I was giving some long over due thought to my Superannuation today, and thought to myself, “I bet there are some low cost ETF-like offerings available to choose from as the underlying funds”.
And I was right!
Thankfully my existing Superannuation managing company offers a fair few to choose from, and even more thankfully – they offer products from Vanguard.
For those that don’t know, Vanguard was started by the master himself, John C. Bogle.
Vanguard is owned by the funds themselves and, as a result, is owned by the investors in the funds. This means lower ongoing management fees which is great for investors.
In the time that I’ve been in Singapore I have not been contributing to my Super any longer, but I built up enough before leaving to make it something that I periodically check on to see how it’s doing.
So last year I received the 6 monthly statement around December, and took a look at it and saw the following:
And I thought to myself, “Wow those Property Securities sure do stink. Since I only have about 10% of my portfolio allocated to this I may as well just sell it off and buy more of those awesome Ethical shares.”
Look what happened in the next 6 months:
It was the one that flourished! 12.4%! Classic rookie mistake, selling low and buying high.
This is a very important lesson as it reinforces what you should do with your portfolio allocations – check your target percentages and top up the one that is falling below.
If I do my calculations after the fact of what I should have done, I would have been 1.473% better off over my entire portfolio. (Instead I am down 1.495%). If I had done nothing, I’d be down 0.56%.
This is why most investors typically under perform the market even when buying Index’s simply because they do the opposite of what they should have done – purchase the laggard to bring it up to the target %. Instead they try and chase the winners.
In my case my laggard had dropped down to 5% of my allocation instead of where it should have been at 10%. This was the right time to buy more, not sell it off.
Before I forget, in order to reach my 36% Bonds allocation for my overall portfolio, I have decided to sell off all of these Funds in the tables above to purchase the “Vanguard® Diversified Bond Index Fund” instead.
This Index fund is more aggressive in terms of risk compared to the ABF SINGAPORE BOND INDEX FUND (A35), however I think it should complement my overall profile quite well.
This new fund has an ongoing management fee of 0.37% which is very good for this kind of product in Australia.
Previously my funds were charging me:
- Australian Property Securities 0.83%
- Australian Shares – Value 0.65%
- Australian Shares – Ethical 0.98%
Fingers crossed that this new Vanguard Index fund continues to perform well and maybe gives me a little more upside to my Bond allocation.