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Which ETF to choose?

Discussion in 'Exchange Traded Funds (ETF)' started by BuffettTheDog, 26th May, 2011.

  1. BuffettTheDog

    BuffettTheDog Active Member

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    I have some money to invest. I already have holdings in LICs, but I am a bit overwhelmed by the variety of choice in ETFs. Some ones which stick out for me are ASX 200, S&P 500, S&P Asia 50 and the S&P Global 100. I have no idea which to buy. Assuming purchasing multiple is best, I have no idea how to weight my allocations (i.e. 20% to this, 40% to that, etc.) Any advice?
     
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  2. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Nobody can predict the future so, nobody can predict which indices will be best in the future. Work out your risk tolerance eg. conservative, balanced, growth. Use a bond index for your disposition to risk (balanced= 40-50% bonds). Your choice of equal weighting of all ETF indices or heavy in one area (eg. BRICs, Gold, Resources).

    I wish you all the luck in the world.
    Try ETF Research and Strategy Australia | ETFmate



    Johny. :)
     
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  3. BuffettTheDog

    BuffettTheDog Active Member

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    Thanks for the advice.

    P.S. I believe my risk tolerance is currently high growth because I'm still quite young. :D
     
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  4. Johny_come_lately

    Johny_come_lately Well-Known Member

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    I nicked this portfolio off Dan Bortolotti's site in Canada. :D Underneath is the Aussie version for high growth( 10% Bonds)


    The Über–Tuber
    ---------------

    For something ultra sophisticated, consider this portfolio based on the academic work of Eugene Fama and Kenneth French. The Fama-French research demonstrated that value stocks and small-cap stocks have historically delivered higher returns than the overall market and is the foundation of the funds created by Dimensional Fund Advisors.

    This ETF portfolio, based on similar principles, is discussed in detail in An ETF Portfolio With Added Dimension, first published in Canadian MoneySaver.

    Canadian core equity 12%
    Canadian small-cap equity 8%
    US core equity 8%
    US value equity 4%
    US small-cap equity 4%
    International core equity 8%
    International value equity 4%
    International small-cap equity 4%
    Emerging markets equity 4%
    Real estate 4%
    Short-term bonds 40%
    ____________________________________________________

    Aussie Version.

    Australian core equity 18%
    Australian small-cap equity 12%
    US core equity 12%
    US value equity 6%
    US small-cap equity 6%
    International core equity 12%
    International value equity 6%
    International small-cap 6%
    Emerging markets 6%
    Real Estate (REITs) 6%
    Bonds 10%





    Johny. :)
     
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  5. BuffettTheDog

    BuffettTheDog Active Member

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    Awesome, thanks! I will take a close look at this.
     
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  6. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Hey Dog,



    Here are the results from July 1996 through April 2011:

    --------------Annualized----Total-----Growth-----Standard
    ----------------Return----- Return-----of $1------Deviation
    Über-Tuber------6.36%-----149.53%---$2.50-------7.82%
    DFA Portfolio-----6.42%-----151.57%---$2.52-------8.14%





    Johny. :)
     
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  7. BuffettTheDog

    BuffettTheDog Active Member

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    Nice, thanks a lot for the help.
     
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  8. Tropo

    Tropo Well-Known Member

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  9. Johny_come_lately

    Johny_come_lately Well-Known Member

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  10. twisted strategies

    twisted strategies Well-Known Member

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    OZG bought Dec. 2011 @ 15c ( currently 16c )

    30/06/2016 Final 0.250 AUD 100.00 08/08/2016 09/08/2016 25/08/2016
    31/12/2015 Interim 0.250 AUD 100.00 01/02/2016 03/02/2016 19/02/2016
    30/06/2015 Final 0.750 AUD 100.00 07/08/2015 11/08/2015 27/08/2015
    31/12/2014 Interim 0.750 AUD 100.00 06/02/2015 10/02/2015 24/02/2015
    30/06/2014 Final 0.750 AUD 100.00 07/08/2014 11/08/2014 25/08/2014
    31/12/2013 Interim 0.750 AUD 100.00 28/01/2014 03/02/2014 17/02/2014
    30/06/2013 Final 1.000 AUD 100.00 02/08/2013 09/08/2013 15/08/2013
    31/12/2012 Interim 0.500 AUD 100.00 14/01/2013 18/01/2013 01/02/2013
    30/06/2012 Final 0.800 AUD 100.00 02/08/2012 09/08/2012 16/08/2012
    31/12/2011 Interim 0.200 AUD 100.00 25/01/2012 01/02/2012 15/02/2012

    please note these are normally a fraction of a cent

    this LIC is WA focused and in small/mid caps ( an active manager )


    WAX bought September 2011 @ 70c ( currently $1.55) i have recovered my cash investment here )

    WAX WAM RESEARCH LTD ORDINARY
    Change
    [​IMG]

    Balance Date Dividend Type Cents per share Ccy Franked % Ex-Dividend Date Books Close Date Pay Date
    30/06/2016 Final 4.250 AUD 100.00 17/10/2016 18/10/2016 28/10/2016
    31/12/2015 Interim 4.250 AUD 100.00 13/04/2016 14/04/2016 29/04/2016
    30/06/2015 Final 4.000 AUD 100.00 12/10/2015 14/10/2015 23/10/2015
    31/12/2014 Interim 4.000 AUD 100.00 18/05/2015 20/05/2015 28/05/2015
    30/06/2014 Final 3.750 AUD 100.00 13/10/2014 15/10/2014 24/10/2014
    31/12/2013 Interim 3.750 AUD 100.00 11/04/2014 17/04/2014 30/04/2014
    30/06/2013 Final 3.500 AUD 100.00 18/10/2013 24/10/2013 31/10/2013
    31/12/2012 Interim 3.500 AUD 100.00 08/04/2013 12/04/2013 19/04/2013
    30/06/2012 Final 3.250 AUD 100.00 08/10/2012 12/10/2012 19/10/2012
    31/12/2011 Interim 3.250 AUD 100.00 10/04/2012 16/04/2012 23/04/2012

    a very active manager , opportunistic ( to be polite )


    WIC bought in July 2011 ( and added extras at times ) av SP 99c ( currently 88c ) will consider adding extra 75c and under .


    WIC WESTOZ INV LTD ORDINARY
    Change
    [​IMG]

    Balance Date Dividend Type Cents per share Ccy Franked % Ex-Dividend Date Books Close Date Pay Date
    30/06/2016 Final 3.000 AUD 100.00 08/08/2016 09/08/2016 25/08/2016
    31/12/2015 Interim 3.000 AUD 100.00 01/02/2016 03/02/2016 19/02/2016
    30/06/2015 Final 4.500 AUD 100.00 07/08/2015 11/08/2015 27/08/2015
    31/12/2014 Interim 4.500 AUD 100.00 06/02/2015 10/02/2015 24/02/2015
    30/06/2014 Final 4.500 AUD 100.00 07/08/2014 11/08/2014 25/08/2014
    31/12/2013 Interim 4.500 AUD 100.00 28/01/2014 03/02/2014 17/02/2014
    30/06/2013 Final 6.000 AUD 100.00 02/08/2013 09/08/2013 15/08/2013
    31/12/2012 Interim 3.000 AUD 100.00 14/01/2013 18/01/2013 01/02/2013
    30/06/2012 Final 3.000 AUD 100.00 02/08/2012 09/08/2012 16/08/2012
    31/12/2011 Interim 1.000 AUD 100.00 25/01/2012 01/02/2012 15/02/2012

    an active manager with WA focus

    now these guys/gals ( various managers ) can spin figures how they like

    WIC and OZG are allegedly struggling ( but a WA mining boom might easily turn that around )

    these are the figures that count to me ( and also that the LIC survives the long term )
     
  11. Dian2

    Dian2 Member

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  12. twisted strategies

    twisted strategies Well-Known Member

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    remember ,

    ETFs can be a very liquid basket ( maybe a bucket would be a better description ) (LOL)

    timing is important as you can target an index like today , or a sector ( when the big 4 banks or Telcos were all nervous )

    definitely worth the extra research if dabbling in LICs or ETFs

    cheers !
     
  13. Hodor

    Hodor Well-Known Member

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    Academics and portfolio theories - They all sound good and have a whole lot of fanciness behind them, just don't get blinded by the bright lights and sparkle.

    Over the same period TSR for;
    the S&P 500 was a tick over 6.9% p.a.
    the All ords was 9.72% p.a (plus franking credits)

    Sure your standard deviation resulted in far more "risk" as the academics see it. However, if you are the type who doesn't confuse volatility with risk then you might look at things differently.
     
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  14. twisted strategies

    twisted strategies Well-Known Member

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    my favourite bugbear is the way of calculating returns ,

    i prefer straight div.( or interest ) per annum , with a favourable consideration if there are franking credits ( some of my holdings have partial or irregular franking credits .

    i am more interested in income ( than income + SP gain/losss + any franking )

    if the share price drops but the income return is ( say 8% ) wouldn't extra shares cheaper be a viable option ( instead of crying over a sliding sare price ) ??

    but please use your own guidelines in planning
     
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  15. Hodor

    Hodor Well-Known Member

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    Exactly
     
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  16. twisted strategies

    twisted strategies Well-Known Member

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    obviously buying into a dip should NOT be an automatic response but it should be considered , as an option .

    i held ( the now acquired) EPX and bought down into the big price fall and by the time of the take-over was in such a nice position ( 12+% pa in divs ) i was rather sad to see it go , despite i was being offered a healthy premium on my share price average .

    BUT this doesn't always have a happy ending , it is an art to select which investment to pump the extra cash into , and when to make other choices

    probably why i never warmed to 'share price averaging '

    What is 'Dollar-Cost Averaging - DCA'
    Dollar-cost averaging (DCA) is an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. The investor purchases more shares when prices are low and fewer shares when prices are high. The premise is that DCA lowers the average share cost over time, increasing the opportunity to profit. The DCA technique does not guarantee that an investor won't lose money on investments. Rather, it is meant to allow investment over time instead of investment as a lump sum.

    i would much rather time ( or at least try to ) extra buys in a share holding ALSO i like to be flexble in my parcel buying ..... say MQG drops below $25 again ( in my life time ) next time, i would buy DOUBLE the $value , in 2011 in bought MQG in fixed number ( of shares ) parcel all the way down to $20 in hindsight a major error of judgement .

    yes buying then was a winning move but i left a lot of the bonus gain on the table ( even if only taking into account the bonus SYD shares that would be disbursed later )
     
  17. austing

    austing Well-Known Member

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    Great post which goes to the heart of how I view shares / ETFs / LICs. That is, for their income. And the cheaper I can purchase that income stream (eg fear causes price drop rather than Coy gone bad) the happier I am. Most investors focus on share PRICE hence volatility causes them all sorts of heartache at times and results in poor decision making. The mental shift of looking at share INCOME rather than PRICE makes for a much smoother and rewarding ride both financially and psychologically.

    That said beware the yield trap. Yield at the expense of capital albeit tempting for high income NOW will generally disappoint over the longer time. Over time the best dividend payers will tend to be those that also experience good capital growth.
     
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  18. austing

    austing Well-Known Member

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    DCA can potentially be modified to work well especially with diversified products like ETFs and LICs which are unlikely to go bust like individual companies.

    The best buying opportunities will occur during longer duration (months, years) bear markets and the like rather than short term (days, weeks) dips. Hence in times of gloom one can increase the DCA amount. Perhaps part cash and part debt. Whereas during times of excessive optimism the DCA amount can be reduced or even stopped if irrational exuberance becomes blindingly obvious. During more normal times just use available cash.

    That said, I tend to keep some dry powder in cash for shorter term opportunistic dips. In the recent sideways market buying the dips has had greater probability of success. But that won't always be the case. There's no guarantees when it comes to timing. Sometimes the opportunities just don't arise with the next dip being higher than the last one. A "know nothing" DCA investor can often outperform some of us who think ourselves more knowledgeable and try to time the market. In fact for many investors automating the DCA process is the better option as it protects us from ourselves.

    What I have done at times in the past is to use NEW cash to periodically invest (bit like DCA) through LIC discounted SPPs and rights issues etc plus some general buying on market. Dry powder for major opportunities in crashes / bear markets is often in the form of debt such as a LOC against property. It's generally the only time I use leverage.
     
  19. twisted strategies

    twisted strategies Well-Known Member

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    is DCA once you remove the strict discipline rules ( say invest $10K in ??? every June 30th ) still DCA ??

    as a core logic to base a strategy on it has many strengths

    but so has invest $10K in ??? every time it dips under ,say, $10 ( regardless of once a decade or 6 times a year )

    having a plan ( but a reasonably flexible one ) is paramount

    but having some 'what if' options thought outin advance is important as well ( i doubt any of us are true market movers in our own right )

    i have a fast approaching deadline so large amounts of cash in the bank don't suit me ( until after the target date is past , after that my priorities may alter markedly )

    younger members will have more choices ( but that is not always easier to handle )

    i actively resist leverage , however shortly AFTER a big crash , i may re-assess that option
     
  20. austing

    austing Well-Known Member

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    Yes, as you point out ones stage of life and goals will influence these things. I tend to favour "periodic" investing to DCA at this stage of the life. Periodic opportunities include dips and discounted capital raisings etc. And even as a retiree (debt free) if another substantial crash occurred I would like in the past still continue to use a "conservative" amount of leverage to purchase heavily discounted future income streams. But it's the only time I would take advantage of debt.

    My approach is not about "predicting" what the market will do but always having a plan in place and being ready for opportunities when they arise. Hoarding cash for long periods of time is counter-productive. Hence why I tend to use debt in times of extraordinary opportunity.
     
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