If you’ve been forwarded this email, sign up so you don’t miss out

Community Question: How should I split my investments for a core portfolio? Is there an ‘ultimate portfolio’ construction?

We put this question to Tristan Scifo, financial adviser and founder of Purpose Advisory

When solving an important problem, ask the brightest minds you can find.

I identified Chat GPT-4, Warren Buffet & Ray Dalio, as the best 3 sources to answer this.

Chat GPT-4’s Response

I pressed Chat GPT-4 to propose an “ultimate portfolio” for someone living in Australia, investing $1,000pm. 

Here’s a summary of what it produced:

• 40% Australian Shares

  • 25% Larger companies

  • 10% Smaller companies

  • 5% Sector or Dividend Focus

• 25% International Shares

  • 15% Developed Markets

  • 10% Emerging Markets

• 20% Bonds/Fixed Income

  • 12% Australian Bonds

  • 8% International Bonds

• 10% Real Estate

• 5% Alternative Investments

• 5% Commodities / Infrastructure

As a general rule, one should never do exactly what Chat GPT says. But this is a useful place to start, and a reasonable yardstick to compare any alternatives against.

Professional Investor Responses

Warren Buffet is possibly the world's best investor, achieving an average return of 20% pa since 1965. Buffet recommends all investors buy low-cost, diversified index funds. In his will, his estate will be invested for his wife's benefit:

• 90% in a low-cost S&P 500 index fund and

• 10% in short-term government bonds

Ray Dalio launched and ran one of the world's top-performing hedge funds, which has returned on average 12% pa since 1975. Dalio proposed the well-known "All Weather" portfolio, designed to perform well across various economic environments:

• 40% long-term bonds

• 30% shares

• 15% intermediate-term bonds

• 7.5% gold

• 7.5% other commodities

It's all about the Execution

Successful investors know NOT to worry about finding the perfect strategy, but focus instead on effective execution. There are no $million-dollar ideas, there’s only $million-dollar execution.

Creating the 'ultimate portfolio' comes down to firmly in sticking with a strategy over the long term, more than in optimising your percentage allocation.

A Financial Adviser’s Tips

I’ll leave you with my 3 simple rules I share with clients to help them choose a strategy that works best for them:

1. Make investing fun - choose a strategy you'll enjoy setting up and managing, even 5 years from now. Investments should add joy to your life.

   1. Don't make investing a drain - being consistent with your strategy requires you to not hate the work. Automate or outsource the parts you don’t enjoy (where practical) and cultivate a winner’s attitude.

2. Make it simple - complexity breeds mistakes, confusion and energy drain. Good strategies become increasingly complex over time, but a great strategy should be simple enough to explain to a child.

3. Leverage your expertise - You have unique money-making talents. Learn what you could be best in the world at, sharpen these skills You don't need to hands-on, but you do need to at least understand your strategy in depth, and know how to adapt it over time

Want to speak with one of our hand-picked financial advisers? Fill out the form on our website and we’ll put you in touch.

• Andrew ‘Twiggy’ Forrest built Fortescue into a $60 billion mining giant, up there with BHP, Rio Tinto and Vale as one of the big 4 players in iron ore globally. In this snippet from our recent podcast interview, Twiggy shares the lessons he’s learned from 20 years of running Fortescue.