Gone fishing portfolio in Australia...

[BelezaPura]

I am trying to invest my super money (no pun intended) using the strategy described in the book from Alexander Green "The Gone Fishin' Portfolio".
In his book, he explains the strategy and lists the exact managed funds to invest in to have the portfolio in place.
The gone fishing portfolio has stood the test of time and has performed well since inception in 2003.
It has returned 15.5% per year and the period goes through the GFC. It seems a good "set and forget" kind of strategy which suits me, at least when it comes to non-property investment.
Trouble is, these are all Vanguard funds in the US.
I would like to somehow translate that to equivalent funds in Australia to try and emulate his results.

His principle is as follows:
You should invest in index funds using a low cost manager. According to the author, ongoing costs can kill the returns of your portfolio very quickly.
Most importantly, the asset allocation should look like this:

Shares 60%
30% US Stocks
30% Foreign Stocks

Other 40%
REITS 5%
GOLD SHARES 5%
short term corporate Bond 10%
high yeld bonds 10%
Inflation adjusted treasuries 10%

Specific Managed Funds used to implement the portfolio in the US

US Shares
15% - Vanguard total stock market index VTSMX 0.15% expense ration
15% - Vanguard small cap index NAESX (0.22%)

International Shares
10% Vanguard European stock index fund - VEURX
10% Vanguard Pacific Stock Index Fund - VPACX 0.22%
10% Vanguard Emerging markets index funds VEIEX - 0.5%

Other 40%
5% Vanguard Precious metals and mining funds VGPMX 0.35
5% Vanguard REIT Index Funds VGXIX 0.21%
10% Vanguard Short term investment grade fund
10% Vanguard High Yield Corporate Fund - VWEHX 0.26%
10% Vanguard Inflation protected securities fund - VIPSX

Having a quick look at the Vanguard website, we cannot really find equivalent funds to these offered in the US.
What do you think would be a suitable replacement, even if not vanguard funds, that would follow this broad asset allocation?

Any thoughts on the allocation described? 15% per year seems a pretty good results to me over a decade.

 

[The Falcon]

You could do this with ASX listed ETFs pretty easily (google this and you'll find the list) or if being very lazy, have a look at Vanguard Australia's unlisted funds, beleive Lifestrategy balanced or Lifestrategy growth may be of interest with roughly similar allocations.

You cannot reasonably expect to match 15% pa going forward though, over a decade that is a tremendous result for an index based portfolio really. I'd suggest 8% is more realistic with a portfolio of this type.

 

[topcropper]

The gone fishing portfolio has stood the test of time and has performed well since inception in 2003.
It has returned 15.5% per year and the period goes through the GFC. .

I must say I find these figures hard to believe! If it was invested through the GFC, and wasn't invested short, and suffered big losses like most other things, even housing in the US, then it must have been returning 20 to 25% during the good times?

See ya's.

 

[VYBerlinaV8]

Sounds to me like the author works for Vanguard.

It's a rather specific strategy, why do you think it will work in Australia?

 

[The Falcon]

It's all over the place , here the book talks of 10.6% since inception

http://www.gonefishinportfolio.com/track-record.html

Anyway it doesn't really matter, the gist of it is index funds / diversified portfolio allocation, combined with a regular savings and investment plan you won't go too far wrong. Obviously he needs to spice it up to sell a book, when an equal weight AU stocks / US stocks / Domestic & International bond portfolio would do the same job.....and you don't need to worry about rebalancing. John Bogle doesn't http://johncbogle.com/wordpress/category/ask-jack/

 

[willair]

I am trying to invest my super money (no pun intended) using the strategy described in the book from Alexander Green "The Gone Fishin' Portfolio".
In his book, he explains the strategy and lists the exact managed funds to invest in to have the portfolio in place.
The gone fishing portfolio has stood the test of time and has performed well since inception in 2003.
It has returned 15.5% per year and the period goes through the GFC. It seems a good "set and forget" kind of strategy which suits me, at least when it comes to non-property investment.
Trouble is, these are all Vanguard funds in the US.
I would like to somehow translate that to equivalent funds in Australia to try and emulate his results.

His principle is as follows:
You should invest in index funds using a low cost manager. According to the author, ongoing costs can kill the returns of your portfolio very quickly.
Most importantly, the asset allocation should look like this:

Shares 60%
30% US Stocks
30% Foreign Stocks

Other 40%
REITS 5%
GOLD SHARES 5%
short term corporate Bond 10%
high yeld bonds 10%
Inflation adjusted treasuries 10%

Specific Managed Funds used to implement the portfolio in the US

US Shares
15% - Vanguard total stock market index VTSMX 0.15% expense ration
15% - Vanguard small cap index NAESX (0.22%)

International Shares
10% Vanguard European stock index fund - VEURX
10% Vanguard Pacific Stock Index Fund - VPACX 0.22%
10% Vanguard Emerging markets index funds VEIEX - 0.5%

Other 40%
5% Vanguard Precious metals and mining funds VGPMX 0.35
5% Vanguard REIT Index Funds VGXIX 0.21%
10% Vanguard Short term investment grade fund
10% Vanguard High Yield Corporate Fund - VWEHX 0.26%
10% Vanguard Inflation protected securities fund - VIPSX

Having a quick look at the Vanguard website, we cannot really find equivalent funds to these offered in the US.
What do you think would be a suitable replacement, even if not vanguard funds, that would follow this broad asset allocation?

Any thoughts on the allocation described? 15% per year seems a pretty good results to me over a decade.

I would be questioning the entire business model,15% year in year out and if you take the "GFC" and several other bumps along the road within that time period with the portfolio theory, I would be looking at the accounting data under a microscope....

 

[redwing]

Anyway it doesn't really matter, the gist of it is index funds / diversified portfolio allocation, combined with a regular savings and investment plan you won't go too far wrong. Obviously he needs to spice it up to sell a book, when an equal weight AU stocks / US stocks / Domestic & International bond portfolio would do the same job.....and you don't need to worry about rebalancing. John Bogle doesn't http://johncbogle.com/wordpress/category/ask-jack/

Doesn't seem correct, why have a portfolio/asset allocation percentage to start with then? Saying rebalancing is unnecessary is basically saying that asset allocation is unimportant. Wasn't it also Bogle who said that an investor should have a bond allocation roughly equal to their age; if so how do you maintain that as you get older without rebalancing

We?ve just done a study for the NYTimes on rebalancing, so the subject is fresh in my mind. Fact: a 48%S&P 500, 16% small cap, 16% international, and 20% bond index, over the past 20 years, earned a 9.49% annual return without rebalancing and a 9.71% return if rebalanced annually. That?s worth describing as ?noise,? and suggests that formulaic rebalancing with precision is not necessary.

I thought rebalancing was all about risk mitigation and reducing volatility?

 

[BelezaPura]

It's a rather specific strategy, why do you think it will work in Australia?

I think the principles are applicable anywhere. Specific asset allocation, low cost funds, rebalance every year or two.

The problem I see to make this work is the fact that we don't have as many choices of funds, specially if investing through a super fund (not SMSF).

 

[BelezaPura]

I must say I find these figures hard to believe! If it was invested through the GFC, and wasn't invested short, and suffered big losses like most other things, even housing in the US, then it must have been returning 20 to 25% during the good times?

See ya's.

This image is from his website:

That is his claim.

 

[BelezaPura]

I would be questioning the entire business model,15% year in year out and if you take the "GFC" and several other bumps along the road within that time period with the portfolio theory, I would be looking at the accounting data under a microscope....

Yeah, there is no way I can confirm his numbers and maybe 15% is not really achievable, but the principle seems sound to me and worth emulating.

 

[BelezaPura]

You could do this with ASX listed ETFs pretty easily (google this and you'll find the list) or if being very lazy, have a look at Vanguard Australia's unlisted funds, beleive Lifestrategy balanced or Lifestrategy growth may be of interest with roughly similar allocations.

You cannot reasonably expect to match 15% pa going forward though, over a decade that is a tremendous result for an index based portfolio really. I'd suggest 8% is more realistic with a portfolio of this type.

Will take a look at these funds. The bit I could not find so far is a junk bond fund. That is what this one in the US is:
Vanguard High Yield Corporate Fund - VWEHX 0.26%

Do you know whether we have such funds in Aus?

 

[MaxwellSmart]

I'd stick your money in VHY.ax and forget about it.

 

[BelezaPura]

I'd stick your money in VHY.ax and forget about it.

My super provider does not offer this one, but it does offer what seems to be the equivalent managed fund.

VAN0104AU - Vanguard Australian Shares High Yield Fund

What makes you think this single fund / etf does the trick?

 

[Macca]

Anybody able to get 15% year in, year out is the best fund manager in the world and will have that much capital pour into their fund it will become too large to manage.

I simply don't believe that it will maintain that % over an extended period of time going forward. We must remember that over the past 15 years or so we have experienced a completely new thing where debts were socialised by the US government and profits were kept by the large funds.

In the near future we will have to unravel all of this mess and when it starts we can kiss goodbye to 5% a year let alone 15%

 

[BelezaPura]

Anybody able to get 15% year in, year out is the best fund manager in the world and will have that much capital pour into their fund it will become too large to manage.

I simply don't believe that it will maintain that % over an extended period of time going forward. We must remember that over the past 15 years or so we have experienced a completely new thing where debts were socialised by the US government and profits were kept by the large funds.

In the near future we will have to unravel all of this mess and when it starts we can kiss goodbye to 5% a year let alone 15%

I agree that may well be the case going forward... but I also think that, when he started out his fund, a lot of people would also have said that getting 15% average over 10 years would be very difficult.

 

[The Falcon]

Yeah, there is no way I can confirm his numbers and maybe 15% is not really achievable, but the principle seems sound to me and worth emulating.

Easy to confirm, refer historical performance of the underlying ETFs / funds and construct portfolio in same weight.

 

[The Falcon]

Doesn't seem correct, why have a portfolio/asset allocation percentage to start with then? Saying rebalancing is unnecessary is basically saying that asset allocation is unimportant. Wasn't it also Bogle who said that an investor should have a bond allocation roughly equal to their age; if so how do you maintain that as you get older without rebalancing



I thought rebalancing was all about risk mitigation and reducing volatility?

I guess my point is this annual (or more frequent) rebalancing process across 10 or so funds is down to x% is bogus IMHO. Selling winners and creating tax events and other frictional costs is a real cost...and not often considered when talking rebalancing theory....by all means divert dividends or income to buy bonds or whatever, but don't get too hung up on it. Same with fractional holdings seeking diversification, the data suggests that a few funds, the big indexes is all you need. Bogle's common sense on mutual funds is a worthy read.

 

[willair]

Yeah, there is no way I can confirm his numbers and maybe 15% is not really achievable, but the principle seems sound to me and worth emulating.

"IF" you can't see it in black and white on paper ,,and then back it with accountable real data then with Minimal Theorizing it could end in the teardrop explodes,and there is always someone saying I made 15%,year in year out but they may have a paid intricate web of links that normal stand-alone traders don't see till it on the news..good luck..

 

[D.T.]

So i did some homework for you and found the 10 year figures on each one:

US
15% VTSMX 10y 8.61%
15% NAESX 10y 9.94%

International
10% VEURX 10y 6.11%
10% VPACX 10y 5.62%
10% VEIEX 10y 10.24%

Others
5% VGPMX 10y 1.28%
5% VGSIX (assume you had a typo) 10y 8.94%
10% VFSTX 10y 7.38%
10% VWEHX 10y 6.7%
10% VIPSX 10y 4.37%

Weighted average of all that is 7.3355% along way from your supposed 15%
Also, they're all with Vanguard. So if Vanguard went under you'd lose all of them as a single point of failure - risky imho.

 

[BelezaPura]

So i did some homework for you and found the 10 year figures on each one:

US
15% VTSMX 10y 8.61%
15% NAESX 10y 9.94%

International
10% VEURX 10y 6.11%
10% VPACX 10y 5.62%
10% VEIEX 10y 10.24%

Others
5% VGPMX 10y 1.28%
5% VGSIX (assume you had a typo) 10y 8.94%
10% VFSTX 10y 7.38%
10% VWEHX 10y 6.7%
10% VIPSX 10y 4.37%

Weighted average of all that is 7.3355% along way from your supposed 15%
Also, they're all with Vanguard. So if Vanguard went under you'd lose all of them as a single point of failure - risky imho.

Damn, you've burst the bubble
Thanks for looking that up. It is strange that the author would claim this performance on a public website, for all his clients and peers to see. Though, he does not let people know about the actual funds he uses unless you buy the book.

It seems that spreading the money over many funds is not really a great strategy in Australia according to this:

• Brokerage and management fees are generally higher in Australia (smaller market), so dividing your investment across ten different securities, and rebalancing, is going to be somewhat more expensive.
  
• If you have a "middle-class-sized" portfolio of somewhere in the tens of thousands to low millions of dollars, you're cutting it into fairly small slices to manually allocate 5% to various sectors. To keep brokerage costs low you probably want to buy each ETF only once every one-two years or so. You also need to keep track of the tax consequences of each of them.
  
• If you are earning and spending Australian dollars, and looking at the portfolio in Australian dollars, a lot of those assets are going to move together as the Australian dollar moves, regardless of changes in the underlying assets. So there is effectively less diversification than you would have in the US.