Alternative to IWLD

[Sisto5]

Hi All

In the last 18 months I have invested and also advised family members to invest in ETF's. I decided IWLD and VAS was the simplest strategy to achieve our goals. I wanted a simple approach my family could set and forget knowing we have most desirable financial markets covered.

The strategy was to loosely follow the Barfoot investor Idiot Grandson setup where it was to produce Dividends as well as Capital Growth. The fund was to assist with retirement if everything goes to plan but also could be accessed prior if required.

Unfortunantely, IWLD has now decided to go down the environmentally sustainable etc path. This has caused me to rethink my International ETF strategy.

I am interested to hear what others have done since the IWLD change and also what people are currently doing with their international portfolio.

Our ratios are currently 65% VAS 35% IWLD. Approx $220k invested plus adding $600p/m

I am thinking of going with the following in the future instead of IWLD. I chose IWLD as it had all markets covered (large medium small emerging etc), was Australian domiciled and had DRP. The below ETFS should provide the same-
VGS- all world Large - Mid
VGE- Emerging markets
VISM- Small cap
VAS- Aus

I am also confused with ratios. From reading what others are doing it seems I may be over weighted in Australia.

Happy to hear some suggestions on what ratios of the above I should be looking at as well as ratios Aus v International.

 

[KevinBB]

Hello @Sisto5

I am hearing you about investment direction. This is a list of all ETPs listed on the ASX (link here). I've always found it to be a good reference, as it breaks down ETPs by function. Look for Equity - Global.

As far as ratios go, its a decision you can only make. My choice of ETP (IOZ - fairly similar to your VAS) is all Australian. I was happy with no direct overseas exposure because many of the companies in IOZ have overseas interests, and will benefit as the overseas (mainly US) market rises and falls.

I do trade overseas futures, but that is a trading thing, and I do not consider them to be long term investments as I do my IOZ. The futures could be domiciled anywhere and I would still be trading them.

So, as far as investments go, I'm 100% Australian, because I know that the larger companies in IOZ have overseas income.

KH

 

[Sisto5]

Thanks for the link Kevin.... very helpful.

I like the idea of All OZ as the dividends will be better over time which is what I am ultimately aiming for. But I also like a little more capital growth just incase i need to access the money prior to retirement.

I think it is the FOMO on current and future big global companies if I stick to OZ only.

I see the connection between OZ and overseas companies as far as success but is it financially enough to completely disregard investing overseas?

 

[KevinBB]

You raise an interesting point about overseas markets.

In my mind, the Australian large cap indices are dominated by banks and resources, while overseas (US) large cap indices are dominated by tech firms. So, the two markets are fundamentally different.

I have attached a table showing index returns for the last year, broken into different time periods, updated to close of US trading this morning. The US data has been added in the last week or so, so I hope it is correct. The table clearly shows that the US indices beat the Australian indices hands down when it comes to capital movement. However, these stats don't take into account:

• The large amount of dividends paid by Australian companies compared to US companies; and
• The increased risk (in terms of PE Ratio) of US companies

The capital difference between Australian and US market returns should be common knowledge, but I'm still happy having my investment funds (as opposed to trading funds) firmly in Australian domiciled companies and ETFs. The lower capital gain of the Australian indices to me is a trade off for the increased risk involved in the US markets.

After saying all that, I am currently long the US markets via futures contracts, but this is just a trading position, and not an investment position.

KH