Australia : Portfolio Advice

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Topic Author
sky12
Posts: 4
Joined: Wed Apr 21, 2021 6:35 pm

Australia : Portfolio Advice

Post by sky12 »

Country of Residence: Australia

International Lifestyle: We will retire in Australia

Currency: AUD
Emergency funds: $65K in offset account linked to PPOR

Debt:
Investment Property(IP)
Value: $290K (Paid $310K in 2011)
Mortgage: $175K (interest rate 2.77%)

Principle place of residence (PPOR)
Value: $400K (Paid $410K in 2014)
Mortgage: $305K (three splits: split 1 (2.77%), split 2 (2.77%), Split 3 (1.99% fixed for 4 years)


Age: 40 & 32(spouse) with 2 kids (age 11 & 7)
Income:   
Salary: $155K + 11% Super   
Spouse Salary: $115K + 12.5% Super
Rental Income IP: $370/week excluding expenses and agent fees (11% inc GST)

Superannuation: $520K
Super: $365K 55% International shares & 45% Australian Shares
Spouse Super: $155K 55% International shares & 45% Australian Shares 
I am maxing out my $25K super concessional contribution limit from last 4 years. Spouse salary sacrificing  3% extra into her super.  

Portfolio:
ETFs: $775K invested using family trust with the following allocations: 
40% Vanguard Australian Shares Index (VAS) (MER: 0.1%)
50%  Vanguard MSCI World ex-Australia (VGS) (MER: 0.18%)
05% Vanguard FTSE Asia Pacific ex Japan, Australia and New Zealand (VAE) (0.40%)
05% BetaShares Asia Technology Tigers (ASIA) (MER: 0.67%)

Currently Contributing $8k/month into above ETFs to keep it balanced at the time of contribution.

Desired Asset allocation: 100% stocks / 0% bonds

Questions:
1. I am leaning towards following asset allocation to reduce Australian exposure: 
30% Vanguard Australian Shares Index (VAS) (MER: 0.1%) 
50%  Vanguard MSCI World ex-Australia (VGS) (MER: 0.18%)
10% BetaShares NASDAQ 100 ETF (NDQ) (MER: 0.48%) 
05% Vanguard FTSE Asia Pacific ex Japan, Australia and New Zealand (VAE) (0.40%) 
05% BetaShares Asia Technology Tigers (ASIA) (MER: 0.67%)

Any suggestions/advice on this?

Note:There is very high chance of redundancy in 8 years time due to my workplace will close and I would be entitled to 2 years of annual salary as a redundancy payout. I would like to reduce my work hours/days in my early fifties and spouse will continue to work :happy and the family trust will allow us to distribute income from ETFs tax efficiently.

2. We both work in IT and want to include NDQ as I have a bit of technology bias. I know this overlaps with VGS and has higher expense ratio. What do you think should I ignore this bias and make VGS 60%?
 
3. 30% allocated to VAS, is it too high considering Australia is 2.5% of world's market? 
User avatar
andrew99999
Posts: 1021
Joined: Fri Jul 13, 2018 8:14 pm

Re: Australia : Portfolio Advice

Post by andrew99999 »

From your property values, my guess is that you are in Perth. Hopefully the IP is a house and not an apartment.

Well done on your savings rate and your super. Hopefully the super is in low-cost index-tracking funds.

Absolutely agree to lower home country bias by com - both inside and outside super.

If you're going to stick with your tilts (NDQ/ASIA) even when they go through long down periods, then it seems ok I suppose, otherwise I don't like the tilt. Also, note that normally you tilt away from your own industry as a way to reduce the risk of your income and that part of your portfolio going down together.

I'm not so much concerned with Australia being 2.5% of the world's market, but more that the Australian market is extremely poorly diversified. 30% is probably on the edge of what I could live with. My preference based on risk and return is lower at 20%.
MrCheapo
Posts: 1469
Joined: Tue Dec 22, 2020 2:43 pm

Re: Australia : Portfolio Advice

Post by MrCheapo »

I have investments in Australia from 25 years ago. Today they are worth 50% more than what I bought them at (sans properties).

In contrast my US investments have more than tripled. Note, we are not talking about risky stocks, just boring index funds (All ordinaries vs SP 500) and
blue chip companies (Qantas vs United, Telstra vs AT&T etc.).

So the take home message is try to invest outside of Australia if possible.
sky12 wrote: Sat Apr 24, 2021 7:52 pm Country of Residence: Australia

International Lifestyle: We will retire in Australia

Currency: AUD
Emergency funds: $65K in offset account linked to PPOR

Debt:
Investment Property(IP)
Value: $290K (Paid $310K in 2011)
Mortgage: $175K (interest rate 2.77%)

Principle place of residence (PPOR)
Value: $400K (Paid $410K in 2014)
Mortgage: $305K (three splits: split 1 (2.77%), split 2 (2.77%), Split 3 (1.99% fixed for 4 years)


Age: 40 & 32(spouse) with 2 kids (age 11 & 7)
Income:   
Salary: $155K + 11% Super   
Spouse Salary: $115K + 12.5% Super
Rental Income IP: $370/week excluding expenses and agent fees (11% inc GST)

Superannuation: $520K
Super: $365K 55% International shares & 45% Australian Shares
Spouse Super: $155K 55% International shares & 45% Australian Shares 
I am maxing out my $25K super concessional contribution limit from last 4 years. Spouse salary sacrificing  3% extra into her super.  

Portfolio:
ETFs: $775K invested using family trust with the following allocations: 
40% Vanguard Australian Shares Index (VAS) (MER: 0.1%)
50%  Vanguard MSCI World ex-Australia (VGS) (MER: 0.18%)
05% Vanguard FTSE Asia Pacific ex Japan, Australia and New Zealand (VAE) (0.40%)
05% BetaShares Asia Technology Tigers (ASIA) (MER: 0.67%)

Currently Contributing $8k/month into above ETFs to keep it balanced at the time of contribution.

Desired Asset allocation: 100% stocks / 0% bonds

Questions:
1. I am leaning towards following asset allocation to reduce Australian exposure: 
30% Vanguard Australian Shares Index (VAS) (MER: 0.1%) 
50%  Vanguard MSCI World ex-Australia (VGS) (MER: 0.18%)
10% BetaShares NASDAQ 100 ETF (NDQ) (MER: 0.48%) 
05% Vanguard FTSE Asia Pacific ex Japan, Australia and New Zealand (VAE) (0.40%) 
05% BetaShares Asia Technology Tigers (ASIA) (MER: 0.67%)

Any suggestions/advice on this?

Note:There is very high chance of redundancy in 8 years time due to my workplace will close and I would be entitled to 2 years of annual salary as a redundancy payout. I would like to reduce my work hours/days in my early fifties and spouse will continue to work :happy and the family trust will allow us to distribute income from ETFs tax efficiently.

2. We both work in IT and want to include NDQ as I have a bit of technology bias. I know this overlaps with VGS and has higher expense ratio. What do you think should I ignore this bias and make VGS 60%?
 
3. 30% allocated to VAS, is it too high considering Australia is 2.5% of world's market? 
Topic Author
sky12
Posts: 4
Joined: Wed Apr 21, 2021 6:35 pm

Re: Australia : Portfolio Advice

Post by sky12 »

andrew99999 wrote: Sun Apr 25, 2021 4:46 am From your property values, my guess is that you are in Perth. Hopefully the IP is a house and not an apartment.

Well done on your savings rate and your super. Hopefully the super is in low-cost index-tracking funds.

Absolutely agree to lower home country bias by com - both inside and outside super.

If you're going to stick with your tilts (NDQ/ASIA) even when they go through long down periods, then it seems ok I suppose, otherwise I don't like the tilt. Also, note that normally you tilt away from your own industry as a way to reduce the risk of your income and that part of your portfolio going down together.

I'm not so much concerned with Australia being 2.5% of the world's market, but more that the Australian market is extremely poorly diversified. 30% is probably on the edge of what I could live with. My preference based on risk and return is lower at 20%.
Thank you Andrew!! I like your suggestions and a huge thank you for your site passiveinvestingaustralia its an excellent resource. We are based in Central Queensland, the property market hasn't been good here compared to capital cities. The IP is 3 a bedroom house positively geared and we will get rid of it once the market improves a bit more. I will reduce my Australian allocations (VAS) further. What do you think of the following AA and can you please share your AA?:
20% Vanguard Australian Shares Index (VAS) (MER: 0.1%)
60% Vanguard MSCI World ex-Australia (VGS) (MER: 0.18%)
10% BetaShares NASDAQ 100 ETF (NDQ) (MER: 0.48%)
10% Vanguard FTSE Asia Pacific ex Japan, Australia and New Zealand (VAE) (0.40%)
User avatar
crinkles2
Posts: 244
Joined: Fri Nov 28, 2014 7:18 pm

Re: Australia : Portfolio Advice

Post by crinkles2 »

I am doing 30% AU and 70% Global stock FWIW. Happy to retire anywhere but probably somewhere more exciting than Aus.
User avatar
andrew99999
Posts: 1021
Joined: Fri Jul 13, 2018 8:14 pm

Re: Australia : Portfolio Advice

Post by andrew99999 »

sky12 wrote: Sun Apr 25, 2021 5:20 pm Thank you Andrew!! I like your suggestions and a huge thank you for your site passiveinvestingaustralia its an excellent resource. We are based in Central Queensland, the property market hasn't been good here compared to capital cities. The IP is 3 a bedroom house positively geared and we will get rid of it once the market improves a bit more. I will reduce my Australian allocations (VAS) further. What do you think of the following AA and can you please share your AA?:
20% Vanguard Australian Shares Index (VAS) (MER: 0.1%)
60% Vanguard MSCI World ex-Australia (VGS) (MER: 0.18%)
10% BetaShares NASDAQ 100 ETF (NDQ) (MER: 0.48%)
10% Vanguard FTSE Asia Pacific ex Japan, Australia and New Zealand (VAE) (0.40%)
Ah, it's regional. At least the yield isn't as terrible as it has been in Perth, but still.

Yeah, I like that portfolio more. I wouldn't bother with NDQ but if you particularly want to tilt, at least it's only 10% of your equities and not individual stocks.
jg12345
Posts: 427
Joined: Fri Dec 11, 2020 12:03 pm

Re: Australia : Portfolio Advice

Post by jg12345 »

My two cents are that I would give up (0%) or halve (5% and 5%) the tilts for Nasdaq/Asia. they are super expensive, choosing them presumes you are more knowledgeable than the market, they go against simplifying, and they make your portfolio more correlated with your salary (Nasdaq definitely, Asia to lesser extent). I don't do 100% stocks, but FWIW my stock portion is VFEM 15%+VEVE 85% (UK resident, retiring in EU), so I'd suggest doing the same or in your case, australia + ex-australia (btw, I would also remove the home bias, but I see that more palatable)
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