Rate My Portfolio

Homr on 19/08/2018 - 11:32

Hi Ozbargainers,

So I have $125K worth of savings and its currently parked at MeBank earning 2.85% interest P.A. An article popped up the other day which mentioned that putting a significant amount of savings in the bank is stupid because of the low interest rate and I'm better off using that money to invest and "multiply" my wealth.

So I got reading into investing and it seems investing ETF and LICs is the way to go for me. Not looking to invest in property as I've read that house prices are going to go down in the next few years. I'm planning to only invest short-term 1-2yrs before cashing out and getting a property.

I'm kinda following Thornhills approach where there is a mix between capital growth and some dividend payouts.

At the moment now, my proposed portfolio is the following

VDHG - $70K
NCC - $10K
MLT - $30K
AUI - $15K

VDHG seems the "safest" investment, that's why I've poured the most capital into it. The other 3 are from LICs. MLT is the safest out of the 3 LICs, NCC for growth potential and AUI is the second safest with capital growth and dividend payout. Any comments on this? Are my LICs chosen correctly? MLT and AUI seems pretty similar so should I be just choosing 1 of them instead of getting both?

What also caught my eye is Wesfarmers and Macquarie bank which has 22% and 40% capital growth in the last year respectively with decent dividend payout. Should I add both of them in my portfolio aswell?

Thank you all.

Financial

Comments

  • Specialist Diaz on 19/08/2018 - 11:43
    +17

    If you're going to be pulling the money out for a house purchase in 1-2 years, I would recommend you leave it in the bank.

    • Ven0m on 20/08/2018 - 10:04
      +2

      ^ this.

      Share markets have been very good for the last decade really with no real major declines. People have become complacent in this low interest rate environment and are seeing good returns from stocks and managed funds. The reality is the risk of a decline in share markets has only increased of late and its only a matter of time before something happens. Not sure what or when or how big but it will. Best thing you can do with your short time frame is to avoid risk of loss as much as possible. If you will need all those funds in 1 - 2 years, then any investment outside of cash deposits isn't a great idea. You are more or less taking a gamble otherwise. Long term you could afford to weather through and recover any losses, but you can't with your time frame.

    • wfdTamar on 28/08/2018 - 16:56

      at 2, maybe 3%? Crazy waste.

  • TheBilly on 19/08/2018 - 11:43

    What also caught my eye is Wesfarmers and Macquarie bank which has 22% and 40% capital growth in the last year 

    Not sure about the rest, but without knowing details I would go all in on a company currently at a high. That would be like investing in Sydney property at the top end of the market, right now. It will hurt.

    • mbck on 19/08/2018 - 11:44
      +10

      Just for clarity sake, 'would not'

      • TheBilly on 19/08/2018 - 14:58

        Yes sorry lol

  • sssx on 19/08/2018 - 12:01
    +1

    I agree that having a significant amount of money in a savings account is silly. If it's for a purpose - 'emergency fund' or 'waiting for a good opportunity', sure. Don't invest it just for the sake of investing it if the timing is bad, or you have other purposes.

    1-2 years is very short term for share market, which I would've thought you'd read in your investment-related reading. Consider it a higher risk investment due to the timeframe - if the market crashes it may take another X years to recover back to breakeven/profit range.

    There's quite a bit of 'fear' that the next year or two could see a 'crash' in several markets, not just the property market. No guarantee any will go down, but they might or might not. Staying out of the market risks missing out on growth, going in to the market risks being involved in a crash. You may end up with less capital than you put in if you try to pull it out in the next 1-2 years for a property. It's a risk you'll have to weigh up.

    Agree with other comments, WES and MQC have had good growth but are at highs, so that's a risky time to invest. What about TLS (Telstra)? They've traditionally had a good dividend return and have taken a tumble lately. But if you look at individual companies, you need to research the company, not just what the price is now vs before vs the dividend. Keep in mind ETF/LICs may own some of the individual companies you look at too, I believe you can find what companies they own.

    VDHG is new. There are other Vanguard options that have a longer history, but I don't know the goal behind VDHG; maybe it's higher risk. I'd consider Vanguard a decent place to start though, with a mix of their options to cover bases with some diversification (e.g. Australia, global, emerging markets).

    You could put half of your funds into the share market, and keep the other half in your savings account. Lower risk, lower return, but still more potential than 100% in the bank. You could find low-low risk share market options that get you an extra 1% on top of the bank, etc.

  • jsheroes on 19/08/2018 - 12:29
    +3

    If you need to use that 125k in the next 12-24 months, there's no way you should invest in shares. I know it sucks to hear / is boring etc, but unless you're ok with a significant chance that your 125k deposit is more like 60k when you come to need it, bank is the only way to go in that timeframe.

  • Oofy Doofy on 19/08/2018 - 12:30
    +1

    I have a different Philosophy, I made my portfolio up just like 60/40 stocks to bonds… except I don't believe bonds are worthwhile, due to inflation eating into them (over the long term you are going to lose money with them), and their returns only really helping when markets are falling or flatlining. Instead, I decided to replace them with REIT's and Infrastructure, which is where most people put their money when the markets are bearish and not doing very well/doing little to nothing.

    I am looking to change to a 90/10 portfolio soon though, I'm happy with taking on more risk even in these high market value times.

    • Rosace on 19/08/2018 - 12:51

      I also don’t understand much when bonds will actually benefit unless the interest rates are high. Appreciate if someone can give some clarification. If one has already a mortgage would it be better off to leave whatever ratio for bond say 25% in the offset account and invest the rest in common stocks?

      • Oofy Doofy on 19/08/2018 - 14:21
        +1

        Long term rate of inflation is like 2% or so, some have factored for 2.5%, but either way, the aim of the game is to beat inflation.

        I would think a property located near a capital city with access to good services and places of business (Where the work is), would be a relatively low risk investment. In that case, it really depends on what your risk tolerance is in order to improve your financial situation/future nest egg.

        • Rosace on 19/08/2018 - 16:55
          +1

          Thanks for the tip on property, I’m down the path of very long term investing. Pretty boring for most of us. As you said, I also don’t see much advantage in investing in bonds due to the effect of the inflation. Not sure if I’m more on the right but my current philosophy is to leave about 25% of my savings in the offset account instead of bonds as still paying off my home and the rest will go towards quality stocks or deposits for investment properties.

  • Meho2026 on 19/08/2018 - 17:06

    You are totally on the right track with your thinking. If you are earning 2.8% interest from the bank, after tax its more like 1.8-1.9% and if inflation is 1.9% then your money isnt actually growing at all.
    Like others are saying if you want to access your money in 1-2 years then investing the share market like this may not be the best choice for you.
    Theres a good article here comparing LICs including MLT and AUI. http://www.etfwatch.com.au/blog/how-do-the-grandfathers-of-a…
    If they have similar holdings then yes you are correct in thinking of choosing one rather than both.
    VDHG is a good diversified ETF but it designed for a longer term investment outlook for people who have a degree of risk tolerance. That doesnt sound like what you are looking for.
    I own MLT and VDHG, the next ETF I invest in will probably be an Index ETF but I am not planning on buying property in the short term.
    I found this really helpful in choosing an ETF https://www.etfbloke.com/. The guy seems to be a Vangaurd fan but he makes some good points about diversification.
    You might be better off spending the next 1-2 years researching a sound property investment strategy and having your cash at hand to jump straight on a good opportunity when you see one.
    You could consider going to see a financial planner, I know they got a bad name at the moment but they may be able to advise a strategy that suits your short and long term investing goals, maybe where part of your money is really liquid and low risk and available for property investing and the other is invested for longer term (higher risk) growth.

    • sssx on 19/08/2018 - 22:13
      +1

      Vanguard has a good reputation worldwide, and it's what I recommend friends to look in to when they first get interested. The biggest detractor from profits are fees, and Vanguard usually has the lowest.

      Agree with your suggestion to research property strategies, good idea.

      I don't agree with the financial adviser part, but I'm sour on them and have been for a long time. Granted I haven't tried many, but I haven't had good experiences (or learnt more from them that I didn't already know/can find on google). Maybe they can provide some useful information, but find one that's a fiduciary at least.

      • Meho2026 on 19/08/2018 - 22:46
        +1

        I totally get your point
        I was trying to imply that a financial planner might give better advice than any of us

    • Homr on 20/08/2018 - 17:43

      Do you know if VDHG etfs overlaps with NDQ etf. NDQ had really great growth in the last 12 month period so I'm looking to get some of that aswell. They have exposure to big companies like Apple, Google, Amazon which I don't think they will go down any time soon.

  • Homr on 19/08/2018 - 22:30

    Thanks for everyone's feedback. I've looked into this more today and just found out that VDHG only has 129 units up for sale (~$6905) so I'm planning to buy it directly from vanguard with the minimum requirement deposit of $100K. The fees is 0.38% pa so that's $380 a year :(

    • Meho2026 on 19/08/2018 - 23:07

      Are you sure you know what you're doing and the risk involved?
      VDHG have a management fee of 0.27% not 0.38%
      Are you perhaps looking at one of Vanguards funds instead of their ETFs?
      VDHG are on the ASX and you have to buy VDHG through a broker.
      If you look up VDHG on the ASX website you will be able to see the daily volume of shares traded. You're right that the volume is low and it may mean it's not a very liquid investment but 4343 were traded on Friday, that's over $230,000 worth.
      Be careful, it's really easy to lose money and educating yourself on risk is vital.

      • Homr on 19/08/2018 - 23:16

        This one here

        https://www.vanguardinvestments.com.au/retail/ret/investment…

        Isn't this VDHG but "wholesale"?

        • azvc on 19/08/2018 - 23:20

          That one says 500k initial investment & 0.29% fee

        • Homr on 19/08/2018 - 23:21
          +2

          @azvc: You can get in with 100K apparently

          http://whrl.pl/RfbT1H

          http://whrl.pl/Rfb04T

        • azvc on 19/08/2018 - 23:29

          @Homr:
          I see, that's interesting.. so the question remains: is it 0.27%, 0.29%, or 0.38%??

        • Meho2026 on 19/08/2018 - 23:44

          Ok I think you are looking at the underlying investments, they are the same however there is a big difference between a managed fund and an ETF.
          http://thewealthguy.com.au/managed-funds-index-funds-etf/
          Selling out of funds is not as quick or straightforward as selling ETFs.

        • Homr on 20/08/2018 - 00:37

          Edit: wrong

        • [Deactivated] on 20/08/2018 - 07:31
          +1

          @azvc:
          0.29% all up inclusive of what they are charging in what VDHG is invested in.

          The extra 0.1% is the spread fee which is factored into the purchase / sale price.

        • Vagon on 20/08/2018 - 08:34

          @Meho2026: it's actually pretty quick, they have a spread is all but more importantly they don't charge brokerage if he wants to DCA

        • Homr on 20/08/2018 - 11:23

          @Meho2026: Thanks, I've decided to sign up to selfwealth and check out the trade volumes there. They offer 5 free trades aswell regardless of size so I save some coins there compared to commsecc which charges 0.12% for anything above $25,000 purchases.

      • Oofy Doofy on 20/08/2018 - 11:54

        At worst it might take a few weeks to sell out of VDHG. In my experience when I've sold off some indexes, they've been picked up within the day, or the day after. You can just set to sell 'until all sold'. Anyway, just my experience.

        Also I recommend you always try to buy-in at a discount (bid at a discount, set a max price), which has usually worked just fine for me.

  • [Deactivated] on 20/08/2018 - 10:55
    +2

    more eneloops, once you get enough you can sell them to south australia like elon musk did

  • nebula98 on 20/08/2018 - 19:00
    -2

    All your money in one bank big mistake, I have 5 diffrent banks,in case one goes down, hacking,spread the risk

    • sssx on 20/08/2018 - 22:05

      What banks?

    • sghetti on 29/08/2018 - 11:14

      All banks are covered by a government guarantee of $250k. If a bank collapses and your savings go missing, the government guarantees up to $250k.

      Having cards or at call funds across multiple institutions is a good idea, as a bank having settlement issues for cards etc. could stop your from accessing your funds when needed. But for significant savings I don't think it's required.

      • sssx on 07/09/2018 - 23:58

        The guarantee is up to $250k per person per bank (including sub-brands), up to a total of $20 billion for the bank (again, including sub-brands, e.g. CommBank + BankWest = one bank). Most banks you've heard of are over $20 billion in total deposits, so … everyone would miss out on a portion of their money.

        Also, from what I've read, APRA or the Gov or someone has to 'enable' the guarantee, so it's not "on" by default. If a bank uses the money you've given them on loan (and thus earn interest on) to stop itself from failing (aka 'bail in'), has the bank failed? Would the guarantee be activated?

  • Homr on 21/08/2018 - 18:28

    After more research, I've decided to take out the LIC and invest all on ETFs

    Is it normal to have VDHG with A200 and NDQ as one folio or does VDHG overlaps everything?

    • usmanyousaf on 22/08/2018 - 07:21

      I would keep atleast 50-70k in the bank and invest the rest in ETFs. And after 6 months of progress, changes the investment/savings accordingly.

    • 7hours 44min ago on 24/08/2018 - 08:33

      They def overlap. Pick one strategy.

      You also need some Asia exposure.

      • Homr on 24/08/2018 - 10:55

        THanks. Which one overlaps? I'm now thinking of not purchasing VDHG as it seems "too" diversified and just building my own portfolio that kinda replicates VDHG but without over-diversification.

  • Homr on 26/08/2018 - 18:14
    +1

    Did more research over the weekend.

    Looking to do $60K VGS, $25K NDQ and $25K A200

    The rest I'm gonna gamble on afterpay shares

  • demiurge on 29/08/2018 - 12:53

    Not meant to be financial advise but don't enter the stock market if you are certain you need the money in 1 year. You have to be able to ride out the lows.

    • Homr on 29/08/2018 - 13:01

      I don't "need" the money in 1 yr. It was more of an estimate than anything.

      I could wait 2-3 years

      • demiurge on 29/08/2018 - 13:24

        In that case yes I agree you should not leave 125k in bank. Even bank shares have better returns and that's not too risky. I am actually still kicking myself not buying CSL this time last year lol.

  • Bohlen on 11/09/2018 - 11:32

    Depends on risk tolerance, age etc
    But generally I wouldn't suggest ETF's or LIC's to anyone with less than 5yrs minimum.
    And Id imagine Thornhill would say more like 10yrs.

    • Homr on 11/09/2018 - 11:53

      Whys that?

      • Bohlen on 11/09/2018 - 12:37

        Ask yourself how much of your 125k you are willing to lose. 20k? 60k?

        The market fluctuates unlike a bank term deposit.
        But given time the market usually averages out for a positive return.
        Without time you expose yourself to more risk.

        If you need the money in 2yrs and the market is down 25% Do you;

        panic sell?
        need to sell for other reasons?
        Well if sell your down 31k.
        OR
        Can you sit and wait 4-5yrs hoping to recover?

        If you answer sell, You shouldn't invest.
        If you answer sit and hold, You can invest.

        IE If you did this 10yrs ago in 2007 and needed to withdraw it 12-18months later. You sir have lost your money (41% market drop in 2008).

        See img of returns of the ASX 200

        https://i.imgur.com/aFs1xIC.png

        This is a very basic summary and doesn't cover a lot of variables.
        You should be doing a lot more reading and learning on the topic.

        Do some reading on the market, finance etc.
        Too many to list. Here's a start.

        https://www.reddit.com/r/fiaustralia
        https://www.reddit.com/r/financialindependence/
        https://www.reddit.com/r/AusFinance ( see side of page for book links etc -> AusFinance Links & Common Questions )

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