Hi everyone! I’m Ian, or ‘Indexing Ian’ as Frankie likes to call me.
You’ve heard Frankie’s Investment ‘F’hilosophy, so let me tell you a bit about mine. I haven’t always been an ‘Indexer’, in fact, for many, many years, I spent HUGE amounts of time analysing stocks, buying and selling, trying to time my investments perfectly. I’m a pretty smart guy, always thought of myself as ‘above average’ in many ways, and like Frankie, have plenty of experience in the finance industry, so I didn’t want to settle for an ‘average’ index fund – how BORING!
Well, it turns out that in my world, boring is better. In fact, I’d almost go as far to say boring is beautiful. Boring is brilliant even!
I had no idea how much I was trading every month or two – even though I’d always considered myself a ‘long-term’ investor. The problem is, the more research I did, the more ‘opportunities’ I kept finding, and the more I felt I had to take advantage of all those opportunities.
I’d sell one of my stocks that’d had a good run, so I could move those funds into the next opportunity. Which didn’t seem like such a bad thing at first. But it’s very hard not to get carried away without even realising it. I became less patient. I started taking bigger risks – again without even realising it.
It wasn’t until I stepped back and really analysed my performance when I saw how fruitless it all was. Any gains I made were pretty much wiped out by trading costs, taxes and of course a couple of big losses!
It’s taken me many, many years to learn what works best for me, and I think I’ve finally found it – passive Index Investing.
What does this mean for Frankie’s approach to investing? Is Frankie simply more disciplined than me? Smarter? More experienced? A snappier dresser?
Perhaps all of the above, but even so, I’m backing my Indexing approach all the way! Let’s see who comes out ahead in the long run hey Frankie?
Indexing Ian’s Portfolio
I like to keep things simple. My portfolio consists of two Vanguard Australian based Index Funds:
The links above provide further details of each fund. VAS covers shares in the ASX 300, and as you might have guessed, VSO covers smaller Australian listed companies.
Ian’s Ignoring International Investments?
But wait – doesn’t this Fly in the Face of ‘Modern Portfolio Theory’*? Why would I only invest in my home country of Australia, when I could push further up the ‘efficient frontier’ by diversifying globally?
And what about the great run these Index funds have had over the past few years, particularly the last 12 months? Am I crazy putting money in these funds when they’ve ridden so high?
Both great questions – which I’ll address in the near future. Let’s get this Fund up and running First!
Ian’s Investments vs Frankie’s Fund
Just to make things comparable with Frankie’s Fund, I’ve invested the same funds as Frankie at the same time he has. I don’t care for picking the best times to invest – no one in the world can time the Market well – so I’m happy to invest my $50,000 along-side Frankie, whenever he chooses.
Any invested funds will be split equally between my two Vanguard Australian Index Funds – VAS and VSO.
And I intend to go toe-to-toe all the way with him – dollar for dollar of invested funds. That way he has no excuses when his Fully-Franked Fund Falls short of mine! Not that it’s a competition of course – we are all investing for our own reasons and goals – but there’s not harm in trying to keep each other on our toes! And who know, we might both learn something from each other along the way.
I’m sure Frankie will be comparing our performance in the near future, which I’m very interested to see. Although we know that anything can happen in the short run – it’s over the next few years that will be the most interesting…
Which of these two strategy are you backing over the next 12 months? The next 5 years? Do you tend to invest more like Ian, or Frankie? A bit of both? Something completely different?