Portfolio for a near retirement investor

[FXTrader]

Guys - I'm a 63 y.o. who is 1-2 years away from retirement and thinking about an appropriate structure for the share market component of my investment portfolio. I want to target around 40% in equities and that has to fit with the my current investments (12% Superann, 12% as a minority shareholder in a small business earning after tax returns 6-10%, 9% gold & silver, & 25% cash left when equities are all purchased). I'm conscious of 1) my age and need for a reliable future income, a share market globally that is undoubtedly over-valued, but an acknowledgement of current good health and the prospect that I could realistically live another 30 yrs plus. My background is in finance but I have a limited background in equities other than from my own reading

I currently have a smaller share portfolio that comprises predominantly MER, TPW, MCY, ARV, IFT & GNE but I'd really appreciate the views/suggestions, or indeed sample portfolios with weightings if it was you, that might be appropriate for someone in my position. Any suggestions would be most appreciated.

[Bjauck]

...
I currently have a smaller share portfolio that comprises predominantly MER, TPW, MCY, ARV, IFT & GNE but I'd really appreciate the views/suggestions, or indeed sample portfolios with weightings if it was you, that might be appropriate for someone in my position. Any suggestions would be most appreciated.

Do you have you own mortgage free home (I regard that as an investment as not everyone has one)?
Does the cash include bonds and term deposits?
TPW and IFT involves a bit of duplication as IFT's main investment is in TPW. Only really ARV is in a non-energy sector.
DISC: This is not advice!

[trader_jackson]

Guys - I'm a 63 y.o. who is 1-2 years away from retirement and thinking about an appropriate structure for the share market component of my investment portfolio. I want to target around 40% in equities and that has to fit with the my current investments (12% Superann, 12% as a minority shareholder in a small business earning after tax returns 6-10%, 9% gold & silver, & 25% cash left when equities are all purchased). I'm conscious of 1) my age and need for a reliable future income, a share market globally that is undoubtedly over-valued, but an acknowledgement of current good health and the prospect that I could realistically live another 30 yrs plus. My background is in finance but I have a limited background in equities other than from my own reading

I currently have a smaller share portfolio that comprises predominantly MER, TPW, MCY, ARV, IFT & GNE but I'd really appreciate the views/suggestions, or indeed sample portfolios with weightings if it was you, that might be appropriate for someone in my position. Any suggestions would be most appreciated.

If you are retiring, I would recommend a larger share of cash, however it depends how much you have and how much you need to live your lifestyle on (of course).

ARV, OCA, TRA, HBL would be my favored picks for 'growth + dividend' (ie a bit of both) style investing... however I am no where close to retirement so don't require as much of a dividend (and ideally that company will operate a DRP for me to reinvest the dividend in). You could also consider some bonds?

Just my thoughts in a nut shell, not financial advice of course.

[percy]

I think with your background, you are best to build your portfolio around what you think are growth sectors,then look for companies in those sectors that are paying reasonable dividends.
Retirement, health,finance,tourism, and export look to be good to me,while importers, such as retailers look to be facing headwinds,and NZ manufacturing appears to be a dead duck sector.
Utilities you have.

[traineeinvestor]

Some additional information might be helpful:

1.Do you know how much "reliable" income you will need from the equity portion of your retirement portfolio? If you need (for example) a yield of 5% of more, this may make some of the lower yielding stocks problematic.

2.You have planned for a time horizon of 30+ years so you may wish to factor in a need for at least a small amount of growth to combat inflation. If you have a dependent spouse you should consider his/her age/life expectancy as well.

3. How much time are you willing and able to spend monitoring your investments. As a minimum, I'd suggest 10-12 stocks to achieve adequate diversification (others may suggest more) which will/should require at least a few hours a week.

One option to consider is DIV which offers a gross trailing gross yield of around 5.9% as well as diversification and reduces the time needed to monitor your portfolio. Of course, it comes with a cost in the form of management fees and other expenses.

As others have mentioned, your existing portfolio is heavily weighted to utilities so some diversification would reduce risk.

Lastly, have you spoken to a broker? At least some brokers have model portfolios which they update from time to time. Brokers aren't perfect and I do not recommend following blindly, but it's still a check of some kind you can consider.

[Dassets]

I will give you my thoughts for what they are worth. If you search my few posts it will probably show who I am and also on top of that I have had a successful bash at investment fund management. What I will say is not commonly accepted by financial planners but, hey, I am not selling a product and I am not defending a product distribution channel(which most are). I am assuming you have $500T min in funds invested.

Based on your age I am going going to assume you will see 3 cycles before you are drinking banana through a straw. In my mind this means you can still take some risk(where others differ in approach).

Ref Equities. You do not have enough diversification in terms of numbers, sectors or geography. I am not an advocate of an individual buying 100 stocks, 10-15 in each market gets you the bulk of the benefit of diversification. It also allows you to sell the high flyers every now and again and pick something else. This can lock in above market returns. Don't expect to be too active though. For offshore buy ETFs but maybe treat those like NZ equities, eg have some emerging market ETF, if it goes for a big tear for a couple of years flick it and go for something else. There is other infrastructure outside of electricity, NZ doesn't represent growth stock well and I would forget about it. Learn about imputation credits also.

Fixed interest/cash

Cash is a proven waste of time. Great in a GFC(first time for 80 years), you probably won't see one. I would hold max 10% for some spending/health at any given time. Realise your portfolio will probably generate 3%-4%(after tax) cash per annum so take that into account. Don't worry about off shore holdings esp US(they do buybacks which are not included in the div yield so you can sell some shares). Fixed interest, learn about corporate bonds especially listed(they provide liquidity). They will provide better returns than in a bank. Stay short duration(if rates go up you won't get slaughtered and will be able to move capital in higher rates over time. I would stick to maybe 2 years average.

Precious metals.

No cashflow. Waste of time for you unless you want to plate your bathroom taps.

Inflation

This is your biggest issue. Markets over the past 15 years(in every asset class) moved(up) because rates went down(including houses). I am not saying inflation will move up. I think there are major deflationary pressures, also I think asset allocation is more risk on than risk off.

So when the rubber hits the road...

Cash(NZ) 10%
Bonds, corporate 25%, sovereign(NZ) 10%
Equities 55%(large cap, no small cap) NZ 25%- get imputation credits, Australia 10%, 20% offshore ETFs divided by 3-4. I personally would hold 7-10% in emerging markets and leave it there, wait for a golden patch.

Good luck

[digger]

Firstly your a young 63 year old that should drop the rubbish thinking about retiring.I used to think that in your own best interest you should plan to retire 20 minutes before you die .But that was about 40 years ago,now I think 20 minutes is waisting time so get nearer to the final act before retiring.
I am nearly 76 and still in the sharemarket with new things. Have just bought into ARV so we have something in common. Yes pay off the morgage before market investments, but I say do not fall for the general popular thinking that as your nearly on the super you should slow up with investments. Not all but save some for the high risk stuff like ARV,
Cheers and best of health.

[FXTrader]

Thanks guys, and a bit more info to answer some of the questions. Yes a mortgage free home, and a dependent wife, and I have plenty of time (and interest) to manage my investments - I work out that an after tax return of 5% minimum, if safely invested, covers comfortably the required lifestyle. We have always, and will continue to live well within our means. As a result, the investment portfolio now runs into a few million, so with a comfortable lifestyle by most measures, 25% cash covers a few years of required income if things turned sour. Of that 25% cash amount, around a third of it is corporate bonds

Bjauck - I was aware of the TPW - IFT relationship so just considered that allocation as part of the obvious dividend paying utilities exposure that you need at 63 y.o. to my mind - what else fits that safer dividend category, but not utilities is one of the bigger questions I guess

Digger - I understand your point on "early" retirement but that really depends upon what work your'e in as to whether that works - in my current role I wouldn't get the time to start ticking off the bucket list things we want to do before actually kicking the bucket, and despite my natural financial conservatism, I don't think money is an excuse (that said, the lack of non-bucket list things is the temptation to keep working in a job I do enjoy) .

Dassets - total understand your cash and inflation comments. In a world flush with printed money I dare anyone to say what the longer-term impact upon inflation will be, and its one of the reasons I have carried the precious metal for many years, which have served me very well so I'm not in agreement with youre thoughts on that. They've grown in NZD terms by around 5 p.a. in the 10 years I've had them and they have been a comfort such as during the GFC when everything else was turning pear shaped - insurance solely.

[BIRMANBOY]

With an investment portfolio of "a few million" I would say keep doing what you are doing because you obviously have a good handle on your finances and presumably your financial capability will keep providing suitable answers. Don't ruin a good thing by getting diverted from listening to the best financial advisor of all ...with proven success and your own best interests at heart...yourself.

Thanks guys, and a bit more info to answer some of the questions. Yes a mortgage free home, and a dependent wife, and I have plenty of time (and interest) to manage my investments - I work out that an after tax return of 5% minimum, if safely invested, covers comfortably the required lifestyle. We have always, and will continue to live well within our means. As a result, the investment portfolio now runs into a few million, so with a comfortable lifestyle by most measures, 25% cash covers a few years of required income if things turned sour. Of that 25% cash amount, around a third of it is corporate bonds

Bjauck - I was aware of the TPW - IFT relationship so just considered that allocation as part of the obvious dividend paying utilities exposure that you need at 63 y.o. to my mind - what else fits that safer dividend category, but not utilities is one of the bigger questions I guess

Digger - I understand your point on "early" retirement but that really depends upon what work your'e in as to whether that works - in my current role I wouldn't get the time to start ticking off the bucket list things we want to do before actually kicking the bucket, and despite my natural financial conservatism, I don't think money is an excuse (that said, the lack of non-bucket list things is the temptation to keep working in a job I do enjoy) .

Dassets - total understand your cash and inflation comments. In a world flush with printed money I dare anyone to say what the longer-term impact upon inflation will be, and its one of the reasons I have carried the precious metal for many years, which have served me very well so I'm not in agreement with youre thoughts on that. They've grown in NZD terms by around 5 p.a. in the 10 years I've had them and they have been a comfort such as during the GFC when everything else was turning pear shaped - insurance solely.

[Hoop]

I agree with some of the posters and including you FXTrader..

I'm with Birmanboy..You have been successful to date, you have a good handle on finances and your portfolios mixes..I admire your willingness to listen to other peoples opinions, that's a good attribute..but I think being successful is a good prerequisite for you to listen to yourself... You are aware that Equities could be over-valued so thats good.. as that awareness shows you have mental flexibility to respond/adjust/alter to future changes (another good attribute)....and you have stuff to dabble with to keep your investing life interesting....Geez I'm jealous

I'm nearly 67 and have no thoughts of retiring..I'm with Digger on this one.. I know you probably have enough wealth to retire and your life needs may be diffent to Diggers and mine, but I suggest keep doing what your doing..keep working, keep active, keep physically fit ...It all helps to slow the physical and mental aging process and keeps you in touch with today's and tommorrow world....You must keep in touch to keep investing wisely.....because as you say you are going to live until you're 90..you have plenty of time, so no need to retire in a hurry.

For those people who think 60year olds now living to 90 is a bit far fetched they should think again...Retiring at 65 is becoming not an option for many...Stats NZ's Cohort Life expectancy tables e.g 65 year old Male alive today has a life expectancy of 86.2 years and your wife of the same age 88.9 years..That's a hell of a long time living off your investments when retiring at 65.....eh