Podcast: The diversification dilemma

Kristia van HeerdenLatest, The Fat Wallet

Diversification is an important part of risk management in a portfolio. Unfortunately, as with all things finance, there’s no simple diversification solution. This week, we address two diversification concerns: being too diversified and not being diversified enough.

In my own portfolio, I pay attention to three diversification criteria, namely assets, regions and sectors. Since I want my portfolio to grow as much as possible, I prefer equities as an asset class. I don’t diversify this much, since I understand the risks involved and I have enough time to recover from market events.

To diversify across regions, I choose equity-only investment products that invest in multiple regions. ETFs with world-wide exposure are excellent vehicles for regional diversification.

In terms of sectoral diversification, I prefer investment products that invest in sectors relative to their importance in the overall market at the moment. I do this by avoiding sector-specific investments.

My single ETF strategy also takes care of my diversification needs. When I can no longer afford single asset class exposure, I’ll have to start including assets that are less risky. For now, one ETF rules them all.

Clean beeped show is as below.


Can it be wrong to be too diversified?

My portfolio is probably made up of 75/25 between ETFs and pure direct shares. The 25% shares I am not worried about as, as I get older this percentage will only get smaller and most of my investments will be in ETFs. I’m 37 now. I have the ASHT40, GIVRES, STXIND, S&P500, STXNDQ, SYGWD ETFs and also the STXPRO and SYGLB in my TFSA.


I was doing some housekeeping on my two ETF portfolios. I ran a report on all dividends received in the 2018 calendar year.

Even though my PTXTEN from a capital appreciation perspective is deep in the red, I was really happy with the total div received compared to all the other ETFs in my portfolio.

My other property ETFs are not performing as well. For example CoreShares S&P Global Prop did about 50% of what my ptx 10 did.

Which other ETFs have a similar yield? I would like to diversify and buy more etfs but with yield in mind for this particular portfolio. I’d also prefer etfs that are more geared towards global exposure.  It doesn’t have to be property.


I have taken a more active approach to my TFSA and am now sorting out my TFSA with EasyEquites.

Now that I have gained the confidence to self manage my TFSA, I am wondering if I should do the same with my RAs?

Between a Retirement Annuity (RA) and a Tax Free Savings Account (TFSA), which should be prioritised?

Is managing your own Retirement Annuity through a site like EasyEquities a viable option?

I noticed the RAs have fact sheets and it feels similar to TFSA. The fees are also under one percent which is way cheaper than with my current provider.

Do I have to take into account Reg 28 when I am investing on the platform? I currently assume all available options are all Reg 28 compliant and I can just invest where I desire.

Are there any investment strategies with regards to a RA? I am only away of appropriate risk e.g. high risk early and move to low risk near retirement.

Could a RA be seen as an alternative to life insurance (assuming living annuity)?

E.g. Take life insurance for the first 5 years of your working life and after that, cancel the life insurance as the RA will pay out to beneficiaries to an equivalent life insurance?

RAs will pay out on serious ill-health / Disability. Is this not an income protector or are there scenarios where an income protector would still be needed as the RA will not cover? Also, would you even recommend an income protector?


My mother, who moved overseas, sold her primary residence.

She has around R1.4m sitting in cash. She is 55 years old, has just enough money to live off from alternative income. Listening to your show, buying another property to rent out seems like a bad idea.

She has a place to stay and enough money to live off. She would like to know what is the best thing to do with the money as she grew up thinking buying property is the only good thing to do with large sums of cash.


10x is relatively new and my friend asked what would happen to the monies invested with the fund manager should they go bust.

Is there a way we can “insure” our investments against funds managers going down.


I have a few debit orders with EE and I want to be sure that when buying on those predetermined monthly dates I am not penalised by buying at inflated prices (when market maker is offline). How would you suggest I go about this?

Nerina pointed out the cost of debit orders.


‪If we ask our financial adviser to drop his fees – and rather pay for his/her time – what rate is reasonable? And how much time per year ?

I have only a basic RA and basic cover (disability / income protection) – under the financial advisor’s care. I doubt it’s more than 2-3 hours per year? ‬

For my actual meetings with my adviser I am paying close to 20k per year – last five years are hardly beating cash – with a pricey platform (AG).   

Don’t want to be insulting but short of cancelling and moving to 10x I thought I would offer to pay per  hour and see if anything changes?


My wife and I max out our TFSAs and have been for the last two years.

I have a pension fund through my work which is relatively fixed. My wife works for herself so, based on advice at the time, opened up an Allan Gray (bleh, fees) Unit Trust. We have ceased contributing to the fund but are unsure of what to do with the amount sitting there (approximately R120k). We have a home loan and are well ahead of curve there – likely to be paid off in about 10 years or so.

What do we do with the R120K?

One option was plowing it all into the home loan to reduce our debt. That would sure feel great but then our only retirement savings would be our TFSAs and my pension fund from work. This feels a bit light and the R120k was initially set aside as part of a retirement investment plan.

The second option we considered was putting this amount into some low cost ETFs on easy equities as a discretionary investment.

The third option was some sort of a split (80/20) between ETFs and the home loan.

Is there something else I am missing?

With the potential of kids in the future we are unsure of our ability to push as aggressively into investing or the loan.

The Fat Wallet Show with Kristia van HeerdenThe Fat Wallet Show is a no-nonsense personal finance and investment podcast hosted by Kristia van Heerden and Simon Brown. Every week we answer questions by a growing audience of finance enthusiasts. Submit your pressing money and investment questions to ask@justonelap.com.

Subscribe on iTunes

Meet the Just One Lap team at these live events

Subscribe to the Just One Lap weekly newsletter here

[adrotate banner=”8″]