Actively managed portfolio journey

[BossMan.]

Progress Update

Again I want to be clear this is not to give financial advice - this is just a journal/log of what positions I have opened etc. as to keep a record to look back at and I also think someone one day if in a similar position to me, could find it interesting or useful.

I have converted 75% of my cash in to index funds on a market order this morning. I have chosen to invest with a weighting of 33% into the following index funds:

Index Fund Name	Weighting
Vanguard Australia Property Securities Index ETF (VAP)	33%
BetaShares Australia 200 ETF (A200)	33%
Vanguard Diversified Balanced Index ETF (VDBA)	33%

The VAP is the most speculative of the three, I think the property market isn't cooling anytime soon and we are dependent on immigration to keep the economy ticking over. Similarly I feel a back to the office drive + the conversion of commercial office property in to apartments is a very realistic and profitable idea that we could see more of in the next 6 - 12 months. As well as the potential of government subsidization to increase the housing supply.

I am aiming to build up a buffer of cash to max out my super contribution in June then anything over a certain cash threshold (I have set) will be invested. As well as a side account investing in my planned month long trip to the USA at the end of this year/early next year.

Will update here when stuff changes/something interest me.

 

[basilio]

Hi all,

A little about me - I am in my early 20s earning ~$100k a year and am seeking feedback on what people thing of my plan.

The Plan:

I was originally looking at potentially negatively gearing some shares i.e. $20k of a safe blue chip stock however came to realize that I am likely better off just reducing my taxable income by meeting the maximum super contribution ($27,500 atm due to increase to $30,000 next fin year) and claiming study expenses/work expenses set to be ~$3.5k for this financial year in turn reducing my gross income by ~$30.5k.

What do you guys think of maximizing my super contributions is my best bet for minimizing my tax and getting the most out of my income (while I'm in a stage where I don't have lots of assets/liabilities)? I figure if I make these concessions consecutively for the next few years I will be able to build up ~$120k in my super prior to turning 25 (in just straight contributions ignoring growth) setting me up well for my later years in life.

However my additional problem is I have a lot of liquid cash in the bank, to much for me to be comfortable with especially given the the low interest rate I get on my savings accounts. What do you guys think of my idea to invest in ETF's?

Cash (Percentage)	Cash Allocation
80% of Cash	Invested in to index funds (85% into safe growth ETFs (well as safe as they get)) then 15% invested in to australian commercial property based ETF's (more speculative - however investment is based off of recent WFH rulings by the Fair Work Commission - I personally am speculating on a return to the office movement happening in the next 12 - 24 months.)
20% of Cash	Remain as liquid cash will be able to cover ~4 months of living expenses if everything goes upside down in my life.

I really welcome any feedback on my plan.

Reminds one of the classic opening line from a classic Book

 

[Value Hunter]

Hi all,

A little about me - I am in my early 20s earning ~$100k a year and am seeking feedback on what people thing of my plan.

The Plan:

I was originally looking at potentially negatively gearing some shares i.e. $20k of a safe blue chip stock however came to realize that I am likely better off just reducing my taxable income by meeting the maximum super contribution ($27,500 atm due to increase to $30,000 next fin year) and claiming study expenses/work expenses set to be ~$3.5k for this financial year in turn reducing my gross income by ~$30.5k.

What do you guys think of maximizing my super contributions is my best bet for minimizing my tax and getting the most out of my income (while I'm in a stage where I don't have lots of assets/liabilities)? I figure if I make these concessions consecutively for the next few years I will be able to build up ~$120k in my super prior to turning 25 (in just straight contributions ignoring growth) setting me up well for my later years in life.

However my additional problem is I have a lot of liquid cash in the bank, to much for me to be comfortable with especially given the the low interest rate I get on my savings accounts. What do you guys think of my idea to invest in ETF's?

Cash (Percentage)	Cash Allocation
80% of Cash	Invested in to index funds (85% into safe growth ETFs (well as safe as they get)) then 15% invested in to australian commercial property based ETF's (more speculative - however investment is based off of recent WFH rulings by the Fair Work Commission - I personally am speculating on a return to the office movement happening in the next 12 - 24 months.)
20% of Cash	Remain as liquid cash will be able to cover ~4 months of living expenses if everything goes upside down in my life.

I really welcome any feedback on my plan.

I definitely would not put any voluntary contribution into super if you are in your 20s. Even though there are great tax benefits for doing so 40 years from now is a long time away and the fiscally irresponsible government could keep changing the rules or outright nationalize/confiscate people's superannuation by then. Sure for somebody in there 50s it might make sense to make voluntary contributions but if you are in your 20s relying on the government not to do dumb things for another 40+ years is a huge gamble.

 

[divs4ever]

I definitely would not put any voluntary contribution into super if you are in your 20s. Even though there are great tax benefits for doing so 40 years from now is a long time away and the fiscally irresponsible government could keep changing the rules or outright nationalize/confiscate people's superannuation by then. Sure for somebody in there 50s it might make sense to make voluntary contributions but if you are in your 20s relying on the government not to do dumb things for another 40+ years is a huge gamble.

sadly , i agree

maybe a small privately held portfolio , tilt towards shares paying fully franked divs and learn as you go , the education gained may well be more valuable than the extra tax paid ( if any )

 

[Value Hunter]

sadly , i agree

maybe a small privately held portfolio , tilt towards shares paying fully franked divs and learn as you go , the education gained may well be more valuable than the extra tax paid ( if any )

I agree at that age invest some money into shares outside of super. And that way you can decide to retire at whatever age you want rather than an arbitrary age set by government bureaucrats.

 

[BossMan.]

I definitely would not put any voluntary contribution into super if you are in your 20s. Even though there are great tax benefits for doing so 40 years from now is a long time away and the fiscally irresponsible government could keep changing the rules or outright nationalize/confiscate people's superannuation by then. Sure for somebody in there 50s it might make sense to make voluntary contributions but if you are in your 20s relying on the government not to do dumb things for another 40+ years is a huge gamble.

I think I have come to the conclusion that I will get my balance to ~$35k. I similarly agree that the superannuation scheme will likely become less and less attractive over the next decade. The most recent tax changes have opened a pandoras box as well as the rise of extremely progressive politics.

However once I hit this $35k balance (expected to reach it in the next 12 months). I will remove my salary sacrifice for super contributions and will invest more heavily into a portfolio which I have full control over. I of course intend to do a lot of travel over the next year or so but I see that as an investment in itself.

I do agree upon thinking more on this over the last three or so weeks that having liquid access to funds is far more important to me, as the funds that are locked up in super ill only have access to in my older age.

 

[Chipp]

More culture related but I wanted to vent about out it anyways - the University system has really failed my generation when it comes to the creation of a culture on campus where people actually meet each other and make friends. Most University classes are silent without a peep of discussion/converse between students - however this could be to do with the stream of education I am undertaking. Not super relevant but I personally believe it is a key driver in what has caused the generation I'm apart of to become one of the loneliness despite the ease of communication.

Playing team sports a great way to get that social aspect and a sense of mateship . fwiw

 

[divs4ever]

but I see that as an investment in itself.

yes , it can be ,
eyes open, thinking cap , and look for small niches as well as larger trends

good luck

 

[dyna]

the rise of extremely progressive politics.

Is that to mean ...." effin lefties" ?
I wouldn't worry too much about that lot. The libs will not be in opposition forever . Even with a Labor government , things super are not going to swing radical . Not ever . For the foreseeable future the $30,000 p.a. concessional contribution will always be legit . Paying 15 % tax on it going in , is a whole lot better for me , than getting hit at my 45 % marginal tax rate . There can be no argument for the tax advantages of super . legislative risk will always be there of course , but it always has been . We will just have to get used to it as we live with every other damned thing in life that carries a risk .The $ 1.9 Mill. T.S.B. limit ( as well as the $ 3 mill. cap at the 15 % tax rate ) for a tax free retirement income stream is not to be scoffed at. Even more so as a couple . I don't know about the others , here , but for me , this is serious dough . Don't reject it out of hand , whatever else you choose to do. Wealth creation outside super ? Sure . Go for it. That's what I do , too. . I can tell you with the utmost sincerity , it would have been my greatest financial failure to have let superannuation pass me by .

 

[BossMan.]

Is that to mean ...." effin lefties" ?
I wouldn't worry too much about that lot. The libs will not be in opposition forever . Even with a Labor government , things super are not going to swing radical . Not ever . For the foreseeable future the $30,000 p.a. concessional contribution will always be legit . Paying 15 % tax on it going in , is a whole lot better for me , than getting hit at my 45 % marginal tax rate . There can be no argument for the tax advantages of super . legislative risk will always be there of course , but it always has been . We will just have to get used to it as we live with every other damned thing in life that carries a risk .The $ 1.9 Mill. T.S.B. limit ( as well as the $ 3 mill. cap at the 15 % tax rate ) for a tax free retirement income stream is not to be scoffed at. Even more so as a couple . I don't know about the others , here , but for me , this is serious dough . Don't reject it out of hand , whatever else you choose to do. Wealth creation outside super ? Sure . Go for it. That's what I do , too. . I can tell you with the utmost sincerity , it would have been my greatest financial failure to have let superannuation pass me by .

Its actually more so the greens especially with my generation. Hopefully a swing of common sense in the next election away from the greens lol

 

[divs4ever]

Its actually more so the greens especially with my generation. Hopefully a swing of common sense in the next election away from the greens lol

common sense isn't that common , sadly

in my generation , i was surrounded by damn drug-crazed hippies

 

[Prepper Pete]

common sense isn't that common , sadly

in my generation , i was surrounded by damn drug-crazed hippies

Like sloths?

 

[qldfrog]

I agree at that age invest some money into shares outside of super. And that way you can decide to retire at whatever age you want rather than an arbitrary age set by government bureaucrats.

I am 57, retired now, if I had put more money in super earlier, I would:
Not be in the house I am, would still be working until official retirement day ...
Until you are really near retirement age, do not put all your eggs in that basket, the mandatory contribution is plenty enough if you are to never access it

 

[qldfrog]

Playing team sports a great way to get that social aspect and a sense of mateship . fwiw

About lonely generation, I assume that the capital cities population means 80 to 90% of the population live within 45minutes from a state university, so can go to uni and staying by mum and dad..great for money saving, less for maturing and social interactions vs stacking in a shared house away from home with other students.
It is sad indeed

 

[BossMan.]

Update

Upon a lot of thought regarding what I should do as we approach the end of the financial year, I have come to the determination that my money is better invested responsibly into etfs/shares/assets that I can access rather than my super (re; maximizing my concessional contribution out of pocket for a tax kickback).

I have decided to leave my salary sacrifice in place however which means I still contribute ~15% to my super which is sufficient in my opinion (and likely more then most other Australians in my current situation).

As a result I am going to be adding some additional holdings to my portfolio over the course of the next 2 - 6 weeks with the money that was otherwise going to be used to max out my concessional cap. The current standing of my portfolio focuses around 66% into diversified growth funds and 33% into the property sector (see below):

Index Fund Name	Weighting
Vanguard Australia Property Securities Index ETF (VAP)	33%
BetaShares Australia 200 ETF (A200)	33%
Vanguard Diversified Balanced Index ETF (VDBA)	33%

I intend to accumulate and diversify my portfolio intensively over the course of the next twelve months until I have a portfolio that follows something along the lines of the below:

Sector / Fund / Classification	Target/Intended Weighting
Diversified Broad Market Growth ETF's	55%
Resource Sector ETF's	20%
Property Sector ETF's	20%
Speculative Individual Stocks (not sector specific)	10%

I am still bullish on the property sector despite the hot CPI data out of the US last night and the reality that we likely won't see rate cuts this year in Australia. While I still see the property and more specifically commercial property sector in a positive light, I won't be accumulating any further until the next lot of Australian and US CPI data is out. Hopefully we can get this sticky inflation under control.

The resource sector is a no brainer for me given the record gold and silver prices and I also sense a rebound in the Iron Ore price (as we see rates cut in the next 12 - 24 months). I as a result am intending on starting to build this portion of my portfolio over the course of the next 6 weeks. Currently narrowing down and researching which funds I specifically have an interest in purchasing.

Finally the speculative individual stocks - this is likely where I will get burnt, however I am young, and it's the best time for me to take some risk on some speculation that won't necessarily be industry specific. However this won't occur until my portfolio is reflecting the three core pillars: Diversified Growth, Property Sector & Resources.

If you made it this far, congratulations (I don't expect many people will hahaha). This post is for record keeping and a personal journal I guess. If anyone has any thoughts or insights on ETF's they have looked into or alternative sectors I would definitely be keen to hear some different opinions! Will have an excel sheet for my next post with my positions, there returns etc. to give this a bit more spice.

 

[divs4ever]

Finally the speculative individual stocks - this is likely where I will get burnt,

maybe , and maybe not

however this area is where the ASF monthly comp. can be valuable , practice selections on paper , you won't lose cash as you learn and maybe even win a few bucks

but i can tell you even ( formerly ) BIG companies ( like AMP , and ELD ) can cause some serious capital losses ( i dumped a fair bit on MTS for example )

now with the speculative stocks , consider taking some profits when well in front ( maybe not all but some ) , sometimes those little fish are very sweet , but be ready to bail if they start doing weird stuff ( like signing up high profile directors , changing name/ticker code for no good reason )

 

[BossMan.]

Just realized I made a typo 50% on diversified growth etf's the above doesn't total 100% .

Yes couldn't agree more. Just need to remember to post for the monthly competition.

 

[Dona Ferentes]

Just realized I made a typo 50% on diversified growth etf's the above doesn't total 100% .

Yes couldn't agree more. Just need to remember to post for the monthly competition.

yeah, and 3 x 33 is close enough !!

 

[UMike]

Financial freedom.
1. Own your own property that you live in.
2. Own assets that create income.
3. Self managed Super fund for later on.
4. Avoid or protect yourself from costly mistakes/liabilities (failed businesses / Divorces)

Worrying too much about tax reduction can lead to poor investment decisions / timings.

 

[Junior]

Some thoughts:

• I would buy a property. Buy something you would be happy to live in if you had to, but knowing that it could make more sense to rent it out for now and live with parents, or in a sharehouse etc. for a better cash flow & tax outcome. If you keep accumulating cash in an offset account, it won't be long until it's cash flow neutral (or close to), so it won't have a big impact on your ability to travel etc. Don't buy a small apartment....ideally house and land (probably not in Melbourne or Sydney)
• 100% build an ETF portfolio on the side, and keep pumping in those monthly contributions. Don't worry too much about where the market is at or what the media/"experts" are saying.
• Focus on growing your income through career or starting a business. This is your most powerful wealth creation tool as a young person with no kids. Ability to talk to people, build a personal brand online etc. is key, given tech advancements and AI etc.
• As your income grows, try not to get sucked into lifestyle creep too much...keep pumping cash flow into ETFs/property/cash/super.
• Some salary sacrifice into super is good, but don't go too hard on super just yet, it's a very long time until you can access it, and if you address the other points above, you'll have no issue with financial freedom after 60years old, given how early you are starting this journey.