Author Topic: Australian Investing Thread  (Read 617315 times)

marty998

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Re: Australian Investing Thread
« Reply #1050 on: July 01, 2015, 01:42:54 AM »
whopping gigantic distribution of $2.74 out of VHY this quarter.

anyone have a clue as to why? Perhaps some rebalancing in the ETF triggered some large capital gains.

Bit surprised by it, based on history I was expecting about $1 per unit as the distribution.

No biggie, all gets reinvested for me. Have boatloads of capital losses to chip away at so hopefully the tax components are capital gains and not income.


Saw this and also wondered - its suspiciously large.  I had a look at the list of shares (https://www.vanguardinvestments.com.au/retail/broker-basket?fundId=47&basketType=) and the list is quite different from that on 31 May (https://static.vgcontent.info/crp/intl/auw/docs/etfs/profiles/VHY_profile.pdf?20150625|091500) .  The top 10 have changed from

TLS, WES, WBC, WPL, CBA, ANZ, NAB, SYD, DUE, MQG
To
TLS, ANZ, NAB, RIO, BHP, WBC, CBA, TAH, DUE, SKI

This suggests that there is a lot of portfolio churn in this fund within the last month - 4 of last months top 10 are no longer top 10 holds. Makes me think there will be a lot of capital gains distributed from this fund, and makes me question the long term tax efficiency of it vs a more passive buy and hold fund (like VAS).

I've been trying to get a copy of the FTSE index that the fund is based on but a google search isn't turning up the list. Must be proprietary information.

So WES and WPL have been dumped.... no real issue with WPL going but surprised by WES given they are doing quite well vs WOW and I'd expect high dividends to continue.

WBC and CBA drop down in favour of ANZ and NAB

Would expect that the majority of the realised cap gains have come from WES and CBA this quarter.

BHP and RIO are high yield plays?


FFA

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Re: Australian Investing Thread
« Reply #1051 on: July 01, 2015, 02:13:49 AM »
yes I understand it to be proprietary. e.g. index specifically prepared for vanguard, which they have contracted ftse to calculate and monitor on their behalf as an independent service provider, based on some rules/criteria set by Vanguard. I guess the cost involved in this must be part of the MER increment of VHY vs VAS. As I've mentioned a few times in different threads i'm not sold on VHY and prefer the meat and potatoes VAS. I consider the ASX overall as a high yield market anyway.

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« Reply #1052 on: July 01, 2015, 02:40:36 AM »
I was about to query the quarterly VHY dividend of 4%!  But the mystery is solved already.

Wadiman

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Stockspot ETF performance report
« Reply #1053 on: July 01, 2015, 03:02:49 AM »
Am just reading this now - some good insights!

https://www.stockspot.com.au/etf/

Download link is towards the bottom of the page.


potm

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Re: Australian Investing Thread
« Reply #1054 on: July 01, 2015, 03:13:50 AM »
Options express is good for international shares. Not as cheap as IB's rates but what can you do.

Happy new financial year all! May it be a prosperous one for you.

marty998

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Re: Australian Investing Thread
« Reply #1055 on: July 04, 2015, 09:48:35 PM »
Been reviewing the list of LIC's NTA vs share price comparisons as published by the ASX each month. One that stuck out for me was Century Investments (CYA).

At the end of May it was trading at quite a discount to pre and post tax NTA (approx 14%). Plus carries a 2% discount on DRPs.

Now, for something that invests broadly in top 50 whats not to like?

Did a little digging - the management company Perennial is a child of IOOF. Makes you wonder whether 14% is a big enough discount to make up for the association with a company undergoing a fair bit of negative press for certain questionable ethical practices.

At the end of the day, Perennial hasn't been implicated in anything to my knowledge. But it does make you think twice

bigchrisb

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Re: Australian Investing Thread
« Reply #1056 on: July 05, 2015, 02:53:14 AM »
While cya trades at a bit of a discount, I'm not sure I'd be prepared to pay their fees (0.44% plus a performance fee). I'd rather have one of the lower fee variants.

FFA

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Re: Australian Investing Thread
« Reply #1057 on: July 06, 2015, 12:20:52 AM »
Now, for something that invests broadly in top 50 whats not to like?
personally i'm not that keen on LIC's for liquidity and transparency. Even the fact we are now in early july and still talking about end of May figures. Who knows what has happened in the past 5-6 weeks. With index etf's you have the intraday NAV up to the current moment to know what that asset value is behind what you're buying. I don't think i'd ever touch a small LIC like this one. If ARG or AFI was at a decent discount due to widespread sentiment / gloom, it might be tempting though. They have been around for that long to give comfort on reputation.

dungoofed

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Re: Australian Investing Thread
« Reply #1058 on: July 07, 2015, 06:13:31 AM »
Anyone normally hold IEU?

I'm sharpening my knives, getting ready to grab some of these delicious European companies....

bigchrisb

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Re: Australian Investing Thread
« Reply #1059 on: July 07, 2015, 05:33:36 PM »
Anyone normally hold IEU?

I'm sharpening my knives, getting ready to grab some of these delicious European companies....

I've always struggled with the fee base on the Ishares products in Australia (except IVV which isn't too bad).  IEU is 0.6%.  I've used VEU at 0.14% instead and been OK with it being a broad index (only 45% eurpoe/UK).  Would be nice if we had the US fees on ETFs (IEU is 0.14% there). 

DrowsyBee

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Re: Australian Investing Thread
« Reply #1060 on: July 07, 2015, 10:38:53 PM »
Random question that I didn't want to start an entire thread about in the Mustachian Book section of the board:

Has anyone read Alan Kohler's Eureka Report? Is it worth a read?

It popped up as the book of the month on Commsec, but I'm more interested in possibly reading a book that is relevant to Australian investors and personal finance. I wouldn't even be mad if it is was filled with 200 pages of his graphs.

dungoofed

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Re: Australian Investing Thread
« Reply #1061 on: July 08, 2015, 07:09:09 AM »
Hi DrowsyBee - I haven't, but the one that was recommended to me about 12 years ago was this:

https://shop.abc.net.au/products/the-australian-stockmarket-9th-edition-a-guide-for-players-planners-and-procrastinators

I read about 1/3 of it before getting busy with life and I've never gone back. I remember it filling in a lot of gaps in my knowledge at the time, but yeah 12 years is a long time. Your mileage may vary.


FFA

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Re: Australian Investing Thread
« Reply #1062 on: July 08, 2015, 07:15:41 AM »
fascinating "people also bought" list for that book :

1. Slow Cooker
2. Rise and rise of Kerry Packer Uncut
3. Monty Don's French Gardens

go figure....

dungoofed

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Re: Australian Investing Thread
« Reply #1063 on: July 08, 2015, 07:23:08 AM »
lol

Unrelated question, anyone have a BBQ suggestion for someone living close to the ocean? I have one from Barbeques Galore that is rusted through and needs to be replaced entirely, and another that needs the bottom tray and briquette tray replaced, also due to massive rusting.

Was thinking about how a BBQ store in a coastal location would be a potential goldmine as a business.

Wadiman

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Re: Australian Investing Thread
« Reply #1064 on: July 08, 2015, 02:59:56 PM »
Dungoofed -

Love my Weber Q200 - enamel top, pretty solid construction.  Bought 4 years ago, no issues to date.

Shaz_Au

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Re: Australian Investing Thread
« Reply #1065 on: July 08, 2015, 07:03:26 PM »
Hi There,
Has anyone else been following the expansion of Robinhood's free share trading into Australia?  They are meant to be launching "later this year".  I believe this would mean that after your initial ASX minimum purchase of $500 of particular share listing you could then buy shares in whatever amount you choose with no brokerage cost! 

https://robinhood.com/?ref=wzeJqf

I signed up for their notifications/early access, apparently I'm currently 13,524 in line.  The link above is a referral, it will help me move up the queue if you choose to use it.

Currently I'm using CMC Markets, I found them to be the cheapest when I did my research.  I have been very happy with them, not that I have much experience or have used another broker.  $11 a trade vs $0 I think I'll be jumping ship. 

So I wonder what is involved in moving your holdings to another broker?

superannuationfreak

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Re: Australian Investing Thread
« Reply #1066 on: July 08, 2015, 08:34:41 PM »
Has anyone else been following the expansion of Robinhood's free share trading into Australia?  They are meant to be launching "later this year".  I believe this would mean that after your initial ASX minimum purchase of $500 of particular share listing you could then buy shares in whatever amount you choose with no brokerage cost! 

To begin with, at least, I think we'll only be able to purchase US stocks and ETFs, not Australian ones.

Still may be worthwhile as a way of accessing international ETFs if you are interested in something other than VGS (e.g. small/mid cap, value and/or momentum.  Even plain cap-weighted emerging markets there's a bit of a cost advantage).

Shaz_Au

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Re: Australian Investing Thread
« Reply #1067 on: July 08, 2015, 09:58:15 PM »
Hi Super.Freak,
Yes it looks like you are correct. That puts a bit of a damper on it but yes having the US market available opens up a lot more variety when it comes to Vanguard funds.  Being part of a much bigger market should help with liquidity and buy/sell spreads.

I wonder how competitive the currency conversion will be...

BTW thanks for your website, it is a great source of information for Aussies and there isn't many of them available.  You have inspired my wife and I to do our super better!

potm

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Re: Australian Investing Thread
« Reply #1068 on: July 09, 2015, 12:42:09 AM »
Hello superfreak,

Thought I would reach you here since it'll be useful for other like minded aussies.

Sunsuper have increased their admin fees slightly and also changed how they are disclosed from net to gross of tax. So the actual gross of tax fee has increased from $1.47 per week plus .59% of the balance to $1.50 per week plus .1% of the balance.
Previously they were disclosed as $1.25 and .05%.

I'm not sure how other super funds have been disclosing but it's quite an important distinction. I think they are required to disclose gross of tax from now. The investment fee was previous disclosed gross so that hasn't changed.

For the two index options I'm invested in Australia shares plus International unhedged the fees have changed as follows:

Australian old: 0.15%+0.059% (previously disclosed as 0.05) = 0.209%
Australian new: 0.13%+0.1% = 0.23%

International old: 0.25%+0.059% (previously disclosed as 0.05) = 0.309%
International new: 0.2%+0.1% = 0.3%

So a slight decrease for Aus shares and a slight increase for Int shares. Overall if they had equal balances it's a slight increase in fees of 0.012%.

dungoofed

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Re: Australian Investing Thread
« Reply #1069 on: July 09, 2015, 01:29:20 AM »
Thanks wadiman. I see they have a full version of that one, I might go down and take a look. Frustrating that we don't have a tough Australian BBQ though.

FFA

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Re: Australian Investing Thread
« Reply #1070 on: July 09, 2015, 05:57:03 PM »
Hello superfreak,

Thought I would reach you here since it'll be useful for other like minded aussies.

Sunsuper have increased their admin fees slightly and also changed how they are disclosed from net to gross of tax. So the actual gross of tax fee has increased from $1.47 per week plus .59% of the balance to $1.50 per week plus .1% of the balance.
Previously they were disclosed as $1.25 and .05%.

I'm not sure how other super funds have been disclosing but it's quite an important distinction. I think they are required to disclose gross of tax from now. The investment fee was previous disclosed gross so that hasn't changed.

For the two index options I'm invested in Australia shares plus International unhedged the fees have changed as follows:

Australian old: 0.15%+0.059% (previously disclosed as 0.05) = 0.209%
Australian new: 0.13%+0.1% = 0.23%

International old: 0.25%+0.059% (previously disclosed as 0.05) = 0.309%
International new: 0.2%+0.1% = 0.3%

So a slight decrease for Aus shares and a slight increase for Int shares. Overall if they had equal balances it's a slight increase in fees of 0.012%.

i'm with sunsuper, when I had a look at this the fee increase seemed modest enough to me. One specific point I noted is the 0.1% caps at $800,000. As I periodically toy with the idea of a smsf, especially for future when my super balance will hopefully grow to those lofty levels. But this fee cap equates to $800, which is lower than any smsf management fee anyway (the online ones might be a bit below but not after annual audit and other costs). So once again purely from a management cost perspective I can't see myself doing smsf, only if you want the direct control and flexibility I think.

potm

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Re: Australian Investing Thread
« Reply #1071 on: July 09, 2015, 06:53:34 PM »
If one was to take a passive index approach then defintely there is no need to set up an smsf. The cap is nice but it will be a long time before I reach 800k in my super.
I may eventually set up an smsf once I am close to preservation age and attempt to move the majority of my investments into super. For now I happy to have the passive regular indexing as a safety net in case I somehow screw everything up, I can still have a comfortable retirement.

superannuationfreak

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Re: Australian Investing Thread
« Reply #1072 on: July 09, 2015, 10:28:55 PM »
For the two index options I'm invested in Australia shares plus International unhedged the fees have changed as follows:

Australian old: 0.15%+0.059% (previously disclosed as 0.05) = 0.209%
Australian new: 0.13%+0.1% = 0.23%

International old: 0.25%+0.059% (previously disclosed as 0.05) = 0.309%
International new: 0.2%+0.1% = 0.3%

So a slight decrease for Aus shares and a slight increase for Int shares. Overall if they had equal balances it's a slight increase in fees of 0.012%.

Thanks potm.  I keep meaning to post an update on this but as you point it the differences are very small.  If time permits I'm tempted to contact SunSuper to ask if they can confirm if these index investments are now fully managed by Vanguard or transitioning to them over time (based on their alliance I suspect they are but a cursory review of the documentation didn't enlighten me on the implementation of that alliance).

They're still my choice for International exposure in Superannuation.  YMMV (for example I don't need insurance from them, and insurance should be considered in the overall super cost calculation where relevant).

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« Reply #1073 on: July 10, 2015, 08:54:27 PM »
is tax-loss harvesting legal in australia?

noting the ATO rules on wash sales.

superannuationfreak

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Re: .
« Reply #1074 on: July 10, 2015, 09:12:05 PM »
is tax-loss harvesting legal in australia?

noting the ATO rules on wash sales.

If you can justify a sale/buy for other reasons then it wouldn't be a wash sale.  E.g. If changing indices or ETFs due to differences in expense ratios or diversification (such as STW to VAS).  If it is the same individual share that probably not be OK, but I'm no expert.

It's less advantageous than the US as you can't typically use any capital losses against ordinary income (in the US I believe they can use $3,000 p.a.) and we don't have a step-up basis on death.  But you can use it to offset capital gains now, when you might be on a higher tax rate, and then realise the extra capital gains (from a lower cost base) when you might be on a lower tax rate after FI.

FFA

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Re: .
« Reply #1075 on: July 11, 2015, 04:08:26 AM »
is tax-loss harvesting legal in australia?

noting the ATO rules on wash sales.

If you can justify a sale/buy for other reasons then it wouldn't be a wash sale.  E.g. If changing indices or ETFs due to differences in expense ratios or diversification (such as STW to VAS).  If it is the same individual share that probably not be OK, but I'm no expert.

It's less advantageous than the US as you can't typically use any capital losses against ordinary income (in the US I believe they can use $3,000 p.a.) and we don't have a step-up basis on death.  But you can use it to offset capital gains now, when you might be on a higher tax rate, and then realise the extra capital gains (from a lower cost base) when you might be on a lower tax rate after FI.
the way I look at it, is a tax minimisation strategy but the premise is any actions should be within the law. for example, I think bogleheads is a reputable website and they recommend TLH. I don't think they are encouraging people to do anything illegal there. A large number of forum members here use bogleheads as a primary source for investing advice/strategy.

However, if you take some of those US based examples and apply them out of context in Australia, then yes it might be illegal, because the laws are different.

Agree with the above comments too, I'm not sure it's a hugely advantageous strategy anyway in Australia. Especially if you adopt the standard approach around here of buy and hold forever, there is no need.

chasingthegoodlife

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Re: Australian Investing Thread
« Reply #1076 on: July 11, 2015, 06:20:56 PM »
Thanks everyone for this fantastic and informative thread. The Sharesight tracker looks great and have downloaded many of the pdfs linked for train reading.

I have recently started investing through Vanguard's Australian Shares index fund (not ETF). I chose it over the ETF despite the higher MER because I liked the idea of being able to make small contributions each fortnight rather than wait until I had saved up enough to justify brokerage.

However, after reading a few things here and elsewhere about exposure to the fund's capital gains (eg http://www.morningstar.com.au/etfs/article/tax-advantages/6202) and doing a few sums on MER, buy/sell spread and brokerage fees, I am wondering if I have made the right decision. 

Is anyone else using the managed fund as opposed to VAS? Why/why not?

Also, for small time investors, what is the minimum amount you would invest if paying brokerage? $2000?

dungoofed

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Re: Australian Investing Thread
« Reply #1077 on: July 11, 2015, 07:03:18 PM »
Is anyone else using the managed fund as opposed to VAS? Why/why not?

Also, for small time investors, what is the minimum amount you would invest if paying brokerage? $2000?

Hi chasingthegoodlife - I use Vanguard ETFs but it was so long ago I can't remember the reason I chose them over the funds - sorry! I think it has been discussed on this site before - start here:

https://www.google.com.au/search?q=site:mrmoneymustache.com+vanguard+etf+fund

I tend to rebalance with clips of about $5000.

FFA

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Re: Australian Investing Thread
« Reply #1078 on: July 11, 2015, 09:20:52 PM »
agree $5,000 is a good (minimum) size to aim for. if brokerage around $15 (e.g. nabtrade) that's 0.3%.

regular investments are good, but there's diminishing returns on dollar cost averaging. I think the benefit is probably small between fortnightly vs once every 1-2 months. Then again, if you stretched it to once every 6-12 months, your purchasing would be somewhat more lumpy which could be good or bad (you will lose out on some returns in an uptrrending market). i'd suggest a (minimum) frequency of once every 3-4 months.

based on these assumptions, implies $5,000 * 3-4 per year = $15-20k p.a. If you are saving/investing this amount or more, I'd go for the etf. With lower levels i'd probably stick with the managed fund and trickle in fortnightly or monthly. At some point in future you can always switch across to etf but it will trigger a capital gain/loss event (and you could have some exposure in the time between you sell the managed fund and buy the etf).

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Re: Australian Investing Thread
« Reply #1079 on: July 12, 2015, 02:40:15 AM »
Thanks everyone for this fantastic and informative thread. The Sharesight tracker looks great and have downloaded many of the pdfs linked for train reading.

I have recently started investing through Vanguard's Australian Shares index fund (not ETF). I chose it over the ETF despite the higher MER because I liked the idea of being able to make small contributions each fortnight rather than wait until I had saved up enough to justify brokerage.

However, after reading a few things here and elsewhere about exposure to the fund's capital gains (eg http://www.morningstar.com.au/etfs/article/tax-advantages/6202) and doing a few sums on MER, buy/sell spread and brokerage fees, I am wondering if I have made the right decision. 

Is anyone else using the managed fund as opposed to VAS? Why/why not?

Also, for small time investors, what is the minimum amount you would invest if paying brokerage? $2000?
I agree, it's great to have so many Aussies on MMM! I've learnt heaps here as well as on Bogleheads (but a bit sparse on Australia-relevant info)

Are you referring to the retail or wholesale funds? I'm still saving up to hit the minimum for the wholesale, but I'm planning on using the managed fund for the same reasons you're considering. I'd like to "pay myself first" every fortnight and drip feed it in, and the brokerage and ETF spread would exceed the fund spread. Actually the fund spread has dropped recently to 10bp/10bp. I consider the extra MER worth the hassle it'd be to set up orders to trade in hours.

Question for the great Aussie minds in this thread: I'd like my portfolio to be 50% Aus shares, 50% International shares. I'm almost at the 100k for a wholesale account, and it will take around 1.5 years to save the next lot of 100k (sitting in high interest account). Thoughts on whether I should go for the Aus shares or International shares first? I was leaning towards International given I have a bit of home bias with work and housing, but the AUD is not at the best place atm and US shares have been on a tear over the last 5 years and may be fully valued? Having a bit of paralysis by analysis on this :s

dungoofed

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Re: Australian Investing Thread
« Reply #1080 on: July 12, 2015, 03:30:36 AM »
Good question. I'd go with International because as you say you already have a lot riding on the Australian economy.

Actually, is there any option to switch from retail to wholesale in a year or so? It might be worth eating the wider spread just to let you get your desired asset allocation.

FFA

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Re: Australian Investing Thread
« Reply #1081 on: July 12, 2015, 03:50:11 AM »
Question for the great Aussie minds in this thread: I'd like my portfolio to be 50% Aus shares, 50% International shares. I'm almost at the 100k for a wholesale account, and it will take around 1.5 years to save the next lot of 100k (sitting in high interest account). Thoughts on whether I should go for the Aus shares or International shares first? I was leaning towards International given I have a bit of home bias with work and housing, but the AUD is not at the best place atm and US shares have been on a tear over the last 5 years and may be fully valued? Having a bit of paralysis by analysis on this :s

Unless you are intentionally taking a view that markets will be correcting downwards, at that saving rate above 5k/month, i'd just go for etf's... 1) MER usually slightly lower than wholesale, 2) invest the initial 50/50k and then invest monthly alternating between Oz / international (keeps your asset allocation basically on track throughout), 3) you can invest into the market gradually instead of taking a large timing exposure to the share market level in 1.5 years time.

For long-term holding, MER is the key factor in the cost equation. brokerage and buy/sell spread are one-offs, MER is ongoing.

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Re: Australian Investing Thread
« Reply #1082 on: July 12, 2015, 05:17:29 AM »
Going from the Vanguard website, to access the wholesale pricing it looks like you need 500k min investment. MER for the wholesale Australian Shares fund is .18%.

For funds over 100k in the retail fund, the MER is .35% (your first and second 50k would be .75% and .5% respectively).

In comparison, VAS ETF is .15%.

For me, with a tiny balance in the retail fund, I am looking at .75% annually on all funds invested.

Am I right in thinking I can 'spend' roughly up to .6% of funds invested (.75% - .15%) on brokerage costs before the cost of investing an amount in the ETF exceeds the cost of investing in the retail fund (first year only)?

So if I use CMC markets at $11 a trade, I need to invest at least $1834 at a time to 'break even' in the first year invested? Of course, the brokerage is a once-off expense while the management costs are ongoing so in that scenario I would be better off with VAS long term.

Does that reasoning make sense? I haven't factored in spreads as not quite sure how to account for ETF.

rowdy

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Re: Australian Investing Thread
« Reply #1083 on: July 12, 2015, 05:55:52 AM »
A call to Vanguard will get you a $100,000 minimum investment in the wholesale funds.

FFA

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Re: Australian Investing Thread
« Reply #1084 on: July 12, 2015, 06:32:25 AM »
Going from the Vanguard website, to access the wholesale pricing it looks like you need 500k min investment. MER for the wholesale Australian Shares fund is .18%.

For funds over 100k in the retail fund, the MER is .35% (your first and second 50k would be .75% and .5% respectively).

In comparison, VAS ETF is .15%.

For me, with a tiny balance in the retail fund, I am looking at .75% annually on all funds invested.

Am I right in thinking I can 'spend' roughly up to .6% of funds invested (.75% - .15%) on brokerage costs before the cost of investing an amount in the ETF exceeds the cost of investing in the retail fund (first year only)?

So if I use CMC markets at $11 a trade, I need to invest at least $1834 at a time to 'break even' in the first year invested? Of course, the brokerage is a once-off expense while the management costs are ongoing so in that scenario I would be better off with VAS long term.

Does that reasoning make sense? I haven't factored in spreads as not quite sure how to account for ETF.
yes makes sense to me. VAS etf buy/sell is typically +/- 10c on $70 = +/- 0.14%

cost economics will favour etf for any pragmatic scale of investment. They are the more efficient product.

It also comes down to other factors, e.g. if you value customer service of the fund manager or you are comfortable with DIY. probably more important is regular investment facilities to automate and discipline contributions, etc. Are you interested and can you be bothered doing the regular online trades ? Especially if you have enough to be in wholesale products. The cost difference there is marginal versus etf's, so it might come down to these other factors.

micase

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Re: Australian Investing Thread
« Reply #1085 on: July 12, 2015, 11:42:51 PM »
Hello guys, I've been lurking this thread long enough thought I would chip in with a few questions. 

A little about me: 25yr Old, recent graduate, just about to start a full time job in a different field to my degree.  My salary will be 55k and I make at least 10k a year from other side gigs (mostly sports betting.)  My COL is low as I still live and plan to stay at my family home (in Sydney) for another year or two.

My first query relates to superannuation.  Being at least 35 years away from being able to access my super (pending possible legislation changes) I would like to put my money in a high growth fund.  While doing research it seems like over such a long timespan two big factors are fees charged and the amount of risk taken on.  Does anyone have any recommendations into what funds would tick these boxes with my circumstances?  I have a relatively low starting balance of 10k from previous part time jobs which has been sitting dormant in a cash only AMP account.

My second query relates to my investment strategy outside of Super.  I have come out of my degree with a HECS debt of 35k and savings of around 40k.  I have aspirations of owning my own property but with the way Sydney real estate prices are, I can not see that happening for at least 5 years.  Is 5 years too short a timespan to be investing in the share market?  Currently the money is in a high rate savings account but the returns are pretty miserable.  Is anyone else in a similar situation or has any advice for me?  I value the flexibility of holding cash but only getting a 3.5% return while my HECS debt is increasing by 2-2.5% has me looking for something better.

Coercivity

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Re: Australian Investing Thread
« Reply #1086 on: July 13, 2015, 04:04:54 AM »
Going from the Vanguard website, to access the wholesale pricing it looks like you need 500k min investment. MER for the wholesale Australian Shares fund is .18%.

For funds over 100k in the retail fund, the MER is .35% (your first and second 50k would be .75% and .5% respectively).

In comparison, VAS ETF is .15%.

For me, with a tiny balance in the retail fund, I am looking at .75% annually on all funds invested.

Am I right in thinking I can 'spend' roughly up to .6% of funds invested (.75% - .15%) on brokerage costs before the cost of investing an amount in the ETF exceeds the cost of investing in the retail fund (first year only)?

So if I use CMC markets at $11 a trade, I need to invest at least $1834 at a time to 'break even' in the first year invested? Of course, the brokerage is a once-off expense while the management costs are ongoing so in that scenario I would be better off with VAS long term.

Does that reasoning make sense? I haven't factored in spreads as not quite sure how to account for ETF.
yes makes sense to me. VAS etf buy/sell is typically +/- 10c on $70 = +/- 0.14%

cost economics will favour etf for any pragmatic scale of investment. They are the more efficient product.

It also comes down to other factors, e.g. if you value customer service of the fund manager or you are comfortable with DIY. probably more important is regular investment facilities to automate and discipline contributions, etc. Are you interested and can you be bothered doing the regular online trades ? Especially if you have enough to be in wholesale products. The cost difference there is marginal versus etf's, so it might come down to these other factors.
Hey chasingthegoodlife, like rowdy mentioned the minimum for wholesale is actually 100k not 500k if you ring them up. I confirmed this with Vanguard last month.

Thanks for your thoughts FFA, I had been tossing up between the funds and the ETFs for a while.
The MER for Aus wholesale index fund is 0.18%, MER for Aus index ETF is 0.15%, MER for International wholesale index fund is 0.18%, MER for International ETF is 0.18% and buy/sell spread is 0.10% for both funds cf the 0.14% you're quoting for ETFs. So it was the convenience of regular contributions and lack of interest/bother in doing online trades which lead me to the funds and I consider the extra 0.03% MER for Aus to be worth that factor. If I had 200k, I'd plonk 100/100 down on both funds and be done with it. I am wishfully hoping the markets will be downgoing/flat for the next 1.5years because of the timing exposure risks in splitting my entry in equities.

Dungoofed, it is possible to go 50/50 on the index funds retail and then switch to wholesale when you reach 100/100 but because it is a different fund you are liable for capital gains at that time (i.e. you're essentially going to cash as an intermediate step). I hadn't really considered this option but it might be a way to hedge any rise in the interim (if there was a rise in either index the capital gains payable would probably be less than the cost of buying in at the more expensive price)


Coercivity

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Re: Australian Investing Thread
« Reply #1087 on: July 13, 2015, 04:19:25 AM »
Hello guys, I've been lurking this thread long enough thought I would chip in with a few questions. 

A little about me: 25yr Old, recent graduate, just about to start a full time job in a different field to my degree.  My salary will be 55k and I make at least 10k a year from other side gigs (mostly sports betting.)  My COL is low as I still live and plan to stay at my family home (in Sydney) for another year or two.

My first query relates to superannuation.  Being at least 35 years away from being able to access my super (pending possible legislation changes) I would like to put my money in a high growth fund.  While doing research it seems like over such a long timespan two big factors are fees charged and the amount of risk taken on.  Does anyone have any recommendations into what funds would tick these boxes with my circumstances?  I have a relatively low starting balance of 10k from previous part time jobs which has been sitting dormant in a cash only AMP account.

My second query relates to my investment strategy outside of Super.  I have come out of my degree with a HECS debt of 35k and savings of around 40k.  I have aspirations of owning my own property but with the way Sydney real estate prices are, I can not see that happening for at least 5 years.  Is 5 years too short a timespan to be investing in the share market?  Currently the money is in a high rate savings account but the returns are pretty miserable.  Is anyone else in a similar situation or has any advice for me?  I value the flexibility of holding cash but only getting a 3.5% return while my HECS debt is increasing by 2-2.5% has me looking for something better.
You've probably already read this from earlier in the thread but I think Sun Super would be cheapest and you can then dial up to an equity % you're comfortable with. I'm unfortunately restricted by my EBA, and First State Super (MER ~0.6%) was the best I could get.

I would think if you have an allocated need for the money in 5 years then shares would put you at risk not being able to meet your deposit goal. If you're flexible in needing it in 5-10 years then I probably would invest it in shares now then take it out at 5 years unless the market had crashed significantly where your flexibility would allow you to wait out another 5 years for them to recover. That's what I would do in your situation YMMV.

deborah

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Re: Australian Investing Thread
« Reply #1088 on: July 13, 2015, 04:53:00 AM »
I would definitely look at the ratings for the appropriate AMP selection you have, because AMP have a name for being one of the funds with higher fees and thus lower returns. However, your selection could be OK.



micase

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Re: Australian Investing Thread
« Reply #1089 on: July 13, 2015, 10:06:40 PM »
Thanks for the posts guys, there is a lot of information out there to devour but the sooner I can start making more informed decisions the better it will turn out for retired me years down the track. 

Sparkie

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Re: Australian Investing Thread
« Reply #1090 on: July 13, 2015, 11:52:31 PM »
Ive plonked for a Vanguard wholesale fund ($100k min) despite the higher fees than just doing etfs. For me it was more about my emotional state. I felt i was unlikely to be able to rebalance out of something doing well, and buy something doing shite. So I've left that to them.  Even with slightly higher fees, I'll probably still do better if my inabilities are out of the way

AustralianMustachio

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Re: Australian Investing Thread
« Reply #1091 on: July 14, 2015, 03:18:52 AM »
Ive plonked for a Vanguard wholesale fund ($100k min) despite the higher fees than just doing etfs. For me it was more about my emotional state. I felt i was unlikely to be able to rebalance out of something doing well, and buy something doing shite. So I've left that to them.  Even with slightly higher fees, I'll probably still do better if my inabilities are out of the way

So if it's rebalancing, is that a wholesale fund which has a mix of different asset classes and geography? LifeStrategy I think it was called, with Conservative, Balanced, Growth etc.

Or is it 100% Australian shares?

I guess my question is, does the 100k minimum apply to these balanced funds as well? Or is just for the VAS or VGS equivalents

dungoofed

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Re: Australian Investing Thread
« Reply #1092 on: July 14, 2015, 03:22:03 AM »
Hi micase - had you considered putting money earmarked for real estate into a low-cost, unlevereaged REIT? That way you expect your investment to move *with* the real estate market, while receiving rent payments in the form of dividends. If real estate continues on its bull run then your investment has increased by a similar amount, and if it drops then your investment drops with it BUT you can buy real estate for cheaper now too.

Hi Coercivity - it might be worth a(nother) call to Vanguard to see what they say. I think they'll probably wipe their hands of making any comment on tax calculations but you never know. Also, I don't think you'd be the first person to have this query.

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Re: Australian Investing Thread
« Reply #1093 on: July 14, 2015, 03:32:17 AM »

So if it's rebalancing, is that a wholesale fund which has a mix of different asset classes and geography? LifeStrategy I think it was called, with Conservative, Balanced, Growth etc.

Or is it 100% Australian shares?

I guess my question is, does the 100k minimum apply to these balanced funds as well? Or is just for the VAS or VGS equivalents

Yep, its in a Lifestategy fund (growth). The $100k applies to these too. I'd have to check but Im pretty sure the $100k can be spread around different funds during the initial deposit. So, you could put some in Lifestrategy fund and some in Oz shares, some in reits etc. i just plumped for a mix I was happy with taking into account my other stuff.

Coercivity

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Re: Australian Investing Thread
« Reply #1094 on: July 14, 2015, 07:19:54 AM »

So if it's rebalancing, is that a wholesale fund which has a mix of different asset classes and geography? LifeStrategy I think it was called, with Conservative, Balanced, Growth etc.

Or is it 100% Australian shares?

I guess my question is, does the 100k minimum apply to these balanced funds as well? Or is just for the VAS or VGS equivalents

Yep, its in a Lifestategy fund (growth). The $100k applies to these too. I'd have to check but Im pretty sure the $100k can be spread around different funds during the initial deposit. So, you could put some in Lifestrategy fund and some in Oz shares, some in reits etc. i just plumped for a mix I was happy with taking into account my other stuff.
I was under the impression the 100k was the minimum per index fund not overall, but definitely worth another call to Vanguard to confirm the distinction.

Hi micase - had you considered putting money earmarked for real estate into a low-cost, unlevereaged REIT? That way you expect your investment to move *with* the real estate market, while receiving rent payments in the form of dividends. If real estate continues on its bull run then your investment has increased by a similar amount, and if it drops then your investment drops with it BUT you can buy real estate for cheaper now too.
Wow, this is a great idea ... like mind-blowingly good. Can't believe this has never occurred to me before. It's almost like a TIPS for saving for a house.

dungoofed

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Re: Australian Investing Thread
« Reply #1095 on: July 14, 2015, 09:04:56 AM »
Well it's not a perfect hedge, and we're a little limited for choice in Australia, but you might be able to find something that you're comfortable with. Check A-REITs on the ASX, ETFs and also property investment company individual stocks as these might be better correlated with your future home value even though less diversified.

MMM had an article about (American) REITs which might also be worth a read: http://www.mrmoneymustache.com/2011/08/15/become-a-lazy-landlord-with-reits/

FFA

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Re: Australian Investing Thread
« Reply #1096 on: July 14, 2015, 05:08:01 PM »
yeah i'd consider it carefully, while both are "real estate" but commercial (offices, shopping centres etc) and residential are very different markets. the correlation with your specific property purchase could be very poor.

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Re: Australian Investing Thread
« Reply #1097 on: July 14, 2015, 06:13:34 PM »
Hey everyone, I'm looking for some advice, that perhaps some of you have some experience with.

I currently own a house which I live in with a mortgage (lets say the amount is $x), and have roughly 0.5x in the offset account.

I am looking to buy some more shares, and have realised it would be better to have a separate loan for the shares, instead of taking cash out of my offset account so then I can net off the interest on the loan against the dividends I receive on those shares.

My questions for you are then:

1) What is the best way to do this? Get a separate line of credit (bank said something about 5.4% rate) or is it possible to split my home loan (~4.1%) into two loans, and have one part dedicated to investments? Is that allowed? How much should I split off?

2) Is it possible to do this for investments I already own outright, so that I can put more cash into my PPOR offset account?

Thanks!

Edit: the other complicating factor is that the house is in our names, but I want to buy the shares in the family trust, not sure if this creates any other issues

Sparkie

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Re: Australian Investing Thread
« Reply #1098 on: July 14, 2015, 07:01:48 PM »
Just checked my Vanguard emails and the initial $100k can be split around various wholesale funds. It is the total initial deposit that needs to add to $100k

englyn

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Re: Australian Investing Thread
« Reply #1099 on: July 14, 2015, 11:42:29 PM »
I am looking to buy some more shares, and have realised it would be better to have a separate loan for the shares, instead of taking cash out of my offset account so then I can net off the interest on the loan against the dividends I receive on those shares.
More importantly, the interest on the loan is deductable against your salary.

1) What is the best way to do this? Get a separate line of credit (bank said something about 5.4% rate) or is it possible to split my home loan (~4.1%) into two loans, and have one part dedicated to investments? Is that allowed? How much should I split off?
Go for the lower rate. Yes you can have multiple loans against your home, such as one for personal purposes and one for investment purposes. I've had up to 3. See a good mortgage broker.

2) Is it possible to do this for investments I already own outright, so that I can put more cash into my PPOR offset account?
Are you talking about taking a loan against investment property you already own outright in order to buy the shares? If so, do it.
Or are you talking about taking a loan to "buy" shares you already own? That... doesn't get you anywhere. Your loan interest wouldn't be deductible. The ATO only cares what you used the loan funds for. If you essentially just dumped the funds in your offset account, you've used them to reduce interest payments on your home loan, not for investment purposes.

Edit: the other complicating factor is that the house is in our names, but I want to buy the shares in the family trust, not sure if this creates any other issues
I think that kills any tax deductions, because the shares do not produce income in your name, but the loan has to be in your name. Check with an accountant.