fication and very low fees. Instead of buying stocks in
one company, ETFs track a market index, meaning they
buy stocks in all the companies. They give you direct
exposure to a wide range of investments in their asset
class, such as Australian shares, international shares,
bonds, proper t y or meta ls. Bet ter sti l l, t hey ca n be ea s-
ily bought and sold like shares on the stock exchange.
A good diversification strategy reduces the risk of
losing money and at the same time boosts your oppor-
tunity to make a decent return. Diversifying means
combining different types of investments to lower the
risk of one doing badly and impacting overall returns.
Investing in ETFs can be a great way to have low fees
and diversify at the same time. A single investment
in an ETF gives you access to shares in thousands of
companies within an index, such as Apple and Google,
or BHP, Woolworths and Westfield, so you don’t have
to worry about picking the wrong stock. With the right
range of different ETFs, you can have a well-diversified
portfolio of shares, bonds and commodities to reduce
risk and generate returns.
At the end of the day this all means more money for
your house deposit.
BALANCE RISK AND RETURN
You’ll first need to consider your investment profile,
which is a combination of two things: how long you
pla n to i nvest to ach ieve you r goa l (for exa mple, a house
deposit) and how willing you are to accept market
movements in your share portfolio.
For many people saving for a house is a three- to
five-year plan. So you need to invest in a portfolio that
strikes the right balance between risk and returns to
achieve balanced growth over that time.
Finding the right balance in your portfolio is the
trickiest part for investors. A rule of thumb we use for
clients is that your portfolio should have a 90% or better
chance of a positive return over your planned invest-
ment period based on historical returns and risk (that
is, giving you the best chance of reaching your goal).
The emergence of digital investment companies and
fund managers such as Stockspot in the past three years
has made it easier and more affordable for investors
to access professional portfolio management to build
a diversified holding. Stockspot builds ETF portfolios
based on a number of personal variables such as your
financial goals, cash flow and capacity for risk. It
takes the hassle and guesswork out of investing while
keeping costs low.
You don’t require a huge deposit to get started, which
is not the case with most traditional advisers. Many
of our investors start with less than $10,000 and are
saving for a house.PORTFOLIO’S CORE ASSET
Australian share ETFs make up about a quarter of the
total ETF funds listed on the ASX. Australian shares
are a core asset in all Stockspot’s portfolios, ranging
between 15% to 50% of the overall allocation. Australian
ETFs let you participate in the long-term growth of the
economy and access the tax benefits of franking credits.
In our portfolios we have chosen the Vanguard
Australian Shares fund (ASX: VAS), which tracks the
S&P ASX 300 Index of Australia’s largest 300 companies
for a tiny fee of 0.15% a year.CUSHION AGAINST FALLS
Bonds tend to move in the opposite direction to shares,
which is why they are often described as a defensive
asset. They provide the padding for when the market
falls. Having bonds in your portfolio helps keep it on
a steady track, balancing out dips in the market.
Bond ETFs include a portfolio of many bonds within
an index. The most commonly used bond index in Aus-
tralia is the Bloomberg AusBond Composite. It invests
in investment-grade bonds issued by the treasury,
state governments and companies. The iShares Core
Composite Bond ETF (IAF) tracks this index and is
part of the portfolio we recommend to all clients to
help cushion against market falls.
By combining Australian ETF shares and bonds in
a portfolio, you can give yourself a better chance of
reaching your goal of buying a house.IDEAL COMBINATION
All our portfolios hold five ETF asset classes: a mix
of Australian shares, bonds, global shares, emerging
market shares and gold. The purpose of an investment
portfolio is to maximise returns against a comfortable
level of risk. We believe five ETF asset classes provide
the best possible combination of returns, risk and costs.
Higher returns with lower risk is the magic of diver-
sification when compared with buying individual
shares. The five ETFs we own tend to move in different
directions, smoothing out market peaks and troughs.
Investing in a well-balanced portfolio
of ETFs will make your investment
journey towards a house deposit less
stressful and easier to watch.Chris Brycki is CEO and founder
of Stockspot.REV UP
YOUR
RETURNSFor home buyers
who are willing
to take on a bit of
extra risk to build a
larger home deposit
the approach, in
my opinion, is the
same. To rev up
your returns buy
a broad range of
ETFs that represent
different assets
(Australian shares,
global shares, bonds
etc) but weight your
asset allocation
more towards shares
and less towards
defensive assets
such as bonds.
Shares have a
higher growth poten-
tial but higher risk.
Keep in mind that
you need to accept
a higher level of ups
and downs along the
way and should be
investing for at least
seven years to give
yourself the best
chance of success.