Portfolio Discussion!!

Question

Hi fellow pearlers
Me(27) and my wife(29) have a joint investment account where we set aside 5k a month and invest fortnightly into the following etfs
A200 50%
IVV.    35%
NDQ.   5%
VEU.    10%

We've tested the waters with VAS , VGS, VGE and SPY before finalizing on the above portfolio.

Question to the extended community here.
Is it worthwhile expanding to the following satellite etfs
IJP
VAP
IJR
ETHI
IXJ
WDMF

Also just trying to understand the value of having divident focused etfs(such as WDMF. I have DRP for all my current etfs and aim to sustain the current portfolio(36k) till we retire. Hopefully increasing income and investments going ahead.
Im also the nominee to my parents mutual funds as well as am inheriting some assets overseas, not sure how that works with this plan as well.

Sorry for the long post. Thanks in advance!!

Answer

Hey there,

Excellent job on the strong savings habit, that’s fantastic!

I think it’s fair to say you might be falling into the area of analysis paralysis.  After having all the main building blocks of a portfolio, there’s very little to be gained by adding more and more, even if they’re different holdings in various ways.

Something that is, by definition, a small part of the portfolio, which is still invested in the same markets, is going to make a very small difference overall.  I would caution against overcomplicating it.  Almost everyone who builds a big portfolio with tons of holdings because they like various strategies etc end up culling it back later on.  Because not only is it ineffective most of the time, but there’s extra admin + moving parts to always be thinking about, and it makes the whole investing experience less enjoyable.

While everyone has their own taste, I would keep things simple as per your current plan :)

That’s my 2 cents.  Hope that’s useful and all the best with it.

Cheers, Dave

Answer

Another suggestion: don’t focus too much on dividends, but rather focus on total return. Total return is dividends + capital growth. And in general you should have preference for capital growth because: 1) you don’t have to pay CGT until you actually sell, with dividends you have to pay tax every year; 2) for assets held longer than 1 year you get 50% discount on CGT.
Don’t get me wrong, dividends are important, but they are not the only important thing. And I suggest the most important thing is the total return of the investment.

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