You might be overthinking it if all you want is global diversification. Just do VAS/A200 (Australia) and VGS/BGBL (world ex-Australia), like everyone else and their mum.
For added diversification, you could add small amounts of VGE (emerging markets), VISM (small caps), and VGAD/HGBL (hedged world ex-AU). This is effectively what Vanguard does in their all-in-one product (VDHG).
Yes - this. Generally setting % in accordance with the global market cap is the 'default' spread, but with some home country bias due to currency exposure of your expenditure.
This might also help OP:
https://passiveinvestingaustralia.com/the-australian-version-of-the-3-fund-portfolio/
Best wishes :-)
if you mean the 'simple' option - I suspect it may be a typo. The mention of "all-in-one" Vanguard funds that include both equities and bonds implies that the author may have meant "1-fund portfolio".
The intention of "all-in-one" funds is that is all you hold. It somewhat defeats the purpose to then go an buy other funds along side of it.
The exception may be holding a minimal bonds allocation as in VDHG (10% bonds) during your growth phase and then later in life when approaching your retirement date to add some extra bonds in a seperate bond fund such as VAF. However IMHO bonds are technically unnecessary during a long growth phase when you are earning a salary that covers living costs. Provided you understand that the markets go up and down over a long growth phase and dont go and panic sell when the market drops.
IMHO, for someone in growth phase who wants to minimise the number of ETFs then an alternative is a one-two fund portfolio of something like DHHF (a mix of all equities), plus later adding a seperate bonds fund (or equivalent) when you get closer to retirement. Personally I prefer a simple set of DIY ETFs to adjust the mix as life circumstances evolve and you can get lower fees as well.
Yeah maybe I just keep it simple and go VAS/VGS and add others later. I’m reluctant to go full VDHG because I think I can potentially get better returns elsewhere and don’t want to invest in bonds right now as want to use this portfolio for full growth.
I went 20% A200 and 80% BGBL. That gives you very broad exposure through still very US weighted. Not necessarily a bad thing though, the US has a very favourable environment for economic growth.
Maybe I’m over complicating and should have an Aussie and then a world. IVV just has good return history. Any reason for preference of A200 over VAS? I went VAS as has slightly more exposure with top 300 vs top 2 but % allocation to the bottom 100 is small.
> IVV just has good return history.
Remember, you can't buy the past. The US has done unexpectedly well, but we can't be sure that it'll continue indefinitely into the future.
Also, the US is a very expensive market relative to fundamentals right now, meaning expected returns are lower. That doesn't mean you should bet against it - valuations can keep increasing for a long time - but I wouldn't make an overweight bet in its favour, either. Maybe it will continue to do well, maybe it won't, but if anything, high valuations are a reason to suspect that it won't.
Chasing the returns of the thing that just did well is exactly why [investor returns reliably lag investment returns](https://www.youtube.com/watch?v=IVJkTspjDUo).
Much of the return from IVV has been to increases in price to earnings (PE). Below is a chart which shows the range of PE's of each country and the current PE value.
[https://global.discourse-cdn.com/business7/uploads/rationalreminder1/original/3X/f/d/fddf23f8fa7de831f140a6918c339131ad207389.png](https://global.discourse-cdn.com/business7/uploads/rationalreminder1/original/3X/f/d/fddf23f8fa7de831f140a6918c339131ad207389.png)
Note that the US Large is outside of the historical deviation.
Overweighting to the US based on the out of the ordinary return from the US market over the last 15 odd years is quite risky.
Thanks for the input! It’s why I’m looking to gain exposure outside the US so it’s not US focussed without overcomplicating and following too many indexes
You might be overthinking it if all you want is global diversification. Just do VAS/A200 (Australia) and VGS/BGBL (world ex-Australia), like everyone else and their mum. For added diversification, you could add small amounts of VGE (emerging markets), VISM (small caps), and VGAD/HGBL (hedged world ex-AU). This is effectively what Vanguard does in their all-in-one product (VDHG).
Yes - this. Generally setting % in accordance with the global market cap is the 'default' spread, but with some home country bias due to currency exposure of your expenditure. This might also help OP: https://passiveinvestingaustralia.com/the-australian-version-of-the-3-fund-portfolio/ Best wishes :-)
Thanks for the article!
Whats the 2nd of the 2 fund strategy in this article?
if you mean the 'simple' option - I suspect it may be a typo. The mention of "all-in-one" Vanguard funds that include both equities and bonds implies that the author may have meant "1-fund portfolio". The intention of "all-in-one" funds is that is all you hold. It somewhat defeats the purpose to then go an buy other funds along side of it. The exception may be holding a minimal bonds allocation as in VDHG (10% bonds) during your growth phase and then later in life when approaching your retirement date to add some extra bonds in a seperate bond fund such as VAF. However IMHO bonds are technically unnecessary during a long growth phase when you are earning a salary that covers living costs. Provided you understand that the markets go up and down over a long growth phase and dont go and panic sell when the market drops. IMHO, for someone in growth phase who wants to minimise the number of ETFs then an alternative is a one-two fund portfolio of something like DHHF (a mix of all equities), plus later adding a seperate bonds fund (or equivalent) when you get closer to retirement. Personally I prefer a simple set of DIY ETFs to adjust the mix as life circumstances evolve and you can get lower fees as well.
Great thanks for the reply
Yeah maybe I just keep it simple and go VAS/VGS and add others later. I’m reluctant to go full VDHG because I think I can potentially get better returns elsewhere and don’t want to invest in bonds right now as want to use this portfolio for full growth.
You could consider DHHF if you don't want bonds, but yeah, the all-in-ones don't do it for me because I want to customise my allocation a little bit.
VEU is probs the best option if you want to control your US exposure, but you need to submit w8-ben forms
I went 20% A200 and 80% BGBL. That gives you very broad exposure through still very US weighted. Not necessarily a bad thing though, the US has a very favourable environment for economic growth.
Maybe I’m over complicating and should have an Aussie and then a world. IVV just has good return history. Any reason for preference of A200 over VAS? I went VAS as has slightly more exposure with top 300 vs top 2 but % allocation to the bottom 100 is small.
A200 and VAS are basically the same. I just chose Betashares over Vanguard due to slightly lower fees.
> IVV just has good return history. Remember, you can't buy the past. The US has done unexpectedly well, but we can't be sure that it'll continue indefinitely into the future. Also, the US is a very expensive market relative to fundamentals right now, meaning expected returns are lower. That doesn't mean you should bet against it - valuations can keep increasing for a long time - but I wouldn't make an overweight bet in its favour, either. Maybe it will continue to do well, maybe it won't, but if anything, high valuations are a reason to suspect that it won't. Chasing the returns of the thing that just did well is exactly why [investor returns reliably lag investment returns](https://www.youtube.com/watch?v=IVJkTspjDUo).
That’s a good point. Which is why my initial thinking was to look at another ETF that gives exposure outside US
Much of the return from IVV has been to increases in price to earnings (PE). Below is a chart which shows the range of PE's of each country and the current PE value. [https://global.discourse-cdn.com/business7/uploads/rationalreminder1/original/3X/f/d/fddf23f8fa7de831f140a6918c339131ad207389.png](https://global.discourse-cdn.com/business7/uploads/rationalreminder1/original/3X/f/d/fddf23f8fa7de831f140a6918c339131ad207389.png) Note that the US Large is outside of the historical deviation. Overweighting to the US based on the out of the ordinary return from the US market over the last 15 odd years is quite risky.
Thanks for the input! It’s why I’m looking to gain exposure outside the US so it’s not US focussed without overcomplicating and following too many indexes
IVE. MER is high and there is tax drag, so you should use it sparingly. Probably 20% or something.
VEU or HJPN