I've thought about exactly this and I like it for anyone who has a set retirement date. This is what I mention on the currency risk page about it -
You could potentially use a glide path increasing steadily each year until retirement, but if you're planning to retire early once you have the funds to retire, you don't have a set date.
For simplicity sake, I just use a more permanent allocation, but I like the idea of a glide path, and just like with an equity glide path, it doesn't need to be exact so could still work since most would lower their equity ratio over time even without a known retirement date, so it doesn't necessarily mean it can't be used.
Hey I was hoping you'd reply! I love your site, but it looks like I missed that bit, I should re-read it I guess. Good to know you have similar thoughts. Hope you write some more articles!
Yeah the information is dense. It's hard to strike a balance between too much possibly unnecessarily complex information vs not enough.
It's not likely to have many more added since it's not a blog, The goal is just to layout the foundational concepts and there are only so many of these foundational concepts before you are tweaking around the edges and tweaking isn't good for passive investors - better to set a good foundation and then just leave it alone.
I've added a couple recently like the cash vs bonds article, why I don't invest in a few of the other asset classes despite the potential diversification benefit, and the example IPS. I've got just a few more in mind but not likely to be many more. Hopefully what's up there can help people bypass the ocean of crap out there that I had to sift through, which was my motivation. Cheers again for the kind words, and let me know what your thoughts end up at on the glide path.
I think the glide sounds right. Although I'm still thinking about a few other things, like Vanguard vs Blackrock, or even whether it's worth it to continue with this roll your own approach over VDHG (I only have a small amount invested so far). I don't think I have behavioural risk for market timing but I do have smart arse risk - it has occurred to me that maybe I don't know as much as the world experts at Vanguard just because I read your website (and didn't pay full attention it seems). Right now it's a lot of fun learning about this stuff but in 20 years it might be a big hassle to re-balance, and tbh I think it's hard to predict how personal circumstances will change over that time frame to know what your AUD exposure should actually be, so I might not get the glide right.
But right now I am enjoying the DIY approach and looking into every detail. As 50 cent said: "Get slightly richer or get slightly poorer tryin'".
I agree with you, a 2 fund portfolio of VDHG and a bond fund makes a lot of sense. It will also help with you are old and don't have the ability to manage a more complex portfolio and a surviving partner likely won't either, but should be pretty simple with a 2 fund portfolio.
Also as your risk tolerance goes down over time and your bond ratio increases, you will naturally be increasing your AUD exposure since your bonds will presumably be in AUD.
I've thought about exactly this and I like it for anyone who has a set retirement date. This is what I mention on the currency risk page about it -
For simplicity sake, I just use a more permanent allocation, but I like the idea of a glide path, and just like with an equity glide path, it doesn't need to be exact so could still work since most would lower their equity ratio over time even without a known retirement date, so it doesn't necessarily mean it can't be used.
Hey I was hoping you'd reply! I love your site, but it looks like I missed that bit, I should re-read it I guess. Good to know you have similar thoughts. Hope you write some more articles!
Thanks that's very nice of you.
Yeah the information is dense. It's hard to strike a balance between too much possibly unnecessarily complex information vs not enough.
It's not likely to have many more added since it's not a blog, The goal is just to layout the foundational concepts and there are only so many of these foundational concepts before you are tweaking around the edges and tweaking isn't good for passive investors - better to set a good foundation and then just leave it alone.
I've added a couple recently like the cash vs bonds article, why I don't invest in a few of the other asset classes despite the potential diversification benefit, and the example IPS. I've got just a few more in mind but not likely to be many more. Hopefully what's up there can help people bypass the ocean of crap out there that I had to sift through, which was my motivation. Cheers again for the kind words, and let me know what your thoughts end up at on the glide path.
I think the glide sounds right. Although I'm still thinking about a few other things, like Vanguard vs Blackrock, or even whether it's worth it to continue with this roll your own approach over VDHG (I only have a small amount invested so far). I don't think I have behavioural risk for market timing but I do have smart arse risk - it has occurred to me that maybe I don't know as much as the world experts at Vanguard just because I read your website (and didn't pay full attention it seems). Right now it's a lot of fun learning about this stuff but in 20 years it might be a big hassle to re-balance, and tbh I think it's hard to predict how personal circumstances will change over that time frame to know what your AUD exposure should actually be, so I might not get the glide right.
But right now I am enjoying the DIY approach and looking into every detail. As 50 cent said: "Get slightly richer or get slightly poorer tryin'".
I agree with you, a 2 fund portfolio of VDHG and a bond fund makes a lot of sense. It will also help with you are old and don't have the ability to manage a more complex portfolio and a surviving partner likely won't either, but should be pretty simple with a 2 fund portfolio.
Also as your risk tolerance goes down over time and your bond ratio increases, you will naturally be increasing your AUD exposure since your bonds will presumably be in AUD.