Australian ETF Portfolio Allocation

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fruitjuicante
Posts: 1
Joined: Mon Oct 30, 2017 8:56 pm

Australian ETF Portfolio Allocation

Post by fruitjuicante » Mon Oct 30, 2017 9:04 pm

Hey, guys.
I'm 25 and Australian.
I know you get these questions a lot but I have no one to teach me or any friends interested in this stuff and it is hard to get the guts to pull the trigger on anything on my own.
I recently put in 5k into three ETFs.
It worked out to:
VAS 50%
VGB 19%
VGS 30%

I understand that I went too hard on bonds and that I've fallen for home bias, but I wouldn't have learned those things if I didn't commit money and thus give myself more incentive to keep learning, so I'm fine with that.
I want to put in another 20k I have lined up for investment keeping in mind I have a healthy safety net as well.
I also understand that it will go down at some stage, but I feel having a good safety net for myself will just lead to such falls being interesting instead of emotional, and a good opportunity to buy more.

I have a few questions.
1. Should I just put that whole 20k into VGS to reverse the home bias and to save on transaction costs?
2. Is doing that not violating my diversifaction rule seeing as I'll be going heavy into one single ETF, or is the VGS ETF diversified enough itself to counter that?
3. Is now the right time to put it in seeing as it has gone up quite a bit since I put it in three months ago?
Should I wait for it to go back down a bit or should I just put it in to avoid trying to time the market?
4. How would you go about adjusting the allocation in future years?

Thank you, everyone, so very much.
It has been hard learning to do this with no-one even remotely financially literate in my vicinity.
I'm willing to learn more, so if you have any good resources, send them this way!

pkcrafter
Posts: 12098
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
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Re: Australian ETF Portfolio Allocation

Post by pkcrafter » Tue Oct 31, 2017 11:57 am

fruitjuicante wrote:
Mon Oct 30, 2017 9:04 pm
Hey, guys.
I'm 25 and Australian.
I know you get these questions a lot but I have no one to teach me or any friends interested in this stuff and it is hard to get the guts to pull the trigger on anything on my own.
I recently put in 5k into three ETFs.
It worked out to:
VAS 50%
VGB 19%
VGS 30%

I understand that I went too hard on bonds and that I've fallen for home bias, but I wouldn't have learned those things if I didn't commit money and thus give myself more incentive to keep learning, so I'm fine with that.
I want to put in another 20k I have lined up for investment keeping in mind I have a healthy safety net as well.
I also understand that it will go down at some stage, but I feel having a good safety net for myself will just lead to such falls being interesting instead of emotional, and a good opportunity to buy more.

Welcome to the forum,

You need to identify the ETFs, are these correct?

VAS - Vanguard Australian Shares Index
VGB - Vanguard Australian Government Bond Index
VGS - Vanguard MSCI World ex-Australia (unhedged)


I have a few questions.
1. Should I just put that whole 20k into VGS to reverse the home bias and to save on transaction costs?

If you mean add to VGS without adjusting bonds back to 20%, then no. Maybe I'm reading something that's not there, but I think you might be trying to convince yourself that an equity allocation close to 100% is OK. Maybe you should be more conservative until you have experienced that first down fall. By back-up do you mean you have a large emergency fund?

2. Is doing that not violating my diversifaction rule seeing as I'll be going heavy into one single ETF, or is the VGS ETF diversified enough itself to counter that?

If you're cutting out bonds, then I think it could be argued that you have reduced diversification.

3. Is now the right time to put it in seeing as it has gone up quite a bit since I put it in three months ago?
Should I wait for it to go back down a bit or should I just put it in to avoid trying to time the market?

No one knows if this a good time, but at some point there will be a reset. I think you are showing signs of worry about what the market is going to do.

4. How would you go about adjusting the allocation in future years?

For now, i'd suggest you set your AA to something like 70-75% equity. You can readjust after you have experienced a hard fall. You have a very long investing timeline, so no rush to do it all right now. Maintain balance between potential reward and risk because sometimes you get the consequences of risk without the reward.

Thank you, everyone, so very much.
It has been hard learning to do this with no-one even remotely financially literate in my vicinity.
I'm willing to learn more, so if you have any good resources, send them this way!

Have you looked at our Wiki? You will also find a list of recommended books.

/wiki/Getting_started


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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