My Optimal Portfolio Construction?

Everyone goes through their investing journey and learns many lessons along the way; such as to be patient, not too get emotional about a stock, and to not have too many stocks in ones portfolio. Another lesson I have been learning throughout this year in particular, is that the NZX doesn't contain many great companies. I have been stung this year owning Fletcher Building, Manawa Energy and even Spark. Meanwhile many stocks/companies overseas have done great; Nvidia, SMCI and Apple being a few of them. My best 'stocks' on the NZX haven't actually been stocks at all, but ETFs, namely the TWF, USF and USG.

Jim Cramer often talks on his show about how you should put your first $10,000 in an S&P 500 index fund (like the USF). If you have a busy full time job, he actually says that you should put all your money into index funds, because you simply don't have time to research individual stocks. But if you have the time and inclination to do research, then you should devote some of your portfolio of owning individual stocks. But how much? I have always devoted the majority of my portfolio to owning individual stocks. But considering that the NZX seems like such a weak stock market, then maybe I should be devoting more of my capital to owning index ETFs.

I own my current ETFs on the NZX, which I buy in regular monthly installments through Smartshares. This seems to work quite well for me, as I pay no commissions on my ETF buys, and management fees are relatively low, although not as low as they would be on Hatch or Sharesies. I buy my individual shares at the moment though ASB Securities and Hatch. The Hatch account, which is American stocks, does quite well. As already mentioned, the NZX account has not been doing so well, and actually nor has my ASX account. The ASX seems to be dominated by a lot of big boring companies like BHP, CSL and Rio Tinto. Although there is the occasional tech company like Seek that has had phenomenal share price appreciation. During commodity price booms, smaller resource stocks like Poseidon Nickel in the 1970s, can also have terrific gains.

The wider point to all of this is that the wealth of the worlds stock markets is becoming more concentrated in a few companies like Nvidia. And the fact is that none of these companies exist in NZ, and certainly don't list on the NZX. Index ETFs are market capitalization weighted, so their performance will be mainly driven by the largest companies, the likes of Microsoft and Amazon. Stocks like these are often priced for perfection, and trade at high earnings multiples, but that is simply a reflection of these being the best companies in the world. And I think that going forward I will be devoting more of my investing capital to owning these kinds of companies, rather than the likes of Fletcher Building and Sky Television.