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Podcast: Asset Allocation For Aussies Pursuing Financial Independence

December 1, 2020


In today’s episode…

We discuss how to approach asset allocation in Australia when your goal is Financial Independence.

We explain why asset allocation matters and how it affects our ability to create passive income, retire early (and stay retired!) for a long period of time.

How much should we invest in Australian versus international assets?  What about other things like home ownership, investment property, cash, bonds, or even assets like gold, bitcoin?  And how do these all fit into the puzzle?

 

Listen to the show…

(or download the mp3 file here)

 

Discussion points…

  • Why does asset allocation matter?  (01:55)
  • Starting at home:  Investing in Australia  (02:42)
  • Venturing abroad:  Investing overseas  (06:52)
  • Combining Aussie/global shares into a portfolio  (09:51)
  • Investment properties in your portfolio?  (18:53)
  • Safe assets – cash or bonds  (22:30)
  • Gold, crypto and other exciting stuff!  (23:56)
  • Why is diversification so useful?  (27:00)
  • Structuring your investments inside and outside super  (29:46)
  • How Pat and Dave approach asset allocation  (35:33)
  • Chasing investment performance  (40:54)
  • Takeaways from this episode  (41:38)

Further reading…

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Check out the complete list of episodes on the FIRE and Chill podcast page.

Do you have something to add to this discussion?  Share your thoughts in the comments below…

8 Comments

8 Replies to “Podcast: Asset Allocation For Aussies Pursuing Financial Independence”

  1. Not sure I follow the inside super vs outside super discussion on dividends.

    Lets say grossed up Australian shares yield 5.7% and International shares 2%. Inside super this dividend would be taxed at 15% and outside super at your marginal tax rate up to 47%

    Am I missing something?

    1. Depends how you look at it I suppose. When looked at that way, that’s correct. But 4% is the actual cash dividend versus 2% cash for international, which was the starting point I had in mind. Then franking results in a more tax efficient outcome vs international, wherever those shares are located, and depending on the person’s long term average tax rate.

      Some other complications: As people hit early retirement, they’ll likely be paying close to 0% tax for possibly quite a while. There’s also the chance that the rules are changed in the future. Then there’s the issue of whether franking refunds are refunded properly to the chosen super option (I’ve read conflicting thoughts on this that franking is used to reduce tax at the broad level, not for each specific account).

      (I think Pat’s conclusion was it’s likely a wash over the long term due to the various possible scenarios lol… he’s probably right)

  2. G’day Boys ,
    Hands down my favourite podcast so far !!
    Dave , you have a fantastic rational mindset & great knowledge.
    Let’s be honest, the Financially independent tribe go by save , save , save , invest , invest , invest & the rest, spend , spend , spend , broke , broke , broke ….
    Cheers

    1. That’s great to hear Jimmy, glad you enjoyed it and I really appreciate your support! 😀
      Haha yeah that’s not a bad way to sum it up. We just have to get more people to realise it’s actually doable while still having a great life.

  3. Hey guys,

    Love the podcast! Are you going to discuss rebalancing portfolios? Methods and frequency? I thought it might have come up in this episode.

    Do you have any thoughts on Ray Dalio’s all weather portfolio? I’m roughly following this with good results.

    Have to also say that crypto is my best performing asset this year. A lot of big names and companies are slowly coming around, not having any exposure could be the same as missing the dot com boom.

    1. Thanks Ben! Appreciate the topic ideas, I’ll speak to Pat and see how what we can come up with.

      What to include in a portfolio is a very personal choice. I do have a view on Dalio’s all-weather portfolio – I think it’ll have pretty poor returns going forward. Also I have no interest in having crypto in my portfolio. Couldn’t care less if bitcoin goes to 10 million or zero, just not interested in owning it.

      Perhaps we should flesh these topics out a bit more in a podcast 😉

  4. I would love to hear more about different portfolio’s and why you decided on your current direction and why you think the All Weather portfolio won’t do better than a VAS/VGX 50/50 split or VDHG or similar. If you’re not into Gold I guess you wouldn’t consider bitcoin at all if you have a Peter Thornhill approach, i.e. no speculation!

    1. Pat and I did touch on which asset classes we like and don’t like (and why) in the following episode – Inflation and Why We Invest

      Basically, because bonds yield almost zero now. And bond yields are a strong indicator of long term bond returns. So a 50% weighting to bonds (all-weather) makes no sense to me. I get that it’s done well in the past, primarily due to the massive decline in interest rates/bond yields boosting bond prices. There’s basically no chance bonds can beat stocks over the next 40 years, unless we have a huge global collapse, or interest rates go to negative 10% or something insane. Gold and commodities I’m not a fan of. No cashflow, no fundamental growth component other than demand and popularity which may rise and fall.

      Hope this explains my thinking a bit more. But to each their own.

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