What's your retirement asset allocation percentages?

[qldfrog]

In the current deflationary environment, it could be wise
If you avoid a 20 or 30pc crash, that is a lot of losses due to inflation when inflation is more or less as low as term deposits returns are..
But when inflation jump to 3 or 4 pc, compounded effect quickly reduce you savings in real term
Some food for thoughts
Have a look at Japan inflation for the last 20y
https://www.google.com/imgres?imgur...mEd_ZyhgcpM:&vet=1&w=525&h=298&source=sh/x/im
For a japanese japanese in 2000, the best action would have been to cash out and store the bills under the mattress...
The real question os
How do you see Australia and the west in 20ythe next
As the past 20y for us, europe, US or Japan
Being right or wrong strategy wise will be decided on this
Sadly no quick easy recipe

 

[tech/a]

Make sure you invest in assets that rise with inflation.

 

[Zaxon]

In general, low inflation periods are a great time to growth wealth, assuming you're prepared to own stocks. There's a big discrepancy between what the sharemarket will return vs what inflation will eat up.

In high inflation environments, sure deposit and bond yields will be super high, but the real rate of return (after inflation) is probably still fairly low. Importantly, sharemarkets are considerably less likely to perform with any premium over bond rates during this time.

 

[Value Collector]

Make sure you invest in assets that rise with inflation.

And produce income (not necessarily that’s paid out to you, but earnings that can compound)

Eg. Not just a gold bar, (although the gold will provide an inflation hedge, it won’t have any real longterm compounding going on)

 

[tech/a]

Perhaps buy more with each 10-20% rise in gold

And produce income (not necessarily that’s paid out to you, but earnings that can compound)

Eg. Not just a gold bar, (although the gold will provide an inflation hedge, it won’t have any real longterm compounding going on)

 

[Zaxon]

And produce income (not necessarily that’s paid out to you, but earnings that can compound)

Eg. Not just a gold bar, (although the gold will provide an inflation hedge, it won’t have any real long term compounding going on)

This is, of course, direct advice straight from Buffett. And it makes a lot of sense to me. I would expect commodities to keep pace with inflation - they're worth something after all, but as they don't inherently produce an income of their own, it would only be a tightening of supply that could cause a return above inflation.

Perhaps buy more with each 10-20% rise in gold

Over short periods, gold can be an excellent investment. On the other hand, if you're holding gold or any commodity as a part of "balanced" portfolio on a permanent basis, I'm not sure of what mechanism would make long term, non-timed holding of commodities worthwhile.

 

[tech/a]

Saxon
It is expected that you’d be investing when inflation is threatening

If not then I agree

I like property.

 

[willy1111]

My super is 100% stocks, it’s just 50/50 split between asx200 index and the world index.

It surprises me a little that you wouldn't use a smsf to invest your super in a similar way you do personally with regard to hunting for what you perceive to be good quality businesses with great growth potential similar to CZZ.

Indexes expected average around the 10% p.a. return, and with your track record of returns of around 20%. I believe you have at least 20 yrs until preservation age, the compounding difference between 10% and 20% over 20 years would be huge.

Perhaps you consider it as another way of diversifying?

 

[Zaxon]

My super is 100% stocks, it’s just 50/50 split between asx200 index and the world index.

My personal portfolio is heavily in stocks, but with some property, p2p lending and some cash.

Sounds good.

I hold enough cash to fund a year or so of spending + a tax reserve + options float and cash waiting for investment.

The money to pay your bills, does that come all from income, so p2p interest, rent, and stock dividends?

 

[Belli]

cover inflation

And it depends on your measure of inflation.

For me:

Education costs - zero
Alcohol and tobacco - zero
Housing - zero
Clothing and footwear - minimal verging on zero
Furnishings and household equipment - zero
Services - Energy costs zero to negative, rates meh chicken sh*t, water same.

 

[Value Collector]

It surprises me a little that you wouldn't use a smsf to invest your super in a similar way you do personally with regard to hunting for what you perceive to be good quality businesses with great growth potential similar to CZZ.

Indexes expected average around the 10% p.a. return, and with your track record of returns of around 20%. I believe you have at least 20 yrs until preservation age, the compounding difference between 10% and 20% over 20 years would be huge.

Perhaps you consider it as another way of diversifying?

Yeah, I just look at it as some diversification/insurance, just in case For some reason I completely mess up and blow up my accounts and lose everything, it’s good to know I still have my super as a back up outside my personal operations.

 

[Value Collector]

The money to pay your bills, does that come all from income, so p2p interest, rent, and stock dividends?

Yeah, as I mentioned earlier I live of 50% of my investment cashflow (excluding rent)

50% of dividends, p2p interest and options profits flows to my spending account, the other 50% gets reinvested.

Property rental just goes to reducing property loans, however all the costs of maintaining home are fund from the property account Eg rates, insurance, maintenance etc, so it probably works out I am using some where around 50%-70% of net property cashflow for personal housing costs, while the remainder is building portfolio equity by reducing loans.

 

[systematic]

What's your planned break down between Australian stocks, international stocks, corporate bonds, treasuries, property, lending products, cash, etc, on the day you retire...

For instance: 60% international shares / 30% corporate bonds / 10% cash.

Practically 100% equities.

International vs Australian allocation - undecided (still). I'm still 100% ASX. I've researched the topics and have different ideas (that have changed from time to time) about international, and never really settled on a decision. ASX has done well enough to make me lazy enough to not pursue the topic to a decision, though now you've reminded me, I must get back to it.
But either way, equities it is.

Also, explain why you've decided on that allocation, and what are you trying to achieve?

On the day of retirement I'll still be looking to achieve growth, same as current. I'm one of the 'public equities are one of the best assets for growth) people I guess. David Dreman (rather than Buffett) convinced me of that early on so I guess I was indoctrinated. I went through a phase of devouring all the asset allocation stuff (I thought it'd be cool to simply own a couple of ETF's or funds and rotate them around etc), along with my own research and never concluded anything other than equities are good enough for me (and probably better than any other option I looked at).

 

[Zaxon]

Practically 100% equities.

We're getting a lot of that is this thread! I was expecting some very conservative allocations full of bonds and big cash holdings, but apparently, this thread has been left to the "stock jockeys".

International vs Australian allocation - undecided (still). I'm still 100% ASX. I've researched the topics and have different ideas (that have changed from time to time) about international, and never really settled on a decision. ASX has done well enough to make me lazy enough to not pursue the topic to a decision

I'm somewhat similar. Now, I do all my active stock holdings via the ASX, and as you say, the ASX has done well enough. My super is 100% in US ETFs.

As Australians we're lucky. If you were going to pick one country and not invest outside it, historically, both the US and Australia have done very well.

On the day of retirement I'll still be looking to achieve growth, same as current. I'm one of the 'public equities are one of the best assets for growth) people I guess.

And one of the nice things about sticking with publicly traded assets, there's a lot more accountability, in theory. So they should be safer assets, on the whole.

I went through a phase of devouring all the asset allocation stuff (I thought it'd be cool to simply own a couple of ETF's or funds and rotate them around etc), along with my own research and never concluded anything other than equities are good enough for me (and probably better than any other option I looked at).

I've reached the same opinion. If shares have had the highest return historically of any asset class, why go anywhere else?

 

[Sharkman]

currently at about 30% international equities (thru index ETFs), 50% Aust equities (thru direct holdings), 20% short term trading including collateral for short option positions.

i'm not retired yet, but am planning to do so in the next 2-3 years, aiming for 50% international, 25% Aust, 25% short term trading. probably won't be able to reach that weighting before i retire (can't sell most of the Aust holdings due to CGT) but i'll keep moving towards it by deploying all new funds to international ETFs. i'd like to up the short term trading slightly, as i do intend to get into it a bit more once retired (can't do that much of it now due to work). but might end up actually lowering it instead, if my paranoia over the loss of SIPC coverage caused by the migration to IB Aust gets the better of me.

i also agree 100% equities is the way to go, but i keep a floating 0-10% cash allocation to allow for some limited market timing/buying on dips. i have a self-imposed rule where if cash rises above 10%, i force myself to make a regular sized dollar cost average into the international ETFs within a week, to ensure i stay relatively fully invested and don't go overboard with trying to time the market too much.

personal views only, may well prove to be wrong in the coming years, but i'm a bit nervous about Aust's long term economic prospects, hence the much heavier weighting towards international ETFs. despite being a developed nation, our currency and stock indices act like those of an emerging market (both tend to get smashed on risk-off sentiment) and our primary/secondary/tertiary sector weights seem to be drifting back towards resembling those of an emerging market as well (heavily dependent on mining and agriculture, manufacturing fading away to irrelevance, high tech stagnant). i think US is still prime, but looks a bit expensive, all world ex-US seems better value at the moment. so i'm going with a 50:50 split when investing new funds (IVV/VEU).

another reason is that international equities (particularly US) pay less dividends than Aust. Zaxon you wrote an excellent post in another thread about the viability of selling units to raise cash vs relying on dividends, which i completely agree with. as a 40 year old FIRE adherent, long term growth is still paramount, immediate cashflow not as much. i don't want companies giving me their earnings as dividends, then i have to go to the trouble of re-investing it again (and paying tax along the way). i'd rather they retain most of it and pump it back into their own future growth.

 

[Zaxon]

currently at about 30% international equities (thru index ETFs), 50% Aust equities (thru direct holdings), 20% short term trading including collateral for short option positions.

Ah, another person with the overseas ETF, and direct shares Australian. I've dabble with options, but I feel the decay and expiry side of things makes it feel like the ASF stock picking comps we hold each month: it may be a brilliant share, but if it doesn't perform well in that exact 30 day period, you get nothing for it

i'm not retired yet, but am planning to do so in the next 2-3 years. i'd like to up the short term trading slightly, as i do intend to get into it a bit more once retired. but might end up actually lowering it instead, if my paranoia over the loss of SIPC coverage caused by the migration to IB Aust gets the better of me.

I hear about a lot of people who "feel lost" once they retire. I think having an active interest in making money through investing/trading once you retire can be very power. You've got the time. There's excellent communities to tap into. And it can become your new focus that gives you purpose.

i also agree 100% equities is the way to go, but i keep a floating 0-10% cash allocation to allow for some limited market timing/buying on dips.

Sounds good. My 10%, which I'll keep in bonds mostly, are to smooth out my takings from my shares. But like yourself, I tend to feel I'm missing out on too many opportunities, if I have a lot in cash just sitting around.

personal views only, may well prove to be wrong in the coming years, but i'm a bit nervous about Aust's long term economic prospects, hence the much heavier weighting towards international ETFs.

Interesting. Instinctively I don't see Australia as much of as risk, but that's based on how well it's performed in the past - which is very well - as opposed to some insight into it's future. I definitely agree about mining being very cyclical. But on the other hand, it did help us through soft spots when other economies went into recession, and we sailed on through. The other sector the ASX is massively overweight in, is our banks. That's bad post royal commission, but historically, they've done really well.

Although Australia is considered very underrepresented in tech, we are quite good at bio tech (CSL, Cochlear, etc), and fin tech (APT, ISX, Z1P, etc). So we're getting there. Not so much straight tech, but I'm waiting on the launch of DingoBook to take over the world.

Zaxon you wrote an excellent post in another thread about the viability of selling units to raise cash vs relying on dividends, which i completely agree with. as a 40 year old FIRE adherent, long term growth is still paramount, immediate cashflow not as much. i don't want companies giving me their earnings as dividends, then i have to go to the trouble of re-investing it again (and paying tax along the way). i'd rather they retain most of it and pump it back into their own future growth.

There you go - an excellent summary of that view point! People like "income" because it works so well in other asset classes, but people overlook the oddity about dividends. If someone pays you rent for your house, your house price doesn't fall because of it. If your bank pays you interest, they don't decrease your balance to offset it. But if a company pays you dividends, your share price does drop by that amount. I think too many people come from understanding of how rents and interest work (which is understandable), and then assume it's the same with shares, so dividends must be good.

 

[Value Collector]

I've dabble with options, but I feel the decay and expiry side of things makes it feel like the ASF stock picking comps we hold each month: it may be a brilliant share, but if it doesn't perform well in that exact 30 day period, you get nothing for it

.

If you are selling options (rather than buying), the price decay works in your favor.

I think of selling a put option as just like placing a low ball buy order in the market,

Eg, if CBA is currently $80, but I want to buy them at $70, I can sell a put with a strike price of $70 and collect $1.

If the share hits $70, I get my buy order filled if it doesn’t I get to keep the $1, and write another put and collect another $1.

I see my options program as just being a part of my investment program, eg I am just using put options to place orders I companies I want to buy, and being paid to wait for them to drop.

 

[qldfrog]

After loosing a bit on options in the past, i believe VC is using them the right way
I once left for a holiday with a paper profit of 60k...and came back from a week in the wilderness with a small loss.there was no SL at the time
But as VC said, it is actually a great way to increase your portfolio if that is your aim

 

[Zaxon]

If you are selling options (rather than buying), the price decay works in your favor.
I think of selling a put option as just like placing a low ball buy order in the market,

OK. That makes sense.

I see my options program as just being a part of my investment program, eg I am just using put options to place orders I companies I want to buy, and being paid to wait for them to drop.

I think that's a smart use of options.

Do you find that if you stray into mid or small caps, that options aren't available - they're a large cap game only, at least on the ASX? And is there much liquidity: if you write an option, is there a high chance there will be a buyer for it?

You gave the example of earning $1 on a $70 share. Wouldn't your brokerage for selling the put, just eat up the premium you received for it? For instance, my broker charges $33 as a minimum fee for options.

 

[Sharkman]

OK. That makes sense.

I think that's a smart use of options.

Do you find that if you stray into mid or small caps, that options aren't available - they're a large cap game only, at least on the ASX? And is there much liquidity: if you write an option, is there a high chance there will be a buyer for it?

You gave the example of earning $1 on a $70 share. Wouldn't your brokerage for selling the put, just eat up the premium you received for it? For instance, my broker charges $33 as a minimum fee for options.

Value Collector beat me to it, but yes that's how i primarily trade options - as a seller, not a buyer. that's why i need a 20-25% allocation to short term trading - have to stump up collateral for short option positions. would probably only need 5% or less if i was doing long options only.

over the years i have made better overall returns from short option trades vs long option trades. it's basically lots of small winners vs a few large winners that get more or less neutralised by a lot of losers. a big part of that is, as you mention, long options need good timing, so you need to be able to watch the market if not continuously, then at least fairly regularly. i've found that difficult to do due to work getting in the way, so i seldom make long gamma bets now. might try dabbling in them again in retirement though, when i will be able to watch the market more, and see if i can do any better.

on the ASX, pretty much has to be the top 20 large caps, and i find i don't trade much outside the top 10.

for trading options regularly, you must use IB or similar (hence my mention of the loss of SIPC), not a ripoff CHESS broker, otherwise you'll be eaten up by commissions. from Value Collector's example, that's $1 per underlying, options are generally over 100 units of the underlying per contract. if you sell 20 contracts, you take in $1,994 after IB commission ($6) and worst case you get to buy 2,000 shares at an effective entry cost of $69. i like to fully collateralise, even though most brokers don't require that (even though IB no longer offers margin, they still calculate your collateral under the old margining rules, just can't let your cash balance drop below $0), as i find it makes it easier to manage - i can opt to simply take the assignment without doing anything if it makes sense to do so. so i would then set aside $140k to collateralise such a trade.