... I keep coming back to that a large part of my funds are in the Balanced wholesale fund who’s performance, compared to higher risk portfolios, like say international funds, is lower. Which is a decision I made that I have been regretting for awhile and I am trying to determine whether It makes sense to sell about 50% of it over the coming months to maximise on its growth then put the funds into International...
I wouldn't beat yourself up for choosing the balanced option 3 years ago. It's actually not a bad option.
One of the really challenging things about investing is making financial decisions for your future self - who is someone you haven't yet met. You go into it with all the best intentions, but 3 years pass and you're likely much savvier, have a better understanding of financial matter, and perhaps a higher tolerance of risk. It's pretty hard to get it exactly right.
I dip in and out of this forum quite a bit. But I seem to recall that at the time you were about to invest you were selling a property and had a lot of cash. I don't think you'd invested in shares/index funds at all up to this point. So it was all quite new, and your tolerance of risk and volatility was probably lower than it is now. At the time I think the balanced option was actually a decent choice.
Three years on the market has kicked on and you're regretting the fact that missed out on the better performance delivered by more growth oriented funds and that's understandable.
But I think it's worth remembering that three years back, no-one knew that the market would perform as it has. (Note that the this period also included the pretty sharp correction at the end of 2018. In fact, some of the stellar performance of 2019 was because it was making up for what was lost at the end of 2018. VAS did 20% approx in calendar 2019. But VAS from it's previous high in Oct 2018 to end of 2019increased by only 7% (not including dividends). Still decent of course, but not the headline figure that you'd feel necessary to beat yourself up about.
But it's also worth remembering that if the market had experienced a sustained contraction over the past 3 years, or we entered into a full recession (something it seems we seem to be continually flirting with since the Great Recession/GFC), it's likely you would have been pretty happy to be in balanced fund as your 'losses' would be significantly less than an equivalent growth fund.
Choosing some degree of stability and lesser volatility with the balanced fund actually is a valuable thing. The fact is, the market didn't crash - but you chose a strategy that would have put you in good stead if it had. No-one knows how they'll behave if the market drops 40% again. Everyone thinks they won't panic but you don't know what your future self might be tempted to do.
But now that you have significant amount in a balanced fund it doesn't need to stay that way forever - something you've already addressed by adding VAS.
You could cash out of your balanced fund and put it in a growth fund, but the CGT hit won't be ideal. And anyway, there's really no urgency to shift the balance if you're investing for a 10-20-30 year etc time frame. Add the 100k cash you have to VGS/VAS, and opt to receive any future distributions from the fund as cash and put it into VAS/VGS. If it's still not the allocation you like (growth v income, international v australia), then cash out a bit and buy into something else to rebalance. This is of course messier than if you had started with a high growth fund from that start, rebalancing will be a pain if you don't have a head for it, but that can't be helped.
It will be more volatile of course and if you're in for the long term it doesn't really matter. As an example, I helped ease my parents into the Conservative vanguard fund. When my High Growth fund dropped around 12% or so, theirs dropped by about 2%. This was just a minor blip in the scheme of things but there were definitely people on forums getting jittery.
But perhaps above all, prepare a ideal allocation that you'd be happy with and slowly work towards that. It took me about 5 years to unravel my legacy investment positions (investment property + no shares, to direct shares and no index funds, to an indexed strategy with a 50/50 international/Australian split). I wish I had bought VGHD ETF at the very beginning. But of course, it didn't exist at the time.
Topic: Australian Investing Thread (Read 2683763 times)
