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Financial Happenings Blog
Thursday, September 02 2010
Many of us relate to the well worn principle- Keep it Simple Stupid (KISS).  The same principle can be just as easily be applied to investors.  An article published by the Wall Street Journal yesterday introduces readers to the Keep it Simple Saver principle - A Simple Recipe for Investors: Less. Can Often Lead to More.  The author points out that if an investor used a simple 3 pronged strategy - a US shares index fund, an international shares  index fund and a bond index fund - with the portfolio rebalanced annually, they would have ended up with a very competitive outcome compared to more active investors, and at a much lower cost.

In Australia, the same sort of scenario would be to build a portfolio with an Australian share index fund, international share index fund and an Australian or global bond index fund.

We believe the case promoted in the article is especially true for taxable investors (i.e. those not in superannuation pension phase) as the approach involves a lot less trading and therefore a lot less trading costs including the cost of capital gains tax.

All that said, there are ways which you can build an even more efficient investment portfolio through adding in some exposure to small Australian and international companies, undervalued Australian and international companies, Emerging Markets companies and Australian and international property index funds.  A little more complex but should provide an even better overall portfolio and still at really reasonable costs - much less than active managed funds.

Please take a look at our Building Portfolios page for further details.

Scott Keefer
Posted by: AT 09:32 pm   |  Permalink   |  Email
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