Investment strategy with SANF

Hi all,

I am 34, no dependents, work in a stable IT job and have done some financial housekeeping and come up with a plan. Wanted to lay it open and ask if anyone has any thoughts on it.

• Mortgages: 3 (PPOR, IP1 and IP2) not counting in below calculations. All P&I, neutral to slightly negatively geared and my PPOR is currently rented out too while I am with friends at the moment.
• Emergency Buffer: 20K in savings – This gets topped by Savings if used. (I used to have a lot bigger Emergency buffer in the past and quickly realized I was prone to “gifting it” so I want to keep just enough for 3-4 months.)
• Cashflow “buffer” in offset that keeps payments/bills/expenses going: 10K – this gets topped by Savings as required.
• Bonus after tax: Get about 10K a year currently(not made a plan yet what to do with this lumpsum)

Monthly Ongoing investment plan:

1. Super contribution: I have updated my super contributions to 15% from 9.5%
2. Company discounted shares: Consistently contribute about $500 each month that gets bought twice a year directly in my name
3. Savings: $500 each month – This feeds my Emergency buffer and “Cashflow” buffer but if those are already topped (as at the moment), then this can go to crypto, speculative stocks, individual stocks etc. To scratch the stupid-itch if you will.
4. ETF/LIC each month: $1000 (debt recycled) – I want to buy this in a discretionary trust structure. Not yet started although i hold 80K currently of individual company stocks
5. Mortgage overpayment each month: $1000 – not yet started and so when my stock values go down as I expect them to, I don’t feel like I “should'ave paid the mortgage instead!”

I feel like above gives me the most peace of mind, without feeling like I am neglecting any areas.

Main questions I now have are:
1. Buying shares: I am looking to buy all shares in the trust structure that is a Discretionary trust, called XXX property Trust, with XXX Holdings Pty ltd as its Trustee and me as the director (appointer). It already holds my IP2 which is negatively geared at present. Also holds 50K of individual company stocks. Do you see any benefits of buying in my own name vs in this trust structure?
2. Pay for PPOR vs. Pay for IP2 which is in the discretionary trust. If you were me where your PPOR is also rented out and hence giving you tax benefits against salary, would you be paying down the PPOR or the IP2 in the trust if you plan to never sell this property and want to quickly get it to a stage where it takes care of itself?
3. Bonus after tax of 10K: Where would you put it? I was thinking 5K ETF and 5K property (if i dont blow it instead! )
4. ETF/LIC buying frequency: What’s the minimum that justifies a cost of roughly $20 per order (using Comsec where I have opened an account against the trust structure) I heard of SelfWealth but will need to set up the trust structure there too. I really want to do this monthly but I think logically should be quarterly. Is that period still small enough to take advantage of DCA? Would you do this differently, perhaps 2K a month goes to shares and then 2K next month goes to Mortgage?
5. Asset allocation considerations for shares: I want to consider it in this order:

a. Tax advantages if any
b. MER
c. Allows for DRIP
d. Currency hedged
e. 50% of the portfolio to be dividend focused, while 50% can remain growth focused ideally
f. Portfolio contains Aus, US and emerging markets growth
g. Portfolio contains specific industry focus such as Technology, Ethical investing ETFs etc.​

Given point 5 above I “ideally” want to invest in the below way:

60% of portfolio is location specific and holds below:
1. 30% - Aus Top 100 or 200 companies index
2. 30% - US top 300 companies index
3. 15% - Europe top 200 companies index
4. 15% - Emerging markets ex china top 300 companies index
5. 5% - China top 200 companies index
6. 5% - India top 200 companies index

40% of portfolio is industry specific and holds below:
1. 15% - Ethical top 100, 200 or 300 companies ETF
2. 25% - Tech top 100, 200 or 300 companies ETF
3. 30% - Health top 100, 200 or 300 companies ETF
4. 15% - Retail top 100, 200 or 300 companies ETF
5. 15% - Utilities top 100, 200 or 300 companies ETF

The above is the ideal mix I would like however as I am exploring it, I am finding multiple barriers, i.e.:
1. Would you argue for or against having industry specific on top of country specific ETFs?
2. A total of 11 funds to manage individually means loads of rebalancing work. I am assuming this. Would you say it would get complicated fast or am I overthinking it?
3. Would you instead suggest that “combining” the above even at a less ideal mix for me so it becomes less than 11 ETFs? E.g. I found an ETF available that already combine china and India for example.
4. Big negative for me would be the constant cost of rebalancing and if the advantages of DCA will be lost as the buy in is stretched out to a year for a specific fund at times. E.g. I only plan to buy one ETF every 2 months or once a quarter so it will take me a couple of years to get them all as I start and to repeat the cycle again the second time.
5. Should I chuck the above investing plan and instead go, based on analysis of MER, allowance for DRIP etc. as the criterias:

• One Top Dividend ETF - 50%
• One Top Growth ETF - 50%

​

6. Would you just keep it even simpler and go 100% in VGHD instead as so many have been suggesting in multiple blogs i have been reading?

I have about 50K currently to invest in shares as a lumpsum or to DCA (and another 80K currently in individual shares that I plan to leave as is for now - although feel like that’s risky and not as stable as an ETF)

Sorry this post is a bit of a mind dump, appreciate any critique/thoughts if you have any to offer

Thank you!

 

Franking credits would be lost potentially if the negative income trust where to own shares. See my tip on why not to hold shares and property in the same trust

 

Thanks a lot Terry!