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ETFs & Portfolio Construction

Discussion in 'Exchange Traded Funds (ETF)' started by TMK, 24th Oct, 2010.

  1. TMK

    TMK Member

    Joined:
    24th Oct, 2010
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    Location:
    Australia
    Hi All,

    It doesn't go a day in the newspapers without seeing an article on exchanged traded funds.

    So interest is out there, but how are people using them in their portfolios?

    As a core? As a satellite? Portfolio completion? Cash equitisation? Active trading? Portfolio tilts?

    If you use them, let me know how and why?

    TMK
     
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  2. Waimate01

    Waimate01 Well-Known Member

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    26th May, 2008
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    Location:
    Sydney
  3. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Location:
    SE Queensland
    I think Australia is behind in Index funds and ETFs and Australians have not yet warmed to this form of investing.





    Johny. :(
     
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  4. Chris C

    Chris C Well-Known Member

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    Brisbane, QLD
    Core.

    Why? Because I don't have the capital base to justify investing large amounts of time, energy and money researching companies that are worth investing in when I can by a diversified portfolio for a very modest fee and get back to my day job where I yield a much greater return from my time.
     
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  5. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Chris,
    Do you mind sharing what ETFs you use.



    Johny. :p
     
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  6. Chris C

    Chris C Well-Known Member

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    GOLD and STW at the moment.

    Planning to expand, will probably add to my position in STW if there is any significant correction in the next 3 - 6 month (I'm overweight in GOLD at the moment - I'm not selling, I'm just not buying either) and will also look to diversify internationally so I might pick up some ETFs like IEM, IOO, IBK.

    I think the next 50 years will be the years or world economic convergence. So from my perspective it makes sense to have a large chunk of one's portfolio abroad.

    I have even considered a position in ETFs like MAM and RSR as they might be a good play if you think western worlds will attempt to use inflation to debase their debt obligations and jump start their economies.

    That said I'm still mostly in cash, one because I think the prospect of downside risk in most markets is still too high, and two because my business is going through an expansion phase so it's good to have cash on hand at the moment.

    I still think the best place to invest your money is always in yourself.

    :D
     
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  7. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Surely, now would be a good time to buy international indices. A Canadian site suggested that I have 'too much local content'. (66% Oz). Half the world's companies are still US held.

    Metals and mining ETFs would require a good knowlege of the mining sector. I guess if you are in gold, then you know more than me. Are they good long term?



    Johny.
     
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  8. Chris C

    Chris C Well-Known Member

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    I don't think this is "surely" anything when it comes to investing in the future. I think that today is "better" than 12 months ago, but that's all I know.

    Personally I think there is probably more downside risk for the AUD in the long run than upside relative both the developed world and the emerging world. So my personal opinion is that yes now is a reasonable time to be buying abroad, and you are probably more likely to find better value investments than you will find in Australia.

    Yes but what's the future growth prospects of those companies? Will their market share begin to be gobbled up by emerging market companies? or will emerging markets expansion grow the pie enough that companies in both markets will prosper going forward.

    The secret at the end of the day is to buy good businesses, wherever they are located. Businesses that are constrained by location need to have the local economy assess.

    I bought GOLD back in 2008 because I didn't like the strategy central banks and governments were using to solve the economic problems. I still don't like their strategies.

    I have a position in gold as an insurance policy against significant currency debasement more so than an investment to make money.

    That said I think most commodities have a bright future just based on supply constraints and the increasing demand looking forward 5, 10, 20 years - plus they have the added benefit of being more protected from inflation which could be problematic in the future depending on central bank policies.
     
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  9. twisted strategies

    twisted strategies Well-Known Member

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    Location:
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    at the risk off a 'super bump' ( 9 years is a bit of a jump in time )

    i currently hold

    VAS ( my largest ETF by $value )

    VHY

    QFN

    IHD

    SYI ( has been sold down to take some profit , and added to later in a dip )

    HVST

    MVB ( a fairly recent entry )

    and arguably AOD ( if you class dedicated 'market making as a deciding factor )

    i have bought and exited ( in profit ) SLF and IEM where they failed to fill my requirements

    the combined $values of the ETFs is less than 8% of my holdings ( roughly equal to my hybrids holdings )

    i have avoided physical commodity ETFs preferring to buy producers of such commodities ( like NST , EVN and BPT )

    after the adventure in IEM i have resisted international ETFs until i see a resolution of the global debt overhang ( suspecting a credit squeeze must happen eventually )

    ETFs i am considering currently ( but possibly not buying .. yet) are MVW and QPON

    i do like physical metals , but absolutely prefer them in my physical possession ( 'under the mattress so to speak ) i see them as a portable 'last resort' asset
     
  10. bundy1964

    bundy1964 Well-Known Member

    Joined:
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    Posts:
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    Location:
    Adelaide, SA
    Smsf
    Gear 35.4% DRP
    Hvst 27.57% 50% DRP
    Hvsjoe 0% was equal with Hvst when purchased.
    Hvsso2 0% smaller holding that will eventually convert to fully paid Hvst shares.
    Umax 15.34%
    Ymax 8.06%
    Listed shares 13.63%
    Almost 2/3 of my Hvst holdings isn't shown in %...

    Outside Smsf
    HVST
    IAA
    MVB
    WDIV

    Thinking if gold falls of adding GOLD or go with EVN as it has income.

    Not a fan of MVW, I don't buy stuff just because it's cheap.

    QPON is a low income play that should be capital stable... pass.

    SLF, VAP, WDIV, YMAX. IHD, VHY and RDV are on the SMSF radar.
     
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  11. twisted strategies

    twisted strategies Well-Known Member

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    Location:
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    MVW isn't particularly cheap ( imo) , but after spending a bit time digging through the strategy they use , i could see how the 2 monthly re-balancing could work , in tandem with the equal weight factor .

    and i can see how that variation of 'smart beta' could work out of sync . with other 'smart beta ' ETFs ( helping smooth the bumps in income .)

    QPON caught my attention because it contained an array of DISCLOSED ( unlike most rivals ) interest-bearing debt and the debt is variable rate ( i see BBSW rates rising in the next 3 years )

    QPON would be bought on a ( near ) certain income stream play with a slightly possible upside should rates finally rise ..

    and ideally i would like to double my exposure the interest-bearing securities , at sensible risk v. reward ratios .QPON MIGHT be a way , but time will tell

    one reason i exited SLF ( but not the main one ) was that i had selected the best liked ( by me ) REIT plays at good prices .

    that is CMW ( top by $value ), INM ( classed as an REIT ) , RFF , SCP , BWP , ABP , MGR ( @ $1.10 ) , SGP .( and a few smaller players )




    i hold EVN and NST at no cash risk and some other gold miners that might pay divs in the near future ( and OZL which is more a copper miner now )