So what does my DIY portfolio look like with TD Ameritrade? Here it is.

Key points:

My overall strategy is unchanged from what I set up previously. I still have a set return focus, which is 10% pa over the next 10 years. I still have my “core” portfolio of boring assets that will be rebalanced once every 6 months. I still have my “explore” investment themes in digital disruption, geopolitical tension and infrastructure deficits, which I will be reviewing once every 3 months (you can’t really call me a market timer). I also still use exchange traded funds (ETFs)! The make-up of my portfolio is very different, however. I have reduced how much I have in the US, and increased my dough in emerging markets and developed markets outside the US. I’ve also gone with a regional approach using ETFs and stocks. Here’s why:

  • There are many more opportunities with my new broker, TD Ameritrade, than I ever imagined. When I saw what I could access, I couldn’t resist making some changes. The ETFs and shares on Hatch only represent 23% of what’s on TD Ameritrade!
  • I’m putting more money in, so it makes sense to look at a variety of shares and not just ETFs, which have long been a dietary staple of mine. ETFs are like porridge for me.
  • Over the next decade, some have forecasted that returns in the US will be much lower and there will be greater growth in emerging markets (for example GMO and AMP Capital). Interestingly, one hedge fund manager, Jeff Gundbach, has even gone as far as suggesting that the US will face a long period of low or poor returns like what happened to Japan in the 90s or emerging markets a decade ago. Gulp.

I’ve used two smart beta ETFs for the US and developed markets. Before you say it, yes, smart beta is horrible funds management jargon. To cut a long story short, smart beta basically means a combination of active (or benchmark beating) and passive investing (or benchmark meeting). The ETFs I’ve selected are focussed on delivering returns with less risk – that’s important in helping me with my objective.

Why the fancy pansy regional approach, you ask? Well, there’s a method to the madness. I wanted to isolate the US market from others, especially emerging markets. As the outlook is more positive for emerging markets, I wanted a more aggressive or active approach. I think that active management is much more likely to work in emerging markets than developed ones, as there are greater inefficiencies. And no, this isn’t something I made up; the Morningstar Active/Passive Barometer shows that active managers in emerging markets have a relatively much greater chance of success over the long-term.

Perhaps controversially, in line with my digital disruption and innovation theme, I’ve said goodbye to the ARK Innovation ETF and hello to Tesla and Tencent. I will explain why I’ve chosen these two stocks as well as Apple, Schwab, AIA Insurance and Brookfield Infrastructure Partners in another post. That’s a story in itself along with how to choose an ETF, which is a different process to selecting a share.

 

The above is my opinion. It is not intended to act as personal financial advice. It does not take into you account your financial objectives, situation and needs. It is strongly recommended you seek financial advice from an Authorised Financial Adviser before you make a decision.