Boglehead/Vanguard way to retire.

@seven ; VAF is composite bond index, includes corporate debt as well as Govt. VGB is Govt bond only. I'd prefer total Oz bond market exposure for the potential higher yield, and just hold term deposits / cash rather than a govt bond only etf. But that is just my thinking on it - I'm not holding any bonds at the moment.

 

Thanks Falcon. I understand your reasoning for VAF now. I will go with this one. it's yield is about 3.97% from what I can see. It doesn't sound like much but its safety for this part of the holding that is its role.
The VAS/VGS can come later.

Thanks Falcon.

Sev

 

Yeah, that's not a static yield so will move with IR and bond capital value. I'd also caution against timing your VAS and VGS purchases and if you are in a position to, get some in the market soon. Research terms for you ; dollar cost averaging / lump sum investment / market timing.

 

Yeah, I have a fair amount in vanguard high growth... and even they are about 3% in emerging mkts last time I checked...
http://www.morningstar.com.au/1/funds/9049--vanguard-lifestrategy-high-growth.html

 

Great thread guys, I have some cash that I want to get into the market as a passive long term prospect.

I was considering the following, 60K VGS , 20K VAS (60K already) 15K VGE, 60K VAF

Falcon , should I use a dollar cost averaging approach to buy? If so over what time period?

Or just do the lot now? The bonds wont change much in market value correct, so I should just do those now?

 

On DCA: http://www.moneychimp.com/features/dollar_cost.htm

 

This is a piece that I think @seven should read ;

http://awealthofcommonsense.com/investing-a-lump-sum-at-all-time-highs/

The point is someone will need to come to their own decision on something like this. There is no guaranteed right choice that will provide optimal outcome. Only probability....and then there is the psychology of the individual investor. It hurts a lot more to lose a bit of a nest egg, than making another few % feels good

 

You might consider a “value averaging” investment strategy

What’s value averaging?

Value averaging is a strategy for investing more money when an investment’s price (value) is low, and less when the price is high, based on an end goal you’ve set. Sound vague? Let me share a simple example to give you an idea of how it works.

Let’s say you’re starting a new investment portfolio in 2011, and your goal is for the value of this portfolio to be $5000 by the end of the year. That comes out to approximately $416/month, so you go ahead and contribute that amount in January.

When February rolls around, you see that your portfolio has decreased a bit due to a down market. It’s now worth $316 ($100 below the initial value). With value averaging, you’d contribute $516 (an extra $100) that month to stay on target for your goal.

Now let’s assume that the market rebounds, and your portfolio jumps to $1,000 the following month. To compensate, you only invest $248 that month, as prices have risen closer to your target value for that point in the year.

You would then continue adjusting throughout the year based on market fluctuations.

The advantage here is that you’re investing more money (vs. just getting more shares for your money) when prices are down, and investing less money when prices are up.

 

Will consider while lump-summing

 

You need the right temperament for value averaging. The reason why most mutual fund holders underperform the mutual fund average is the same reason most will have trouble sticking with value averaging

 

Thanks all for this thread some good info here.

I'm thinking about establishing a portfolio with the following asset classes: Aus Shares, Intl Shares, Aus Prop, Intl Prop, Aus Bonds, Intl Bonds and Cash.
I'm looking to use etfs/index funds where possible with the possible addition of LICs for Aus shares.
It would be easiest to just use one diversified or six individual Vanguard products for all of the above. They have products with low fees and funds of a decent size that I'm guessing are less likely to be closed down due to size or folded into another more popular/better performing product.

Whist I know of Vanguards ownership structure in the US (not sure how that affects Vanguard Oz)and of their reputation I am still wary of manager risk.
I have done a little investigation and reckon I could find three providers for each asset class (more for shares) but that would leave me with 18+ etfs/funds (with huge overlaps) with a third of them still being Vanguard, and the remainder still only split between 4 other managers roughly equally.

Am I unduly worried about manger risk and nuts to be considering 18+ etfs to do what one/six Vanguard products can do for me just as well?

Or.....

Even with the portfolio spread across 5 mangers - is this enough? Where do you stop?

The above is in regard to a seven figure portfolio holding approx 70% of net worth.

 

A solid asset allocation is a good place to start. I use investsmart's health check feature to see how my selection compares to my risk profile:

 

What do you mean by Manager Risk TB?

 

Fraud or insolvency of the manger or any other un-thought of reason why I may suffer a loss or non/delayed redemption of funds due to issues with the manager it's employees, agents, practices or products etc.
Who ever thought that monies invested in/with/through Lehmanns, Bear Stearns, Madoff etc would be at risk? Or that AIG, Fannie Mae. Freddie Mac, Merril Lynch etc would suffer huge losses. Not many had an idea at the time. I'm sure there would be plenty Aus examples too over the years. The problems only become problems when they become problems. Its all good... until its not. Its only afterwards we find out if something is built on sand.
Or am I just paranoid!

 

Hi Chylld, Not sure if this was meant for me?
I'm not worried about the asset allocation matching my risk profile. I'm concerned about Manager Risk.

 

No such thing, its just a "Higher State Of Awareness"

You'd be pretty safe with Vanguard though considering the structure and some of Australia's best LIC's have been around for Donkeys. As an alternative, you could always bury your hard earned in the chook pen

 

Hi Falcon,
Thankyou for this information and all your good advice.
As you stated it boils down to what the individual is comfortable with.

So here is the plan (set in concrete and subject to change).
VAF 50% - try and buy this at under $50.
CBA term deposit until the next crash..then buy
VAS and VGS 25% each. VAS will have to go below $60 for about a 5% yield (I may be wrong on this) so that's the minimum I'll wait for.

I am comfortable with this strategy as last crash I bought a bank (still holding) which was the best thing I could have done.
Next hiccup will come sooner or later...its been a few years now since the last one (2007?) so we are due - sooner or later. Odds are on my side at this stage that we are well past the half way mark (It's been 9 years).
This is a long long term plan and I really don't want to loose any money at my stage of life.

It's probably not really the Bogle Head way to go but it's a strategy I am comfortable with.

All comments and critics welcome and encouraged.

Sev

 

Yes I can see that you're very concerned about manager risk... that much is crystal clear

My post was in reply to your comment:

 

check out independent fund reporting agencies reporting on manager risk per fund you are looking at. From memory, I think Morningstar gives their 2c worth for manager risk for funds...you will likely have to sign up, but I think there is a free trial and then you can access their take on fund risk factors.
im sure there are other similar fund rating agencies that do this as well...

 

@The Butler , you are a little paranoid but nothing wrong with that. In the examples you cite you are pointing to collapses that have resulted from either leverage or fraud. In the case of the major ETF providers being BlackRock and Vanguard, we can rule out the former, but never the latter where humans are involved. However, when you look at the fund structures (managers only, no claim on assets) I would be happy to have 7 figures in either.

Having said that, with 7 figure portfolio what's wrong with some duplication if it makes you feel better? Maybe also get some strategic beta, factor and size tilts with different managers. With ASX LICs mix it up among the big 3, maybe BKI and WHF too. Remember stock positions don't cost anything to hold....just pile them up. I've got about 30 positions and will top around 40. Nothing wrong with a lot of positions particularly if buying large parcels. And it doesn't cost you any more to manage.