Creating a Simple Carefree Portfolio

Discussion in 'Shares & Funds' started by jacquiz, 13th Aug, 2021.

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  1. jacquiz

    jacquiz Member

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    Hi everyone,

    I'm rebuilding an investment portfolio post divorce and this time around I'd like to keep things really simple so I don't have to think about it too much or be tempted to tinker with it.

    I'm 33 years old and my plan is to reduce my work hours in the next year or so and live on my passive income while focusing on building a business.

    Within super I have a 60/40 split with international (60%) and aussie (40%) index funds.

    A few options I'm considering:

    1. VAS / VGS

    2. A200 / IVV

    3. VAS or A200 and potentially some LICs for extra income + make my super 100% International

    The main things on my mind:

    1. VAS/VGS offers broader diversification with slightly higher fees than A200 and IVV and past performance is slightly below too, but Vanguard has higher FUM and strong reputation. If my super is already very broad, should I focus on being more narrow outside super with the hopes of a higher return and keep costs to a minimum?
    2. Are there any issues with A200 tracking a different index to S&P200 - so far its looking like it's slightly performed better from what I can tell?
    3. If my plan is to live off the distribution or dividend income - is it too risky to go 100% aussie outside of super, if I make my super 100% international?

    Clearly I have way too much time on my hands in lockdown to be thinking about it! I'd like your input and what you'd do if you were in my situation.

    Thanks in advance! :)
     
  2. Trainee

    Trainee Well-Known Member

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    How much do you have outside super? Super isnt really accessible at your age.
     
  3. jacquiz

    jacquiz Member

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    I will initially have approx. $500k - $600k outside of super to invest and also will be making regular contributions.

    I won't be able to access super for years as I'm only 33, so that's why I was thinking of making my super 100% international to try achieve maximum growth as I can handle the ups and downs and then investing in more income generating assets outside of super so I can live on it while building a business.
     
    Last edited: 13th Aug, 2021
  4. Trainee

    Trainee Well-Known Member

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    So you might get 30k or so income from assets outside super.

    is that enough to live off?
     
  5. jacquiz

    jacquiz Member

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    I'll still be working a job while building my business but I'd like the option to reduce my hours if I need to and have the distribution/dividend income as a back up.
     
  6. Big A

    Big A Well-Known Member

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    For the sake of simplicity and hedging your bets on which will pay more dividends, I would go VAS & VGS. While in theory VAS pays a higher dividend in reality its a different matter. I have held both over the last few years and after calculating all dividends received to date, surprisingly VGS has paid me more dividends as a percentage of holdings compared to VAS. Yes I am surprised as well.
    VAS would have the franking credit advantage but VGS has had stronger growth since the Covid downturn. Since we don't know what the future looks like with regards to growth and which will continue to be a superior dividend paying share I would put a bet each way and go 50 / 50.
     
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  7. Trainee

    Trainee Well-Known Member

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    Isnt that just because dividends were cut in the last 18 months?
     
  8. Big A

    Big A Well-Known Member

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    Yeah probably. But Covid was a world wide problem not just Aus. The way I see it, is that Aus dividends got cut and international not so much. All I know is I got more income from VGS than VAS during my holding period. Not saying one is better than the other and that's exactly why I go straight down the middle.
     
  9. Baker

    Baker Well-Known Member

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    I only jumped back into the share market in recent months. Have a guess at what point I stopped trying to pick companies and just lumped into ETFs and a managed fund?

    upload_2021-8-13_18-13-25.png
     
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  10. Alex AB

    Alex AB Well-Known Member

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    I want to put money into ETF as regular contribution, hold it for a long time - 10 years? What should I do?
    1. All on VDHG
    2. 40% VDHG; 30% VAS; 30% VGS
    3. 50/50 VAS and VGS

    In early 40s so don’t need dividend and invest for long term. Any advices?
     
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  11. Big A

    Big A Well-Known Member

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    My vote is option 3. Using this option myself.
     
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  12. MB18

    MB18 Well-Known Member

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    I vote option 1 because thats the foundation of what I do myself (your super allocation sounds almost identical to mine too).

    In all honestly however all of the ideas are pretty good.
    Simplicity is our friend.

    I wouldn't worry about minor performance and fee differences between the options you are considering as they are all 'good'.

    At the end of the day you have simple ETF holdings with low fees and good diversification.
    Dont worry too much about the dividend side of things in isolation, its the total return that matters more.
     
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  13. Ross Forrester

    Ross Forrester Well-Known Member

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    If your buying vgs/vts etc in a super environment just remember that the foreign tax credits don’t get refunded if the fund is in pension mode.
     
  14. Hockey Monkey

    Hockey Monkey Well-Known Member

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    Not this one as you lose the simplicity of a single fund but still incur the higher cost of the single fund
     
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  15. Redwing

    Redwing Well-Known Member

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    Simple Carefree Portfolio

    VDHG

    Under the hood

    Vanguard Australian Shares Index Fund (Wholesale) 35.90%
    Vanguard International Shares Index Fund (Wholesale) 26.60%
    Vanguard International Shares Index Fund (Hedged) - AUD Class (Wholesale) 16.00%
    Vanguard Global Aggregate Bond Index Fund (Hedged) 7.00%
    Vanguard International Small Companies Index Fund (Wholesale) 6.40%
    Vanguard Emerging Markets Shares Index Fund (Wholesale) 5.10%
    Vanguard Australian Fixed Interest Index Fund (Wholesale) 3.00%


    This reduces the number of trades you need to make, and no need to rebalance yourself when allocations go out of kilter

    Worth reading the below

    VDHG or roll your own
    Does the 10% bonds in VDHG make it a no-go?
    DHHF and other VDHG alternatives

     
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  16. Zenith Chaos

    Zenith Chaos Well-Known Member

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    Welcome. This question has been asked before so you will find excellent advice in existing posts.

    The simplest portfolio is VDHG, but you can tweak as much as you want by using the following in order of priority in my opinion, which is not financial advice:
    1. VGS
    2. VAS
    3. VGE/VAE
    4. VISM
    5. DJRE
    That is, a 1 portfolio fund has VGS, 2 portfolio VGS/VAS Remember bonds/cash for risk reduction (volatility dampener). Note VDHG has some bonds rolled in already.
     
    Last edited: 14th Aug, 2021
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  17. Alex AB

    Alex AB Well-Known Member

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    Thanks all. Seem just a simple VDHG will do then. Hard to tell if a different allocation will make much a difference over long term so keep it simple as I don’t want to tinker with it too much. Just save and invest long term and capture the time / compounding effect.
     
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  18. Redwing

    Redwing Well-Known Member

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  19. Zenith Chaos

    Zenith Chaos Well-Known Member

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    Replace hard with impossible.
     
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  20. Redwing

    Redwing Well-Known Member

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    It's like a bar of soap, the more you play with it, the less you get :D

    VDHG Review - Is This The Best All-In-One Investment Option? - Aussie FIRE Movement

    Introducing: my brand new “idiot grandson” share portfolio

    VDHG MER of 0.27%, so for a $1M portfolio $2'700 p/a

    VDHG (High Growth) 90 / 10
    VDGR (Growth) 70 / 30
    VDBA (Balanced) 50 / 50
    VDCO (Conservative) 30 / 70

    You can see how they tracked over the covid hit to the markets and subsequent run-ups. VDCO didn't fall as hard


    upload_2021-8-16_5-28-53.png

    Conservative

    upload_2021-8-16_5-29-43.png
     
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