For index investors, we have come a long way since 2013. Fortunately, the tools available to us have changed dramatically over the years!
I wrote about it last year, and this is a quick recap. More tools, while providing more options, also means that it is going to be slightly more complicated for the novice investor. How has it changed the way I invest?
Index Investing is boring, and there isn’t really much of any new materials to write about. What I wanted to blog about is really the idea of an asset allocation approach of looking at our portfolio.
When I First Started
When I first started and decided upon index investing, this is pretty much all I needed. No-frills and simple to the bones. A standard Bogleheads Three-Fund portfolio was what I was trying to achieve.
Top-up and re-balance periodically, if the need arises.
- Equities (Global) : 35%
- Equities (SG) : 35%
- Bonds (SG) : 30%
This is what a sample $20K portfolio might look like with a 70%/30% tilt towards equities. Vanguard VWRD is just one of many ETFs that can be used. iShares IWDA is preferred by many (in place of VWRD) because there is no USD-denominated dividend component to manage.
Adding Robo-Advisors To The Mix
For a while, I toyed with the idea of adding robo-advisors into the mix and decide what is my long-term plan.
I can simply take out VWRD and use a robo-advisor in its place. By playing around with asset allocation, a sample $20K portfolio would look like this. Instead of a Three-Fund Portfolio, now I have a pseudo “Four-Fund” Portfolio that is globally diversified.
Allocation remains the same as 70% equities and 30% bonds.
- Equities (Global) : 22.5%
- Equities (SG) : 47.5%
- Bonds (Global) : 15%
- Bonds (SG) : 15%
Note – There is a typo in the table below. The equities (Singapore) column should be $9,500. Many thanks to a reader who pointed it out.
Sample Portfolio #001
By extending this way of looking at my portfolio, it can be expanded to have a quick overview of a portfolio that has its core philosophy in index investing. What do I mean by that?
Let’s suppose (an itchy-handed individual like myself) has a $100K sample portfolio with index investing at its core. Let’s throw in other components like high-interest cash accounts, crypto (because YOLO), gold and REITs! What do we have now?
Index Investing Core (91%)
- Equities (Global) : 27%
- Equities (SG) : 27%
- Bonds (Global) : 18%
- Bonds (SG) : 19%
Non-Index Investing Components (9%)
- Stock Picks : 6%
- Crypto : 1.5%
- Gold : 1.5%
This is just something to get your imagination running. Tools (such as Fidelity’s no-fee index funds) have made index investing incredibly easy these days. Robo-advisors automate investments and remove the need to deal with non-SGD currency.
It is really easy to do up something like this using Google Sheets, and the only limitation is your imagination. You may wish to include CPF money, for example.
Well, I just need to take care that my portfolio allocations doesn’t get out-of-sync with my target allocations. If it does, re-balance according.
FYI – Yes, I can confirm that I no longer use VWRD to build my global equities component of my index investing portfolio. That responsibility have now shifted to robo-advisors like StashAway and AutoWealth.