Vanguard ETF Portfolio Decisions

[BrownTaipan]

Hi All,

I am 33, new to investing, and have read a couple books (Bogle, William Bernstein "All About Asset Allocation") and decided on Vanguard ETFs (mainly due to greater diversification options compared with the mutual funds).

I have an initial $50k to invest (and i'll keep an additional reserve of $20k cash) and am on a fairly high income so hoping to save $1000/week and invest about $25k half-yearly for further reinvestment and rebalancing. My overall goal is to invest my way to financial freedom within about 10 years.

I am leaning away from VTS and VEU, mainly because of no DRP, and from what I have read there are some forms involved and overall a bit of a hassal (and i don't fully understand why the currency is in USD). I was thinking along the following lines:

VAF (20%) - Decided on 20% bonds / 80% stocks
VAP (10%) - REIT for diversification and low correlation
VAS (20%) - Diversify in large Aussie shares (makes up 20% of my 30% allocation to Aussie shares)
VSO (10%) - Diversify into small cap Aussie shares
VGS (30%) - Get that international allocation (~20% US stocks and 10% non-US/Europe, unhedged)
VGE (10%) - Emerging markets (further global diversification)

Does anyone have any comments on this? Specifically i have a few issues to sort:
- Is 40% to international a good allocation? I realise Aussie market is only 3%, but i also realise the tax benefits of franked dividends for aussie investors
- Is the 10% allocation to small caps a good way to diversify here? Hopefully the correlation to Aussie large caps gives an additional diversification benefit and presuming there is no overlap in securities
- Is 10% to REIT a good allocation? I do not plan on owning my own home nor investment property, i will probably just rent my whole life
- 10% to emerging markets?

If anyone has any advice for me to consider i'd love to hear it before i take the plunge!

 

[hiddencow]

Nothing wrong with your allocation but since you've gone with 6 ETFs, brokerage is going to cost a bit.
You can sign up for one of the free brokerage offers that most of the Big4 have when you first join. After that, unless you save up a large amount it's going to be hard to contribute more to all 6 ETFs without incurring a prohibitive amount of brokerage.

 

[BrownTaipan]

Thanks for the reply.

Yes, agree that I am now bordering on those brokerage fees stripping the benefits of the lower MERs of ETFs compared with the mutual index funds. Vanguard just don't offer the variety in their mutual funds compared with the ETFs.

I'm trying to decide whether it would be best to limit myself to 5 ETFs maximum. However, I don't own real estate (and do not plan to) so think it is wise to have that small 10% allocation to VAP. I also want the emerging markets exposure so want to include the 10% VGE.

That leaves the Aussie small companies (VSO). After reading William Bernstein's "All About Asset Allocation" he has pretty compelling evidence for adding a small-cap to possibly increase return and lower overall volatility (unless the correlation to VAS is high, but who can tell). Although i realise that fundamentally a small-cap fund will be more volatile/have more risk than a large-cap or VAS. Would you think it is worth adding the extra small-cap fund? Basically my options become 30% allocated to VAS outright, or 20% to VAS and 10% to small-cap (VSO).

Another question is Aussie bonds. The options at Vanguard are pretty limited, the fixed-interest bonds or the government bonds? How do you decide between the two, and is it worth even having one of these bond funds?

I've got my $50k sitting here waiting for me to take the plunge (and then rebalancing every 6 months by adding $25k that i save up)

Any further considerations that anyone might be able to let me know of?

 

[Pager]

Why not just use one of the Vanguard lifestatagy funds, sounds like the High Growth would suit your needs, and you can add to the fund weekly if you want rather than every 6 months and no need to re balance.

Check them out on the Vanguard site

https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-retail.jsp#fundstab

But if your going to go the ETF route then look beyond Vanguard as well as them, yes there good but personally I would look to diversify providers, and there are other good ETF,s out there from iShares, State Street and Beta just to name a few.

 

[Latics Fan]

Why not just use one of the Vanguard lifestatagy funds, sounds like the High Growth would suit your needs, and you can add to the fund weekly if you want rather than every 6 months and no need to re balance.

Check them out on the Vanguard site

https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-retail.jsp#fundstab

But if your going to go the ETF route then look beyond Vanguard as well as them, yes there good but personally I would look to diversify providers, and there are other good ETF,s out there from iShares, State Street and Beta just to name a few.

You can now access the Vanguard wholesale funds with a min $100k investment as opposed to the previous $500k min.

 

[PZ99]

Hi All,
I am leaning away from VTS and VEU, mainly because of no DRP, and from what I have read there are some forms involved and overall a bit of a hassal (and i don't fully understand why the currency is in USD).

I'm a beginner as well. I bought the VTS at $143.7 around a fortnight ago through etrade - didn't know about any forms?

Also bought the ZYUS ETF from ANZ which appears to be similar.

 

[Joules MM1]

best pick for the ASF yearly comp

2020 is likely to see another move up gold/silver, most likely their final swing at the windmill before continuing in their respective bear markets for 2011, this counter-trend rise should take most of 2020 to play out, i think we'll see a dip for PM's into january/feb then a general rise and peak late 2020

https://www.vanguardinvestments.com...ments/product.html#/broker-basket/etf/8211/5/
as the $VSO etf carries a balance of small companies the exposure to goldies is 'padded' and as Australia is currently in a major bull leg then, all boats, while not necessarily all rising, stay afloat, as Vanguard have a fairly stringent management inspection for BOD's, small ords are very reflexive, so while it can take a thump, the smalls should lead the way, after the oct - dec 2018 dip the construct of the chart (reflecting investment drive of itself with no external impetus) has had a very robust construct

accompanying Twiggs 13 week money flow appears less than stella, although, I prefer that to buying at the height of the investment cycle, sure it can go down, on balance, it has plenty of room to ascend,

the etf attracts a lot of longterm and 'tradeable' liquidity

there are plenty of clouds that say a decent storm is coming in the form of a very sharp and deep correction but i think we probably have a recognition period to go thru before that enventuates, right now liquidity (credit debt) remains propped and cheap, so long as that is the case, markets, especially in Asia, support the outlook locally as the AUD offers discounts