Ideal Passive Income Portfolio for Retirement - advice from forum experts

Hi All

As you might know I am thinking of transitioning some of my wealth from property into other asset classes. I have done reading and it looks like that you can possibly get returns of 5-7% per year.

Assuming that the draw draw down is 4.5% to 5% per year...what in your opinion would be an ideal low maintenance ...forget and set portfolio. I have read about Vanguard..Betashares..etc. If you say invested 1-1.5m what in your opinion would be an ideal portfolio for retirement income and to stay in pace with inflation?

Call out to the experts ( I am mere property guy...calling the gods of Indexed funds and Manage funds in particular order..sorry if I missed anyone..) :

@HomePage @Redwing @Nodrog @oracle @Frank Manno @therealAusting @Il Falco @SatayKing @Heinz57 @Austing @Falcon

Would be good to get a split by % of your ideal portfolio - ie.
30% Vanguard Australian Shares (VAS)
30% Vanguard High Yield Australian Shares (VHY)
30% Vanguard MSCI International Shares Hedged (VGAD)
10% Vanguard Bonds (VBND)

The above is an example only..would it be good to get other funds managers in there it diversify funds managers and not put it with one?

Look forward to your responses....

 

As far as I know, if you are not a business member you can only tag 5? So, tagging @therealAusting @Il Falco @SatayKing @Heinz57 @The Falcon

And following the thread with interest

 

Few here are qualified (or probably willing) to give specific advice. Your risk profile and circumstances are unique to you. All the information you require is already here in various threads on this forum. Make yourself a coffee or grab a beer and start reading! If you are prepared to put in just a little effort, reading various threads the rewards will be worth the time. You can do it!!

 

I have read them...but would be good to hear from people who have done it......

As for specific advice that sounds to be the words which FP use....I would much rather learn from the people mentioned...their knowledge is real world...similar to mine in property ...a lot of them have been doing what they have been doing for over 10 years or even more..some even retired before 50 from what I understand.

I am not the only one interested...guys like @Perthguy are also interested....

 

To keep it as simple as possible I would say

40% Vanguard Australian Shares (VAS) - Gross Yield 5.5% (MER 0.14%)
40% Vanguard MSCI International Shares (VGS) (Unhedged) - Gross Yield 2.75% (MER 0.18%)
10% Vanguard FTSE Asia ex Japan Shares Index (VAE) (Unhedged) - Gross Yield 2.60% (MER 0.40%)
10% Cash

I would be happy to accept slightly lower yield on VGS and VAE because what you miss out on yield you make it through Capital growth. So you have nice 50% portfolio from overseas stocks.

Cheers,
Oracle.

 

Boom boom...noice...thanks Oracle.

Have you got a similar portfolio or are you more towards growth at this phase...I think you are quite young still?

 

Very similar..but still it's a work in progress. I do have some LIC to smooth dividends and few direct share holdings. It's like with property if you knew at the start of your journey what you know today your property portfolio would look very different to what it does today. You learn from the journey along the way. I am not unhappy with my current portfolio but I think I can certainly simplify things more. I still have time on my side since I am in my late 30s.

Remember there are only 3 rules

1) Go indexing with lowest fees
2) Diversify. So have overseas stocks
3) Have large portion of your portfolio in stocks. Over the long term stocks have provided superior returns than other asset class. (Just to clarify I am talking net passive returns which is after all holding costs and without leverage)

Cheers,
Oracle.

 

Hi @sash,

What is your planned age to retire and what structure are you likely to be holding the assets in please?

There are a number of other factors also that may impact what’s more suitable. But those above are a start.

 

Assume now....as this will form only less than 10% of my portfolio...more for steady CF.

I would prefer to hold via company and then distribute to approrpiate people. Franking credits via prepaid tax should give some level relief to beneficiaries via tax? Am I correct here?

 

So you’re under 60 and hence SMSF Pension not an option and / or you’ve already maxed out Super contribution Cap?

 

Very nice indeed...I agree.

Based on your experience what sort of % can you expect in returns (I realise in some years it will be lower due to market)....what is the split of income to growth...4% income vs 2% growth?

 

Nah....Super is just for back-up/ play money...this is outside all that.

I am only 50 for year before access to super....can't wait till then....

Have not maxed out super but plan to get to about $1m by 60

 

@sash very tempting to throw my thoughts into the ring but I agree with @unwillingwillis. I never advise others what to do with their money. First because I have no qualifications at all and, second, I don't know the person and, third, I am not across Vanguard or products from other providers.

For myself, if I buy I may say what I've done AFTER the event but certainly not before. My holdings are simple in my view. LIC's (AFI, ARG, BKI, DJW, MIR, MLT, PIC, PMC, WHF), SOL, STW (the only ETF I hold) and shares in direct holdings (banks, WES, AGL, CSL) from the days when I thought I knew what I was doing. That generally reflects the structure of my personal holdings and the SMSF. I do administer other portfolios but I don't "own" them so I consider them in a different light.

My approach is always to keep things as simple as possible, buy according to either my gut feeling, if a share is attractive or by throwing caution to the wind because I wish to increase my income - I do a fair bit of the latter! Right now I'm cautious. Just something about all the froth at the moment which is making me uncomfortable.

Having said that, I still drip feed $$'s in but not great amounts, an example being buying DJW shortly before Christmas, which in essence means I have invested all up some 25% of my available investing funds compared with last year.

My attitude is gathering shares in those LIC's which have been around for a number of years, whose management style resonates with me and which I think will be around for many years to come irrespective of the fluctuations of the overall market. As for any new kid on the block, as if I could give a toss about them.

 

About 4% income (including franking) and 4-5% CG

9% is long term average return (Income + CG) from stock market.

If you plan to use company structure than VTS (US Total Market Index - MER 0.04%) is also an excellent choice instead of VGS. It is one of the best stocks to own for capital growth. Yield is around 1.5%-1.75%. Below is chart of S&P500 which is a subset of what VTS invest in.






Cheers,
Oracle.

 

OK ta...I am not looking for specific advice...just to learn from the masters and own my own destiny.

I do like your approach on LICs.

Incidently are you retired now yet?

 

Yes, I am retired. Have been for a while and it's no secret I am closer to 70 than 60. Nup, not telling

 

Quite a list of investments @SatayKing, may I ask when you first got the ball rolling in lic investing I'm guessing you only got a couple lics to start with and then built from there both your investment strategy as well as your lic positions?

 

I would add @Snowball to the list. A very young person and already retired. His blog strongmoneyaustralia is awesome too.

 

Now ya talking would I would hear what he has done...

 

In 1987, AFI. And, yes, I still hold those shares from the first purchase. I mentioned the circumstances in the LIC thread but please don't ask me to find it. Searching forums is a total pain for me.

Funny thing now, those share have now cost me absolutely zilch. I've recovered all of the purchase price and more through dividends I've received from them. I reckon they are now free carry.

Where I am placed now is mostly due to pure dumb luck and some strong financial discipline as I have previously stated.

One other thing, after allowing for the account-based pension, my SMSF is getting towards 15% in cash I reckon. That could come in handy at some stage. Stupid Governement. Wanted people to consume super in retirement but now with a portion a of my SMSF in accumulation phase, it's become wealth creation, whatever one's definition of that may be, and highly likely will form part of my Estate. Unintended consequences and all that.