Anyone doing a three fund portfolio?

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Forums › Finance and wealth management › Anyone doing a three fund portfolio?

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Handle9

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#3198449 21-Feb-2024 17:12

CokemonZ: So quite an interesting conversation.

I think after a bit more reading, that the plan of 80 - 90 in total world, 10 - 15 in NZ shares, and 5-10 in a pie style bank account seems to be the closest to boglehead I'll get.

Be fun to compare in a couple of years.

You are very long in equities and very short on bonds with that portfolio. Personally, I'd say it's not really capturing the countercyclical benefits of a three fund portfolio and you may as well just go 100% equities.

It really depends what your goals are and how you align your investments with them.

My 25% in bonds is also short and I plan to adjust that in 3 years time, when my investment horizon changes a bit.

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eracode

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#3198555 21-Feb-2024 20:55

There’s a lot of info missing here about the OP’s situation:

age, where are they in their financial life-cycle?
how much are they investing and whether it’s all, or a part, of their investable assets?
attitude/tolerance toward risk?
how long is their investment horizon?
what are their financial goals?
are all or some of their invested funds required at some point to buy a house, or help kids with a house/put kids through uni/travel, etc?

and so on. Without knowing more of this stuff, it’s difficult and unwise to start making detailed comments on asset classes (NZ/international equities, NZ/international bonds and fixed interest, cash, etc) and on the asset allocation/weightings to each of these - that would suit their specific situation.

This is where a qualified financial adviser can be really valuable - but probably not what the OP has in mind.

Sometimes I just sit and think. Other times I just sit.

Handle9

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#3198564 21-Feb-2024 21:25

eracode:

There’s a lot of info missing here about the OP’s situation:

age, where are they in their financial life-cycle?
how much are they investing and whether it’s all, or a part, of their investable assets?
attitude/tolerance toward risk?
how long is their investment horizon?
what are their financial goals?
are all or some of their invested funds required at some point to buy a house/put kids through uni/travel, etc?
and so on. Without knowing more of this stuff, it’s difficult and unwise to start making detailed comments on asset classes (NZ/international equities, NZ/international bonds and fixed interest, cash, etc) and on the asset allocation/weightings to each of these - that would suit their specific situation.

This is where a qualified financial adviser can be really valuable - but probably not what the OP has in mind.

Either an independent financial advisor (ie one you pay rather than one who works on commision) or taking some time read books and articles and understand what would suit your investing goals and style would be a good idea.

There's a detailed book on the three fund strategy and why it's balanced the way it is but there's also lots of books on different strategies.

I really like Andrew Hallams writing and his book Millionaire Expat has heavily influenced my investment strategy but there's plenty of others as well. IMO if you want to DIY your investments first you should read widely to select a strategy then read deeply to understand it.

eracode

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#3198586 22-Feb-2024 02:53

I do ours as a DIY but in the last part of my working life before retirement I was a qualified govt-registered Authorised Financial Adviser and a registered Certified Financial Planner in the international CFP body.

Sometimes I just sit and think. Other times I just sit.

Handle9

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#3198587 22-Feb-2024 04:53

eracode:
I do ours as a DIY but in the last part of my working life before retirement I was a qualified govt-registered Authorised Financial Adviser and a registered Certified Financial Planner in the international CFP body.

It’s obviously helpful to have that level of background knowledge. Saying that it’s quite possible to have a successful DIY approach without being trained in all the aspects a professional CFP would be trained in.

Given the number of commission salespeople masquerading as financial planners it could even be preferable to DIY if you can take the time to find a strategy that is effective and understandable. Just like any other industry there are good financial planners, bad financial planners and crooked financial planners.

I’m someone who like to take the time to get a real understanding of things I am interested in so DIY suits me. My job has also exposed me to a number of realities of finance which is obviously helpful. Others mileage may vary and it’s a personal thing. Having an annual session with a good CFP is clearly highly beneficial if you don’t have the time, skills or mentality to DIY.

johno1234

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#3198593 22-Feb-2024 08:05

History not a predictor of the future, but since 2003 hasn't the NZX cumulatively outperformed the ASX and S&P indexes:?

https://www.spglobal.com/spdji/en/documents/education/education-celebrating-20-years-of-the-sp-nzx-50-index.pdf

CokemonZ

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#3198600 22-Feb-2024 09:19

There are a lot of things missing from my information :)

That being said

Relatively high risk tolerance, and a 10+ year horizon.

I've had a read of a couple of books, and was really looking for the right sort of funds in nz to do this strategy.

Bonds really don't seem to be thing.....?

eracode

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#3198613 22-Feb-2024 09:43

CokemonZ:

There are a lot of things missing from my information :)

That being said

Relatively high risk tolerance, and a 10+ year horizon.

I've had a read of a couple of books, and was really looking for the right sort of funds in nz to do this strategy.

Bonds really don't seem to be thing.....?

Don't misunderstand me - I wasn't criticizing at all or suggesting you should put all that info up on here. This is not the place for that. Just saying there's only a limited amount by way of wider comments or suggestions that can be given here without knowing your full situation. Still an interesting thread though.

Even as once a pro in this field, I could never really get warm on bond/fixed-interest funds - especially international ones. When the yields go up, the values go down (and vv) - plus exchange risk on the international ones. I know they add diversity and reduce overall portfolio risk as a result - but meh.

An exception for me can be domestic bonds where you can buy on issuance and hold to maturity - if you're happy with the issuer's credit rating and the coupon return at the outset. In this situation you avoid the yield/value thing and obviously no exchange risk. And you can sell them if you want to get out prior to maturity - not so easy to get out of a Term Deposit.

Sometimes I just sit and think. Other times I just sit.

CokemonZ

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#3198636 22-Feb-2024 10:16

No offence taken at all, and it's 100% fair as advice should differ on personal circumstances.

Where/how do you buy domestic bonds? As I type that I realise starting to get a bit more involved - the exact opposite of what I want to achieve :)

eracode

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#3198669 22-Feb-2024 11:04

CokemonZ:

No offence taken at all, and it's 100% fair as advice should differ on personal circumstances.

Where/how do you buy domestic bonds? As I type that I realise starting to get a bit more involved - the exact opposite of what I want to achieve :)

This 'Sorted' webpage is a good summary (albeit pretty brief) of NZ bonds and talks about how to buy them. I haven't looked further but I'm sure there will quite a few other NZ sites with valuable info.

Edit: Just found this FMA page which is good. Also this FMA Guide to Bonds.

Sometimes I just sit and think. Other times I just sit.

johno1234

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#3198736 22-Feb-2024 13:06

CokemonZ:

There are a lot of things missing from my information :)

That being said

Relatively high risk tolerance, and a 10+ year horizon.

I've had a read of a couple of books, and was really looking for the right sort of funds in nz to do this strategy.

Bonds really don't seem to be thing.....?

We have a component inf bonds - they're quite popular in managed funds. Generally a couple of % higher yield than bank deposits in return for increased risk. Infrastructure companies (power, utilities) seen to be reasonably safe.

Handle9

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#3198912 23-Feb-2024 00:42

johno1234:

History not a predictor of the future, but since 2003 hasn't the NZX cumulatively outperformed the ASX and S&P indexes:?

https://www.spglobal.com/spdji/en/documents/education/education-celebrating-20-years-of-the-sp-nzx-50-index.pdf

You can slice the markets in a variety of different ways which will show different funds outperforming each other.

Part of the point of a 3 index fund portfolio is to diversify across different geographies and asset classes.

CokemonZ

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#3200106 26-Feb-2024 11:54

Ok, so after reading a bit, and looking at the different funds available.

Foundation Series Total World Fund - 64% US weighted, and very low fee. 65%

Smartshares S&P/NZX 50 ETF - NZ Fund, low fee, invest local :) - 15%

Smartshares Global Bond ETF - Still young enough this isn't a huge concern - 10%

PIE 90 Day saver/Short term term deposits - 5%

Gambling - I just like the stock - 5%, likely NVDA, AMD and MSFT at the moment - go AI - reckon over 5 - 10 years a great focused play.

I understand I could potentially do better - looking at past returns some of the smartshares funds have done very well, but this seems both high and low enough risk, with good potential for returns.

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