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  1. #1
    Registered User bananastand11's Avatar
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    Investment Advice

    (Story takes place in Australia)

    Long story short, I was never good nor responsible with money growing up.

    I fell into the hole of debt with personal and car loans as well as credit and store cards.

    At 32 I've managed to clear the remaining $22K of debt to my name and am now debt free (do not have a house or mortgage)

    Since I for the first time have seen my savings account begin to grow ($10k at the moment... I know it's absolutely p*ssening and embarrassing but unfortunately it's a first for me), I'm becoming increasingly annoyed that the money isn't 'working for me' and the savings account is essentially useless as the interest rate is non-existent.

    I have as of last week opened up some accounts with Vanguard and am going to invest my money.

    $4k into a Vanguard Conservative Index Fund (70% Conservative / 30% Growth)
    $2k into a Vanguard Active Global Growth Fund
    $1k into Vanguard International Shares Index Fund
    $2k in shares for an individual company here in Australia

    Question 1: is this what they mean when they say 'diversify your investments' ??

    Question 2: what do I do now?
    I'm thinking that I save up the next couple of payslips I receive from work and keep $5k in my savings account ready to use straight away in case of an emergency.
    Then once that $5k is in my savings account, I do the following every fortnight:

    Conservative Index Fund - invest an additional $1,000
    Active Global Growth Fund - invest an additional $400
    Vanguard International Shares Index Fund - invest an additional $400

    Is that what the game plan is moving forward? Essentially keep contributing regularly into these investment funds?

    How should I be looking at the individual funds themselves? ie: I was told conservative funds are for say a 3 year outlook; whereas active growth funds are for say a 5-7 year outlook so it has time to recover from potential drops. If that's the case do I then not have the thought of ever moving money out of these accounts for the next 3 years at least? And pay no attention to how far down they may dip? Just continue to keep putting in fortnightly contributions?

    Sorry for the stupidity on a seemingly straight forward life plan... Just really wanting to right this ship that I'm on and make sure the future is good.
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  2. #2
    Forever aBOARD guest89's Avatar
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    Here is my question to you. When will you need/want/use this money? In 5 years? In 15 years? In 30?


    Really conservative funds and being well diversified and safe is fine and dandy if you are looking at retirement in the near horizon and want to preserve as much money as possible. As a young investor with a 30 year time line I'd be looking more at aggressive growth. There is plenty of time to make up any dips in the market.


    If I were in your shoes I'd probably put 45% of my money in Vanguard information technology fund. (Ticker VGT). 45% in ARK Invest (Ticker ARKK). 10% in Vanguards money market account as an emergency fund/small holdings to increase your position in the market on a dip.



    If you'd feel safter with a portion of your money in a 'safe' or 'international' fund find then just do like 30% of your holdings in each of the three funds. Just my 2 cents.
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    Registered User bananastand11's Avatar
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    I will want to use a section of my investments in say 3-5 years to purchase a house.

    The rest of my portfolio I would like to leave for the long run and not look at touching for another 30 years.

    With that answer how would you say I should approach the above funds I have?

    I've had a look at the 65 products that Vanguard Australia has just now, and neither the Ticker VGT or Ticker ARKK are there - they must be an American opportunity unfortunately.
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    Congrats on being debt free. That's huge milestone that not a lot of people your age are at. You got the right idea. Live below your means and invest the rest.

    Index funds are a safe, proven way to get 8-10% returns over a long term horizon. I recommend an index fund that tracks the S&P 500 to all my friends and family that are just starting out (VTSAX or VTI). Sure, there are more aggressive strategies out there, but that's for someone who wants to be completely passive and hands off.

    Guest89 recommended VGT and ARKK, which I think are two good aggressive recommendations for part of your portfolio at your age. Both give the potential for greater returns than an S&P 500 index (Most of the ARK ETF's are all up 100%+ on the year). I personally had some $ invested in VGT and put that money into ARKG (another ARK ETF. ARK is led by Cathie Wood, who is the most success ETF fund managers in the game right now).

    I would recommend doing more research yourself and feeling informed and comfortable with your decisions.
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    Don't buy any short term rental properties. Granted, you can double your money in a year, but it's going to be a full time job. I should know, got 23 of them. What's my free time like? Haha, I don't have any.
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    take risk imo

    super is your retirement plan
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    Practically thousands of serious scientific studies show that the most profitable stock investment strategy in the long run (20 years and above) is a globally diversified, buy and hold method aka passive investment. This is because although outperformers exist in the short run, they are not identifiable by their past performance. Outperforming the market is pure luck.

    75% in MSCI World and 25% in MSCI Emerging Markets is what I would recommend.

    If you need money within the next 5-10 years, keep it out of the stock market. Profit is always a result of risk People tend to forget this fact whenever the market goes up for a few years.
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    Originally Posted by bananastand11 View Post
    (Story takes place in Australia)
    Question 1: is this what they mean when they say 'diversify your investments' ??
    First, good job taking charge of your finances. You have done well getting yourself moving in the right direction.

    You are on the right track with diversification but I would recommend taking a look at the top holdings for each of the funds you have selected as I think you will probably find a lot of the same stocks across these funds so you are not as diversified as you expect. At your age I would ditch the conservative fund and put a small percentage into a bond index fund and add some small cap exposure.

    Once you've got a solid base set up for your retirement and a good handle on investing I agree the recommendation from others you should introduce some higher risk for some larger gains. I like leveraged index funds like UPRO that aims to return 3x the gains (or losses) of the S&P 500. S&P 500 index funds are highly recommended as a fairly safe way to get 10% annual returns over the long term so if you buy into that strategy why no triple down for 30% average return?
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    Invest on property or purchase gold.
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    Originally Posted by paulinkansas View Post
    Don't buy any short term rental properties. Granted, you can double your money in a year, but it's going to be a full time job. I should know, got 23 of them. What's my free time like? Haha, I don't have any.
    jesus man, every post you make is you telling people you have rental properties. Suprised you left out that you rent them out to refinery workers.
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    Originally Posted by wave_length View Post
    Practically thousands of serious scientific studies show that the most profitable stock investment strategy in the long run (20 years and above) is a globally diversified, buy and hold method aka passive investment. This is because although outperformers exist in the short run, they are not identifiable by their past performance. Outperforming the market is pure luck.

    75% in MSCI World and 25% in MSCI Emerging Markets is what I would recommend.

    If you need money within the next 5-10 years, keep it out of the stock market. Profit is always a result of risk People tend to forget this fact whenever the market goes up for a few years.
    Can you clarify a few things for me?
    - This might be what you're saying but isn't cost the best indicator because studies show people don't consistently beat projections and so low cost funds tend to do the best?
    - Can you link me to some studies suggesting a globally diversified portfolio is the best? I've never seen that
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    Originally Posted by dyee4613 View Post
    Can you clarify a few things for me?
    1.) This might be what you're saying but isn't cost the best indicator because studies show people don't consistently beat projections and so low cost funds tend to do the best?
    2.) Can you link me to some studies suggesting a globally diversified portfolio is the best? I've never seen that
    1.) That's one part of the story. Asset picking and/or market timing - aka active investment - must on avarage always be more expensive than passive investment for obvious reasons. This is mainly because of cost of trading, which is lower on avarage in case of passive investment. See 'The Arithmetic of Active Management' by William F. Sharpe, an article that should be read by every investor.:

    https://web.stanford.edu/~wfsharpe/a...ive/active.htm

    So since both active and passive investment must yield the same results on avarage before cost, passive investment performs better. This does not mean that there can't be market outperformers of course, like genius active fund managers. This however is only useful if they are identifiable by their past performance. Otherwise their outperformance is not siginificantly unrelated to pure luck.

    2.) There are lots of scientific studies (performance persistency studies) that support the unidentifiability of outperformers, thus supporting the notion that passive investment will always provide the best results in the long run. The globally biggest, continously updated study in this field is the S&P Persistence Scorecard study:

    https://www.spglobal.com/spdji/en/sp...nce-scorecard/

    By definition, passive investment in a market (e.g. the stock market) means that you don't do market timing or asset picking. Thus, buy-and-hold, globally diversified.
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