Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Our high-income portfolio – the first review
It has been just over a month since we introduced our ‘income biased’ portfolio of stocks to the Switzer Super Report (read, Our high-income portfolio) and several subscribers have requested that we provide regular updates on how it’s performing.
Before moving to the update, a quick recap on its construction:
We started with a ‘top down approach’ looking at the sectors, and introduced biases that favour lower price to earnings (PE), higher yielding sectors;
So that we are not overly exposed to a major market move in the major sectors (financials, materials, consumer staples and energy), we have made sure that our sector bias is not more than 33% away from index;
We eliminated property trusts (as there is no real tax advantage to an SMSF), the IT sector is too small, and from an industry perspective, we are not real fans of the consumer discretionary sector. Consequently, we are overweight in financials, consumer staples, utilities and telecommunications; underweight in materials, energy and consumer discretionary; and broadly index-weight in healthcare and industrials;
We are after 15 to 20 stocks (less than 10 is insufficient diversification, while over 25 is hard to monitor); and
We confined our stock universe to the ASX 100, avoided chronically underperforming industries (in an Australian context) such as airlines or general insurance, and of course, looked for companies that pay franked dividends and have a strong record of earnings consistency.
Our income biased portfolio (per $100,000 invested) and its performance over the period is as follows: