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  1. #1
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    Default Building a small but balanced portfolio

    You pretty much all know my situation now, in terms of my financial situation and beginner investor status. I am learning heaps here so thank you to those of you who have contributed to that. I have come to a few realisations, which I wish it had come to a long time ago but better late than never I guess.

    Firstly, as I approach 59 and 65 is getting closer by the day, I realise some of my investment thinking has been flawed. I have felt that at my stage in life I should be “playing it safe” with my money and avoiding any kind of “growth” investment now. I am OK with this as far as my KiwiSaver goes, which is why I have switched my fund to Balanced now. But as far as future investments are concerned I realise there is still sufficient time for me to invest in growth funds - I don’t necessarily need to be looking at conservative investments only. As you know I recently signed up to Sharesies as a way to get cracking and build a small portfolio over the next year, that will then be my “back up” for down the track when I am mid-retirement (alongside my KiwiSaver, which I intend to leave as it at 65 and only draw down for emergencies etc).

    So ... I need some advice please. My first Sharesies fund is USF but I now need to think about which other funds would be the best choices to create a small but balanced/diversified portfolio. I am thinking 3 Funds in total at this point. Given that I have the small holding in KFL, which other two Sharesies funds would be my best option? My understanding of the different funds is limited, although I have been reading up on them all, but I would really appreciate some input please. (Apparently Sharesies are rolling out some new funds this week - managed by BlackRock. Not sure what they are yet)

    Thanks in advance

  2. #2
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    I've never really subscribed to the approach of investing based on balancing the portfolio. A more relevant risk factor is to determine at what stage the global economy is and the likelihood of a stock market crash in the long or short term future. If you look at all those managed funds like in Kiwisaver, how many of them are factoring this very important risk level? Probably not many and the reason is they're more focused on allocating the cash inflows instead of just sitting aside knowing when the next correct occurs. In another thread i've discussed the importance of low cost index funds and how much investors lose from mgt and administrative fees (re: Buffet's $1M bet against these actively managed funds).

    At your age the real deal is you should be asking yourself, "what would you do if over half of your investment portfolio were to lose value in a global market crash?" Conventional thinking tells that those approaching senior age are to lean towards bonds and low risk, low return, investments. That's because at that age, if you timed things wrong, you still have your nest egg. Those that are young and in full work mode can afford to take aggressive risks because a loss at an early age isn't so damaging when they have 20 or 40 years of contributions to make.

    Personally, I like to treat investments based on generation. Meaning I don't look to invest based on my age but rather, what my grandchildren can see. So the age of 60+ etc is of moot interest to me.

  3. #3
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    Once again you need to remember that you and I are in vastly different life situations. My focus with my late start at investing is to invest what I can over the next 6 years before I turn 65, so I have a second egg in my basket. KiwiSaver is my only egg right now and it’s a small one, which is why my plan is to leave it invested when I turn 65 - not withdraw it. It can sit there doing its thing for the next 10-20 years and will hopefully continue to grow (and recover from any crashes over that time). I don’t intend to touch that money after 65 unless I have to, although a little holiday somewhere not too far away for a few days might be nice too).

    My investments in shares will be small too for obvious reasons, and yes, I totally realise and accept I could lose some or even all of my investment. I feel that I still have enough years to take some risk, as again, this is money I don’t intend to touch for at least 10 years or more. Not sure what your last comment meant - if you meant you see your investments as something you will leave for your grandkids, that’s awesome. My focus is not on building wealth to leave my kids or grandkids. I’m too late to the game for that and the amounts we are talking about are peanuts. I am looking at it as a better alternative to watching my money languish in the bank, with the hope that it will do OK over time. If it doesn’t, it doesn’t. Such is life. I don’t need a ****load of money. Never have. Never will. I live in my caravan and work as a caregiver in a rest home for less than $20 an hour! I’m not a material person, but I would like to create a little more financial security for myself if at all possible.

    Maybe I am dreaming/making a total dick of myself, but at least I’m trying and as my kids would say - YOLO (or You Only Live Once)
    Last edited by justakiwi; 04-06-2019 at 05:10 PM.

  4. #4
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    Default

    justakiwi a lot of posters here make dicks of themselves on a regular basis, including myself. To date you have not. Asking for other investors thoughts can only help you in the long run. At least you have a plan and all plans can be changed as you go. Best of luck with your investing and enjoy it in the process.

  5. #5
    Guru peat's Avatar
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    give it a go mate!
    but my advice to you is to be relatively conservative
    firstly because of your age.
    secondly because of the elevated market levels
    thirdly because of your inexperience.

    by conservative I mean pretty dammed conservative. eg , buy quality , even if its expensive, but still try not to overpay!. have strict (low) limits on how much equity %'s you have. etc etc. feel your way slowly into owning volatile assets. keep imagining how you would feel if your shares halved.

    Operate something along the lines of those rules that Benjamin Graham made - read The Intelligent Investor. note what he says most people should do!


    small parcels , in market dips of MFT FPH EBO etc. not NTL or PPH.
    so, no investing in Cannasouth , for instance.


    Thats what I'd suggest.
    For clarity, nothing I say is advice....

  6. #6
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    OK, thanks for the suggestions so far. I really appreciate the input but for various reasons, at the moment I need to stick with funds I can invest in through Sharesies, rather than direct buy individual companies. Here are the funds currently available (the ones to be released this week are not out yet). I have already chosen US500 (but can change that at any point if I wish to), so which two others would you recommend I go with?

    AMP Capital


    * AMP Capital Global Shares (Higher Risk)—Invest in over 2000 companies around the world. This fund includes companies across a broad range of sizes, sectors in developing and emerging markets—including well-known companies like Facebook, Johnson & Johnson, Samsung, Coca-Cola, Visa, Apple and Boeing. And excludes Tobacco companies and controversial weapons such as nuclear weapons, cluster bombs and landmines.


    * AMP Capital Responsible NZ Fund (Medium Risk)—A diversified portfolio of mostly New Zealand shares. It aims is to outperform the S&P/NZX 50 Index. The fund looks for companies that have a sustainable competitive advantage, a good growth outlook, the ability to grow earnings faster than revenue, and which can grow without a strong reliance on raising additional capital. The fund is managed by Harbour Asset Management Ltd.


    Pathfinder


    * Pathfinder Global Responsibility Fund (Higher Risk)—includes socially responsible companies around the world. Each company goes through a screening process to make sure they’re socially responsible. This means excluding companies involved in restricted industries such as gambling, tobacco, controversial weapons and thermal coal, and selecting the companies that have the highest Environmental, Social and Governance (ESG) score.


    * Pathfinder Global Water Fund (Medium Risk)—includes socially responsible companies around the world involved in the water industry. The water companies cover a wide range of activities including water treatment, pipe and pump manufacturing, and specialist engineering. Each company goes through a screening process to make sure they’re socially responsible—there are no bottled water companies in the water fund.


    * Pathfinder Global Property Fund (Medium Risk)—Take a step onto the global property ladder. This fund invests in global property companies including traditional office, retail, industrial and residential properties, as well as other property investments like data centres, cell towers and healthcare facilities. Each company goes through a socially responsible screening process, which includes selecting companies with the highest Environmental, Social and Governance (ESG) score.




    NZ Core Fund (Medium Risk) issued by Smartshares Ltd


    * Put your money to work in a range of large and small companies listed on the New Zealand Stock Exchange (NZX). The NZ Core Fund gives you access to the big brands you know like TradeMe and Spark, plus increased access to smaller companies. The NZ Core Fund is a Smartshares managed fund, and is a medium risk fund. This fund is well suited for a Kids Account.




    Exchange-traded funds (ETFs) issued by Smartshares Ltd
    Most of these are Index Funds (excluding the NZ Bond Fund)


    * NZ Top 50 (Medium risk)—includes the 50 largest companies listed on the New Zealand Stock Exchange (NZX). At 28 April 2017, this included companies like, Spark NZ Ltd, Fisher & Paykel Healthcare Ltd, and Auckland International Airport Ltd.


    * Australian Top 20 (Higher risk)—the top 20 companies listed on the Australian Stock Exchange (ASX). This includes companies like: ANZ bank, Woolworths, and Commonwealth Bank of Australia.


    * US 500 (Higher risk)—the top 500 companies in the United States. This includes companies like Apple, Alphabet, amazon.com, and Facebook. This index is managed by Vanguard (one of the world's largest investment firms).


    * NZ Bond (Lower risk)—a broad range of deposits or bonds, including some which are issued or guaranteed by the New Zealand Government. A bond is a loan typically made by investors to corporations or governments. The NZ Bond Fund is actively managed.
    NZ Property (Medium risk)—the NZ Property Fund invests in property listed on the NZX. Examples include Kiwi Properties Group Limited and Argosy Property.
    * Australian Resources (Higher risk)—spread across the top 200 companies in the resources sector that are listed on the Australian Stock Exchange (ASX). This includes companies in Energy, Metals, and Mining sectors.


    * Europe Fund (Higher risk)—companies based in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the UK. This index is managed by Vanguard (one of the world’s largest investment firms).


    * Global Bond Fund (Lower Risk)—a broad range of global fixed-interest assets. The fund is actively managed by PIMCO Australia Pty Ltd and includes bonds issued by the governments of USA, United Kingdom, Japan, France and other countries, as well as bonds issued by other governments, companies and non-government entities. The fund is hedged against the NZ dollar, which helps manage the risk of currency movement.


    * NZ Cash Fund (Lower risk)—This fund is more for short-term savings—like a ‘rainy-day fund’— than a long-term investment. It includes a diversified range of New Zealand cash and cash equivalents, including deposits and short-term debt securities issued by NZ banks and large corporations. The fund is managed by Nikko Asset Management NZ Ltd. It aims to outperform the 90-Day Bank Bills Index over a rolling one-year period (which is a bit like trying to outperform the savings rate you’d get from a bank).


    * NZ Mid Cap (Medium risk)—This award-winning ETF contains some of New Zealand's top growth companies like Chorus, Air New Zealand, and Comvita. It includes companies in the NZ Top 50 but with the top 10 and dual-listed Australian banks removed.


    * Emerging Markets Fund (Higher risk)—companies based in emerging markets around the world. This includes China, Brazil, Taiwan, and South Africa. This index is managed by Vanguard (one of the world’s largest investment firms).


    * Asia Pacific Fund (Higher risk)—companies based across Japan, Australia, Korea, Hong Kong, Singapore and New Zealand. This index is managed by Vanguard (one of the world’s largest investment firms).

  7. #7
    Guru peat's Avatar
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    Default

    I'm looking forward to the new releases myself !

    At present I have the Pathfinder Water because its hard to get any exposure like that through specific stocks.

    For you though I'd go, continue with the US500 but stagger purchases until there has been a bad month or two. so now is not too bad a time to start dribbling funds in. As an alternative or when you have enough to diversify try the AMP Capital Global Shares as well. Those two seem to be the core for an int'l exposure.

    NZ and Australia later I reckon, and then Emerging Markets.




    For clarity, nothing I say is advice....

  8. #8
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    Yep, the staggered purchases with no buy fees is the main reason I’ve gone with Sharesies. I kicked it off with just a $50 starting investment, I direct credit my wallet with just $10 a week and have a weekly auto-invest for the same amount. Small bikkies right now but I will increase this and/or make additional purchases as I’m able.

    I have to to say I am incredibly impressed with the whole Sharesies platform so far. Their customer support is impeccable, their web app is excellent and so far my weekly orders have been processed, confirmed and showing in my portfolio in less than 8 hours. They update me via email for every transaction eg: I got an email this morning to confirm my wallet had been credited, and an email just now to say my order is completed. These guys know what they are doing and how to provide an excellent service. I wish something like this had been around when I was in my twenties.

    Quote Originally Posted by peat View Post
    I'm looking forward to the new releases myself !

    At present I have the Pathfinder Water because its hard to get any exposure like that through specific stocks.

    For you though I'd go, continue with the US500 but stagger purchases until there has been a bad month or two. so now is not too bad a time to start dribbling funds in. As an alternative or when you have enough to diversify try the AMP Capital Global Shares as well. Those two seem to be the core for an int'l exposure.

    NZ and Australia later I reckon, and then Emerging Markets.





  9. #9
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    Quote Originally Posted by justakiwi View Post
    Once again you need to remember that you and I are in vastly different life situations. My focus with my late start at investing is to invest what I can over the next 6 years before I turn 65, so I have a second egg in my basket. KiwiSaver is my only egg right now and it’s a small one, which is why my plan is to leave it invested when I turn 65 - not withdraw it. It can sit there doing its thing for the next 10-20 years and will hopefully continue to grow (and recover from any crashes over that time). I don’t intend to touch that money after 65 unless I have to, although a little holiday somewhere not too far away for a few days might be nice too).

    My investments in shares will be small too for obvious reasons, and yes, I totally realise and accept I could lose some or even all of my investment. I feel that I still have enough years to take some risk, as again, this is money I don’t intend to touch for at least 10 years or more. Not sure what your last comment meant - if you meant you see your investments as something you will leave for your grandkids, that’s awesome. My focus is not on building wealth to leave my kids or grandkids. I’m too late to the game for that and the amounts we are talking about are peanuts. I am looking at it as a better alternative to watching my money languish in the bank, with the hope that it will do OK over time. If it doesn’t, it doesn’t. Such is life. I don’t need a ****load of money. Never have. Never will. I live in my caravan and work as a caregiver in a rest home for less than $20 an hour! I’m not a material person, but I would like to create a little more financial security for myself if at all possible.

    Maybe I am dreaming/making a total dick of myself, but at least I’m trying and as my kids would say - YOLO (or You Only Live Once)
    It's great you have an interest in finance as the vast majority just don't care (they're more concerned about the rugby game etc.). For such a boring subject, yet a very important part of living ; we all know having $ is a necessity in life.

    At times I can be very blunt. What I was saying is when you go down this path of investing for retirement, there is simply no substitute for how many years you stay invested. Certainly 6 years is a very short time frame, and perhaps a risky one if you intend to sell up at age 65. Equally important is estate planning. What do you intend to do if you leave the 2nd nest egg invested after 65? This is why I mentioned about generations as most people who have next of kin or usually plan their retirement portfolio for the benefit not just for themselves at elderly age but for also the next of kin family.

    I'm sorry I have no experience about Sharesies (or on similar part, Kiwi Saver funds). That's because I already know for the vast majority of investors, such actively managed funds just simply won't work for them. Warren Buffet has proved this time and time again that investors (particularly the small guy) loses far more $ in administration and mgt fees than what they actually get back in compounded returns in their portfolio. I recall reading an article a year or so ago about all the different Kiwi Saver funds failing to meet their mark but were great at marketing their aggressive / moderate / etc funds that a person can invest in. By making the investors choose which area to put their savings in, the investment industry gets off the hook because there is no accountability when the person is presented 3 different risk levels of investment. It's a laugh because they're trying to match the individual's risk tolerance vs their time frame vs the overall return when the sad reality is, everyone wants a bigger portfolio at the end, and when the fund managers do a poor job of delivering that to their investors, they say well it's the individual's fault for not choosing the 'right' mix in their 'balanced' portfolio.

    If I was in your position and dealing with very small sums, I would look at investing directly to US equities. Particularly in quality, well established companies like those on the S&P500. Since you would be well under the $50K threshold, you would be exempted of FIF / FDR etc. and this is a big deal. Because unlike Kiwi Saver, your portfolio holding the shares directly would attract no taxation at all. Compare that to NZ funds like under the PIE structure that are set at 28% tax no matter if you invested $1 or $1M. Again, this is only my opinion and in a different posting, I mentioned that taxation is key in planning for investment and retirement.

    As for living in a caravan, I myself live in a similar lifestyle for 3 months of the year (RVing / work related) so I know what it means to live frugal.

  10. #10
    Ignorant. Just ignorant.
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    Cheat.

    Work out an asset allocation model based on the literature from a number of funds - some conservative funds, some balanced funds, some growth funds. See what their asset allocations average out at.

    Now you know what the professionals are doing.

    Then think about what you feel comfortable with.

    Then have a look any their reporting, and see what individual shares/bonds/funds/currencies they're invested in.

    Now you're in a position to create your own personal fund - your own blend of conservative/balanced/growth.

    Just a thought - good ideas are worth stealing.

  11. #11
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    Quote Originally Posted by SBQ View Post
    At times I can be very blunt.
    Yes, you can be 😉

    What I was saying is when you go down this path of investing for retirement, there is simply no substitute for how many years you stay invested. Certainly 6 years is a very short time frame, and perhaps a risky one if you intend to sell up at age 65. Equally important is estate planning. What do you intend to do if you leave the 2nd nest egg invested after 65? This is why I mentioned about generations as most people who have next of kin or usually plan their retirement portfolio for the benefit not just for themselves at elderly age but for also the next of kin family.
    As I have already explained, I have no intention of selling up at 65. It will be a back up fund, used only for emergencies and possibly for a domestic holiday at some point.

    In in terms of my estate when I die, it will be close to a non-issue. My KS “might” be worth a maximum of $30,000 when I hit 65 (possibly less if we experience a crash before then). This new investment will be worth bugger all. Definitely less than $10,000. That’s it. I have no assets other than my caravan, which is currently worth probably no more than $20,000. By the time I’m 65 it will be worth less. So, when I die, once my funeral is paid for, my 4 kids will be lucky to see $10,000 each. I am not one of those people who lives and works to leave my kids an inheritance. If there is something there for them when I kark it, sweet, but I’m not holding my breath and neither are they. We are talking minuscule amounts of money here. Which is exactly why I sometimes start second guess myself and thinking “why am I bothering even considering investing when I have so little money?” But I’m a bit pig headed and I like a challenge so I’m going to give it a whirl anyway.

    I'm sorry I have no experience about Sharesies (or on similar part, Kiwi Saver funds). That's because I already know for the vast majority of investors, such actively managed funds just simply won't work for them. Warren Buffet has proved this time and time again that investors (particularly the small guy) loses far more $ in administration and mgt fees than what they actually get back in compounded returns in their portfolio. I recall reading an article a year or so ago about all the different Kiwi Saver funds failing to meet their mark but were great at marketing their aggressive / moderate / etc funds that a person can invest in. By making the investors choose which area to put their savings in, the investment industry gets off the hook because there is no accountability when the person is presented 3 different risk levels of investment. It's a laugh because they're trying to match the individual's risk tolerance vs their time frame vs the overall return when the sad reality is, everyone wants a bigger portfolio at the end, and when the fund managers do a poor job of delivering that to their investors, they say well it's the individual's fault for not choosing the 'right' mix in their 'balanced' portfolio.
    My KS is actively managed and I am currently considering switching providers but not rushing into making that decision right now.

    My Sharesies investments will all be ETFs which I’m choosing myself, rather than going with one of their “pre-built” orders, so will be a passive investment as I have no intention of buying/selling to try to beat the market.

    If I was in your position and dealing with very small sums, I would look at investing directly to US equities. Particularly in quality, well established companies like those on the S&P500. Since you would be well under the $50K threshold, you would be exempted of FIF / FDR etc. and this is a big deal. Because unlike Kiwi Saver, your portfolio holding the shares directly would attract no taxation at all.
    I get this but if I were to do it this way I would have to save up larger amounts of money before purchasing shares, and would also be paying brokerage. Sharesies gave me the opportunity to get started with $50 and to set up regular orders with no buy fees. That is a huge advantage to someone in my position. Tax is never going to be a big issue for obvious reasons and I can claim imputation credits on my PIE income. So unless I win LOTTO, or a handsome Sugar Daddy comes knocking on my door, it is currently the most efficient and cheapest way for me to invest. 😄

  12. #12
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    Hi justakiwi. Some good comments on here and I mostly agree with what Peat said in post #8 (wouldn't consider feel good "socially responsible" investment funds in your situation though) and stick to dribbling into the USF through passively managed Sharesies.
    The USF includes the 500 largest companies on the NYSE and many of those rely on sales from around the globe and thereby give you access to foreign exchange hedging in dozens of currencies and access to dozens of economies.

    I can't see why you would want to diversify any more than that with your relatively small amounts.

    But good luck whatever you do and I repeat what 777 said above, you most certainly have not made a fool of yourself with your questions and obvious enthusiasm.

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