Prudent risk management, something that's been on my mind today.
Not something that gets any real airtime on either channel but something we need to be thinking about, especially those nearing or in retirement looking to take a balanced approach towards managing risk in their portfolio in the years ahead..
Is it time to consider the classic 60/40 share bond portfolio now that corporate bonds are paying real returns above the expected inflation rate again ?
Food for thought. https://www.ftadviser.com/investments/2024/03/01/re-evaluating-the-classic-60-40-stock-bond-portfolio/
Maybe a prudent well balanced portfolio for someone in their early 60's looks like this:
45% overseas shares (combination of pick your own, ETF's and / or managed funds)
15% N.Z. equities, maybe with a REIT or two for some property exposure
30% Fixed interest bonds, (N.Z. yields are good so invest here)
5% cash
5% Alternate asset class, Gold Silver or some other tangible asset alternative or some combination, (not suggesting Crypto).
Vell Basil. An eemportant point you miss eez ze amount of money your portvolio returns verses ze living costs you vace. EEf you are a gazillionaire, then volatility een your portvolio means your living expenses are covered between 8 or 12 times. Zo who cares vot your allocation eez?
On ze other hand, eef you are a retired vighter pilot, who lives een a hay barn, to keep a careful eye on heez trusty Vokker Triplane, then allocation to zmooth your eencome can make ze difference between camembert or cowdung cakes vor dinner. Vortunately I am een a relationzhip vith ze great great great niece of ze Kaiser. Zo I am never zhort of vood or vine.
But of course zome of us have expensive leisure plans vor our retirement, vhich means ve must 'go for growth' no matter how vell off ve veel. Vor example, my own ambeetion een retirement eez to conquer Germany. I vould remove ze zhameful democrateec vrule, and eenstall my partner as 'Kaiserette'. Zo you zee my need vor eencome eez a little higher than most, vhich eez vhy I am on ze maximum growth path.
RB
Quote from: Basil on Apr 07, 2024, 07:37 PMPrudent risk management, something that's been on my mind today.
Not something that gets any real airtime on either channel but something we need to be thinking about, especially those nearing or in retirement looking to take a balanced approach towards managing risk in their portfolio in the years ahead..
Is it time to consider the classic 60/40 share bond portfolio now that corporate bonds are paying real returns above the expected inflation rate again ?
Food for thought. https://www.ftadviser.com/investments/2024/03/01/re-evaluating-the-classic-60-40-stock-bond-portfolio/
Maybe a prudent well balanced portfolio for someone in their early 60's looks like this:
45% overseas shares (combination of pick your own, ETF's and / or managed funds)
15% N.Z. equities, maybe with a REIT or two for some property exposure
30% Fixed interest bonds, (N.Z. yields are good so invest here)
5% cash
5% Alternate asset class, Gold Silver or some other tangible asset alternative or some combination, (not suggesting Crypto).
For what it is worth...
Personally I'd forgo a little yield (NZ bonds) in favour of more diversification (total bond fund).
And for NZ Equities, assuming you are using a NZ50 tracking fund I think there is plenty of Property exposure that investing in a REIT isn't required - particularly if you already own your own PPOR.
Our asset allocation is currently
80% Global Equities
10% NZ Equities
10% Global Bonds
but we are also 39y and 36y respectively.
As we approach (early) retirement we plan to move to close to a 70/30 equity / bond allocation. There is also some good analysis that suggests that a rising equity glide path is beneficial after the initial period of high SORR.
For what it's worth, I think your portfolio allocation is spot on for your age.
Have heard a theory your bond allocation should be proportional to your age. 20% at 20 years, 30% at 30 years and so on. I think that's too conservative.
Quote from: Basil on Apr 08, 2024, 02:30 PMFor what it's worth, I think your portfolio allocation is spot on for your age.
Have heard a theory your bond allocation should be proportional to your age. 20% at 20 years, 30% at 30 years and so on. I think that's too conservative.
Thanks Basil. And I agree, I think of my salary/savings rate as a bond like instrument whilst I'm working.
As long as your portfolio has a Shsrpe Ratio >3 you'll be fine
Use it conjunction with the efficient frontier
Nz Super fund only have 5 percent in NZ Equities according to annual report. Also found it interesting that they are not active investors for the most part. Some very interesting stuff here.
https://nzsuperfund.nz/how-we-invest/actual-portfolio/
Quote from: Shareguy on Apr 09, 2024, 01:37 PMNz Super fund only have 5 percent in NZ Equities according to annual report. Also found it interesting that they are not active investors for the most part. Some very interesting stuff here.
https://nzsuperfund.nz/how-we-invest/actual-portfolio/
Thanks for that link. I found it interesting that the international exposure was 100% hedged. I expected to see some diversification away from the NZD.
Quote from: Shareguy on Apr 09, 2024, 01:37 PMNz Super fund only have 5 percent in NZ Equities according to annual report. Also found it interesting that they are not active investors for the most part. Some very interesting stuff here.
https://nzsuperfund.nz/how-we-invest/actual-portfolio/
If you look below at the smartshares ETF returns from the NZ market you'll see that they made a very wise decision.
https://smartshares.co.nz/fund-investor-report
UK pension funds are being heavily critisised by UK investors at the moment for only having a similar 5% in UK shares (down from 52% some time ago). Mind you, most of the same critics probably also voted for Brexit. :'(
https://www.harbourasset.co.nz/research-and-commentary/long-term-investment-return-assumptions/
Caught up with family friend in the weekend. He has a very large portfolio. He made the comment that he has hardly anything left in the NZ market. Said he had just been to a meeting with Milford's who made the comment that there are better opportunities offshore currently.
Investing in the NZX is very similar to fishing near the mouth of the Manukau harbour at what's known as "destruction gully" with the tide ripping out at a phenomenal rate. You just sit there praying your anchor holds and you catch something worthwhile considering the risk.
When I did that last time in a friend's boat the anchor didn't hold, we caught nothing but thankfully the motor started so we avoided getting washed out into the notorious Manukau bar.
Quote from: Basil on May 13, 2024, 05:10 PMInvesting in the NZX is very similar to fishing near the mouth of the Manukau harbour at what's known as "destruction gully" with the tide ripping out at a phenomenal rate. You just sit there praying your anchor holds and you catch something worthwhile considering the risk.
When I did that last time in a friend's boat the anchor didn't hold, we caught nothing but thankfully the motor started so we avoided getting washed out into the notorious Manukau bar.
Sums it up well Basil. There is a lot of investors and even fund managers that have lost large sums on some of these dreadful stocks we have. It's no wonder that a lot of kiwis have a great distrust of equities and favour property. I really like the quarterly reporting in the US and hope that at least the larger NZX companies follow suit here.
I also think though that we are not far away from deploying more funds in the NZ market. Sharks are circling......and they are hungry.
As far as the Manukau, it's a hidden gem that few people venture. The bar which we have crossed over numerous times needs caution, respect and experience. A Coastguard bar crossing course is recommended. However once you get out there, Gamefish galore and some of the best fishing in NZ is waiting for you.
Quote from: Shareguy on May 14, 2024, 07:07 AMSums it up well Basil. There is a lot of investors and even fund managers that have lost large sums on some of these dreadful stocks we have. It's no wonder that a lot of kiwis have a great distrust of equities and favour property. I really like the quarterly reporting in the US and hope that at least the larger NZX companies follow suit here.
I also think though that we are not far away from deploying more funds in the NZ market. Sharks are circling......and they are hungry.
As far as the Manukau, it's a hidden gem that few people venture. The bar which we have crossed over numerous times needs caution, respect and experience. A Coastguard bar crossing course is recommended. However once you get out there, Gamefish galore and some of the best fishing in NZ is waiting for you.
All I own are NZX stocks and none of them are dreadful so you must be talking about another NZX. The pricing of a stock by the market is often far removed from the potential of the business itself. So if you could explain why any of these stocks are dreadful in a factual and logical way I'd be eternally grateful (FPH/SPK/ATM/RYM/OCA) and on the unlisted but still NZ stocks PAZ and SFF.
Agree that a very small number of stocks on the NZX are looking very cheap.
That bar...not for the faint of heart that's for sure !!...not sure it would do my blood pressure much good lol
Quote from: Basil on May 14, 2024, 09:58 AMAgree that a very small number of stocks on the NZX are looking very cheap.
That bar...not for the faint of heart that's for sure !!...not sure it would do my blood pressure much good lol
I highly doubt you would enjoy Cook Strait fishing then, can be incredibly scary with exceptionally strong currents&wind, huge swells, quick weather changes and more hidden rocks than you can point a stick at.
Probably wouldn't enjoy that at all as I've already seen more than my fair share of rough conditions Breezy. Came back from the Bay of Islands to Auckland in 4 meter breaking swells beam on and similar conditions coming back from the Gt Barrier Island several times with huge following seas. No fun in that but definitely sweaty forehead and dry throat at times ! Happy to take a far more circumspect approach these days. 15 knots gusting 20 is my limit now and much prefer no wind or 5-10 knots lol
Anyway...back to portfolio allocation. Lot more strength in the US economy than the weak and anemic N.Z. economy here.
Happy to have a large position in Marlin and Barramundi with the overseas exposure they provide and the ~ 45 stocks they hold between them providing good diversification. Really good tax free income too @ 8% per annum, although I am presently fully subscribed to the shares in lieu of dividends programs for both.
$1,000,000 invested gives you tax free retirement income of $80,000 per annum and no stress or drama's...just a thought.
Quote from: Breezy on May 14, 2024, 09:50 AMAll I own are NZX stocks and none of them are dreadful so you must be talking about another NZX. The pricing of a stock by the market is often far removed from the potential of the business itself. So if you could explain why any of these stocks are dreadful in a factual and logical way I'd be eternally grateful (FPH/SPK/ATM/RYM/OCA) and on the unlisted but still NZ stocks PAZ and SFF.
Gosh I did not say all NZX stocks are dreadful. We have our fair share though. The point I was trying to make is it's more about the quality and liquity of many of our stocks. It's becoming more difficult to buy and sell some stocks without impacting the stock price. Have no issues doing this in the US or Australian markets. If we had quarterly reporting investors would be much more informed.
I hope your strategy of just having NZX stocks works well for you. My portfolio is mostly invested offshore and it's one of the best decisions I have made. On saying that I think the NZ market will shine again and I'm watching and mostly waiting.
Each to there own and best of luck Breezy.
Quote from: Shareguy on May 14, 2024, 02:47 PMGosh I did not say all NZX stocks are dreadful. We have our fair share though. The point I was trying to make is it's more about the quality and liquity of many of our stocks. It's becoming more difficult to buy and sell some stocks without impacting the stock price. Have no issues doing this in the US or Australian markets. If we had quarterly reporting investors would be much more informed.
I hope your strategy of just having NZX stocks works well for you. My portfolio is mostly invested offshore and it's one of the best decisions I have made. On saying that I think the NZ market will shine again and I'm watching and mostly waiting.
Each to there own and best of luck Breezy.
Yeah I've only ever owned NZ stocks but several are dual listed on the ASX. The NZX will indeed have its time in the sun again once we claw our way out of the current pit we find ourselves in. Our market is still relatively clean by comparison with some overseas markets which are cesspools of shorting and Insto manipulation and blind eye turning by the regulators.
Hi all, I've been thinking a bit about asset allocations and I wondered if some of you might share your thoughts on the topic and perhaps even give examples of yours.
I'm interested in the split of your portfolio between International Equities, NZ Equities, Bonds and cash? And how close you are to starting to draw down on the portolio.
Thanks!