Model portfolios: Topping up our Australian shares

Our model portfolio’s asset allocations are drifting a little off-target (see our recent ETFs.

The additional purchase is Echo Entertainment Group (ASX Code: EGP). Echo operates The Star casino in Sydney, Jupiters and Treasury casinos in Queensland and a range of other leisure and entertainment assets.

Echo’s share price has been under pressure recently from a range of factors (including Crown opening up in Sydney) but we believe these are priced in and there’s some upside at the current price (about $2.40) if a few things don’t pan out as badly as investors fear.

It’s higher risk than ASX so we’re adding a smaller holding. We’ll buy 1,500 shares, funded by selling 75 units in STW. At current prices that leaves us with a total allocation of 25.7% to Australian shares.

Aggressive Portfolio

We’ll also add stakes in ASX and Echo here, sticking with the same size investment in ASX but a larger one in Echo (2,000 shares) as this portfolio can handle more risk.

On top of those investments, we’ll also add a small stake in M2 Telecommunications (ASX Code: MTU), which sells products under the Dodo, iPrimus, Commander and M2 Telecom brands. At a price around $6.30 it’s sitting closer to Share Advisor’s price guide of $6.50 (compared to Echo and ASX). We’ll purchase 500 shares, a slightly smaller position than our stake in Echo.

All up, we’re purchasing about $14,000 of shares, which would have us above a 31% allocation to Australian shares. To reduce it slightly, we’ll adopt the same strategy as the Moderate Portfolio and sell down part of our holding in STW (100 units).

Revised Asset Allocations

The new asset allocations (once these transactions are complete) are shown in Table 1. We’re now slightly over our target on Australian shares but that’s intended. The receipt of interest and dividends into our bank account will bring it back into line.

Now that we’ve got our Australian share allocations back on track, next up we’ll take a look at an unusual opportunity specifically for our Aggressive Portfolio.