Aggressive Portfolio: Asset allocation

We’re not quite in the same league as rap star 50 cent, who said we should ‘get rich or die tryin’’, but our aggressive portfolio certainly cranks it up a notch.

Key Points

  • No investments are off limits to the Aggressive portfolio
  • Cash and fixed interest serve more of an offensive, rather than defensive, purpose
  • More listed securities will be added shortly 

When it comes to the aggressive end of the spectrum, there’s really no limit to how much risk you can take. A portfolio consisting of 100% shares is aggressive but you can take it up a notch by focusing in on, say, junior mining stocks. You could go even further by funding it all with borrowed money.

In two exchange traded funds (ETFs) for about two thirds of our overall allocation: the SPDR S&P/ASX 200 Fund (ASX code STW) and the Vanguard Australian Shares Index ETF (ASX code VAS). Please bear in mind that an existing diversified Australian share portfolio would substitute for these ETFs.

We’ll add some direct share selections in the near future to provide more diversity and value and, as we mentioned above, we’ll be happy to include some high risk options. Small companies and specialist funds are on our watchlist.

International Shares

The Australian dollar has fallen since we launched the Moderate Portfolio but, as long-term investors, we’re more focused on the historically high valuation. That’s why we’re leaving our international shares exposure unhedged but have filled slightly less of our allocation than we did in the Moderate Portfolio.

To get us in the market, we’ve again plumped for the SPDR S&P World ex-Australia Fund (ASX code WXOZ) and two internationally-focused listed investment companies: Templeton Global Growth Fund (ASX code TGG) and Platinum Capital (ASX code PMC).

Property and Infrastructure

For the property class we’ve replicated our approach in the Moderate Portfolio with investments in Sydney Airport and the property ETF, S&P ASX 200 Listed Property Fund (ASX Code SLF).

Recent price falls have opened up some interesting opportunities in this sector (and in Australian shares generally) and we’ll be looking at these in more detail in our next article.

Final result

Table 1 shows the final position of our Aggressive Portfolio on day one. Today it has an average (gross) yield of approximately 4.4%, with the potential for more growth than either of the earlier portfolios.

Our next article will focus on listed securities and we’ll look to add specific investments in the Australian shares and Property/Infrastructure asset classes to each of our portfolios.


Asset class/investment Target allocation (%) Current allocation (%) Purchase price ($) Current price ($) No of shares/units Current value ($) Individual weighting (%) Gross yield (approx)
Table 1: Aggressive Portfolio - Day one allocations versus target allocations
Cash (<2 yrs) 10.00% 48.49%            
RaboDirect online savings (4mth intro rate of 4.76%)      1.00  1.00  242,469.50  242,469.50 48.5% 4.8%
Aust Fixed Interest (>2yrs) 10.00% 10.08%            
Schroders Fixed Interest Fund (SCH0028AU)      1.12  1.12  45,000.00  50,418.00 10.1% 3.9%
International Fixed Interest 5.00% 0.00%            
Aust Shares 30.00% 18.14%            
SPDR ASX 200 ETF (STW)      45.03  45.03  1,000.00  45,030.00 9.0% 5.6%
Vanguard ASX 300 ETF (VAS)      60.91  60.91  750.00  45,682.50 9.1% 5.6%
International shares 30.00% 20.00%            
SPDR S&P World ex Australia Fund (WXOZ)      17.00  17.00  4,000.00  68,000.00 13.6% 2.5%
Templeton Global Growth (TGG)      1.02  1.02  15,000.00  15,300.00 3.1% 2.5%
Platinum Capital Ltd (PMC)      1.39  1.39  12,000.00  16,680.00 3.3% 2.5%
Property and infrastructure 15.00% 3.28%            
SPDR ASX 200 Property ETF (SLF)      9.38  9.38  1,000.00  9,380.00 1.9% 5.0%
Sydney Airport (SYD)      3.52  3.52  2,000.00  7,040.00 1.4% 6.0%
Other 0.00% 0.00%            
Totals 100.00% 100.00%        500,000.00 100.0% Avg yield (grossed up) 4.4%
Note: Based on closing prices at 7 June 2013 (except Schroder fund which is based on 6 June). For consistency we have kept the same dividend yield estimates as earlier portfolios but, due to recent price falls, some may be higher than listed.

 

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