Australian (ASX) Stock Market Forum

ETF Portfolio Allocation

27 January 2018
Hi everyone, I've been reading and researching about investing for quite a while now and I feel ready to finally enter the market. Could someone with more experience than I do critique my planned allocation?

$10,000 over three ETFs. My first five trades will be free from a referral link.

50% VTS
40% VEU
10% VAS

I am not too comfortable with allocating more into VAS as it is heavily weighted in financial institutions.

Thanks in advance.

Not advice.

I personally go 1/3 into each of the below 3:


I personally don't have VEU - I get the concept but history has shown it has paid to have a piece of the USA.
Carlos, people on ASF can't legally give you financial advice!

But a few things worth thinking about:

- Being heavily weighted into financials looks bad from a cursory perspective but if you think about it fundamentally, financial organisations are broken up into Banks, Insurance, REITs, Mortgage Brokers, etc. Those organisations are plugged into and make their return from every sector of the economy. If a retailer wants to open 10 new shops, a bank, insurance company and REIT will almost certainly be getting a cut of the revenue before the retailer sees a cent of profits!

- Buying Aussie businesses have a special advantage of dividend franking credits. It's worth reading more about those if you don't know what they are.

- Buying overseas will expose you to currency fluctuations. Sometimes those might be to your advantage, other times to your disadvantage. Currencies have their own dynamics. If you aren't thinking about those dynamics then investing in overseas businesses might have outcomes you didn't anticipate.

- I think there are some tax nuances with VEU, and you might have to fill out a W8-BEN USA tax form.

- How will you handle rebalancing? For example, if the US markets outperform by a lot, then they will become a big % of your portfolio. Will you sell down some VTS and use it to buy the others or just be happy with our new allocation ratios? How will you handle the tax implications of selling down if you do that? There are some new Vanguard ETFs which hold and rebalance a mix of local/foreign stocks+bonds inside the fund. It might be worth investigating those as the tax implications are probably better than rebalancing yourself.

Some of those points might make it seem like I am trying to convince you to buy local and ignore overseas, but I do think investments overseas are a good idea, however they do require some additional considerations.

If you're not thinking about all of that stuff already, then think about just holding onto your cash for a while and spend some time learning. Learning is free, losing money on your investment because you missed something basic you could have learned isn't!

How about 5% in ROBO for some tech exposure, and why not a LIC for the franking credits?

VTS already has a lot of tech exposure at much lower fees and VAS has franking credits as all the component stocks are ASX listed businesses.
VTS already has a lot of tech exposure at much lower fees and VAS has franking credits as all the component stocks are ASX listed businesses.

VAS lucky to average 70% franked, VTS a little tech and ROBO pure tech...but yep whatever, like i said 5% for a little exposure.