Two Fund Portfolio Vs Three Fund Portfolio

whiterice on 14/11/2017 - 21:17

Hi guys,

Looking to invest in Vanguard ETFs at the moment. FT student, got $5k, and hoping to put another $5-10k per year following, long time frame (5 yr+).

Tossing up between two, although open to suggestions.

VAS (ASX 300) - 50%
VGS (MSCI World ex-Australia) - 50%

vs

VAS (ASX 300) - 50%
VEU (FTSE All-World ex US) - 25%
VTS (CRSP US Total Market) - 25%

To my (limited) understanding, the latter is more diversified (includes emerging markets). But given my small amount of capital to invest, I'm a bit wary of the increased brokerage fees in order to maintain the portfolio balance. Opinions?

Financial

Comments

  • 00 on 14/11/2017 - 22:22

    Mattress

    • whiterice on 14/11/2017 - 22:26
      +2

      Good nights sleep sounds like a good investment to me

  • cpho on 14/11/2017 - 22:28

    Start with the two and add a third when you have more capital to invest.
    Like you said, brokerage will eat your margins.

    Any particular reason you're more inclined to buy VEU+VTS instead of VGS? The combination of VEU+VTS pretty much equals to VGS (not exactly, but almost)
    For your third one, have you considered VAE/VGE or even VEQ?

    • whiterice on 14/11/2017 - 22:52

      I was thinking VEU + VTS over VGS because of emerging markets coverage (seems mostly Asia I'm missing out on in VGS) as well as lower management costs. But I suppose the 0.07% difference in management costs isn't even close to the difference in brokerage costs haha.

      VGE and VAE seems to have really high management costs (0.48% / 0.40%) compared to the others though, but seem to have what I'm looking for.

      • 1ch1go on 15/11/2017 - 08:42

        If you wanting to access Asia, have a look at IEM

  • GetOffMyUnicorn on 14/11/2017 - 22:50

    The way the world is now I'd hold off for a while and do some more research.

    • whiterice on 14/11/2017 - 22:57

      Do you think there will be a crash sometime soon or something? Clueless in these matters haha. I figure if I just buy regularly and hold, I should be able to ride it out … right? Can these things be predicted?

  • Yttrium on 14/11/2017 - 23:03
    +1

    There is no correct asset allocation. Either of those choices are fine.

    Remember your W8-ben form.

    • whiterice on 14/11/2017 - 23:21

      Mm, I was thinking simpler might be better for the time being.

      Will I get a notification from my broker or ComputerShare or something, or will I have to preemptively fill one?

      • 1ch1go on 15/11/2017 - 08:40

        You'll get one from your welcome pack. Just make sure you remember to fill them out and return them.

  • djones145 on 15/11/2017 - 08:18

    Why not have four?
    Place it all on black?

    All advice here is general advice, no personal advice can be given unless we have an afsl licence, please consult ur financial advisor for more tailored advice towards ur current situation.

  • powerhead on 15/11/2017 - 09:09
    +1

    if i was starting now and was index inclined, i would probably go with
    VAS - 30%
    VGS - 30%
    cash - 40%

  • abb on 15/11/2017 - 09:47
    +3

    You might be better off using one of the retail funds. Yes the management fee is a little higher, but you can invest smaller amounts ($100?) via bpay with no brokerage, and the gains from having your money invested more quickly will likely mean you come out ahead.

    If you're set on the ETF way, I would do VAS + VGS (or maybe even just VGS by itself!).

    • Seraphin7 on 15/11/2017 - 09:55

      I agree. For small investment amounts, brokerage can be a real killer. You need to examine the cost of brokerage vs. the spread on managed funds (along with differences in management fees). Until you can get your brokerage (remembering you need to pay it on both sides of the transaction) under the managed fund spread, you are losing money with the ETF approach, all else being equal.

    • whiterice on 15/11/2017 - 21:38
      +1

      Hm, that does sound like a good idea. Ran the numbers and the retail funds look a lot cheaper at this point with a lot less effort too. Set and forget haha.

  • ozmian on 24/11/2017 - 11:58

    they've launched some new diversified ETFs now too VDHG etc which are similar to the wholesale funds only you buy them like any other ETF

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