Barefoot Investor Index Funds – The Best Index Share ETFs

Ah, the famous Barefoot Investor index funds!  We all know index funds are the key to successful long-term stock market investing, so what share market index funds does the Barefoot Investor buy? Read on to find out exactly what and how to create your own Barefoot Investor portfolio.

Topics: Barefoot Investor index fundsBarefoot Investor sharesBarefoot Investor ETFs

We all know that index funds are a smart way to invest. They give us instant diversification, are super easy to buy and manage, and have rock bottom management costs. It also makes it easy to choose what markets and assets we want exposure to, making them a useful tool to structure our portfolio according to our individual circumstances. So, what does Scott Pape the Barefoot Investor think of index funds?

The Good

  • Steady, Reliable growth – Outperforms actively managed funds over long term
  • Ultimate diversification
  • Extremely easy, passive investment – no time required
  • No experience required
  • Fewer trading decisions required
  • Lower fees than actively managed funds
  • Can tailor each ETF weighting to suit your personal preferences

The Bad

  • Boring (although this is a good thing!)
  • Need to manually rebalance these portfolio’s every 6 or 12 months
  • Higher brokerage costs than an ‘all-in-one’ ETF
  • Limited exposure to small-cap companies
  • Can’t beat the market – you ARE the market (again this is actually a good thing)

Verdict: The Barefoot Investor Index Fund portfolio is best built using A200, VTS and VEU

This article will explore what the Barefoot Investor thinks of index funds, and explores some of the index fund portfolios he has created and invested in, such as the Breakfree Portfolio, and the Idiot Grandson Portfolio, including his recommended Barefoot Investor ETFs. The article then explores the practical side of things – how I take Barefoot Investor index funds recommendations and actually construct and manage a portfolio. I cover:

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Index funds removes the need for complex financial tracking

Who is the Barefoot Investor?

Well, unless you’ve been living under a rock, you’ll know that the Barefoot Investor is Australian Scott Pape. Self-proclaimed as “Australia’s favourite money guy”, he provides no-BS personal finance advice and recommendations, and recently re-trained as a not-for-profit financial counsellor.

While he recently closed the Barefoot Investor Blueprint which contained his Barefoot Investor shares recommendations and Barefoot Investor ETF recommendations, he did provide some further recommendations – which I’ll get into later.

What does the Barefoot Investor think of index funds?

Well, it turns out the Barefoot Investor thinks index funds are great. Actually, one of his favourite investment firms and one he recommends everyone starts with when they buy shares is the Australian Foundation Investment Company – AFIC. This is a solid company that was my first share purchase.

Although, if we are getting technical here, AFIC isn’t an index fund, but it sticks pretty darn close to the index and it also has pretty low fees. I prefer to call it an ‘old school granddaddy LIC’!

The Barefoot Investor has designed a couple of index-based portfolios over his time, which he has distributed to his readers. While he has dabbled in stock picking and used to provide a subscription stock tip service, he has since cleaned his act up. He is now providing free financial counselling through his charity to some of the most vulnerable Aussies, which I think is a very noble thing to do, and completely makes up for his previous stock-tipping-dodgy-ness.

He initially suggested the Barefoot ‘Breakfree Portfolio’, and has since revised this and called it the Barefoot ‘Idiot Grandson Portfolio’.

I’ll get into both of these portfolios in this article and explain what each includes.

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Barefoot Investor shares part 1: The Breakfree Portfolio

barefoot investor shares
You’ve got better things to do than look at your portfolio all day

The Breakfree Portfolio was designed by the Barefoot Investor with the idea of “breaking free” from dealing with your portfolio all the time. It’s a fairly simple portfolio that predominantly includes Vanguard ETFs:

  • Australian Bluechip Shares: STW – 35%
  • Australian Small companies: VSO – 15%
  • Global Bluechip Shares: IOO – 20%
  • Australian Property securities: VAP – 20%
  • Australian Fixed interest: VAF – 10%

The Barefoot Investor suggests re balancing once a year in the following ratios

barefoot investor shares

Australian Shares: ASX:STW

State Street Global Advisors (SSGA) are the fund manager for STW which seeks to track returns according to the S&P ASX 200 fund (ASX:STW). The MER is .13% and since April 2020 their 1, 5 and 10 year returns have been -17.96%, -2.14% and .71%.

The Barefoot Investor recommends holding the bulk of your portfolio (35%) in STW to concentrate your returns on the majority of blue-chip Aussie stocks. These pay good dividends (approximate current dividend yield of STW is 6%) with quarterly dividends that are approximately 70% franked.

Australian Small companies ASX:VSO

Vanguard MSCI Australian Small Companies Index ETF (ASX:VSO) seeks to track the MSCI Australian Shares Small Cap Index. With a MER of .3%, its one of the more expensive ETFs, and as of March 20 its 1,3 and 5 year returns are -21.24%, -1.81% and 1.84%.

The Barefoot Investor recommended holding 15% of your Breakfree portfolio in VSO to diversify within the Australian share market sector, weighting your portfolio to small size companies which have been shown to provide higher risk but higher reward. For example, during COVID-19 a number of these small-cap stocks have suffered greatly, and many smaller businesses have even gone bust.

Global Bluechip Shares ASX:IOO

The BlackRock iShares Global 100 ETF (ASX:IOO) is an ETF which tracks the Global S&P 100 index. It has a fairly high MER of .40%, and its 1, 5 and 10 year returns (as of April 2020) have been 7.14%, 10.01% and 13.17%.

The Barefoot Investor recommends 20% portfolio exposure to global bluechip shares to spread your investment risk out of Australia and diversify into some of the worlds biggest companies like Microsoft, Apple, amazon and Nestle.

Australian Property ASX:VAP

Vanguard Australian Property Securities Index Fund (ASX:VAP) tracks the Standards and Poor’s ASX 300 A-REIT index (Australian Real Estate Investment Trust). Its one year return is -31.39% (OUCH), 3 year return is -4.88% and 5 year return is .39% (as of March 2020). The management fee is .23% –

This portion is to provide investors exposure to the Australian property market to provide diversification into a non correlated asset class. The Barefoot Investor recommends to hold 20% of VAP in the breakfree portfolio.

Australian Fixed interest ASX:VAF

The Vanguard Australian Fixed Interest Fund ETF (ASX:VAF) seeks to track the benchmark of the Bloomberg AusBond composite 0+ year index. As of 31 Mar 20, the 1, 3 and 5 year returns have been respectively 6.67%, 5.58% and 4.09%. This has a management fee of 20 basis points (.2%).

This portion is suggested to be 10% of the portfolio, and exposure to Fixed Interest bonds seeks to reduce volatility in the Breakfree portfolio

Barefoot Investor shares part 2: The Idiot Grandson portfolio

Barefoot investor index funds

After releasing the Breakfree Portfolio, the Barefoot Investor took another closer look at index funds in general. He started by looking at over 315 different index style funds – a combination of 201 true index-tracking exchange traded funds and also 114 index-inspired listed investment companies (LICs), and whittled them down to a final list of ten potential index funds worthy of investing in.

Barefoot Index fund first pass

The first iteration of the Barefoot Investor Idiot Grandson index fund portfolio looked at over 315 individual funds (no I will not list them here LOL!) and cut them down based on management costs.

Management costs are a massive deal and you only need to play around with compound interest calculators to work out why. Paying a 1% management fee doesn’t sound like much, but in the long term (30 years) when dealing with stocks for the average investor, this can add up to hundreds of thousands, if not millions, of dollars.

It is known that on average, investors have up to 40% of their investment returns gobbled up due to high management fees and charges.

The first pass cut away any index fund with a management expense ratio (MER) above 0.40% (which equals $4 per every $10,000 invested each year).

This cut the list down to 60 ETFs and 10 LICs to choose from (and no I won’t list them, there is STILL too many)..

Barefoot Index fund second pass

The second pass analysis of the Barefoot Idiot Grandson Portfolio of index funds cut away funds based on undesirable fads and those that contained risky financial products like synthetics and derivatives

These are second or even third order financial products that don’t actually track or represent underlying holdings, but rather are a gamble or speculation on how their prices move (for more detailed explanation watch the movie The Big Short).

The second pass also removed any ‘outliers’ such as funds geared towards producing really high dividends. High-dividend stocks often suffer in terms of total return due to a lack of capital growth, a form of dividend trap. Both dividend yield and capital growth that should be considered together.

The second pass similarly removed small company funds (which was ironic as we were recommended to buy these in the form of Vanguard’s ASX:VSO fund in the Breakfree Portfolio).

Similarly, equal weight portfolios were discarded. These are portfolios which include the same dollar or percentage value of all the stocks they hold, which by definition gear a portfolio more heavily toward small caps than a typical index fund.

Finally, in a move which could be considered a one finger salute to investing legend Peter Thornhill (who loves industrials), all industrial funds were also dropped. You can interpret that how you wish but I am not sure why the Barefoot Investor has done that.

This left only 6 LICs and 13 ETFs to choose from.

Barefoot Investor index funds
The Idiot Grandson portfolio is meant to stand the test of time

Barefoot Index fund third pass

The Barefoot Investor index fund third pass cut the remaining 19 index-style funds down to just 10 by considering the management style of the funds. This pass was more of a judgement call, where the Barefoot Investor opted for funds owned and run purely to benefit its shareholders (not-for-profit funds), such as Vanguard.

This is because they have the lowest MER and the management themselves are shareholders, meaning they make decisions and act in the shareholders’ best interest.

Personally I was a bit miffed that BetaShares A200 didn’t make the cut since that’s something I invest heavily in (I suspect it’s because the Barefoot Investor doesn’t like BetaShares), instead of Vanguard’s VAS fund.

So, without further ado, here is the final list of the recommended Barefoot Investor shares that make up the Idiot Grandson Portfolio.

Barefoot Investor Idiot Grandson Portfolio: Australian LICs

Barefoot Investor Idiot Grandson Portfolio: Australian ETFs

Barefoot Investor Idiot Grandson Portfolio: International ETFs

The Barefoot Investor Idiot Grandson Index Portfolio

As the Barefoot Investor says, the sheer power and simplicity of the exchange traded fund trumps all. Pick whatever index funds you want from this third pass, and put them in these percentage allocations:

  • Australian total share market index fund: 75%
  • US total share market index fund: 10%
  • Global ex US total share market index fund: 15%
Barefoot Investor index funds

How I use the Barefoot Investor Idiot Grandson Portfolio

The Barefoot Investor Idiot Grandson Portfolio could be cheaply and simply constructed using a split of A200 / VTS / VEU – interesting that this has been the core of my investment holdings and my financial independence investment strategy for some time!

Of course, the Barefoot Investor suggests you could use any index funds from his final third pass to meet this asset allocation. I also personally do invest in some Australian LICs, which is probably due to home bias and increases my concentration risk in the Australian economy (but it’s good to know the Barefoot Investor does, too!).

If you’re already familiar with my investment strategy, then the below won’t be a surprise to you, but I thought I’d reiterate it here to show how you also can create something similar to the Barefoot Investor’s strategy.

Betashares Australian Bluechip stock index fund (ASX:A200)

BetaShares A200 ETF aims to track the Solactive Australia 200 index, that is the top 200 Australian publicly traded companies by market cap. This is effectively the biggest blue chip Australian stocks. It has a MER of .07% and as of March 2020, its 1-year return has been -14.56% (exactly the same as the index it tracks).

I have this in my portfolio – instead of the Vanguard VAS ETF that the Barefoot Investor recommends.

Check out my detailed review: BetaShares Australian top 200 index fund (ASX:A200) MER = .07%

Vanguard US total stock market index fund (ASX:VTS)

Vanguard US Total Market Shares Index ETF (ASX:VTS) tracks the CRSP US total market index (approx 3500 stocks). With a MER of .03% it is one of (if not the) cheapest ETFs on the market, and its 1, 3 and 5-year returns as of March 2020 are 5.32%, 11.91% and 10.53%

Check out my detailed review: Vanguard Total US Market 

Vanguard World ex US total stock market index fund (ASX:VEU)

Vanguard All-World ex-US Shares Index ETF (ASX:VEU) tracks the FTSE all world ex US index. Its MER is .08% and as of March 20 its 1, 3 and 5 year returns are -2.25%, 5.33% and 4.01% respectively.

Check out my detailed review: Vanguard Total world ex US 

Vanguard World ex US total stock market index fund (ASX:VEU)

Vanguard All-World ex-US Shares Index ETF (ASX:VEU) tracks the FTSE all world ex US index. Its MER is .08% and as of March 2020 its 1, 3 and 5-year returns are -2.25%, 5.33% and 4.01% respectively.

Check out my detailed review: Vanguard Total world ex US 


Aussie Listed Investment Companies

I also check out these LICs, and if any of them are trading at a juicy discount (or discount delta to be more precise) then I load up on them. If they are trading at fair value or at a premium, I just stick to the above ETFs.

However, of late I have been wondering whether LICs are worth investing in, given their historical performance and higher fees. I am starting to think ETFs that focus on capital growth may be the best option for me and more tax effective now that I have developed a nice ‘base’ of passive income from my investments. What do you think? Let me know in the comments.


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How to buy the Barefoot Investor index funds

Alright, so that was a lot to get through, I know. But now hopefully you have a good idea about the recommended Barefoot Investor index funds. Now it’s time to actually build your own Barefoot Investor portfolio.

Buying the Barefoot Investor index funds and building your own portfolio is super simple using online share trading platforms. Check out my Personal Resources page to see my top picks for share trading platforms – I have extremely thorough and detailed reviews of popular share trading platforms.

Pearler is my choice for buying the Barefoot Investor Index Funds portfolio’s

Buying the Barefoot Investor index funds to set up your own portfolio is actually super simple:

  1. Decide on which portfolio you want to use (or mix and match and create your own as I have)
  2. Tweak the portfolio percentage weighting to your personal liking (I personally go for 1/3 equal weight of A200VTS and VEU)
  3. Open an Australian brokerage account
  4. Search the stock by their ticker codes
  5. Place a bid at market rate (don’t bother with limit rates)

Alternatively, set up a Pearler account and configure your target portfolio as the Barefoot Investor index funds. Once you set up and turn your auto-invest on, Pearler will do the hard work for you building your portfolio. I set mine to rebalance by buying my least-weighted holding.

Tracking your Barefoot Investor index funds

The beauty of index funds really lies in the fact that a handful of holdings can literally give you global diversification to not only every single blue chip stock, but also small caps and emerging markets.

But luckily you don’t need some crazily complicated spreadsheet that tracks thousands and thousands of companies. I started using Excel spreadsheets to track my index fund holdings, but it quickly became an unwieldy beast and overwhelmed me.

I discovered Sharesight, a free accounting tool. Finance professionals and companies often use a paid Sharesight subscription to help them manage massive amounts of data (such as multiple client portfolios etc), but for you and me, we can use Sharesight completely FREE because we have under 10 holdings.

The free account is more than enough for the average person, but you can upgrade to a paid subscription which gives you some more features.

Check out my detailed review of how I use Sharesight to manage my index funds, or Captain FI readers can actually get thisbonus sign up offerwhich gives you four months of premium for free if you do upgrade.

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Summary of Barefoot Investor Index funds

Index funds are not just a fad, they are a sensible tool that can be used in every investor’s portfolio to diversify holdings and reduce risk.

I transitioned to an index style portfolio many years ago in an effort to simplify my life and investments, whilst also maximising my returns and decreasing my long term risk

Barefoot Investor index funds

I have owned or currently own AFI, MLT, BKI, ARG, VAS, A200, VTS, IVV and VEU. Index fund ETFs and index-style LICs now make up my entire portfolio. As I mentioned earlier in this article, since adopting the index fund investing approach I have simplified my portfolio again (recently sold IVV and VAS and rolled funds into A200). I am now long (holding for the long term) on the following index fund ETFs: A200, VTS and VEU.

I am also long on the following index style LICs: AFI, MLT, ARG and BKI , however I am evaluating whether the increased management fees, active management risk and extra paperwork (admin burden) is worth keeping them – my alternative would be to sell them and roll the funds over into the A200/VTS/VEU split.

I think some of these index funds that the Barefoot Investor has recommended are great, and by following a similar strategy, you too can create a long-term investment portfolio that’s simple and hassle free.


Want to learn more about the Barefoot Investor?

Check out the Barefoot Investor’s two-award winning books.

Barefoot Investor index funds
The original Barefoot Investor Book
Barefoot Investor index funds
Barefoot for Families

Grab yourself a copy from Amazon Here, listen to it through Audible or buy it from Australia’s local bookstore Booktopia

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33 thoughts on “Barefoot Investor Index Funds – The Best Index Share ETFs

  1. Good read.

    I had a look at the Idiot Grandson paper a while back and was surprised, perhaps even a bit reassured that the allocation I went with for Australian/International (which suits my own personal goals) was very similar to what Scott Pape proposed in that paper.

    That said I hold a mixture of ETF’s and LIC’s so it’s still different from his final portfolio.

    I only have five holdings but I have also been tempted to just roll it into a basic VAS/VGS split which I’ve been adding to more over the last 9 months, however I think I’ll hold onto the LIC’s as a smaller percentage of the overall portfolio as I feel more comfortable with them during major downturns like the current pandemic.

  2. Excellent article! I am surprised by the high allocation of Australian funds though. Vanguard’s VDHG has it closer to 40% which is still considered high by some.

    1. Hi David,
      I think its a consequence of the awesome franking credit system, the strong Aussie dividend yields and the home bias. I agree, 75% is a high allocation to national funds. My portfolio is a bit out of ‘whack’ and heavily weighted to Aussie shares as I think they provide a quicker path to FIRE, but less diversification. As I get a higher net worth, I will endevour to diversify overseas more. I am thinking my ‘ideal’ post FIRE portfolio might look something like: 50% AUS – A200, 30% US – VTS, 20% total world ex US -VEU. Or maybe even 40:40 AUS/USA. What do you think?

  3. I am 15 years old and I am thinking about investing in a simple share fund (annual contribution – $5000). Would you recommend that I invest in different index funds (AUS – 75% US – 10% Global – 15%) or should I just invest in just one index fund? If so, what index funds would you recommend?

    1. Hi Arihant, First up thats just downright amazing that you are thinking about this at 15 – if you maintain even a 50% savings rate which is incredibly easy, you could be financially independent by 31, or bumping it up to 60% that would mean financial independence by 27! incredible! (https://networthify.com/calculator/earlyretirement). Unfortunately mate I can’t really recommend any particular investment or financial product – and its important to note that nothing here is financial advice. What I can recommend though is to work hard, keep reading and save hard so you can invest hard. As your friends increase their income they will likely lifestyle inflate, but if you manage to keep tucking away a good portion into your investments, you will become rich. That is a fact. I personally choose low management fee total index fund ETFs, and low management fee old school LICs, across the Australia, US and Global markets – you can check out exactly how and what I invest in my portfolio on my monthly net worth updates. You need to work out which product is right for your personal circumstances though! Best of luck mate.

  4. Just found this article today and am so happy to see your thoughts on this, silly me didn’t
    t save all the articles from Blueprint as I thought we were getting them bundled together. I’ve signed up for notifications and will be having a good read around your site.

    1. Hi Melanie,
      I also did not save the Blueprint reports but saw a recent post on the Barefoot Facebook page from someone asking if it was too late to download. Scott replied and suggested an email to [email protected] and he’d “see what he could do”. So I emailed also on Wednesday night and by Thursday morning, Louise had answered with a personal temporary link to 80 of the most popular files to download. The link lasts for 14 days only and it’s much easier to download the lot in one hit- it is 2 gigabytes in total. So, not access to everything, but certainly better than nothing!
      Good luck,
      ps. I have just come across Captain FI too and am finding it fascinating and very helpful to increase my (basic so far) knowledge….thank you Captain!
      Cheers

      1. Awesome. thank you so much, hopefully it works, I was so devastated the site closed down and I missed downloading everything. I was under the impression we would be sent a link.

  5. Hi,
    Love your work. I have recently set up a Commsec account and have become interested in investing for my long term financial future with the hope of setting up my son financially in 20-25 years (He is currently 3) I understand ETFs and LICS are the way to go due to a DRP and dividend strategy, but I had a couple of questions.

    1. Is it important to just look at the ETFs and LICs with the lowest MER?
    2. What other factors are most important to look at?
    3. Is it worth having a split of ETS and LICS
    4. Is it worth investing in a Gold and Silver ETF also?

    Would love your advice before I start investing. Would be looking to start with around 5-6k and gradually keep investing annually.

    Any light you could shed would be greatly appreciated.

    1. Hi Bret, Glad to hear your on the on the right path mate. I started out with CommSec too, but I switched to a cheaper broker in the end because the fees were killing me. I can’t provide any financial advice (I am not a financial advisor) and besides it takes a lot more information to figure out what is appropriate for someones individual circumstance than just an online forum, but I can only show you what I personally do myself – I personally Don’t invest in gold or silver, I have a core holding of domestic and international ETFs and then buy aussie LICs as well. MER is very important but not everything, you also need to consider the index its tracking, what your portfolio splits are between domestic and intl., how many stocks in the fund, whether DRP is important to you etc. It sounds like youve got a lot of reading ahead of you but luckily you have come to the right place!

  6. Hi There, I was wondering why you sold VAS ?
    With the low interest rates on cash & term deposits and cash on hand I am adding to my EFT’s or one EFT (STW).. Via More EFTS, (Also have AFI) I have put some cash in VAS and added to STW.. But I will need to buy more. Dividend imp is good so I like Aussie EFTs. but I am not sure if to go an intl ETF’s say S&P 500 but cautious of any others. Bit of a conundrum. I guess the other question (besides why did you sell VAS) are your thoughts on a 58 y/o looking to retire in 3 years what the ideal percentage of asset allocation (shares, cash etc) would be now until retirement for amount of $1.5m available, existing is E1m in super. & no debt. EFT’s Aussie preferably or other suggestions.

    Thanks

    1. Hey Mark! Sold VAS to buy A200, because of the cheaper management fee. We probably have very different investing requirements because of your timeframe approaching retirement. Personally, I will be holding a slightly larger emergency fund of cash in retirement (1-2 years living expenses) than I do now (6 months ish worth) but will keep the same core strategy of buying index funds, investment properties and websites.

  7. Hi,

    I have recently read barefoot investor and now keen to start investing in shares and secure our future. But i have absolutely no idea about the shares and where to start. In the book itself, it says to invest in index fund but which and how?
    I am 30 years old and have decent 100k+ income. I generally save40% of my income and not where to invest it. I have also read couple of books in property investment and that looked fancy – Positively Geared and Steve knights 1 to 130 properties.
    So, not sure in which exact path I should be going?

    Cheers!

    1. G’day Sandeep – Sounds like you are in an awesome position. Check out the blog guides on how to buy vanguard index funds on the blog, I have a review of a few share trading platforms too, so have a look and see which one you like. If your not confident, its probably a good idea to chat to a good independent, fee-for-service financial advisor. Check out the ASIC MoneySmart blog for recommendations about how to find one (its a government website). Otherwise just read this blog, The Aussie Firebug, Mr Money Mustache etc LOL

      1. Thanks for the reply Captain!!
        Will surely do.
        Do you also recommend some books which can help me educate from the basics in this area?

        Cheers!

  8. Loving your articles!
    You’ve explained the reasoning of you selling your VAS FOR A200. Can I ask, what was your thoughts/reasoning behind the shift from IVV to VTS? Thanks!

    1. Good Morning Miss K! The main reason was to avoid ‘double ups’ which made my portfolio unnecessarily complex, because IVV and VTS essentially give me a similar exposure to the US markets. Specifically for VTS, it is a more broad index fun which holds a larger amount of US companies, and its actually cheaper by 1 basis point (.03 vs .04). I also really like Vanguard as it is a’not-for-profit’ style company which is run to benefit members. However, IVV does have benefits over VTS – it has a Dividend reinvestment plan and I think might be domiciled in Aus? Can’t remember will need to double check that. Anyway, I am happy to submit the W8 tax form through my share registry every few years and stick with VTS for now.

  9. Hi Captain, Your thoughts on the Beta Shares QUS, in caparison to IVV & VTS and then with it changing in Dec to an Equal Weight Index S&P 500 . Management fee also being reduced to .29%.

    Also sorry if you have answered this in previous threads. As a global fund is your preference still VEU over VGS, can you explain why please

    Thanks
    Mark

    1. Hi Mark, I haven’t looked this up but Straight away the management fee is .29% is ridiculous given VTS is like .03%. When I googled it, IVV was 500 companies, QUS was 1000 companies but VTS was like 3500 companies. Obviously its market cap weighted so they are all probably very similar in terms of the top end (top 10 holdings). QUS looks like its changing to be similar to IVV. I think the only thing QUS has going for it, is if it might be Australian domiciled – but I am not even sure. But then if that is what you want, you’d just go with BlackRock iShares IVV, and pay .04% to get aus domicile and DRP. Seems crazy to be paying like 8 times the MER for the same thing? Also QUS only has like $61M funds under management, so its a really small fund.

      In terms of global funds, I go for a combo of VTS+VEU. However, that’s because I like tinkering. If am honest, and I was doing this all over again, I would probably just have gone for VGS rather than VTS+VEU, for simplicity sake since VGS is only like .18 MER… (which is what, double that of the VEU+VTS combo?). Having the A200+VEU+VTS as the three ETFs gives me an ability to rebalance a bit better, and I am thinking of adding a small cap fund to the mix just for stamps… but not sure!

  10. Hiya Captain,
    Must admit, this is alllll very new to me, and I’m hoping I could get some thoughts? On a major learning curve, here – I’ve read the 2017 Barefoot Breakfree Portfolio and am keen to get started, but with things as they are (four yrs later, COVID etc.) I wonder if all of the info is still current/relevant? Like I said, new to this. I’m sort of juggling if using Breakfree as a template is where I should begin, or if I should K.I.S.S. and go for his AFIC more ‘set it and forget it’ style investing from his book to get started…? I’ve read comments above and much goes over my head, I’m embarrassed to admit. But there’s no time like the present, right!? Thanks so much in advance for your thoughts…

    1. Hey Mate – the book has a lot of great lessons, the most powerful of which is controlling your spending and living within your means. Provided you are in a solid foundation to be investing (i.e. decent emergency fund, paid off any debt, got some breathing room / equity in your property/mortgage etc) then my personal belief is you cannot really go wrong with index funds, broad market stock index funds. I have looked at three main ETFs (you can read my Net worth reviews etc to see what I personally invest in) for global diversification, and I occasionally look to purchase LICs like AFI, ARG, MLT and BKI if they are trading below NTA because I feel like I am getting ‘free’ value (noting I then sell them when they trade above NTA and I immediately buy index fund ETFs). Ultimately the best thing you can do is just start small mate, and snowball from there. Even if you get it wrong, you will learn and thats more powerful than just sitting on the side lines

          1. Hey Cap,
            Love the content, alot of helpful info. I have a specific question i’ve tried to get answered from several sources but haven’t had much luck.
            I have no debt and no house and have been investing in ETFs on a monthly basis for a while (2 years). I’ve built 50k so far. So the question. In the next 2 years or so i plan to buy a home but i hate hate the thought of selling my shares…. As far as i see it, i have 3 options and no idea which makes more sense:
            1. Stop investing now and put my savings into a bank account for the house deposit. Then only use the cash i have for the deposit in 2 years and keep my shares.
            2. Sell shares at market high now and put everything into a bank account and use the lot for a bigger house deposit in 2 years.
            3. continue my monthly investing strategy and at the time i want to buy, sell the amount of shares that i want for a home deposit (shares should be 100k+ at this point).

            The thought of selling my shares is horrible….. but also having a small deposit obviously is not ideal at all.
            Do you have any general advice for people trying to build a portfolio and a house deposit at the same time?
            Thanks

            1. Hey mate. The commonly accepted practice is if you need the money within 3-5 years to keep it as cash. I am not a financial advisor and can’t recommend you do anything, but personally I just invest everything into shares and other investments and I plan to sell off a portion of my investments to fund the deposit for the property (10+ acres for a hobby farm I am looking for). I will then probably look into debt recycling to turn the PPOR loan into a tax deductible loan, and aim to pay it down as quickly as possible using income from the shares and websites. I am still undecided about selling my *full* share portfolio to just pay off the loan in full quicker, as like you I wouldn’t want to give up all the passive income that the shares provide. I couldn’t answer it untill I am in that situation, but to be honest I don’t really like debt at all. It feels shit and I have got a $370K mortgage against an investment property I am developing and even that makes me nervous about potential interest rate rises etc

              1. Thanks for the speedy reply! I like the sound of your method more, just sell some shares to fund the deposit. I invest 50% of my take home and have 10k cash account for emergencies. So i am not stressed about needing the money. If the markets are down when i want to buy, i will just save for another year and reassess then. The debt recycling is super interesting. It keeps coming up on podcasts and blogs recently. Will you be documenting your experience with debt recycling when it comes to it? Also, your reading list. Tough ask, but do you have a top 3? My next buy is ‘Motivated Money’.

                1. Hey Chuck, sounds like a solid plan! I auto invest about 50% of my pay, I keep a few thousand and then I spend the rest on other investments like property or speculative things like managed funds. I will most certainly document the debt recycling journey if I embark on it, but my aim is to have a fully paid off PPOR for when I have kids. Reading list top 3 – Barefoot Investor – 4 hour work week – Your money or your life

  11. Hi, awesome content!
    I am 35 years old with a stable job and a lot of savings. Looking to start investing.
    This is my first pass ever to build a portfolio.

    20% Aussie market – VAS and VHY (high divided) 50/50 split.
    25% US market – VTS (higher percentage because I don’t want small caps currently).
    15% International – VEU (as an edge for Aussie / US markets).

    20% Aussie REIT – VAP.
    10% – Aussie Interest Fund – VAF.
    10% – looking to invest in one of ARK etf’s.

    Highly appreciate any thoughts!

    1. Certainly looks diversified! What are your reasons for wanting to create your own portfolio, over say, one of the all-in-one funds like VDHG or DHHF? Have you had a look at them and their make up to see if that might influence your own portfolio construction?

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