Advice on diversifying a portfolio

[jjtrader]

Hi guys,
I am new here and new to investing in the stock market. I am in the process of building a portfolio for long term. my knowledge is basically just from what I can read so no experience yet and I was hoping someone with experience can help me out with some questions I have. First, I will explain the model I am leaning towards. I want 50% ASX bluest of the blue chips, diversified by sector. I want 30% international ETF's (mainly US high cap) and 20% asx traded bonds. I have read that you need bonds and international to diversify in case of a crash etc. My question is, looking at the charts for the SPY for example, this took a hit in 2008 like everything else. In fact, all of these "safeguards" appear to have taken a hit. So, what exactly makes these options "safe" or safer (i know no investment is safe). Looking at the historical charts, is it safe for me to make the assumption that if 2008 happens again, my portfolio will take a hit regardless of whats in it. If this is the case, wouldnt it be just as safe to have 100% ASX blue chips diversified by sector? Also, am I right in saying that there is more growth potential in the blue chips. When I get the mix right I plan to reinvest all dividends and put 1k a month in it (disposable income) , spread amongst my portfolio.
Hopefully I will be able to do this every month for 5 or more years unless circumstances change. Am I on the right track with this. Thanks in advance, any help will be appreciated. I feel that I would like to speak to "real" investors, not people with vested interests in certain funds etc ie financial planners.

 

[Julia]

I want 50% ASX bluest of the blue chips, diversified by sector. I want 30% international ETF's (mainly US high cap) and 20% asx traded bonds

How will you identify these bluest of the blue?

 

[ROE]

Here are some of the big business and leaders in their field...what price you want to pay is something you have to decide..

WOW
WES
These two business although they treat as one...they operate diverse set of business buying them is like a bit of hotel,pub,pokies,properties,food,alcohol,hardware stores, general merchandise, insurance, mining,stationaries and the ability to squeeze anyone ball they are giants in Aussie market

CCL. Soft drink,water,sport drinks
CBA banks and broker
BHP diversified miner
QBE insurance
BXB pallets and logistics
CPU share registry and data processing

 

[george55]

Hi.. I guess you are interested in portfolio trading... ? in fact I have not traded with portfolios, but recently I have found out that there is an opportunity for this type of trading: trading one portfolio against another ... so .. Am I right? ... regarding your question.. can you clarify one thing... you are asking about risk diversification..?

 

[jjtrader]

Hi.. I guess you are interested in portfolio trading... ? in fact I have not traded with portfolios, but recently I have found out that there is an opportunity for this type of trading: trading one portfolio against another ... so .. Am I right? ... regarding your question.. can you clarify one thing... you are asking about risk diversification..?

Hi George,
Just to clarify. I am not talking about trading portfolios, I am talking about investing in a portfolio longterm with a hope to double in 7 years (or there abouts) and reinvesting all dividends to compound. I want to correctly diversify to minimise risk but I guess my question is relating to what happenned in 2008 and if it happens again. in the event that it does, is there any way to protect against this. EVERYTHING seemed to take a hit so is there really any point in getting bonds etc and international ETF's to diversify. Isnt it the same risk to have 100% asx bluechips (I am talking about top 50) diversified by sector. Its not like, in the event of a crash, some investments act in the opposite direction to counteract it, or is it?. I understand that I may sound novice but that is because I am. Also, I am trying to do Fundamental research but cannot seem to find data on free cash flow anywhere, does anyone have a source for this that the use?

 

[ROE]

Hi George,
Just to clarify. I am not talking about trading portfolios, I am talking about investing in a portfolio longterm with a hope to double in 7 years (or there abouts) and reinvesting all dividends to compound. I want to correctly diversify to minimise risk but I guess my question is relating to what happenned in 2008 and if it happens again. in the event that it does, is there any way to protect against this. EVERYTHING seemed to take a hit so is there really any point in getting bonds etc and international ETF's to diversify. Isnt it the same risk to have 100% asx bluechips (I am talking about top 50) diversified by sector. Its not like, in the event of a crash, some investments act in the opposite direction to counteract it, or is it?. I understand that I may sound novice but that is because I am. Also, I am trying to do Fundamental research but cannot seem to find data on free cash flow anywhere, does anyone have a source for this that the use?

Find the business you like everything is details in annual reports ...free on all broker sites, asx and company websites

 

[Craton]

Hi jj,

You mention 2008 as in the GFC, with a longer term view a meltdown like that is perfect for getting into the market, getting into the stocks one likes or stocking up (there's a pun there), as the case maybe.

To mitigate risk, if we all knew how to that whithout loss, so we keep our shirts, we'd all still have our shirts...j/k...sorry not helpful. From your post you are asking for specific advice, not sure we can give that here.

As you indicate you don't want to seek professional advice, I guess doing what you're doing, asking, studying, learning, reading et all, will put you in good stead for investing wisely.

Short or long term, one thing I've learnt along the way is that having some dry gunpowder on standby, is a must.

 

[george55]

ok.. in fact I now understand what you are looking for... and actually what I meant in the comment was a tool for risk diversification... I mean... in that case you may have a portfolio with different type of assets... and quote it against another portfolio... you get it? in this case the possibility of your investment profitability will be much higher.... because you will create a portfolio with diffrent assets of various weights... get the full price history of your portfolio in only seconds.... so if one instrument falls.. another will rise in your portfolio... thus resulting in balance... what you say... is quite complex.. because there is no single advice... you will need to do a very deep research.. going back and back.... the tool what I'm talking about does all this stuff very fast.... So.. you may think before investing... I don;t know whether you understood the tool I have described.. but we may go further if it interests you.. if you are looking for less risk.. I guess this is what you need.

 

[wadesansom]

ok.. in fact I now understand what you are looking for... and actually what I meant in the comment was a tool for risk diversification... I mean... in that case you may have a portfolio with different type of assets... and quote it against another portfolio... you get it? in this case the possibility of your investment profitability will be much higher.... because you will create a portfolio with diffrent assets of various weights... get the full price history of your portfolio in only seconds.... so if one instrument falls.. another will rise in your portfolio... thus resulting in balance... what you say... is quite complex.. because there is no single advice... you will need to do a very deep research.. going back and back.... the tool what I'm talking about does all this stuff very fast.... So.. you may think before investing... I don;t know whether you understood the tool I have described.. but we may go further if it interests you.. if you are looking for less risk.. I guess this is what you need.

No offence George55... (usually followed by an offensive comment).

But your comments are quite bizarre

It may just be the cut of your jib; but reading your posts reminds me of the emails I get daily at work from foreign countries - promising exclusive offers to get me filthy rich etc.

I apologise if I am wrong. It's just the "but we may go further if it interests you..." set off some alarm bells

Or maybe my paranoid delusional schizophrenia with involuntary narcissistic rage is getting the best of me again...

 

[ROE]

sound like George and OP are the same gang promoting some tool, they getting a little clever I didn't see that one coming but after reading a few post I can spot it now.

 

[Craton]

@wadesansom and ROE

Scammers? Here? :frown:

Surely not.

 

[Julia]

sound like George and OP are the same gang promoting some tool

Yep, the op wasn't interested in any of the responses until George came in.

It's poor form to do this sort of thing because it puts people off responding to genuine enquiries.

 

[burglar]

Yep, the op wasn't interested in any of the responses until George came in.

It's poor form to do this sort of thing because it puts people off responding to genuine enquiries.

I have really mixed feelings about diversification.
But I don't have any mixed feelings about "this sort of thing"!

Blue chips, anyone?

 

[george55]

No offence George55... (usually followed by an offensive comment).

But your comments are quite bizarre

It may just be the cut of your jib; but reading your posts reminds me of the emails I get daily at work from foreign countries - promising exclusive offers to get me filthy rich etc.

I apologise if I am wrong. It's just the "but we may go further if it interests you..." set off some alarm bells

Or maybe my paranoid delusional schizophrenia with involuntary narcissistic rage is getting the best of me again...

I don't think that I need to explain anything .. I read a comment... regarding portfolio ... as I had read about portfolio trading I thought this guy is talking about the same thing .. ) that's it... if you consider sharing thoughts and opinions as job ... then ))) what to say ... just skip it... guys.... KEEP CALM )))) it is just a comment nothing more... what scammer.. you just need to read all comments of a person and then judge .. if I need to advertise something .. at least I would do it more clever.. with a link or exact information .. but even I was studying ... and the question was really confusing... I just did not think that portfolio was mentioned like account... anyway, if a person is interested in risk diversification, I'm happy to share my opinion! and If you don;t like it... then ... do not read...but if you are traders.. then instead of talking after me ))))) you'd better find out maybe I was talking about something useful ? ://///// Thank you for attention... and rude attitude

 

[jjtrader]

Ok, Thanks guys (i think). After reading a lot of previous posts on the forum I am getting the idea that using the word "advice" in the post title is not a good idea. So, let me ask another question. As you probably can tell I am looking to build a long term dividend based portfolio with a focus on dividend/reinvestment/ regular contributions/ compounding. I am doing fundamental research on blue chip companies by asking the following questions
1.) Debt/equity ( under 1)
2.) P/E (above 8)
3.) PEG
4.) P/FCF
5.) Div Yield (above 3%)
6.) EPS (eps growth rate and dividend yield sum to 10 or more)
7.) Interest coverage rate (above 8)
8.) Company credit rating
9.) payout ratio ( above 60%, below 100%)
10.) Grows its dividends by at least 4% on average
11.) 10 years or more of consistent dividend growth.

I got these criteria from various sources but mainly took most of it from a book I bought called the dividend toolkit. Anyway, I am finding that companies on the asx top 50 satisfy some criteria but not others. I am interested in what people would consider the most important out of the above. My instincts tell me that 10+ years of consistent dividend growth should trump the rest. Am I getting too complicated with this or should I just say that if a company has delivered increasingly higher dividends over 10+ years (with a gfc in the middle of that period) I cant go far wrong with it.

 

[Craton]

Your last sentence answers your question jj although nothing is a given apart from death and taxes.

Have you looked at LIC's like AGO and BKI among others? These too are a great way of diversifying and have very low MER, are managed very prudently and have a longer term view. Savvy investors will be buying when the SP is discounted to the NTA.

Anyways, looks like your well informed and have set a goal that you have aimed for and about to put in motion what you have set out to achieve. Good luck and happy investing.

 

[jjtrader]

Thank Craton,
It seems the more I research, the more confused i get. I am unsure of some of the acronyms, LIC, MER, NTA? Sorry also, should I choose to invest in NYSE stocks as diversification, can I just invest in individual companies or do I have to either get an American account with an American broker or invest in foreign ETFs on the asx. I have looked for previous posts on this topic but didn't come up with much. Thank you for responding.

 

[jjtrader]

Also, If I am to view the 10+ years of consistent dividend growth as the most important out of the above criteria, I have only come up with 3 companies out of the asx50 that fit the bill. They are WOW, CCL, and ANN. I like WOW and CCL enough to invest but what are everyones thoughts on ansell. Yes, they have the consistent 10+ years but looking at the rest of the fundamentals, it doesnt paint a very good picture. Maybe someone with more analytical skills than myself can have a look. I am interested what others see for the future of this company.

 

[burglar]

... at least I would do it more clever ...

No george, the smart way is less clever,
it attracts an easier target,
and filters out those that will twig,

you dig?