Holding shares is a much better idea from a charges and tax point of view.ETFs have hassle, but if you bought all in one go, a once every 8 years deemed exit tax event isn't too much bother for a retired millionaire
ownership of a diverse portfolio of directly owned blue chip stocks is your lowest risk, long term investment. No management fees. A bit of work once a year doing a tax return.
I guess I never though about it implementing it, how would I build a blue chip portfolio; copy the allocations of the top 20 or so companies from an All World ETF's holdings and rebalance quarterly?
I’m able to do that and I guess you are too, it is not a common trait however, the average person will absolutely be thinking about this on the beach and most will end up trading on emotions. Another reason I do not like this advice - it doesn’t work well when average human beings are in the loop.And don't be reading up about Intel while you are on the beach or at home.
You can also outsource all of this too and get someone else to do it for you.I’ll offer a counter opinion to the basket of shares approach so. There are lots of AAM threads worth a read on shares versus ETFs too.
In your case I’d be careful of letting the tax tail wag the lifestyle dog. The supposed complexity around ETFs is meaningless to you - you can and should pay an accountant to deal with your tax returns and forget about it, they’ll easily pay for themselves. Then do you really want to be lying on a beach somewhere wondering how for example Intel’s current woes are going to impact your nest egg, spending hours considering how to rebalance your portfolio every year or two, thinking about US estate taxes and what forms need completing, dealing with shareholder communications etc? Can you handle the stress and heart ache of realising the decision you made to choose Intel and Vodafone over Microsoft and Amazon has cost you a few hundred thousand Euro? Trading your personal time and head space to make your pile of beans, which you’re unlikely to ever need to spend, that little bit bigger?
If you had more money you might start a family office and let them worry about all that stuff for you, for a price! You don’t have that option and you don’t want to go the advisor route, so my advise would be to put it all into one or two Index fund ETFs spread across a few brokers. Forget about it and go enjoy your good fortune, check in with your accountant for a few minutes each autumn. Consider the cost of the tax differences (which could well be gone when your estate sells it in 50 years) the cost of this easier less stressful life.
I wouldn't outsource ETF or Trust Management as that's all done for you within the funds.You can also outsource all of this too and get someone else to do it for you.
You should read this key post:I wouldn't outsource ETF or Trust Management as that's all done for you within the funds.
But going with an 100% equity portfolio would require initial help. As Brendan suggested to simply pick 10-20 diverse blue chip stocks and forget about them. But I wouldn't know the correct diversification or allotment percentages and then the rebalancing, as ETFs rebalance constantly vs. my self managed index of equities. I wouldn't know when to rebalance; When they drop out of the top 20 MCAP? When they drop 30%?
It does seem a lot riskier running your own equity index as companies do rise and fall fast in some cases and how do you know if they will recover eventually, an Index will recover but Enron, would not or most of the companies during the dot com crash for example.
Enron was in the S&P 500 and a Global Stock Index.I wouldn't outsource ETF or Trust Management as that's all done for you within the funds.
But going with an 100% equity portfolio would require initial help. As Brendan suggested to simply pick 10-20 diverse blue chip stocks and forget about them. But I wouldn't know the correct diversification or allotment percentages and then the rebalancing, as ETFs rebalance constantly vs. my self managed index of equities. I wouldn't know when to rebalance; When they drop out of the top 20 MCAP? When they drop 30%?
It does seem a lot riskier running your own equity index as companies do rise and fall fast in some cases and how do you know if they will recover eventually, an Index will recover but Enron, would not or most of the companies during the dot com crash for example.
Thank you for the post, I'll review it thoroughly.You should read this key post:
Whatever about periodically rebalancing a diversified portfolio of shares from time to time you should forget about trying to time the market.
As I said before you could just keep it simple and buy one or more already diversified conglomerate stocks (or index tracker ETFs as others have suggested if you don't mind the slight downside on taxation) and forget about having to manage anything.
Not too sound rude but the returns seem small in comparison to an SP500 Index; Since mid-2014, the S&P 500 has produced a total return of 233.6%.Portfolio theory and academic evidence supports the idea that you need at least 30 stocks to achieve an appropriate level of diversification. I assist a family member (at arm’s length) who has an all-equity portfolio with a discretionary fund manager. It’s around 50 stocks and looking at the June valuation it’s up 134% net of all fees over the last 10 years.
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