Asset Allocation

Discussion in 'Share Investing Strategies, Theories & Education' started by dunno, 25th Feb, 2019.

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  1. dunno

    dunno Well-Known Member

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    No, especially not in the accumulation stage.

    Continuous contributions to the growth option of a large industry fund like Australian Super or similar would be the best option for 95%+ of people accumulating super. They just need to make the contributions and then stay out of the way.

    For the other few % a SMSF (or direct options in a pooled fund) might be viable but if a more hands on option is right for you then you really should be all over the topic to the extent that an advisor would not offer any further value. Fintech disruption to SMSF administration has made the exercise easier than in the past for those so inclined to DIY.

    Take a look at @Hockey Monkey excellent thread where he has recorded his journey. To me this is where you need to be at before making a move to self management and once you are there, I don't see what value a Financial Advisor adds.
    Low cost DIY SMSF for an ETF portfolio

    Knowing me I doubt I can get through to 2030 with a cash allocation at all. If I find ways to safely eliminate the need for it I will.

    If It does exist at retirement, I won't have a predetermined plan to reduce it. I don't think any sort of pre-determined glide path helps sequence risk. If the capital available is marginal in relation to the cash flow you want to pull then a fixed allocation to defensive assets does help. I may be in this position and if so I envisage 5% will be directed to IAF or similar for harvesting rebalancing cashflows in a downturn and 5% will be directed to QPON or ILB to help with unexpected inflation.
     
  2. ChrisP73

    ChrisP73 Well-Known Member

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    @dunno VEU/IJH - curious as to your thinking here? - looks to be tilting away from large cap US(SP500) in VGS/VGAD - is this a "forever asset allocation" tilt - or more of a bet on current valuations?
     
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  3. dunno

    dunno Well-Known Member

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    Forever is a long time!

    What I'm pretty sure about is that 1/3 of the passive portfolio will remain as VAS and 1/3 will remain as VGS/VGAD and 1/3 will be what I think of as the diversifiers.

    I'm comfortable playing around in the diversifying 1/3. The combination of IJH & VEU helps create the diversification that I'm currently happy with. The thinking is more about diversification than valuation, though valuation is the ultimate driver because it is what narrows the diversification of MCW itself.
     
    Last edited: 11th Jan, 2022
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  4. ChrisP73

    ChrisP73 Well-Known Member

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    :). Ok then.

    Yes I can see you've created the dunno version of VDHG - or thereabouts.

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  5. The Falcon

    The Falcon Well-Known Member

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    This haunted me.

    In the end I couldn’t go through with the proposed SAA tweak….where does it stop, when does it end ? It’s madness I tells ya. I’m pinning the ears back on VAS and riding the good ship Cap Weight at 35% !
     
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  6. Hockey Monkey

    Hockey Monkey Well-Known Member

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    AVDV has enough ASX small cap exposure for me :)
     
  7. The Falcon

    The Falcon Well-Known Member

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    missed this.

    Starting point is that VAS + VGS is a perfectly reasonable “2 fund” portfolio. Mention of cash assumes the investor is debt free. Level of cash will come down to investor preference/situation.

    If someone is interested in going beyond “2 fund” given how cheap it is to implement via ETFs I wouldn’t necessarily wait until at $500k+ for example.

    Sorry not sure if I answered your question?
     
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  8. Nodrog

    Nodrog Well-Known Member

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    Until recently I never realised how much "disinterest" in investing could be a virtue. Recent posts here suggest that "peace of mind" is a constant struggle. I look back and can't help but think that excessive tweaking / striving etc is just not worth it in general. And for the "lucky" few that gain a financial benefit there is more often than not a non-financial price to be paid!

    Yes, if in investing there is a God St Jack just might be it.

    PS: Chanellling Buddha with the aid of a good wine.

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  9. Nodrog

    Nodrog Well-Known Member

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    But most will have say 4%, 7% or maybe even 10% invested in such things. Will such allocations really make that much difference. And that is if one has the patience to ride out the at times long periods of underperforming the overall market.

    If you believe in such things then devote a decent allocation to it. Otherwise keep it simple. Over-thinking can be a killer.
     
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  10. The Falcon

    The Falcon Well-Known Member

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    Problem for me is DFA AU small cap not small enough, or enough value factor (same price to book as market). So you end up paying 50 bps premium over cap weight cost, with higher turnover in exchange for higher stock specific diversification = didn’t add up in the end. Much rather go tiny + cheap (which I already have) and pay for it.
     
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  11. SatayKing

    SatayKing Well-Known Member

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    If you would like to enrol in my course..................

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  12. Isla_Nublar

    Isla_Nublar Well-Known Member

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    Yes, in a round-about way. I guess what I was asking is when do you diversify away from the 2 fund portfolio? Is it based on the amount of funds invested or is it based on SANF, or desire to more heavily weight to US-tech stocks, etc. We have some legacy LICs, but largely the portfolio is AU broad based funds and ex-AU broad based funds. Not really sure if there is a question in there or not...
     
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  13. Nodrog

    Nodrog Well-Known Member

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  14. Big A

    Big A Well-Known Member

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    This is what I’m seeing ( hearing ). The common theme here which most agree is the sensible approach is keep it simple. Don’t overthink , don’t over plan, don’t over strategies. I mean generally that’s what most on here recommend, yet for some reason we also keep coming back with but what if I just allocate 3.674% of my portfolio towards xyz and 2.39614% towards abc for some extra diversification and performance.

    Not that long ago that’s what I was thinking. Then you all convinced me that all this tinkering and over strategising was lots of effort for no guarantee of any extra reward. So I have now stopped the continues game of investing chess that we seem to be playing against our selves and just stuck to VAS & VGS.

    Surely the pupil can not be preaching to the head master, or however that saying goes. :D
     
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  15. The Falcon

    The Falcon Well-Known Member

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    There is a happy medium I think between the simplicity of VAS+VGS and the Rational Reminder Community type factor zoo. My desire to include Small, Value, Emerging Markets and REIT in portfolios doesn’t change because there isn’t viable, post cost and friction (tax) systematic small cap value product for Australian exposure, and no point trying to make something fit to tick a box.
     
  16. ChrisP73

    ChrisP73 Well-Known Member

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    The lots of effort bit is of course quite subjective - for most here I suspect it's mental effort rather than actual / administrative effort. Wes Gray has a less PC term for mental effort.

    I think it's the case that many that are curious enough to find their way to investment forums are veracious consumers of content and enjoy the intellectual stimulation. As was mentioned on a recent RR episode - managing our investment portfolios more than often satisfies individual needs (emotional, mental stimulation etc) other than just financial returns (even though this is primary).

    As @The Falcon points out there's a balance to be found in all this, and a temporal aspect to that as well. Those that are still in the early or mid stages of accumulation tend to be more focused on research, understanding, tinkering to find a strategy that works for them. The more experienced, distinguished members have figured it all out and often (but not always) tend towards simplicity - or at least have settled on a plan and implementation that requires very little mental effort. Also mentally I think having 'enough' and being in captial preseveration/decumulation mode changes your mindset somewhat at least.

    Having said all that - I personally find it very helpful to be reminded of the benefits of simplicity per your comments @Big A, and still enjoy the discussion, particularly around the behavioural and 'life stages' aspects of investing.

    Oh, and I still don't know exactly where I am in all this - but it's great to be alive and have the oppertunity to experience it all!
     
    Last edited: 18th Jan, 2022
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  17. Nodrog

    Nodrog Well-Known Member

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    Very well put!
     
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  18. SatayKing

    SatayKing Well-Known Member

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    No you haven't. You just don't fully realise you haven't.

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  19. Big A

    Big A Well-Known Member

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    I hope my post didn't come across the wrong way. Not having a dig at anyone's strategy as I don't believe there is a right or wrong in this discussion. Its all about what works for you and gives each individual comfort on their investment journey.

    In my eyes the tweaking and adjusting for anything more than VAS & VGS is about reducing risk and increasing performance. If I think I can do that then I tweak. I thought I could do that, but obviously I cant. I don't consider my understanding of this game anywhere near as advanced as the more wiser heads on here. I now know that even the smartest in this game have a hit and miss chance of reducing risk and increasing performance by such tweaking and strategizing. So lets be honest what chance do I have. If I some how manage to pull it off it out of pure luck rather than genius.

    Since I now know and accept this then I would be going against my common sense to do anything else. Doesn't mean that every now and then silly ideas get in my head about " What if I just add some of this or more of that". As I am saying all this I am also realizing that I am talking purely in context to my equities portfolio. I have obviously done exactly what I am preaching ( Tweaked and strategized) by having large holdings in property trusts and mortgage syndicates :rolleyes:.

    Having this non equities part of the portfolio gives me this false sense of security that then allows me to stick to a simple equities plan.

    Now I am confusing myself. Ok maybe no one should be listening to me. :D
     
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  20. ChrisP73

    ChrisP73 Well-Known Member

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    @SatayKing what do the three blank rows represent to you?
     
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