Assett Class Spread.

Currently I am spread accross the three sectors as follows:

70% Property
25% Equities both direct and MF
5% Cash

I actually thought I had a reasonable sized Share portfolio but now seeing that they only make up 25% of our net wealth I am starting to think I should expose myself a little more.

What sort of ratios do others hold in their portfolios?

Any comments?

Thanks team,

 

Good points Sim although I am not so concerned. My total LVR is only about 35% at present. I can borrow with no problem however do not wish to raise my LVR to the 70% or 80% level until my wife finishes her studies and our income rises.

But taking it to 50% for either class is neither here nor there.

So my question remains - Do people think 25% is underweight for sharemarket investment?

 

I'm about 1.5:1.0 (Property to Shares).

 

Simon,

You're underweight in Gold. It has low to negative correlation with other asset classes which means that it gives diversification benefits during high stress periods such as now.

http://www.australiangoldinvestment.com/why_def.asp

You don't think this is a high stress period? Well, the clouds are gathering and time will tell. Here's just a couple of POV from one source, but there are heaps more from other sources if you want me to link them:

http://www.peakoil.com/fortopic1514.html
http://www.peakoil.com/fortopic14879.html

Cheers,
Michael.

 

I already have plenty of gold around the missus neck

Interesting articles. Some are a bit reminiscent of Y2K:

Here are my priorities:

1. Get out of debt.
2. Get out of the city. ( I just moved from San Diego)
3. Put your money in precious metals.
4. Sell your house and get someplace smaller and cheaper while you have the equity. Housing prices are going to collapse big time.
5. Upgrade your disaster preparedness kit.
6. Try to find work where you don't need a car to commute.
7. Make capital investments to improve your energy efficiency.
8. Stay away from "leisure activities" jobs. Luxury fuel use vehicles, boats, RV's, although RV's may be the home for a lot of people.
9. Surround yourself with people who you can count on. Not just trust, but who have abilities..MacGyver types.
10. Join peak oil.com

I am not keen to hold much gold due to lack of yield. But thanks Micheal.

Cheers,

 

Sim,

Not enough... I'm taking a punt on the markets holding strong for the next 6-12 months so am maximising my leverage in equities. If you read that first article it says that "A portfolio which is optimal for good times (non-stress periods) is not one which is optimal for bad times (stress periods)". So, I'm gambling on this being a non-stress period so I can optimise my returns in the equities markets.

The thing is though that others are starting to perceive this as a "stress period" which is driving the gold price up. So, to optimise my return in this period I should optimally be holding 12% gold: "The “optimal” portfolio allocation to commodities was 3% during the full-sample period and 12% during the stressed period."

I've looked into purchasing hard bullion out of the Perth Mint and its readily done:

http://www.perthmint.com.au/gc/depository/depository_layout3.asp?file=precious

I like the idea of the certificated service whereby you can buy gold but have them store it for you. I've got an LOC for $100K just sitting there at the moment and am contemplating putting a large portion of this into gold.

My current asset allocation is about 50:50 property and shares. My property is all my PPOR at $800K and shares of around $700K. I hold no IPs currently and believe the property market will stagnate for a few years yet. I'm not into +ve CF property so will hold my dollars in reserve (maybe gold) until the market improves and then buy some CG properties.

Cheers,
Michael.

PS Oh yeah, I also have about $60K in cash now too, my emergency buffer and its parked in the offset account against the PPOR...

 

Sim,

This article might paint a pretty picture to answer that question. You'll like it because it uses statistical analysis based on correlations:

http://www.zealllc.com/2004/goldoil4.htm

Note that the gold/oil correlation is statistically significant historically. Then consider that the oil price is currently around $60 a barrell. Now, draw a line across on the chart to what this might translate to in gold price....?

OK, maybe US$1000+ an ounce is a little on the "high" side. But I've read a lot of reports lately suggesting US$700-$800 is achievable and its currently at US$500. So, it has the potential to be a high yielding asset in the short term. Add the diversification benefits and it is something I'm looking into SERIOUSLY at the moment.

Cheers,
Michael

<edit> Link to breaking news article today:

Gold breaks US$500 barrier
http://www.theaustralian.news.com.au/common/story_page/0,5744,17402810%5E1702,00.html

 

Lets get back to the original question,

I'm at,

7% cash
17% shares
76% property

Its actually surprising when you work it out.
I'm leveraged off the property to 80% but am applying no leverage against the shares. Maybe that is the next step? suppose that what many are doing with LE ( leveraged equities)? Margin lending?

I've got a long way to go to get to 50/50 property and shares!

MJK

 

how much cash to hold

It's interesting that nobody is holding much cash (percentage wise at least)

Of course even 5% can be a substantial sum if your net asset base is large.

I've been reading that some of the more bearish managed funds out there are at around 60% cash atm. Of course that's not exactly a fair comparison, but what do people think is an appropriate cash holding to permit you to take advantage of opportunities but without too great an opportunity cost?

Our cash holdings are under 10%.

 

MJK,

That is exactly what I use LE for myself.

Cheers,

 

MJK,

OK...

Specifically:

Property 56% ($800K)
Shares 40% ($580K)
Cash 4% ($60K)

I'm pretty happy with the mix right now but have spare income and spare equity. So, when the property markets look like they've stopped tanking I'll put that equity and income to work servicing some IP loans.

Cheers,
Michael.

 

Cash 3%
Property 65%
Shares 32%

 

I suppose us property investers consider the shares are liquid enough?

MJK

 

Shares 68%
Property 28%
Cash 4%

 

Gold breaks US$500 barrier >>>> and oil is down so we've got clear divergence between this two....right now.
Many investors belive that gold is an indicator of a weak dollar.
Gold has been used by hedge funds as a inflationary hedge and also to protect their dollar longs.
So buying gold ( long ) is a temporary convenience and a hedging tool...

 

Property 65%
Shares 34%
Cash 1%

gee Gazza your cashflow is much healthier - areya good for a loan