MMM is a very recent find for me, very happy to discover it! I'm hoping to get some insight into developing an investment strategy, so here goes......
I have some equity investments already, made up of individual ASX stocks (NAB, CBA, CSL, COH, BWP), LIC's (AFI, ARG, CTN) and ETF's (VAP). All up ~100k, so fairly small holdings in each as I just got started a few years ago and have been dabbling. I also have ~18KUSD split evenly between ETF's VOO (S&P500) and VXF (US Extended Market) and Berkshire-B, all held via a US broking account.
I'm now at the point where I want to develop a strategy (rather than continue the dabbling!) and ramp up the investments considerably. I have a lump sum in cash that I want to invest and I'm finding it difficult to put together a good plan. I've had some introductory chats to some financial advisers that has more or less confirmed that I probably won't use them!
The ETF and\or LIC path still appeals, I just need to figure out the strategy and breakdown. I read the greaterfool.ca blog, although Canadian there seems to be some relevance to Australia, and (at least for me) his thoughts seems to resonate.
He often mentions a portfolio as follows, with re-balancing (I think a couple of times a year), along the lines of:
60% Growth: ETF's, comprising a small REIT holding, then one third evenly split between ASX, US, and international markets. Mix of large cap and smaller cap in each.
40% Defensive: ETF's, Half in bonds and half in preference shares.
A couple of links for reference:http://www.greaterfool.ca/2015/02/03/surprise-9/http://www.greaterfool.ca/2015/02/13/the-motivator/
Before getting into how such a portfolio breakdown might look, I'd be interested to know your thoughts on the strategy. One part in particular I'm unsure about (uneducated perhaps!) is how the growth and balance components offset each other. I know the idea is that when equities are down, the fixed income will be up, and vice-versa, but in practice it's unclear how this will help me (FYI I'm planning to hold my portfolio long term and live off the income in the not too distant future, perhaps in < 5 years).
I've got a basic understanding how moves in interest rates affect bond prices and yields but I'm unsure how this is a good thing for the portfolio - e.g. do I care that bond prices (ETF's) go up in a market downturn.....I'm not planning on selling anyway. And if I buy them in a downturn it would suggest I'm paying for something that is going to decline in value, as well as getting a low yield. As I said, it's fair to say I don't understand this well.....
There is probably lots more to add, but I'd be appreciative of your thoughts.