even if only mentally, and keep that soup to a fixed percentage.

    My own choice for the core would not have quite so much exposure to the US equity markets, although in 2017 you have been knocking it out of the park! But I agree wholeheartedly with having a decent exposure to non-Australian equities and, personally, this is where I choose to mix things up a bit, and reallocate periodically to the relatively undervalued markets, say Europe (eg., with IEU or VEQ) or Japan (eg., HJPN or IJP).
     
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  4. PeterT

    PeterT Active Member

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    Oh yes, and the LOC approach, I like that too. Just keep the amount of borrowing in check with your own clear guidelines. My own rough rule of thumb is to have "normal" borrowing at a level where I could, if I chose or had to, repay the total debt on a principal-plus-interest basis in seven years at seven percent. Obviously, the amount of debt will depend on the overall dividend yield coming from your total portfolio, assuming dividends are what you are using to service the debt, and non-Australian equities don't yield as much as for Australian equities. But personally, with my portfolio mix, then the "P and I in 7 at 7" approach gives me a loan-to-value ratio in the range of 15% to 20%.

    And keep some of your LOC in reserve to "pin the ears back buying" when the market tanks...
     
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  5. Strawbs

    Strawbs Member

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    Thanks for the advice and feedback - food for thought is greatly appreciated.
     
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  6. Chris Au

    Chris Au Well-Known Member

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    I'm just wondering about 15 satellite shares? That appears a ot of companies to monitor ? I'm not sure of the funds you're investing but will you have enough to get decent returns across that many companies?

    I like the core-satellite approach.
     
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  7. twisted strategies

    twisted strategies Well-Known Member

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    that depends on the 'satellite ' ( individual ) shares chosen

    sometimes a small or mid-cap has lot of gallop in it ( even if you don't suspect it at the time

    take BKL for example i bought it as a boring div. paying share in 2013 ( sub $24 ) NEVER dreaming it would go over $100 a share

    i look for solid dividend paying shares , some stay boring div. paying shares , some get taken over and a few exceed your wildest dreams
     
  8. Strawbs

    Strawbs Member

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    @Huon: My approach is very similar to what @twisted strategies outlines.

    I pick the shares for this bucket that have a proven history of dividend payments and steady capital growth noting that a number I pick will end up being bad decisions, some will just be boring and hopefully, the larger number will provide solid returns over the very long term (most are direct holdings but a few EFT's in there as well in small, medium and large cap) - so intent is not for anyone share to see myself buying a superyacht but that overall, this 20% allocation more than holds its own as a collective. So to answer your specific question: I don't actively monitor any of them per say given (again) my timeline is 10+ years for these.

    This works for me and is probably just reflective of me being a, as I touched on earlier, boring investor.

    I also realised I didn't reply to @twisted strategies question re the volatile times ahead. I have two thoughts/approaches to this:
    1) I am pretty confident that in 15-years time I will wish I owned more AFIC, ARG and IVV/NDQ securities, not less. Yes these will crash in a big way, at least, two times along with the rest of the market in that timeframe but history does suggest they will more than recover which brings on point 2.
    2) I ensure I have enough liquidy (via cash or use of my LOC) to buy when things crash in a big way. My standard strategy is to purchase my core every 6-months but more than happy to jump in with some (what will be longer-term) bargains when the next crash comes. This is I purchased a heap of IVV in particular as the S&P500 went further and further down and returned to my 'standard approach' as it went back up - including rebalancing against AFIC, ARG and NDQ.
     
    Last edited by a moderator: 23rd Feb, 2018
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  9. twisted strategies

    twisted strategies Well-Known Member

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    Strawbs ,

    re the volatility ... mentally prepared is important , having a crisis of faith ( in your plan ) as the percentages of 'paper losses grow , is what the market predator hopes for .

    also a ( flexible ) plan for exploiting any opportunities is good , i selected a straight mathematics plan in 2011/2012 when i was a raw novice ( watch the anns BUT consider adding more if a GOOD selected share dropped over 20% below the last top-up price ) but devise a plan YOU are comfortable with , a tired mind in a time of chaos will not help you .

    my time-frame has been shortened , and thrown into some uncertainty , but having the plan i have already in operation ( NOT waiting on the sideline with a pile of cash ) has so far proved workable for me ( but could easily see monstrous ' paper losses' if the crash is equal to previous epic crashes of history ) ( 2011 was only a nasty correction .. not a real crash )

    also t DO actively monitor my holdings , simply because i have nothing better to do until 2020 ( and maybe until 2022 and after ) ( i was forced onto a disability pension ) , if you are busy generating an income , that is probably a good place for your major focus .

    apart from joining selected ( by YOU ) DRP plans i can't see and obvious tweak of improvement ( until this is crash-tested ... a crash might cause disarray in one or more fund management teams )

    i hold HHV ( now PIA )and was quite happy with Peter Halls contrarian selections and timings , but others weren't and expected big returns ALL the time .

    good luck ..
     
  10. Strawbs

    Strawbs Member

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    Thanks again for your comments @twisted strategies.

    As I like to put my portfolio on auto-pilot: I have joined the DRP plans for AFI and ARGO along with others which offer such in my "20% satellite bucket" with those that pay dividends going into the Trust bank account where they stay until I do another purchase/re-balance every 6 months. The exception to this (as touched on above) would be when the markets again take a full and I will then jump in to get some, what will be in the longer-term, cheaper purchases.

    As @twisted strategies suggest, this does require being able to 'shrug and smile' as you see you paper balance full but also knowing things will come back up.
     
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  11. twisted strategies

    twisted strategies Well-Known Member

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    in your 15 year investment time-frame you could reasonably expect the share market to drop below 40% of current levels twice , hopefully one soon ( within the next 3 years ) and one in the middle of your plan to give you an opportunity when wiser and more experienced , but along with those drops you could reasonably hope for the ASX the approach pre-GFC highs ( and maybe beyond )

    but until you need to sell-down ( or out ) the share price is not as important to you as divs paid out , regularly , and there will be ups and downs there as well .

    the important thing is to be comfortable with your plan ( or be willing to change it if a better way can be found )

    high profile gurus are full time market participants ( earn the bulk of the money from the share-market ) you , having an income from outside the market will have more choices , but likely less share market gains , not a bad thing in every case .
     
  12. twisted strategies

    twisted strategies Well-Known Member

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