How do you overcome the inherent conflicts of investing in Australian stocks when you're the Prime Minister?
It's quite simply really.
You don't.
At least, that's the approach new Prime Minister Malcolm Turnbull has taken, with no direct stakes in any Australian company shares.
But Mr Turnbull has taken an approach to investing that could easily be emulated by many retail investors. He told Fairfax Media last month that his investments are rather limited and that 'it's very boring and passive'.
Exactly the sort of hands-off approach you might expect someone as busy as the PM to take.
Taking a closer look at Mr Turnbull's investment portfolio, it contains no less than 10 different Exchange Traded Funds (ETFs) giving him exposure to assets like high yielding bonds and information technology companies – including the likes of Google, Apple and Amazon. If you want to see the portfolio for yourself (or any politician for that matter) – see here.
Hunt for yield
Interestingly, in December 2013, Mr Turnbull exited many of if his direct equity investments, instead preferring to keep a minimal selection of ETFs, including the Vanguard Dividend Appreciation ETF – which despite the name – pays just 2.3% in annual dividends according to Google Finance. It's just one of three ETFs focused on providing higher yields and income, rather than capital appreciation. The portfolio also includes the Dow Jones Composite Global Yield ETF and the iShares High Yield Corporate Bond ETF.
More passive approach
Additionally, the PM also has a wide selection of managed funds including Kerr Neilson's Platinum International Fund and John Hempton's Bronte Capital. In fact, it appears Mr Turnbull has handed over more control of his investments over the past year or so to savvy fund managers and hedge funds – for which he is likely paying higher fees.
Interestingly, Mr Turnbull has no direct exposure to China – although many global companies held by his managed funds and ETFs will have exposure.
Risk and opportunity
Like many value investors, Mr Turnbull sees risks and opportunities in the current volatility – as we explained yesterday – get used to it.
How could you emulate the Prime Minister's portfolio?
With an international trading account (Interactive Brokers or Options Express are but two providers), you and I could gain access to all the ETFs Mr Turnbull holds in his portfolio. Many of us could also access many of the managed funds and other fixed income securities in his portfolio too.
We can also diversify our portfolios beyond company shares into bonds, currencies and commodities ETFs, simply with any online ASX brokerage account – as I outlined in this series.
Foolish takeaway
Investors need to decide how active they personally want to be with their portfolio. If you don't have the time or inclination, setting up a widely diversified, passive investment portfolio like Prime Minister Malcolm Turnbull is not that difficult.
