Tuesday 21 August 2007

Decisions, decisions

The funds in our SMSF bank account have finally cleared, so I was able to transfer $330K into the investment sub-account which is used to settle any e*Trade transactions. I can now apply via e*Trade to make our initial investment into the Vanguard LifeStrategy High-Growth Fund. Of course I don't know if the unit prices will go up from here in the short term or maybe drop even further, but at least I can be 100% sure that the current price is around 10% off its peak from earlier in the year, and that we gained a couple of percent by being in cash for the past two weeks. I'm sure that in 20 years time the current dip won't even be noticeable in the chart. The important thing is to be invested in our chosen asset allocation and remain invested for the next 20 years. One good thing about investing all our SMSF funds in the one fund is that rebalancing between the underlying asset classes should be done automatically by Vanguard to stay close to the target asset mix for this fund. This is even better than using a mixture of Vanguard Index Funds to achieve a desired asset mix because rebalancing between funds would cost the 0.5% buy-sell spread in unit prices, although since rebalancing would generally only require a small fraction of the total investment to be moved, the effect would be negigible. All we need to do on an ongoing basis is to periodically adjust our automatic investment plan to reflect the amount of money we are depositing into our SMSF bank account each month via salary sacrifice and the SGL contribution from our employer.

Copyright Enough Wealth 2007

1 comment:

mOOm said...

Personally I would DCA it over a few months (3-4?). Of course if the turmoil in the markets seems to be gone you could accelerate the schedule.