Asset Allocation

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

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  1. Nodrog

    Nodrog Well-Known Member

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    You’re truely an inspiration. Despite adversity you have a plan and remain determined to give it your best. Good on you, you’re very much in the minority as @SatayKing eluded to earlier.
     
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  2. Nodrog

    Nodrog Well-Known Member

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    :D LOL. Yes it sounds like one can of beer was one too many:).
     
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  3. SatayKing

    SatayKing Well-Known Member

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    So was the price of the beer - and it was a light.

    For some reason, while it's nothing to do with me, I like it when others start and continue with their plans. And it certainly can be difficult when they have to deal with the day-to-day issues. Takes a fair degree of guts not to give up.

    I can only hope when the inevitable hiccups happen it doesn't cause them to abandon all the effort required.
     
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  4. dunno

    dunno Well-Known Member

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    Hi @sharon

    Truly great stuff. Those that can inch forward in tough times are the ones that eventually fly when things get a bit easier.


    Some random thoughts – certainly not advice.

    Putting your stocks into a portfolio analyser spits out the following top 10 underlying exposures.
    upload_2019-2-27_12-9-2.png

    If you have mortgage you have a “fixed” obligation against an asset that can fall in value. Banks are leveraged to that same risk of a potential for house prices to fall. Your financial assets are not the greatest diversifier to your house and mortgage risk.

    In an ideal world, if you have a house, cash flow investments and debt, the debt would be against the investments and not against the house to minimise your non-deductable debt.

    Weather you should even have investments at all when you still have non-deductable debt is debatable. Defensible arguments on both sides I think. As a general concept I think, paying off non-deductable debt 'before' investing is not given enough creadence - Its just not sexy I guess.

    Maybe just maybe – reducing some of the CBA exposure and paying off the mortgage, then maybe maybe increasing diversifying exposure by borrowing to purchase could be thought about. Just watch that any change is not negated by cost and tax issues.


    The above are just thoughts with no true understanding of your situation, You are undoubtedly doing the most important thing right and that is learning.
     
    Last edited: 27th Feb, 2019
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  5. sharon

    sharon Well-Known Member

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    @dunno - thank you for your thoughts. I really appreciate it.

    At the moment the mortgage outstanding is $94k and I would love to just pay it down first. But I also have to consider age and distance to retirement. I have started very late in life. Then I think about compounding and dividends earned v interest paid for the mortgage - and I am still in front by investing (not by much admittedly). Although I am equally torn about not putting that money into the mortgage. Which then opens up dividend recycling - but - $94k recycled is not a lot (dividends calculated at 4%).

    Yep - you are absolutely right about me being way heavy in financials. Not sure what do to about that either. As I admit that I have no idea about investing - I really am a good candidate for Index Investing. It's something I am contemplating.

    On a happier note - I am also salary sacrificing up to the $25k pa into super. I hope they are better at managing my portfolio then I am. :)

    Edit to Add - I just found a thread on this.......Buy LICs or pay down mortgage?
     
    Last edited: 27th Feb, 2019
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  6. Anne11

    Anne11 Well-Known Member

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    My investable asset allocation is:

    41% Resi IPs - husband won’t let me sell, and when we do, he wants to keep proceeds in cash:)
    Aus shares 21%
    Int shares 6%
    Defined benefit in super 17%
    Others(in super) 15% eg. Fixed interests, infrastructure, private equity, bond etc..

    Not part of my plan, or lack of plan.

    Maybe I should take the equity out and invest in shares...

    55% outside super, 45% inside super.

    The % for IPs is equity. LVR is 44%, if I add the loan then IPs will be at 56%.
     
  7. Islay

    Islay Well-Known Member

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    good on you @sharon. Investing gets to be addictive doesn't it? I have found its ok for a plan to not work out 100% of the time.
     
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  8. sharon

    sharon Well-Known Member

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    @Islay - thank you. Yes - I really am complaining about a plan that is off the rails for all of 8 weeks only. I could have posted it in the thread for first world problems. :) I quite like being a little addicted to investing - it feels more sensible then my friends that are addicted to buying shoes. :)
     
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  9. Nodrog

    Nodrog Well-Known Member

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    Addictive is an understatement. No matter how much money I have to invest I want more. Obsessed collector syndrome I think.
     
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  10. Burgs

    Burgs Well-Known Member

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    Thought I would post my portfolio:
    48% WDIV - SPDR S&P Global Dividend Fund
    42% VHY - Vanguard Australian Shares High Yield
    2% AFI - Australian Foundation Investment Company
    8% BKI - BKI Investment Company Limited

    I have only recently added AFI and BKI due to learning about the Peter Thornhill approach, eventually I will aim for around a 75% Australian to 25% International ratio.

    There seems to be a lot of love for VAS which I can understand why.
    Its interesting comparing the 5 years distribution between VAS and VHY per annum of 4.43% to 6.82% a difference of 2.39% per year on average.

    I know there is a higher turnover of constituents and potential CGT, but since I'm a dividend investor, VHY makes more sense with the extra 2.39% per year.

    Happy to hear thoughts on this.
     
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  11. Big A

    Big A Well-Known Member

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    While VHY might have a higher distribution over the last 5 years if you take a look at the total performance it tells a different tale. VAS 6.92% VHY 3.83% total performance over the last 5 years as of 31st Jan 19.

    Return is return regardless whether its growth of share price or distribution. I would take 6.92% total return over 3.83% any day regardless the split of that growth.
     
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  12. Burgs

    Burgs Well-Known Member

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    Good point Big Al.
    Dividend investing or the Peter Thornhill approach is to never sell, so in some ways the price of the shares doesn't matter as much?
    Invest for income, but at the expense of capital growth?
    Maybe there needs to be a compromise?
    Sorry for the question marks, but this is something I have been contemplating and Big Al has made a fair point.
     
  13. Big A

    Big A Well-Known Member

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    I had a similar mind set. But if your share price is growing then so is your distribution. So if we start at a share price of $100 with a 4% return when that share price grows to say $200 my 4% is now worth double. I'm getting 8% on my original investment of $100.

    With this Peter Thornhill phenomenon at the moment you have to be careful how you interpret what he is saying. I am a big fan of investing for income but that income can come in the form of Growth and distributions if it means a better total return. Especially if that better return is 3%+ p.a.

    Doesn't mean over the next few years VHS cant outperform VAS. Though if you are basing your strategy on the performance over the last few years then VAS is the winner.
     
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  14. Zenith Chaos

    Zenith Chaos Well-Known Member

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    VAS will outperform VHY unless suddenly yield chasing happens to correlate with quality companies. VAS, A200, STW should be superior to VHY.
     
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  15. SatayKing

    SatayKing Well-Known Member

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    At last someone besides me recognises quality!
     
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  16. sharon

    sharon Well-Known Member

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    I like State Street too - but they manage my Super (within QSuper) .......

    upload_2019-3-1_12-12-36.png

    So I intend to stay away from STW in my personal holdings.
     
  17. Snowball

    Snowball Well-Known Member

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    The share price might not matter that much, but the distributions with VHY and the turnover is all over the shop.

    I used to hold it and am not really a fan.

    Last few years distributions measured in financial years are as follows...

    2011/12 - 300 cps.
    2012/13 - 278 cps.
    2013/14 - 374 cps.
    2014/15 - 439 cps.
    2015/16 - 318 cps.
    2016/17 - 446 cps.
    2017/18 - 470 cps.

    Turnover last year was 37%. That’s huge. Not very reliable as an income stream and also not very tax efficient.

    It’s also very concentrated, so many of us prefer the wider diversification in the likes of VAS or old LICs which hold high yielding dividend payers but also hold a number of low yield high growth stocks, which helps overall distributions to keep growing year on year.

    Franking is higher for VAS and LICs too over time compared to VHY because of lower turnover so it’s mostly pure dividends. It’s not a huge boost but be sure to account for that in your gross income comparisons.

    The yield is still lower and I get the appeal of VHY, but even though I’m very income focused right now personally, I’m happy to accept a lower but still strong yield of 4-5% plus franking, because it means greater diversification and a solid base of companies to deliver ongoing growth in dividends.
     
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  18. Hodor

    Hodor Well-Known Member

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    This is one of the problems for the dividend investor to think about. Where is the nexus between timeframe(s), dividend growth and spot yield?

    The ASX has done well so it hasn't been a total return sacrifice to invest in Australia (for yield).

    The cross over of income for a 2% yield to pass a 4% yield (similar to VGS vs VAS) is close to/over two decades when spending all income if previous growth is any guide.

    Draw what you want.
     
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  19. Nodrog

    Nodrog Well-Known Member

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    The Thornhill approach also warns of the yield trap. High current yield is often a red flag under generally normal market / sector conditions. Hence it pays to look underneath the hood before buying.
     
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  20. Redwing

    Redwing Well-Known Member

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    Definitely some influence from the Bogleheads strategies, a diversified account of stock and bond indexes with a home country bias thrown in also. I’m not a gambler, so its a simple dispassionate strategy

    Bonds not set to match my age in my Super though as it needed a bit more risk/compounding, then again not as low as 90/10 per Warrens advice for his estate either ;)

    Initial rules:
    1. Buy a low cost, short term government bond index
    2. Buy a low cost U.S. stock market index
    3. Buy a low cost international stock market index
    4. Buy a low cost Australian stock market index
    Sell portions of the bond index to buy into the stock market indexes when the stock market drops, with a longer term collectors view there's no fear of buying into a falling asset class