I would like to get advice on constructing a simple blue chip index fund (set and forget) - balanced fund passively managed 40% - 60% income growth.
Top answer provided by:
Patrick Forrester
Lorraine,
When considering this type of investment you must take into consideration a number of aspects before deciding whether that investment is appropriate for your circumstances.
First of all it is important to consider what your investment timeframe is. If you only plan to invest for 1-2 years it might not be appropriate and you might want to consider investing in something more secure like a bank account or term deposit. This is largely because investing in blue chips exposes you to the share market which has the risk of volatility and the shorter your timeframe reduces the chance of riding out that the bumpiness in markets which can be experienced from time to time.
Second of all it is important to understand what your tolerance for risk is and whether your tolerance is suitable for that type of investment. You can do this yourself or seek guidance from a financial planner to help understand what the right investment approach is for you. Completing a risk tolerance questionnaire would involve you answering a number of questions which helps gauge your tolerance for risk. After answering the questions you would then have an understanding of your tolerance for risk which can equate to 50% growth investor for example. This simply means that you would be comfortable to invest 50% of your investments in growth assets which is comprised of Australian Shares, International Shares, Property, and Alternative investments. The other 50% is invested in defensive assets which is comprised of Cash and Fixed Interest.
Once you have an understanding of your investment time frame and attitude to risk you should be armed with enough information to understand whether this investment is right for you. If you believe the investment is right for you I would seek the expertise of either a financial planner or stock broker to help select the right index fund for you.
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Comments7
"Hi Lorraine, Please accept the following as general advice to your query only. You should seek professional advice on weather this investment is right for you, your time frame for investment should be approx 5 - 6 years minimum for an investment such as this. There are many low cost index options for passively managed diversified fund. Vanguard one of the lastest and oldest fund managers in the world managing trillions in assets for investors globally. They do not offers a 60/40 fund but you may wish to split your money 50% into their 70/30 fund and 50% into their 50/50 fund to achieve your desired risk profile and remember to re balance regularly to ensure you remain at your desired level of risk. These funds are available on the ASX, the ticket codes are VDCO & VDBA, most large Australian banking institutions offer online self service broking platforms to facilitate your investment. More info can be found at this link - https://youtu.be/GzUGm8pvS8w Cheers, Declan Thomas Momentum Planning"
Declan Thomas 16:19 on 20 Dec 18
"PS If you leave the "blue chip" bit out, there is no need to "construct" your own index fund. Look around the market for the many 40/60 index funds that are out there."
Real World 16:47 on 14 Nov 18
""blue chip" is a term that is heard a lot less these days. It used to imply these were the best stocks that will give solid returns and stand the test of time. If you could find the list of stocks considered blue chip from the 70s and 80s there would be many that have disappeared into oblivion. One of the reason why diversified funds and portfolios are generally recommended - they can mitigate those "blue chip" stocks that go under."
Real World 16:44 on 14 Nov 18
"Couldn’t have answered this vague query better! The role of a planner is to inform the customer of all the areas to think about (risks & advantages), not to simply meet their initial request, otherwise we’d be called Accountants or Bank Clerks. In other words... know our customer and help then understand what it is they actually want to achieve. If you want to receive intellectual property, be prepared to pay for it.."
Zac 18:02 on 09 Nov 18
"It is sad that financial advisers are legally not able to provide Lorraine with an actual answer to her simple question without her having to spending hours and thousands of dollars. Legislation gone too far!"
Frustrated 16:53 on 09 Nov 18
"Was really interested in what the answer to this question would be, specifically - bit disappointed that it seems to be a bit of a non-answer "seek financial advice" :( Tell us more!"
Anthony 16:49 on 09 Nov 18
"You mention that you want a 40-60% income growth, Lorraine. This might change once you've considered your risk profile which needs to consider your age and long term plans as well. Hopefully your financial planner or stock broker goes over these things in detail with you. "
Kym 16:46 on 09 Nov 18