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ETF portfolio

Discussion in 'Exchange Traded Funds (ETF)' started by jomond, 24th Feb, 2008.

  1. jomond

    jomond Member

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    I'm pretty new to the whole portfolio management thing. I've invested in Vanguard in the past, but I believe I could do better using ETFs. I've come up with a buy-and-hold portfolio that I intend to keep for more than 15 or so years. It's based on the available ETFs on the ASX, with the aim of being as diversified as possible:

    SPDR S&P/ASX 200 index ETF - 50%
    iShares MSCI EAFE Index ETF - 20%
    iShares S&P SmallCap 600 ETF - 20%
    iShares MSCI Emerging Markets Index ETF - 10%

    The weighted MER on this portfolio, which is 0.325% beats Vanguard's equivilent high growth index fund by 0.575%. I just want to get some feedback on the asset allocation. Is this a stronly diverified portfolio? Any comments would be good =).
     
  2. Glebe

    Glebe Well-Known Member

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    Would be interesting to see how AUD/USD fluctuations affect the value of your portfolio.
     
  3. Rod_WA

    Rod_WA Well-Known Member

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    I reckon it's a great looking mix.

    But why choose the MSCI EAFA fund? As far as I know, it invests globally ex USA, so you don't get any USA stock exposure. Is this a decision based on current US recession fears? But you said that you'll buy'n'hold for 15 years, so why not buy the US market while it's gloomy and reap the benefits of recovery?
     
  4. The Stig

    The Stig Well-Known Member

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    Apart from STW I don't know the other ETF symbols. Can you share them please?

    You don't have any property ETFs there. Why not?

    I can only see the Emerging markets out performing the rest of the world for the next few years. I would have more than 10% devoted to emerging markets myself.

    Cheers
    The Stig
     
  5. jomond

    jomond Member

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    I did a little hypothetical with foreign exchange rates. Assuming I had invested in 2007, the return would have been 9.4% after management fees (ex brokerage). Taking into consideration of the Australian dollar, this would have reduced the return to 6.5%.

    Both the MSCI EAFE fund, and the S&P SmallCap 600 I think is a good representation of the world markets. The MSCI EAFE represents the developed markets in the world, while the S&P smallcap 600 represents the US markets. It's also kind of a balance between small and large cap stocks internationally. The decision is based on a buy and hold strategy, and not because of recession fears, even though US small cap stocks have been doing fairly poorly during the past year.

    The ETF symbols for the ASX are:
    iShares MSCI EAFE Index Fund - IVE
    iShares MSCI Emerging Markets Index Fund - IEM
    iShares S&P SmallCap 600 - IJR
    SPDR S&P/ASX 200 index ETF - STW
    These ETFs are run by StreetTracks (SPDRs) and iShares (iShares ETFs for Australian Investors), both reputable ETF companies in the US.

    I didn't put in any property ETFs because they focus less on overall growth, and give out larger dividends in comparison to equity based ETFs. I think in the long run, it is better to have growth than dividends, if only for tax reasons.

    I have heard that the emerging markets will be doing very well in the future too, but they are still very risky. What percentage would you invest in emerging markets?
     
  6. The Stig

    The Stig Well-Known Member

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    I would do up to 20% in the emerging markets myself. But no less than 10%.

    I like to include property and commodities other than just shares. Between the 3 different categories, I have never seen all three going down at the same time (but someone will probably reply, in 1930 all 3 went down at the same time). As property and shares have gone down recently, commodities have gone up.

    I like to spread between property (international and Australian), Australian shares (STW), emerging markets (China & Brazil), oil and oil drillers, alternative energy (solar & wind energy manufactures), agriculture (futures traded with ETFs), agribusiness (businesses riding the rising soft commodities), metals (futures traded with ETFs) and miners (riding the rising commodities).

    Split between US and Australia accounts so I can have Aussie and US dollars. I would like some Euro dollars in the mix somehow too. Haven't put any thought into that though.

    There are so many good Australian companies I would like to own. I am better off buying the STW or the Top 50 ETF (what ever that is).
     
  7. Compleks

    Compleks Well-Known Member

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    Interesting thread guys.

    I've been considering buying into some ETF's myself recently, so it's good to see how you more experienced investors diversify your portfolios.

    Cheers.