A newbie's balanced portfolio

Hi everyone,

I’ve been sitting on the sidelines for the last few yrs feeling guilty about not doing more with my money. I’ve been doing a fair bit of research lately, including reading through the forums, and am now keen to get rolling.
I have about 55k to invest and am looking to get my toe wet with ETFs before venturing into stock selection.
I know that nobody is allowed to provide what could be considered advice, but it would be great if anyone could provide any very generic & high level points on this portfolio I’ve put together below. I’m only 25 so am willing to assume a fair bit of risk and would consider myself a long-term investor. On this basis i've followed that broad rule of 100 - your age for growth vs defensive allocations.

I guess, above all else, I’m wondering if there’s any fundamental flaws in this strategy (such as ineffective attempts at balancing risk etc) that immediately strike you.

I’d be looking to invest this money indefinitely as something I will rebalance when necessary, and am keen to be exposed to the USD at least for the next 1-2 yrs.

Aus equities (30%)
• RVL Russell Australian Value ETF (10%
• iShares S&P/ASX High Dividend (10%)
• iShares S&P/ASX 20 (10%)

US equities (25%)
• Vanguard ® US Total Market Shares Index ETF (VTS)

Emerging markets equities (15%)
• iShares MSCI Emerging Markets ETF

Property (5%)
• BlackRock Global Property Securities Equity Tracker D

FI (20%)
• PIMCO Total Return Exchange-Traded Fund (10%)

Cash (5%)

Any quick feedback would be hugely appreciated.

Thanks very much for your time and looking forward to contributing back once i actually have something worthwhile to say!

Cheers,
Alex.

akb88 said:

... Any quick feedback would be hugely appreciated ...

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IMO Looks like the kind of list I would expect from a fund manager!

burglar said:

IMO Looks like the kind of list I would expect from a fund manager!

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Or a financial planner.

Alex, I think if you're in for the long haul, and you're a fund manager why not put what you do on a day to day basis to use instead of paying someone else to do it for you, ie why don't you buy shares directly?

My feedback is:

a) Get rid of or size up the small allocations -- if you don't have lots of money to invest then rebalancing up or down to 5% is going to cost more than it's worth and you might not be able to achieve the correct granularity anyway.

b) The portfolio is well diversified from ideosyncratic and secondary risk but highly exposes to systemic risk on the equity front. With forecast 10Y returns on equities at record lows of 2-3% PA nominal (especially for US stocks, expected to underperform other countries.) then you are loading up on a lot of risk right now for not much return. Consider increasing your allocation to the Total Return fund to lower overall correlation, but again prospective 10Y returns for fixed income is like 2-3% PA, I would personally prefer physical gold for convexity and nonfinancial "hedginess".

c) The Russell guys do a good job at determining value in their various universes. I reckon (assuming management fees etc equal) up the allocation to this and get rid of the dividend yield ETF.

THIS POST IS WRITTEN BY A MADMAN AND DOES NOT CONSTITUTE FINANCIAL ADVICE.

A read of Mebane Faber's quantative approach to asset allocation http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461 I feel is a must read on this topic.

Too safe, too conservative and about 16 months to late.

So_Cynical said:

To safe, to conservative and about 16 months to late.

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too late for a grammar lesson ?

too late for a grammar lesson ?

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The grammar fixer took care of it...

CanOz said:

The grammar fixer took care of it...

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the third one......went to Toorak?

Too safe, too conservative and about 16 months to late.

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:

Joules MM1 said:

the third one......went to Toorak?
:

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You're both wrong, ... that's not grammar.
It's spilling!

:dunce: <

Look ok fairly conservative, you not going to get stellar performance buying index now as decent gained has been made in the last 15 months and you unlikely to lose a lot of money either ...

You got plenty of times so get your feet wet now and if things don't work out you can still come back stronger....

sometimes you can learn a lot more by having some money in the market....it forces you to read and keep track of your investment....only through actions lead you to the goal you want, so when you are comfortable with that steps
Take it and ignore most people who talk you out of taking actions....

Good luck and enjoy the journey

burglar said:

You're both wrong, ... that's not grammar.
It's spilling!

:dunce: <

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If its not the spelling police its the grammar police.

So_Cynical said:

If its not the spelling police its the grammar police.

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So sorry!
I was going to pull it, then I got distracted.