Financial Planner or good accountant?

I think it's the behavioral aspect that you have mastered that makes you an expert.

Successful investing requires
1) Spent less than you earn
2) Invest the saving in low cost index fund/eft
3) Keep doing it over the long term
4) Staying the course (Don't change strategy midway and engage in trading)

Buying low cost index fund is just one of the four ingredients to successful investment. The other 3 require a lot more effort to implement which I believe you have mastered.

Cheers,
Oracle.

 

If you owned a successful restaurant, mechanic shop and medical centre (you can pick and choose any 3 different industry) in your town would you feel diversified enough?

Don't go for diversification just for the sake of it. Only if you really feel you need to diversify go for it.

I am currently diversified geographically but have thought about it lately and honestly I would not lose sleep if those diversification was not present and I only hold VAS.

Go through the AFR Rich list and see how diversified (geographically as well as industry sectors) Anthony Pratt, Harry Triguboff, Packer, Gina Rinehart, Andrew Forrest, Mike Cannon-Brookes, Ruslan Kogan are?

Just by investing in VAS you are probably more diversified then any of them on simple networth comparison.

Cheers,
Oracle.

 

Again not an expert but I think knowing oneself and being honest about it is very important.

There’s a big difference between knowing an optimal plan vs implementing it. We can endeavour to improve our knowledge and behavioural weaknesses but for many there’s generally a limit. Plus there’s often a partner to consider in the household investing plan. This from @truong recently sums it up nicely:

And this from Bill Bernstein who has great expertise in investor psychology. It was taken from a discussion about Bucket strategy vs asset allocation where Bogleheads generally get on their high horse suggesting Bucketing is simply mental accounting and a waste of time. However Bernstein’s message can be universally applied:

 

A jolly good read so thanks to all.

Although not much which has been posted is conceptually new it always helps to reiterate the simple basics even if the result is to reinforce them for yourself.

 

Ask the FP what the indirect cost ratio is 6 Fees and costs

 

Actually, I under-quoted what the FP wants to charge. On our portfolio it would be .59% (or $22K) pa, plus the wrap costs, plus any ETF/fund management fees, plus the cost of setting up trusts etc.

I did a back-test using Sharesight and while his direct Oz share recommendations did slightly outperform the index (since 2007), overall I get similar or better results using VAS, VAF, VAP and VGS. Or simply one of the diversified funds.

I'll be passing and applying some of the advice here.

 

Eeeekkk I suppose it would come down to the total management costs, but that seems to increase the costs somewhat.

Sounds reasonable. Their performance/returns would really have to blow the 'self managed' approach (ie LIC/ETFs) out of the water to return the management costs.

 

Well, the FP came back to me today with a response to my questions about value and index versus active.

I basically asked his opinion on an alternative strategy to their 60/40 portfolio which involved splitting the loot in half into two buckets.

The Income bucket would follow the Thornhill strategy and should provide enough income through dividends for our living expenses. It would be held outside super.

The Growth bucket would be a diversified folio (but without any Oz shares) with as much as possible put into super.

He's proposed an Option B where they provide strategy, and I self-direct the investments as above, for which they'd charge .15% or so.

To me, this says that either there is no difference in expected between the two strategies so why were they going to charge me .59%, or there is a difference but they don't feel strongly enough about theirs and figure they may as well get some money out of me.

 

Just intrigued to know if you decided to get out of the FP's clutches fully to do it yourself or you decided to go the 0.15% route?