Trying to reduce my risk

Unfortunately, owning individual shares you can sometimes get quite painful share price moves, which I have got reminded of today. My second largest holding (Ebos Group) has lost a big $2 billion contract with the Chemist Warehouse and subsequently seen its share price decline substantially.

I made a small buy last week of Macquarie Group, which is a large global investment bank with a $69 billion market cap. I don't think that this was an overly risky purchase, but as I have just learnt with Ebos, even when you think that you own a safe company, they can still make drastic share price declines. Especially if they lose a big contract.

For my next share to buy, I don't fancy buying something that could make a big decline. This movement today in Ebos has given my risk tolerance a bit of a hammering. My solution is not to buy an individual share, but to buy an ETF. I own almost all of my ETFs on the NZX through Smartshares. The one ETF I own outside the NZX, is the QRE on the ASX. The QRE is the Betashares Australian Resources Sector ETF. It has an absurb trailing yield of 14%. I am not going to delude myself into thinking that is going to be its next years trailing yield, but the advantage in this ETF is not its yield, but its diversified exposure the strong resources sector.. The main holding is the Big Australian BHP, followed by Woodside Energy, Rio Tinto and Fortescue Metals. So while I think that Fortescue is overvalued, I don't think that BHP or Woodside are overvalued. There is exposure to gold through Newcrest Mining, and to growing resource companies like Pilbara Minerals. The Aussie resource sector is one that I am not overly exposed too, so I won't be putting too many of my eggs in one basket so to speak. And while the yield won't be as high as it has been the past year, it will still be decent. I can reinvest those dividends and watch the holding grow.

I have just under $3,000 in the QRE ETF at the moment, and this new buy will give me around $6,000. That is a sensibly sized holding. And while the share price of the ETF may decline at times, I will be avoiding the drastic declines that you sometimes see in individual shares aka. Ebos.