Asset Allocation

I still tinker about with ARG, although there are plenty of worse investments out there and I keep reminding myself that, "the enemy of a good plan is the dream of the perfect plan".

 

Still nothing wrong with the likes of ARG, AFI. But they often trade at a premium with little guarantee they'll out perform the index. I no longer have an interest in checking NTA and don't like unnecessarily paying a premium. The likes of VAS removes those issues. As for LIC dividend smoothing that's of little benefit to us now given our circumstances. And easy enough to do yourself if needed.

I think also the shock of MLT merger with SOL in part played a role in all this. Less unexpected surprises and resultant negative tax outcome likely with VAS.

 

I will have to give my vote to the Nodrog approach. VAS / VGS and forget the rest. Looking at the last 7 years of investing in equities I would probably also be ahead if I had done a simple 50/50 split across those two and forgot about active and any other factors or tilts let alone market timing attempts.

Good thing is it only took me 7 years to get to this point. 6 years actually, as since this year started all capital allocated to equities has been split evenly between VAS & VGS. With the last 12 months allocation going into the 2 index funds I have am now sitting at 55% of the portfolio in index funds and just under 45% still with the actives I held onto. Even the few actives that I am still holding have been having mixed results recently and not many are consistently outperforming the index any longer. Will continue to only add new capital to index till the active part of the portfolio eventually becomes insignificant.

 

While not a perfect plan I continued with 'my good plan' by selling last lot of WAM & a parcel of WLE (both trading at a premium) & plonked the money straight into AUI trading at a discount, thus cheaper than VAS at present. Was this the perfect choice? Dunno but I'm okay with it & by selling WAM & a direct holding a few weeks earlier I now have 2 less holdings to bother about.

 

Plenty of worse investments than AUI that's for sure, old school low fee, low turnover, consistent dividend, trades at discount fair chunk of the time, lacks some liquidity but hey it beats some of the other active funds out there charging 1.1% and 15% management fee.

 

The liquidity thing is not something I've found an issue with but then I'm not chasing 20, 50 or 100 grand at a time either (unfortunately ).

 

Agree. AUI/DUI still a reasonable option. I'd wager they will be taken over / merge with something else sometime in the next ten years though.

 

Nooooo , hands off AUI .

 

Sums it up. 'Nuff said.

 

Don't let my lack of knowledge appear as if I was making a conscious choice about Dimensional.

One thing is certain, noone is certain of the value factor mean reversion. Eg Bitcoin's recent poor run won't result in me jumping on the bandwagon.

However, I am backing the Value factor in my portfolio based on probabilistic diversification. I will research Dimensional.

 

As a bit of an intro to DFA check out
https://www.optimizedportfolio.com/dfa-etfs/ (even the the article is really focused on their more recent ETF offerings/conversions).

There's some pretty useful content at optimizedportfolio.com - worth consuming.

Of course the other place to go is the PWI Website and the RR podcast / community (forum). Eg. Episode 131: David Booth: The First Index Fund, Competing Fiercely, and Keeping it Simple — Rational Reminder

DFA website too obviously.

Also, I posted this last week on another thread. Probably more entertainment value than research but interesting discussion none the less.

 

First up nobody needs to go beyond VAS/VGS and a little cash…but…

For me belief in market factor (cap weight equity risk premium) is required to understand other factors and their role in a portfolio.

Academic theory supports value and size premiums however we cannot guarantee that this will bear out in the coming decades even before implementation cost and tax….this is why I dont bet the house on these factors and only use mild tilts….positive skewness is a powerful force!

Ken French on Rational Reminder No.100 podcast might be worth a listen.

 

Nailed it.

 

Interested in your viewpoint at what time you would look beyond VAS/VGS?
Ie, if you had a $100k portfolio, you would do 50:50, if you had a $500K portfolio you would do 49:49:2, and if you had a $1m portfolio you would do 48:48:4, etc. Any positive outcome at $100k would be barely noticeable, and at $1m, any negative effect isn't going to dramatically effect the outcome? Do you think along those lines?

 

Nice year for both VAS & VGS

I'm still in the collecting stage though

 

Fixed.

 

End 2021 Update.

The big change is that Non-Super money has been transferred to kids – well at least in my mindset, legally/physically it will happen over an extended time frame. Kids are fully involved in decision making and it is now investing mainly in direct shares, agricultural land and operational businesses based loosely around farming and farming equipment, Little of the passive funds remain at this stage. This family business will fund our next nine years of living expenses until 2030 and preservation age is reached but the ownership has moved generations in my mindset. My role in this enterprise is overall capital allocation to properties, the operational businesses and direct share investments – I do not have an operational management role, this is handled by the kids and employees. I’m feeling totally re-invigorated having made the structural changes.

Our super money is in a SMSF – the objective is to live solely off the fund post 2030 and draw a minimum of 3x AWOTE (that would be a current monthly income of $22,644 and is our personal happy spot) Current SMSF balance is in the 5-10M range. Strangely, I’m excited that the level of capital and desired income presents a non-forgone conclusion with respect to inflation and sequence risk. A meaningful challenge to exercise the mind.

With the SMSF being sole source of funds post 2030 some minor allocation changes have been made. (I’m still not sure about the 2030 cash allocation)

Current SMSF position and mud map for 2030 Allocations.



I’m allowing myself a fair bit of flexibility of how I move between current allocations and target for 2030.

Its interesting to look back upon posts made in this thread and see how allocations have evolved and how those allocations stood up to market tests at the time. Pleasingly I don’t see a lot of changes in reaction to the market mainly changes in reaction to life stages.

Happy new year to all.

 

Are the agricultural land and operational businesses new to the family, or have they always been held?

 

New.

Hopefully in a few generations the descendants will answer the question as "yer, always been in the family"

The most robust perseverance of generational money I have observed is through substantial productive land ownership.

My parents had no assets and I grew up in housing commission. I can't deny there is a bit of
'changing the family stripes' desire driving the acquisition of the agriculture portfolio. Once the kids (and their partners) initiatited the direction, I instantly warmed to it and it's potential, but I want operations large enough to justify employing managers and staff so as to avoid any tied to the farm burden for any family member. We want assets/business that bring lifestyle not burden.

 

Happy new year @dunno et al. Thank you for your post.

Do you believe professional advice is necessary for superannuation structuring? I am comfortable making asset allocation decisions (market risk only) but appreciate the regulatory nightmare presented by superannuation. I remain slothfully in Sunsuper, await Vanguard's superannuation offering, and would prefer to avoid SMSF unless there is a compelling reason.

Is 10% your planned maximum cash allocation? Do you plan on reducing it post 2030 in line with the sequencing risk?