Written For The Australian - How to build a share portfolio like a professional wealth manager
by James GerrardThu Sep 14 2023
Remember when building a share portfolio meant picking between the big four banks and BHP? Those days are gone.
On this week's episode of The Money Puzzle podcast, I sat down with accountant Timothy Ricardo from Bishop Collins Chartered Accountants to unpack how professional portfolio construction has evolved — and why the humble ETF has fundamentally changed the game.
The approach most wealth managers now use is called "core and satellite". The core is the boring, brilliant bit — low-cost ETFs designed to capture the average market return without you paying a fortune in fees or trying to outsmart the index. The satellite component is where things get more interesting. This is where you back specific themes over a five to 10-year horizon — think AI, renewables, healthcare, or emerging markets — with the aim of outperforming the broader market.
The obvious question is: how many ETFs do you actually need? My view is that more isn't better. I've seen portfolios with 20-plus ETFs that end up being an expensive, tangled version of the index. A tight core of two or three ETFs with a handful of satellite positions is usually plenty.
We also got into some meaty tax territory — the proposed changes to superannuation tax and capital gains, how the EV Discount Bill can deliver a tax deduction of up to 47 per cent on a car, and a genuinely useful tip on reducing the interest rate on SMSF loans (something a lot of trustees are still overpaying on).
Timothy also raised an interesting question that I think more investors should be asking: should equal-weight ETFs have a place in your portfolio? The standard ASX 200 is heavily skewed to a handful of names, and equal-weight versions can smooth out that concentration risk.
Portfolio construction isn't about being clever. It's about being deliberate.