Author Topic: Australian Investing Thread  (Read 507179 times)

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Australian Investing Thread
« on: July 29, 2014, 02:19:17 AM »
Things are a bit different now! Back in the day there was only 2-3 of us hanging out, now with a few dozen, I think it's worth having our own discussion thread about how we invest, changes and updates, news and critique.

It seems every week or so another Aussie comes on the forum with a few investing questions, and maybe it'd be more productive and useful to have a central discussion, rather than disparate pockets.

So, please feel free to ask questions, post ideas, offer suggestions, pose solutions, proffer allocations, exploit loopholes!
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #1 on: July 29, 2014, 02:26:27 AM »
I'll go first, my current investments are:
$17k cash
$20k stocks (1/2 AUD, 1/2 other)
$16.5k bonds
$6k Whiskey Barrell

I'll be adding about $10k of my savings into investments soon, and I was weighing up my options.

So far (6 months in), the stock market has kept relatively stable (I think total ups and downs total $200 change) - but the dividends have been nice. I've been investing in index funds (IAU and Vanguard's US/World). I'm tempted to throw a few more $$$ this way, as stocks are what I'm biased against.

Bonds have been pretty cool - I'm glad they are easily purchased now. They're a bit conservative (but then, so am I).

I'd like to buy 1 barrel a year - it seems a small risk and the returns are higher (10%) - exposing about 10% of my portfolio seems fine.

I wish my strategy was a bit more coherent and conscious - at the moment I'm choosing asset classes not-quite-arbitarily (diversifying). Ideally, I'm after average returns and growth, and hopefully build wealth without massive ups and downs (which I'm not really comfortable with).

Any thoughts on the strategies - any tips from my follow Australians?
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

goponcho

  • 5 O'Clock Shadow
  • *
  • Posts: 2
  • Location: Western Australia
Re: Australian Investing Thread
« Reply #2 on: July 29, 2014, 11:09:18 AM »
Good idea! I'm new but keen!!

Me+partner:

x2 houses value 1.3million, equity 130k. One is a PPOR
ETF 2k
200k cash

Spent the last year learning as much as could about RE and happy to sit on it to see how it pans out for a few months.
Popping all excess monies in my offset account for my PPOR while i learn as much as i can about value investing. Still minimal knowledge.
Will likely sink some more money into an ETF as i learn!

Long journey ahead, good to have a place to bounce ideas!
Knowledge and experience

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #3 on: July 29, 2014, 05:32:35 PM »
Why so much in RE?

I've been interested in it for awhile, but the entry costs seem way too high. I also keep reading things about how the level of mortage debt, and the price rises in the cities are unsustainable. I don't know what credence to give these, bt RE seems uber complex.

www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

TB_J

  • 5 O'Clock Shadow
  • *
  • Posts: 33
  • Location: Perth
Re: Australian Investing Thread
« Reply #4 on: July 30, 2014, 10:31:53 PM »
Great idea. Out of curiosity Is anyone in a non-ETF vanguard fund? You know the ones with the 5k minimum buy in?

I've got no RE yet. Hopefully soon.

I'm at approx 90k individual stocks
3k cash
20k asx 300 mutual fund (super)

Liabilities - 9.5k personal loan used for shares, tax deductible but stupid high interest rate.

Age 25.

bigchrisb

  • Pencil Stache
  • ****
  • Posts: 858
Re: Australian Investing Thread
« Reply #5 on: July 30, 2014, 11:22:21 PM »
My data is over in the journals thread, but a quick recap, age 32:

Assets:
AU shares: $457k
AU REITS: $108k
AU LICs (closed end funds): $350k
US ETFs: $142k
International ETFs: $212k
Car: $6.5k
Cash: $160k
Cash collectible in next 2 years (payout from company sale) $306k
First home saver account: $21k
Deposit paid on house (not yet settled): $40k
Total: $1802k

Liabilities:
Margin loan: $500k (fixed at 5.35% until June)

Add in settlement of a house in October (purchase price $770k), which is why I'm so cash heavy at the moment.

Net worth approx $1.3M

Main themes for me at the moment are:
- I want to stop paying rent out of taxable income (hence the PPOR purchase - will pay this out in full in the next year)
- Desire to refinance margin loan against PPOR - lower interest rate, no margin calls
- Continue to make use of trust and company structures where it makes sense
- I'm feeling stock values are a bit stretched, so not keen to leverage into them at the moment (I'm guilty of occasionally being a naughty market timer!)
- I want to increase international weighting (currently about 15% international, if you include RE in my asset allocation), I feel I should be more like 50%
- Need to keep savings rate up and avoid lifestyle inflation.

Great to see more Aussies!

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #6 on: July 31, 2014, 02:37:30 AM »
Chris why do you say the market's overinflated right now (stocks, that is)?
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

Meat Popsicle

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: Australian Investing Thread
« Reply #7 on: July 31, 2014, 02:49:00 AM »
Excellent idea for a thread!

In all honesty I'm a pretty late starter on these financial matters. Until about three yeas ago I was completely oblivious to these FI ideas, after a year of researching, then another of procrastination, I've finally had a sensible year of spending ...at the age of 33.

Currently I'm cash & stocks, and have begun looking at bonds, my question for the Australian investor is where's a good place to buy bonds?

(Fiigs appears in various searches and ASX has a market for bonds however there seem to be little volume)

marty998

  • Magnum Stache
  • ******
  • Posts: 4286
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #8 on: July 31, 2014, 06:02:17 AM »
Hmm...Bonds are a tough one. Have you considered hybrids? Personally I'd stay aways from any hybrids that are not issued by the banks, however many preference shares come with those glorious franking credits attached.

happy

  • Magnum Stache
  • ******
  • Posts: 3272
  • Location: NSW Australia
Re: Australian Investing Thread
« Reply #9 on: July 31, 2014, 08:02:57 AM »
Just posting to keep updated: keen to learn more.
Journalling at Happy Aussie Downshifter

bigchrisb

  • Pencil Stache
  • ****
  • Posts: 858
Re: Australian Investing Thread
« Reply #10 on: July 31, 2014, 03:25:39 PM »
Chris why do you say the market's overinflated right now (stocks, that is)?

Pure speculation. I'm still fully invested in stocks and I'm not selling. However I'm more reluctant than previously to buy on margin at the moment. My reasoning in that:
A) a g20 nation just defaulted on its bonds (Argentina)
B) a European nation just annexed part of its neighbor (Russia/Ukraine)
C) most of the middle east seems to be at war (iraq, Syria, lybia, Israel, palestine)

Usually any one of those would freak the market out. All three and not a blip? Seems like investors have forgotten fear, and that scares me a little.

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #11 on: July 31, 2014, 07:49:52 PM »
Hmm...Bonds are a tough one. Have you considered hybrids? Personally I'd stay aways from any hybrids that are not issued by the banks, however many preference shares come with those glorious franking credits attached.

Marty (or anyone) - what is a hybrid? I've never heard of this term used when discussing bonds? Where do I find out about them?

Chris - thanks for the explanation. I was thinking of investing sooner rather than later because most markets have a run up over the October-Christmas period with increased spending on travel, presents, entertainment, food, transport, etc. Without market timing, sooner is often a bit better.

I might just invest more OS - since my job and many other investments are Australian-centric.

Which brings us to another question I wonder about: how important is international diversification for you guys? Australia doesn't really seem like the place that'll go caput and its market crash into nothing (though there are always some alarming things happening and worries for the future), but I've tried to balance out my investments here (stocks/bonds) with 25-50% international (US/Top100 companies, etc). My rationale is that, in general, larger companies tend to be a bit more stable (coca cola, apple, sony, etc, seem to do ok no matter what their domestic market is doing).
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 3461
  • Location: Anywhere/Perth.
Re: Australian Investing Thread
« Reply #12 on: July 31, 2014, 08:37:09 PM »
I've been thinking about starting a thread, so yay for this! I'm only just dipping my toes in, in regards to serious investments, so far... most of my money is still in term deposits, etc.

I'd love to have a mix of both Australian and international investments, as well.

Just wondering if anyone has any recommendations from this list of ETFs?

http://au.ishares.com/publish/content/documents/pdfs/product_list_au.pdf

Or are there cheaper alternatives?

bigchrisb

  • Pencil Stache
  • ****
  • Posts: 858
Re: Australian Investing Thread
« Reply #13 on: July 31, 2014, 08:46:21 PM »
The expense ratios on those aren't too bad really.  There are some cheaper alternatives if you really want to screw down the costs. some I have used include:
VAS - Vanguard Australian shares 0.15%
Also consider the listed investment companies (some pros and cons), several of which are cheaper than Vanguard (MLT at 0.125% and CIN at 0.09% last time I checked)
 

goponcho

  • 5 O'Clock Shadow
  • *
  • Posts: 2
  • Location: Western Australia
Re: Australian Investing Thread
« Reply #14 on: August 01, 2014, 12:30:02 AM »
Why so much in RE?


Because i have very limited investing knowledge, RE seems to have a decent return long term, have placed my money in there while i learn further. Money was sitting in the bank prior to this. Studied RE books/forums/followed local market for a bout a year prior to purchasing. Now focussing on learning how to gain a reliable return through value investing which can at least beat inflation!
Knowledge and experience

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #15 on: August 02, 2014, 05:02:32 PM »
G'day All, first post, yay!

I'm a 36 year old guy, married with a 2 year old daughter, based in Sydney.

LonerMatt, one of the main advantages that RE provides in Oz is leverage, obviously works both ways though...banks are happy to lend against home equity, so once you get established, that property provides access to funds for equities investment at 4.xx% with no margin calls, and your home is CGT Free....one of the few free kicks available.

I have SMSF and a Family trust and outside of our family home I am not in RE. Outside of our home, Investments as below ;

- Shares in unlisted business of which i am a director, dividends streamed to my wife via trust.
- SMSF holding 80% Oz stocks, Blue chips and the big LIC's. 20% US stocks, which is ETFs and direct stock in BRK-B

My wife and I both salary sacrifice into super, works well for her as she only earns 45k, so she salary sacrifices most of her pay so after trust distributions (fully franked divi) she gets a cheque from the ATO.

Shortly, family trust will taking out a 5 year interest only loan at sub 5% against some home equity for income focused buy and hold...VHY as primary vehicle, with Large LIC's (when cheap...ie. discount to NTA) and 25% US stocks unhedged for some diversification. This will be a DCA draw down situation whereby $XX,XXX will be drawn down and invested twice annually on specific days as set in the investment plan, and invested in predetermined weights so that no attempt at kidding myself with market timing, or getting weak kneed can occur!

terrier56

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Australian Investing Thread
« Reply #16 on: August 02, 2014, 05:23:34 PM »
Good Thread Idea,

Chris b seems to have this game locked up. about me.

20k shares 24k cash

looking to get a property in perth when I get to 90k (20%) and after all that I will start investing.

Probably a mix of Vangard, ARIETs (I like the look of GOZ) and LICs.

Does anyone know if I can do this. I am married and have joint bank account with wife. Can she purchase all the investments under her name since I earn significantly more than her?? any advice appreciated.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #17 on: August 02, 2014, 05:36:32 PM »
Terrier56 - Yes, just set up the brokerage account in your wifes name, or if you go Vanguard unlisted funds then same thing.

terrier56

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Australian Investing Thread
« Reply #18 on: August 02, 2014, 06:16:22 PM »
Terrier56 - Yes, just set up the brokerage account in your wifes name, or if you go Vanguard unlisted funds then same thing.

Great news indeed. thanks.

marty998

  • Magnum Stache
  • ******
  • Posts: 4286
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #19 on: August 02, 2014, 08:52:23 PM »
Hmm...Bonds are a tough one. Have you considered hybrids? Personally I'd stay aways from any hybrids that are not issued by the banks, however many preference shares come with those glorious franking credits attached.

Marty (or anyone) - what is a hybrid? I've never heard of this term used when discussing bonds? Where do I find out about them?


Usually called preference shares, listed on the ASX. Have bond like characteristics (pay a fixed return, linked to BBSW + margin). Some pay interest, some are dividends with franking credits attached.

Terms vary per issuer, some are redeemed at face value, some get converted to equity/ord shares at a discount. As always gotta DYOR.

marty998

  • Magnum Stache
  • ******
  • Posts: 4286
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #20 on: August 02, 2014, 08:56:19 PM »
Shit. There's a little speccy stock I've been looking at for a while now - Minatour Exploration (MEP). Management have a good track record, they discovered the Oxiana Prominent Hill deposit.

Fell as low as 8c a couple of months ago and was afraid to pull the trigger. Just released some good drill results and now trading at 26c. No guts no glory, missed the easy gains on this one.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #21 on: August 02, 2014, 09:43:54 PM »
Speculation works great in hindsight :)  A few years ago I worked out I didn't have the temperament for those sort of plays, i'd spend all day looking at the screen rather than grow my business....silly stuff indeed. To each their own though.

Re bonds, ASX:VGB might be worth a look, Vanguard Oz Govt's bonds ETF. mer is 20bps....market cap is very low so not sure of the spread. RCB & IAF (corporate and composite index) are available too. Forget the Vanguard unlisted products, the fees are killers.


LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #22 on: August 02, 2014, 09:52:13 PM »
Few ideas:

1. With bank interest so high (think mine's 4-5%) keeping cash is still a great option: I've been umming and ahhing about investing most of my cash, but the liquidity and returns are easily on par with the market over the past 6 months (well, my foray into the market).

2. I really, really need to know about the ATO and salary sacrificing and all that jazz. I just found out that some states have salary deferring in my profession - taking 4 years @ 80% pay for a fifth year of 80% pay but no work. Interesting.

3. What is ''franking"?
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #23 on: August 02, 2014, 10:03:50 PM »
Where are you getting 4-5% Matt? 4%+ at the moment is just a BS honeymoon rate, typically over a few months. 3.25% is more like the ongoing rate from online guys like ING Direct. Cash is just buffer, not an investment. "Beware the yield trap" as Peter Thornhill says.

Franking applies under the Australian Dividend imputation scheme whereby there is no double taxation on dividend payments from a company, a dividend received with 100% franking means that the company has paid tax at company rate (30%) on that distribution, franking credits are attached to that payment to you. So when you see dividend yield of 5% with 100% franking, we are actually talking about a grossed up equivalent of 7.10%. in other words, franking matters!

Cash franking = zero
ASX200 index franking level = approx. 70-80%
LIC's franking level = 100%

What you want is both yield, and growth of the value of the underlying asset......cash can never do that.
« Last Edit: August 02, 2014, 10:06:03 PM by The Falcon »

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #24 on: August 02, 2014, 10:26:52 PM »
Where are you getting 4-5% Matt? 4%+ at the moment is just a BS honeymoon rate, typically over a few months. 3.25% is more like the ongoing rate from online guys like ING Direct. Cash is just buffer, not an investment. "Beware the yield trap" as Peter Thornhill says.

Franking applies under the Australian Dividend imputation scheme whereby there is no double taxation on dividend payments from a company, a dividend received with 100% franking means that the company has paid tax at company rate (30%) on that distribution, franking credits are attached to that payment to you. So when you see dividend yield of 5% with 100% franking, we are actually talking about a grossed up equivalent of 7.10%. in other words, franking matters!

Cash franking = zero
ASX200 index franking level = approx. 70-80%
LIC's franking level = 100%

What you want is both yield, and growth of the value of the underlying asset......cash can never do that.

1. Thanks for the explanation of franking - does that mean that we (investors) have to claim that against ATO - or that it is automatic?

2. Ubank gave me 4.17% this month - I get a 'bonus' for depositing a consistent amount, but you're right the trend has ben interest rates going down

3. How do I get into hybrids? There seem to be quite a few attached to banks, so it might be an interesting experiment to have 10k or so in them.

At the moment, I feel like my investing is so random - I just buy different assets, but there's no coherence or strategy. I'm not OK with this, but I barely understand the most basic options.
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #25 on: August 02, 2014, 10:39:58 PM »
I'm afraid I don't do my own tax but essentially when you do you annual return you report dividends and franking then. Your accountant will take care of that.

I wouldn't get too worried about hybrids as yet. I think the starting point would be picking up something like Burton Malkiel's "A random walk down wall street" and getting your head around basic investment philosophy, products, risk, life stage planning and the like. From there you can start to build an investment framework that suits you. Then you work in Australian specific things like franking, super and tax into that plan/asset mix. Vanguard Australia actually has some pretty good educational stuff on their site as well.
« Last Edit: August 02, 2014, 10:43:11 PM by The Falcon »

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #26 on: August 02, 2014, 11:01:09 PM »
I'm not worried, I just was interested in how one buy them - not saying I will!

I've read a few books on investing (asset allocation, PP), but while I understand what I want conceptually, it's difficult to make that a reality as the ASX (as many other places) is incredibly complex in terms of options.

Basically, I just would like steady, average returns with some dividends along the way, happy to keep pace with the market, generally. I always thought if I had something like 60/40 stocks/bonds, or 70/30 that'd be fine, but I'm not adverse to a bit more risk at times.
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #27 on: August 02, 2014, 11:07:32 PM »
Its not incredibly complex. If you want a 70/30 diversified portfolio and you cant put it together and administer it yourself (ie. ETFs and direct shares), you could do far, far worse than buying this ;

https://static.vgcontent.info/crp/intl/auw/docs/funds/factsheets/ret/vlsgf.pdf?20140731|103700

then just work on your MMM savings side and BPAY $$$$ into Vanguard every month. Simple to transact, simple tax reporting.

Depending on your PAYG income is, and your living arrangements you'd also need to consider salary sacrifice, getting your super into a low cost fund, and what you will be doing viz. putting a roof over your head. Remember this is a very long game....ignore the market noise and just keep saving and investing...always.

It can be as simple or as complex as you make it.
« Last Edit: August 02, 2014, 11:10:09 PM by The Falcon »

SU

  • 5 O'Clock Shadow
  • *
  • Posts: 91
Re: Australian Investing Thread
« Reply #28 on: August 03, 2014, 01:28:14 AM »
Quote
I'm afraid I don't do my own tax but essentially when you do you annual return you report dividends and franking then. Your accountant will take care of that.

I think these days the ATO is taking care of this for you (<3 the ATO). Last time I went to report dividends and franking credits my accountant told me not to bother as the securities registers (ie. CHESS etc) are now reporting directly to the ATO.

limeandpepper

  • Magnum Stache
  • ******
  • Posts: 3461
  • Location: Anywhere/Perth.
Re: Australian Investing Thread
« Reply #29 on: August 03, 2014, 01:50:21 AM »
The expense ratios on those aren't too bad really.  There are some cheaper alternatives if you really want to screw down the costs. some I have used include:
VAS - Vanguard Australian shares 0.15%
Also consider the listed investment companies (some pros and cons), several of which are cheaper than Vanguard (MLT at 0.125% and CIN at 0.09% last time I checked)

Thanks for that, bigchrisb!

Its not incredibly complex. If you want a 70/30 diversified portfolio and you cant put it together and administer it yourself (ie. ETFs and direct shares), you could do far, far worse than buying this ;

https://static.vgcontent.info/crp/intl/auw/docs/funds/factsheets/ret/vlsgf.pdf?20140731|103700

then just work on your MMM savings side and BPAY $$$$ into Vanguard every month. Simple to transact, simple tax reporting.

Thanks for this suggestion, The Falcon. Simple transactions and tax reporting is an enticing feature indeed...

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #30 on: August 03, 2014, 02:07:33 AM »
No worries, the starting MER is a little higher than I'd like, but it's a solid product and auto rebalances. MER reduces for higher balances. You can't go wrong with Vanguard...not many unlisted funds you can say that about!

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #31 on: August 03, 2014, 03:02:35 AM »
Its not incredibly complex. If you want a 70/30 diversified portfolio and you cant put it together and administer it yourself (ie. ETFs and direct shares), you could do far, far worse than buying this ;

https://static.vgcontent.info/crp/intl/auw/docs/funds/factsheets/ret/vlsgf.pdf?20140731|103700

then just work on your MMM savings side and BPAY $$$$ into Vanguard every month. Simple to transact, simple tax reporting.

Depending on your PAYG income is, and your living arrangements you'd also need to consider salary sacrifice, getting your super into a low cost fund, and what you will be doing viz. putting a roof over your head. Remember this is a very long game....ignore the market noise and just keep saving and investing...always.

It can be as simple or as complex as you make it.


I think the bolded part is the most important thing to keep in mind.

I'm happy doing my own buying, etc, just as long as I'm keeping it simple.

I'll go for:
70% stocks (35% international, 35% Australian)
30% bonds (all Australian)

This thread is already mad useful.
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #32 on: August 03, 2014, 03:10:37 AM »
That's 3 ASX listed ETFs mate. Done and dusted :)

LonerMatt

  • Bristles
  • ***
  • Posts: 281
Re: Australian Investing Thread
« Reply #33 on: August 03, 2014, 03:28:24 AM »
Since I already own bonds outright it's marginally more complex than that, but basically you're right: KISS.
www.mattdunnephoto.com
IG: matt.dunne

When you get wealthier make the table bigger, not the wall higher.

Ozstache

  • Pencil Stache
  • ****
  • Posts: 742
  • Age: 49
  • Location: Oztralia
Re: Australian Investing Thread
« Reply #34 on: August 03, 2014, 05:37:34 AM »
I receive a military pension, which effectively counts as an inflation adjusted cash source income stream. For my other investments, my AA is roughly:
- 65% super (Sunsuper balanced fund)
- 15% Aussie shares (Vanguard VAS ETF)
- 25% fixed interest (various net bank accounts ~ 3.8%)

My portfolio is less share heavy than I had planned, due to my concern that share markets are potentially due for a sizable correction soon and that I can still achieve my target WR without having to take more risk than this. As comforting as this has been, it has cost me around 3% lower portfolio performance for the year to date, which is not too bad in the grand scheme of things.

If I wasn't in receipt of a military pension, I would have far less in super as I have 14 years to go until preservation and I reckon the government may move that age to the right in the future. I am also fortunate in that I can withdraw nearly half of my super before preservation age due to the type of contribution it was (unrestricted, non-preserved), so I've effectively got an each way bet on changing superannuation laws.

Apart from owning my house outright, I have no other interest in investing in property, especially in (IMO) overpriced Australia. The only way property really stacks up with investment numbers compared to shares is using leverage. In Australia at least, property is more about capital gain than yield, which is not very useful when you are after income streams like I am. As such, for me property is just too much administrative and hands-on management effort for too little income compared to passively receiving quarterly share dividend payments paid directly into my bank account.

marty998

  • Magnum Stache
  • ******
  • Posts: 4286
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #35 on: August 03, 2014, 05:46:16 AM »
Quote
I'm afraid I don't do my own tax but essentially when you do you annual return you report dividends and franking then. Your accountant will take care of that.

I think these days the ATO is taking care of this for you (<3 the ATO). Last time I went to report dividends and franking credits my accountant told me not to bother as the securities registers (ie. CHESS etc) are now reporting directly to the ATO.

They won't report it if your shares are held in joint names. And besides, it still up to you to include them in your tax return, especially if you are an early bird who lodges in July when not all the data may have been reported.

HappierAtHome

  • Walrus Stache
  • *******
  • Posts: 5281
  • Location: Australia
Re: Australian Investing Thread
« Reply #36 on: August 04, 2014, 09:30:26 PM »
Its not incredibly complex. If you want a 70/30 diversified portfolio and you cant put it together and administer it yourself (ie. ETFs and direct shares), you could do far, far worse than buying this ;

https://static.vgcontent.info/crp/intl/auw/docs/funds/factsheets/ret/vlsgf.pdf?20140731|103700

then just work on your MMM savings side and BPAY $$$$ into Vanguard every month. Simple to transact, simple tax reporting.

Okay I'm super lazy and this appeals to me.

It looks like it's paid an average 4% 'distribution' annually, does this mean that as well as any capital growth (which I would need to sell units to access), it will also give me, on average, 4% a year without me needing to sell anything?

Possibly a really dumb question but I'm a beginner when it comes to investing :-)

The idea of my asset allocation being sorted out for me, so I don't have to rebalance or make those decisions, sounds enticing right now.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #37 on: August 04, 2014, 09:37:44 PM »
Yep, that's it in a nutshell. The distribution will be a mix of dividends and interest, there would be some franking credits included from the australian shares component.

MsRichLife

  • Pencil Stache
  • ****
  • Posts: 536
  • Age: 40
    • Living My Rich Life
Re: Australian Investing Thread
« Reply #38 on: August 04, 2014, 10:19:54 PM »
Haven't read through the entire thread yet, but I'm new here and keen to discuss investing with other Aussies.

Assets:
RE: $1M
Cash (term deposits & ING Savings): $270k
Super: $770k

Total: $2040k

Liabilities:
$Nil

Net worth: ~$2M

Investing has been pretty 'simple' for the last few years. Our goal was to get out of debt and then save some cash. As FIRE approaches I'm finding myself starting to think more about how to best to invest for the long haul. I'm pretty conservative after being burnt really bad during the GFC. The fact that I've started to look at getting back into shares probably means that we are due for a huge downturn! :)

Anyway, I look forward to bouncing ideas around with you all.

Now off to read the thread.....

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #39 on: August 04, 2014, 10:52:39 PM »
Hi MsRichLife, when you say you were burnt badly during the GFC what did you hold and what did you do?

PS. Well done, $2M net worth is not to be sneezed at :)

Majik

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Re: Australian Investing Thread
« Reply #40 on: August 04, 2014, 11:18:35 PM »
just joining ... nice to see other Oz based MMM around :)

MsRichLife

  • Pencil Stache
  • ****
  • Posts: 536
  • Age: 40
    • Living My Rich Life
Re: Australian Investing Thread
« Reply #41 on: August 04, 2014, 11:25:15 PM »
Hi MsRichLife, when you say you were burnt badly during the GFC what did you hold and what did you do?

PS. Well done, $2M net worth is not to be sneezed at :)

I'll try to outline our financial position at the time, but I honestly think I've blocked most of it out :) It was painful.

We had 5 IPs. We used the equity in those properties to leverage into various share market investments. We also had a margin loan. All up, we had about $500K in the share market and we were heavily leveraged. I thought I had a high tolerance for risk, but I now realise we had no idea of the real potential of a significant downturn. My whole life had been a growth bonanza, so it was not within my worldview to think otherwise.

Anyway, GFC hits. I was living in the US at the time and was trusting my finances to my financial advisor in Australia. (Hint: Big mistake. I will never outsource my investment thinking again). I was getting to see first hand how badly GFC hit Americans. By comparison, Australia got off very lightly. Anyway, I digress.

Sometime in mid 2008 I started getting margin calls. Because I was in the US, I'd often get them in the middle of the night or on weekends. They would not be for small amounts. I'm thinking $40K at a time. I was left scrambling to find money in Australia whilst I was overseas. To say it was stressful is an understatement. It fact, my pulse is rising as I type this. [ ohhh...you are in luck. I just re-discovered a blog post from back then: http://livingmyrichlife.wordpress.com/2008/11/12/so-my-financial-advisor-called/ ]

I don't recall exactly how much I lost, but I think it was in the vicinity of $250K.

After we got through the worst of it, we did the sums and worked out we were better off selling what was left of our stock portfolio and getting out of debt as quickly as possible. I'm actually surprised at how fast we managed to pay off over $1M of debt. Since then, we've just been saving.

I'm still not sure about investing in shares as I think most of the 'recovery' has been engineered by cheap free credit from the Federal Reserve et al. But I'm doing my research and pondering and I look forward to hearing what others say on the matter.
« Last Edit: August 04, 2014, 11:27:21 PM by MsRichLife »

The Hamster

  • Stubble
  • **
  • Posts: 203
  • Location: Perth WA
  • Vivere intus vestri mediis
Re: Australian Investing Thread
« Reply #42 on: August 04, 2014, 11:27:21 PM »
Is anyone a more active investor or do most people buy index ETFs and just hold?

I would like to save up some cash over the next 3 - 4 years then enter the share market with the idea of actively trading (not day trading) and learning about options to make some extra income off shares.  I'm also interested in investing directly into US shares.

Thanks for sharing your story MsRichLife.  Its great to see you have come out on top after what must have been an extremely stressful time.
« Last Edit: August 04, 2014, 11:31:28 PM by The Hamster »
Cheers,
The Hamster(ette)

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #43 on: August 05, 2014, 12:04:06 AM »
Thanks for that MsRichLife.

What a nightmare, I think you know the real issue here was leverage, not shares per se (lack of stop loss/poor advice a significant contributor!). If you had not leveraged with margin loans, say just taken out line of credit against your IP's you would have been able to hold on and weather the storm. The ASX200 accumulation index (growth and dividends reinvested) is at an all time high, as opposed to the ASX200 index which is nowhere near where it was. Vanguard Australia recently included this in one of their newsletters ;

Quote
What a difference five years can make. Contrast, the fortunes of the S&P/ASX200 Index (prices only) and the S&P/ASX200 Accumulation Index (share price plus dividends) over this period.

Five years ago on July 16, 2009, the S&P/ASX200 closed at 3995.6 points with further to fall in the depths of the GFC. Move forward to July 16, 2014 when this index closed at 5518.9 points - a rise of 38 per cent.

By contrast on July 16, 2009, the S&P/ASX200 Accumulation Index closed at 27,332.5. And move forward again to July 16, 2014, this index closed at 47,043.6 - a rise of 72 per cent.

In short, the accumulation index passed its pre-GFC high almost a year ago and hit an all-time high this month. Meanwhile, the S&P/ASX200 (price only) is still way below its pre-GFC high.

If you had held, you wouldn't have lost your money, and now would be significantly ahead. (say in the case you held ASX200 index ie. STW or similar, and had LOC against IP equity - no margin call).

The underlying message here is understand that shares of stock are not 1 dimensional assets, they provide income, and ideally, capital growth. In Oz due to dividend imputation, pay out ratios are higher than just about anywhere else....but here is the big secret ; the entire industry doesn't want you to buy and hold shares and take the dividend reinvestment plan that many companies offer......why? how can they make money from you if you don't keep buying, selling, paying for advice, subscribing to newsletters, attending seminars, watching CNBC etc etc.

With shares you have to take a long term (20+ years) view, and embrace volatility (essential in the capitalist system) as a chance to BUY more. Stock picking yeah you can certainly come undone there...but if you are diversified enough (ie. index or individually constructed portfolio) and you can hold on through the troughs I believe that you will be well served in the future, as in the past. Provided you don't try to time the market, (ie. dollar cost average - and force yourself to BUY) and avoid selling at all costs and reinvest dividends.

I love this bit from Peter Thornhill, from the darker days of 2011 ;

Quote
I'm not going to bother, but consider this possibility. The share market ultimately reflects the endeavours of the human race, for better or worse. If you therefore believe that human endeavour is not dead then for heaven's sake, buy with your ears pinned back; we are not going to go back to living in caves.

http://www.motivatedmoney.com/mysay.php?iid=w5awkrn9fp

Is anyone a more active investor or do most people buy index ETFs and just hold?

I would like to save up some cash over the next 3 - 4 years then enter the share market with the idea of actively trading (not day trading) and learning about options to make some extra income off shares.  I'm also interested in investing directly into US shares.

Thanks for sharing your story MsRichLife.  Its great to see you have come out on top after what must have been an extremely stressful time.


I buy and hold, but a combination of LIC, Direct shares and ETFs. There are some businesses I "like" over the long term but I do not intend to sell these shares unless I change my view on these businesses. So I have no intention to "trade". Essentially, we are talking about Investment vs. Speculation. Take into consideration tax and transactional costs of churning, oh I mean trading :) and in my view its just a punt. Despite what the industry says.
« Last Edit: August 05, 2014, 12:18:19 AM by The Falcon »

The Hamster

  • Stubble
  • **
  • Posts: 203
  • Location: Perth WA
  • Vivere intus vestri mediis
Re: Australian Investing Thread
« Reply #44 on: August 05, 2014, 05:06:27 PM »
Hi Falcon,

Thanks for the extremely in depth reply.  Some very valuable information there.

By "trade" I think Im mainly talking about buying dips and holding for min 5 years then re-evaluating and adding an option buying strategy for extra income.  I definately don't mean trading in days or weeks.  I've done that in the past and no doubt would have been better off just buying and holding for the longer term.  A strategy that has worked well for me in the past is what I call boom-trading.  Basically waiting for the next irrational "boom" and jumping on board until things get too overheated and then getting out.  I have done OK with that in the past due basically to not knowing what good shares to buy and just going along with the herd until I get chicken :-)

I think you are spot on the money re the use of leverage in share trading.  Anyone who wasn't leveraged during the GFC and could afford to ride out the storm would have done OK.  I myself suffered a small margin call on some funds I was invested in and made a loss when I sold out.  It probably was a good thing as those funds ended up going broke and I would have lost a lot more had I not gotten out when I did.  I made it all back from buying CBA shares in 2008 when they were down below $25.00 though but even so, I have become very wary of margin loans since then and probably won't ever use one again. 

I also completely agree with your quote from Peter Thornhill.  Even if the share market is a huge Ponzi scheme propped up by free credit or whatever, the basic human drive to make a better life for ourselves and a more prosperous society will ensure that the share market goes up in the long term no matter what economic blips happen along the way.  We as a species simply wont devolve back to living in caves or a basic barter society.  And with superannuation funds having to put their trillions of $$$ in the share market, it certainly wont go to 0 in my lifetime, bar a huge meteor striking the planet in which case it won't matter anyway :-) 

A final question, I didn't realise there was a prices only index and an accumulation index.  Which one do ETFs such as STW invest in or try to follow?  I assume the accumulation index?
Cheers,
The Hamster(ette)

MsRichLife

  • Pencil Stache
  • ****
  • Posts: 536
  • Age: 40
    • Living My Rich Life
Re: Australian Investing Thread
« Reply #45 on: August 05, 2014, 05:52:38 PM »
What a nightmare, I think you know the real issue here was leverage, not shares per se (lack of stop loss/poor advice a significant contributor!). If you had not leveraged with margin loans, say just taken out line of credit against your IP's you would have been able to hold on and weather the storm.

Yep. The leverage was the killer. Maximise your return on the may up. Maximise your loss on the way down. I also had put a lot of trust in my financial advisor. He had done well for me over the years and I assumed that would continue (you know what they say about assuming). My view on investing had fundamentally changed since then. I will never use leverage again and I will not run my investments on autopilot. I am a lot more cautious now, which is why it's taken so long to even consider buying shares again.

The underlying message here is understand that shares of stock are not 1 dimensional assets, they provide income, and ideally, capital growth. In Oz due to dividend imputation, pay out ratios are higher than just about anywhere else....but here is the big secret ; the entire industry doesn't want you to buy and hold shares and take the dividend reinvestment plan that many companies offer......why? how can they make money from you if you don't keep buying, selling, paying for advice, subscribing to newsletters, attending seminars, watching CNBC etc etc.

This is the key to my investment in shares going forward. I need to think of it as an additional income stream and therefore will be looking to maximise the 'income' from the shares and worry less about the capital growth/loss along the way. This was how I started investing in shares when I was young, but at some point I felt 'rich', got a bit fancy and well...we know where that got me.

The Falcon

  • Stubble
  • **
  • Posts: 100
  • Location: Sydney
Re: Australian Investing Thread
« Reply #46 on: August 05, 2014, 05:57:32 PM »
@ Hamster ;

STW is ASX200. The big LICs tend to mark themselves against the accumulation index.  index is just ASX200 with all divis reinvested...so STW with DRP box ticked will get you the accumulation index performance less STW costs (bugger all).
« Last Edit: August 05, 2014, 06:03:47 PM by The Falcon »

MsRichLife

  • Pencil Stache
  • ****
  • Posts: 536
  • Age: 40
    • Living My Rich Life
Re: Australian Investing Thread
« Reply #47 on: August 05, 2014, 05:59:57 PM »
Thanks for sharing your story MsRichLife.  Its great to see you have come out on top after what must have been an extremely stressful time.

You are welcome. What doesn't kill us, makes us stronger, right?

Actually DH and I firmly believe that $250K was well worth losing spending to learn the lessons we did. I'm a reasonably positive person and choose to learn from my mistakes and move on.

We very quickly learned that we don't need to be filthy rich to retire early. We just need be very conscious of what is actually important to us (rather than the Jones's) and simplifying our lives accordingly. We cut away all the crap and realised we don't really need much to live a great life. We have gleaned so many benefits from our new philosophy on life.
« Last Edit: August 06, 2014, 06:13:42 PM by MsRichLife »

AustralianMustachio

  • Stubble
  • **
  • Posts: 167
Re: Australian Investing Thread
« Reply #48 on: August 06, 2014, 09:21:44 AM »
Just wanted to post to subscribe and say thanks for the great thread so far

AustralianMustachio

  • Stubble
  • **
  • Posts: 167
Re: Australian Investing Thread
« Reply #49 on: August 06, 2014, 08:16:00 PM »
Also @The Falcon, could you explain the basic difference between VAS and VHY? I've read the vanguard page but can't quite work out what the jargon and stats going to mean. Is it as simple as VHY paying out larger dividends? If so, does that mean less capital growth perhaps?

Im looking to invest in both most likely, and I guess I'm curious what made you choose VHY as the primary vehicle for your leveraged share investment.