Page 44 - DIY Investor Magazine | Issue 29

LONG TERM INVESTOR CHECKLIST – BANKER ON WHEELS
As a Do-It-Yourself Investor you know you can get great value from doing your own homework and investing without incurring additional costs (costs add up significantly)
You control the re-balancing process and observe how markets evolve - a humbling exercise that shows that even most professional investors can’t add much value over the long term.
You may have a plan but would like to get a second opinion – did I miss something?
Investment advice is always personal (Bankeronwheels.com gives broad guidance not tailored advice); here are some common questions investors seek to answer before starting out investing:
DID I CONSIDER MY OBJECTIVE AND TIME HORIZON?
• Different objectives drive different asset allocations in your portfolio
• Be prudent if investing for the short or medium term and protect your capital against market volatility
• For those with a long term vision seeking to be Financially Independent, Retired Early (FIRE) market volatility may help you achieve great returns over time; a typical model portfolio will be more aggressive towards long term returns
• When approaching retirement or focused on regular income you may look at corporate bonds to reduce equity risk.
DO I HAVE A PLAN WHEN MARKET CRASHES
• Crashes are part of the game; plan on how you will behave when the next one comes along; how much can I lose? How long will a downturn last? How quickly can I recover my savings?
• Here is a comprehensive answer on how to protect your portfolio
DID I CHOOSE THE RIGHT EQUITY ETF?
• The easiest way to combine equities and bonds is a one- stop ETF like Vanguard LifeStrategy or BlackRock’s ESG ETFs
• A great way to control equity allocation is to buy a World ETF - I have reviewed the main ones so you only have to pick the best given your requirements
• Alternatively, you could split your portfolio as introduced here through a Banker or Cyclist portfolio, and choose a combination of International ETFs
DO I HAVE THE RIGHT PROPORTION OF BONDS?
• Bonds reduce the volatility in your portfolio and protect capital during sell-offs; unless you are very long term with high risk tolerance you need bonds - understand why
• Understanding risk tolerance and time horizon is key to your financial success; take a questionnaire to understand what stocks/bond allocation is suitable for you
• Once you decide on an allocation, use this guide to select an appropriate bond ETF
• Cash or bond ETFs? A mix of the two could be the answer - here is a calculator to compare cash and bonds
DID I HEDGE CURRENCIES WHERE NEEDED?
• Currencies can be confusing here is what you need to know
• You may consider a hedged international bond fund
to reduce portfolio volatility as two thirds of risk in international bonds comes from currencies; you should keep international equity funds unhedged
• Here is a guide regarding currency hedging
DID I CONSIDER ALL IMPORTANT CRITERIA WHEN
CHOOSING AN ETF?
• Choosing ETFs includes which provider to select, fund characteristics, fees, dividend reinvesting and tax. Here’s how to pick the right UCITS ETF
• Here’s a Q&A on how to buy the cheapest ETF
• Choose wisely between Accumulating and Distributing
ETFs and ETF Domicile as each has tax implications
• Before you invest - consider the Best UCITS ETFs - here is
a curated list
DID I DECIDE IF GOLD IS APPROPRIATE FOR ME?
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If you already have inflation protection with assets like real estate it may not be as necessary
Within your bond allocation you may also consider a small part of Gold.
DIY Investor Magazine | Jun 2021 44