Author Topic: Australian Investing Thread  (Read 617294 times)

FFA

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Re: Australian Investing Thread
« Reply #1250 on: August 20, 2015, 09:48:21 PM »
yeah me too picked some up earlier at 66.60.....  alas it is falling further still, but it seems much more comfortable value now to buy for long term !

AustralianMustachio

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Re: Australian Investing Thread
« Reply #1251 on: August 20, 2015, 10:35:29 PM »
the first prediction was already (very nearly) reached by mar/apr'15 and then he turned bearish. but let's not give marty a big head just yet, I think he was calling for a 20% fall in May, which still has a bit to go...

But his first prediction was targeted at December 15, not March. Thats why I meant, if the ASX goes to 5000 then back to 6000, then thats a top notch market prediction effort - exactly as forecasted haha

dungoofed

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Re: Australian Investing Thread
« Reply #1252 on: August 21, 2015, 04:50:26 AM »
I see. Most Australians seem to invest with vanguard?

The traditional oz index is State Street (code STW). But fees are relatively high, and it's fast losing share to vanguard for that reason. Although STW is still quite good for liquidity. Ishares is another competitive option by the worlds largest fund manager, Blackrock. Around the MMM board vanguard is quite popular, as a typical investing strategy is the index approach popularised by Bogle (Vanguard founder).

And the typical Australian portfolio looking something like:

VAS (30%)
VGS (30%)
Government bond / high interest account (40%)

?

Typical Aussie portfolio is House, Government Age Pension, Cash, CBA, BHP, MPL, TLS, WOW, QAN, IAG, AMP.

Most people haven't a clue how to go about buying a bond portfolio.

Maybe if they knew GSBG37 had shot up 7% over the last month and a half they'd be more interested in learning : )

terrier56

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Re: Australian Investing Thread
« Reply #1253 on: August 21, 2015, 04:22:38 PM »
An absolute bloodbath on the US stocks last night. I wonder if this will drag down the ASX on monday. I will be looking to buy VAS around mid sept so if it keeps going a bit that would be great. Yield looking so amazingly attractive right now.

DrowsyBee

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Re: Australian Investing Thread
« Reply #1254 on: August 21, 2015, 05:26:49 PM »
Great summation of yesterday when I logged in to Commsec and it had "3 top performers of the day" and 2 out of 3 were in the red.

marty998

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Re: Australian Investing Thread
« Reply #1255 on: August 21, 2015, 05:39:19 PM »
LOL I'm a little embarrassed now.

Well done guys quite enjoyed that :)

Like I said, make enough predictions one of them will come true eventually. It's called the Steve Keen hypothesis I think.

I'm calling time on Sydney property. APRA has killed the boom. Probably 2 years too late but better late than never.

CBA is wobbling a bit - latest result had the 2nd half down 2% on 1st half. The banks will claw back Net Interest Margin this  year - they won't get the benefit of the full recent 27 basis point increase on investment property loans, because not all of the book is investment loans, but even if they hang onto 5bps on a $600bn lending book it's a fair kick up in profit ($300m each). Can see profits grinding higher, but the bank's P/E ratios will probably stay between 11-13 for now due to the lower growth prospects.

Best blue chip performer this past year? Who in their right mind would have thought it would be Qantas!!


potm

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Re: Australian Investing Thread
« Reply #1256 on: August 21, 2015, 06:26:46 PM »
Oh things are getting interesting!

marty998

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Re: Australian Investing Thread
« Reply #1257 on: August 21, 2015, 06:56:14 PM »
http://www.abc.net.au/news/2015-08-22/us-stock-plunges-more-than-3-per-cent/6716770?section=business

You talking about this?

Quote
The day included a 4.27 per cent drop in Shanghai after another unnerving sign of slowdown in China's manufacturing sector.

It ended the Shanghai exchange's worst week since 2011, losing 11.5 per cent.

Among leading indices, Tokyo shares lost 2.98 per cent, Hong Kong 1.53 per cent and London's benchmark FTSE 100 lost 2.83 per cent.

The Dow Jones Industrial Average gave up 3.12 per cent for the day and was down 5.82 per cent for the week.

The S&P 500 shed 3.19 per cent in the session and 5.77 per cent for the week ó a loss representing some $US1.14 trillion in share value.

The tech heavy Nasdaq fared even worse, losing 3.52 per cent, down 6.78 per cent for the week.

Ouch. Hope you are managing your margin loans effectively potm.

potm

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Re: Australian Investing Thread
« Reply #1258 on: August 21, 2015, 07:04:43 PM »
If things dropped another 50% I'll be worried.
Times like this create the best opportunities, where everything is thrown out regardless of how well it's business is actually doing.

With your views on the property market, are you going to take any action or just hold for the long term. Ironically the biggest fear I have for my portfolio is the impact of a large housing downturn. I hear of too many people my age still putting their all into getting a place so hopefully our lucky country will keep trucking along. She'll be right.

marty998

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Re: Australian Investing Thread
« Reply #1259 on: August 21, 2015, 07:12:02 PM »
Hold for long term, just won't be buying another anytime soon. Won't sell - exit costs and subsequent re-entry costs are just too big.

The 2 I hold now are the type you'd be comfortable holding forever. Small blocks, low strata, easily rentable, close to town, growing young-family-population type area. They won't ever show spectacular growth but nor will they crash and burn like some of the bigger and more showy OTP developments coming up all over Sydney.

BondiCigar

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Re: Australian Investing Thread
« Reply #1260 on: August 21, 2015, 07:36:26 PM »
Hi all and great thread so far, 21 y.o. student here.

I bought my first ETFs yesterday noon-ish (split equally between VAS, VTS and VEU) and while I'm glad I finally got round to pulling the trigger I just wanted to clear up a bit of confusion regarding limit orders and the like.

I'm using CMC, my account got activated on Monday and after a little test money (before BPAYing through 80% of my NW) the bulk of my savings earmarked for ETFs came through by yesterday morning. In the excitement, I put my money down on VAS, VTS and VEU in roughly equal proportions, and because I'm using the standard price info with 20 minute delay, I thought I'd place a one-day limit order at slightly above the displayed asking price... All my orders got filled instantly (below the limits I'd set, so I assume at market price), and I just wanted to inform myself for next time what the best practice is since I definitely didn't do it right this time (though I'm not kicking myself over the long-term ramifications of having paid a little extra per share this one time).

I've done a bit of googling and know enough to never buy Australian-listed ETFs before ~10:30 or so (for liquidity/spread reasons), and to keep orders at one-day expiry, but should I have placed my limit at roughly the middle of the 'current' bid/ask spread?
What do you normally do, and how long do orders usually take to be filled?
I'd estimate that my usual orders would be around $4-6k chunks after accumulating in my HISA.
Is there a best time for buying the cross-listed ETFs like VTS and VEU?
Out of interest, if you were starting all over again in your early 20s, with $20k or so, what would you be doing with it right now?

Thanks in advance and again for the great thread and journals (just starting to go through them, I'm sure I'll be a lot wiser for it in a few weeks!)

qwerty8675309

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Re: Australian Investing Thread
« Reply #1261 on: August 21, 2015, 07:59:45 PM »
An absolute bloodbath on the US stocks last night. I wonder if this will drag down the ASX on monday. I will be looking to buy VAS around mid sept so if it keeps going a bit that would be great. Yield looking so amazingly attractive right now.

It's a great time for rebalancing I reckon. I've been eyeing a few parcels of STW ETFs that I've held for a while, which I'm planning to sell when the cost base is the same as the price to avoid capital gains... and then putting the money into VAS which has lower fees.

I'm not sure if I should go outside of my investment plan, and buy on speculation that things are cheap. Bogle would probably say no, but its so tempting!

qwerty8675309

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Re: Australian Investing Thread
« Reply #1262 on: August 21, 2015, 08:05:06 PM »
What do you normally do, and how long do orders usually take to be filled?

Usually in a few seconds for the Vangard ETFs, but I buy at market price.

Is there a best time for buying the cross-listed ETFs like VTS and VEU?

The best time to buy is when you have enough to put in your next investment 'chunk' :P

potm

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Re: Australian Investing Thread
« Reply #1263 on: August 21, 2015, 08:06:46 PM »
If you are going to put a buy order at slightly above the offer price, it will get filled instantly.
I would suggest opening a commsec account so you have access to live data. You can even take advantage of some sign on free brokerage.
For ETFs there should be a market maker most of the time, always check the spread though especially for the less liquid ones.
If the spread is small you can choose to just accept it and buy at the offer price.
If you are going to try and set a bid within the spread, I would set it at just above what the market maker has. You can't know how the market will move but this gives you the chance to sell your shares to somebody else. Most likely though, your order will be filled if the market goes down or just will sit there doing nothing if it goes up.

If I was 21 again with 20k starting again I would find the best value stock and put it all into that, with a little leverage to add some more on top if possible. 20k is a small proportion of my future earnings and expected wealth, no need to waste potential return with diversification. That's not advice though, just me. You've done the right thing according to conventional wisdom here, I would have gone with VGS over VEU/VTS. Slightly more expensice mer but better tax implications and less brokerage. Hopefully vanguard can lower the Australian based etfs costs over time as more people buy them.

marty998

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Re: Australian Investing Thread
« Reply #1264 on: August 21, 2015, 08:11:30 PM »

I thought I'd place a one-day limit order at slightly above the displayed asking price... All my orders got filled instantly (below the limits I'd set, so I assume at market price), and I just wanted to inform myself for next time what the best practice is since I definitely didn't do it right this time (though I'm not kicking myself over the long-term ramifications of having paid a little extra per share this one time).

Ahh think about what you did. Lets say you were buying a house. The seller says to you "I'll sell at $500,000". You then countered with $505,000. Fortunately for you the way that the auction system works on the stockmarket is that your order gets matched at the seller's price when you input an at-market order.

I'm agnostic on limit or market orders with ETFs. It doesn't matter - you should always buy and sell at a price you are comfortable with.

I will say that you should never place a market buy order when buying individual shares - you will get 'front run' by HFTs and bots, and you will end up paying a bit more.

FFA

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Re: Australian Investing Thread
« Reply #1265 on: August 21, 2015, 08:40:28 PM »
I've done a bit of googling and know enough to never buy Australian-listed ETFs before ~10:30 or so (for liquidity/spread reasons), and to keep orders at one-day expiry, but should I have placed my limit at roughly the middle of the 'current' bid/ask spread?
What do you normally do, and how long do orders usually take to be filled?
I'd estimate that my usual orders would be around $4-6k chunks after accumulating in my HISA.
Is there a best time for buying the cross-listed ETFs like VTS and VEU?
Out of interest, if you were starting all over again in your early 20s, with $20k or so, what would you be doing with it right now?
I also crosscheck the NAV while executing. Sometimes bid/ask can be evenly spread around NAV. Othertimes it can drift a little. vanguard and iShares have live NAV calc's online. For VTS/VEU you will need to convert it with the fx rate.

Sometimes it's a bit petty and you calculate the difference you are trying to save instead of lifting the offer, it might be $10-20 and takes a long time to get filled, or you miss alltogether. Maybe it's a better idea to just trade at market or use a buy limit order at the offer level or slightly above, to ensure you get filled but keep some control in case the market jumps suddenly.

If I was starting again, i'd probably regularly invest into 50/50 VAS/VGS (or equivalent products with other index manager e.g. iShares).

limeandpepper

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Re: Australian Investing Thread
« Reply #1266 on: August 22, 2015, 01:44:07 AM »
An absolute bloodbath on the US stocks last night. I wonder if this will drag down the ASX on monday. I will be looking to buy VAS around mid sept so if it keeps going a bit that would be great. Yield looking so amazingly attractive right now.

I'm hoping that the market continues to go down for a while, too, so I can grab some bargains. Is there a reliable site where we can find out a reasonably accurate P/E ratio of ETFs?

BondiCigar

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Re: Australian Investing Thread
« Reply #1267 on: August 22, 2015, 04:20:57 AM »
Thanks all for the swift and thoughtful replies. I had thought that maybe the price would rise as my order was filled up and didn't want to miss out, but apparently neglected to notice in each instance that the top asking price was for more units than I was purchasing. Lesson learnt!
With the time for buying VTS/VEU I was meaning more whether there was an ideal time of day for liquidity considering that the markets of the underlying securities don't line up very much if at all with the ASX hours, but maybe this doesn't matter? Next time I buy a chunk I will definitely keep my eye on the NAV in particular with the cross-listed ETFs.

If you are going to put a buy order at slightly above the offer price, it will get filled instantly.
I would suggest opening a commsec account so you have access to live data. You can even take advantage of some sign on free brokerage.

Good idea with the live data access, I was wondering recently if I had signed up to Commsec and gotten the $600 free brokerage whether I would be able to easily transfer the shares over to a different, cheaper, broker if the need arose to sell them. Of course, having a buy and hold strategy makes that a bit irrelevant but if I could claim a capital loss on VTS+VEU and purchase VGS or something it could be useful.
I also signed up to the Sharesight portfolio tracking and I feel like that had much more recent (or at least different) price data when looking at it side-by-side with CMC. Anyone know whether it has live pricing? I'm sure its in the documentation somewhere but if someone knows off the top of their head and can save me using mine :)

If I was 21 again with 20k starting again I would find the best value stock and put it all into that, with a little leverage to add some more on top if possible. 20k is a small proportion of my future earnings and expected wealth, no need to waste potential return with diversification. That's not advice though, just me. You've done the right thing according to conventional wisdom here, I would have gone with VGS over VEU/VTS. Slightly more expensice mer but better tax implications and less brokerage. Hopefully vanguard can lower the Australian based etfs costs over time as more people buy them.

Interesting choice, and a very useful mindset when thinking about my net worth at this early stage.. Thanks for that perspective. Out of curiosity, how would you go about determining the best value stock? Shiller P/E?
My mentality for choosing VTS+VEU over VGS was mainly based on MER and diversification, as the tax benefits of getting franking credits for a 4% dividend yield of the 3% cap of Australian shares in VGS isn't a huge bonus. Of course, over a lifetime these little things add up to large differences but I've only ever seen the decision made one way or another out of personal preference.
Typically though (or I guess conventionally), VGS would need pairing with VGE to keep the Emerging Market share that makes up about 18% of VEU, which adds more MER and brokerage, not to mention the fact that VTS+VEU covers 6300 securities to VGS's ~1500 and VGE's ~1000 (of course, 98% of those extra securities are probably worth 2% of the fund so it isn't going to make an enormous difference). I'd be interested in hearing what everyone's ETF choices are in this area, and your relative allocation to VTS/VEU or VGS/VGE. I think the world-cap equivalent is roughly 45% VTS/55% VEU or 90% VGS/10% VGE.

Speaking of 90% VGS/10% VGE, I was doing some asset allocation thinking a short time ago, and came up with the exercise of determining an allocation for a 1, 2, 3...9 fund/ETF portfolio. I think I had a Vanguard Growth LifeStrategy Fund for the 1 fund portfolio, VAS+VGS for the 2 fund, etc etc. and obviously as the number of fund/ETFs went up, individual allocations fell quite fast. Looking at the 9 ETF portfolio makes me question the benefit of adding many (significantly more expensive) ETFs in small proportions to a portfolio:
25% IHD 0.30%
15% VGE 0.48%
15% VEU 0.18%
15% VAF 0.20%
10% VAP 0.25%
5% VTS 0.05%
5% IJR 0.16% (US Small Cap 600)
5% IXJ 0.48% (Healthcare)
5% IXI 0.48% (Consumer Staples)
Obviously some people end up with lots of little parts of their portfolio as remnants of previous allocations, but does anyone have any thoughts on the point at which adding x% of something to your portfolio becomes a meaningless attempt at optimisation/diversification?
In this case it was wishful thinking that instead of 20% VTS I could overweight myself in US smallcaps, healthcare and consumer staples in order to get higher growth/more recession-proof/whatever (Note that I have not gone through with this or most of the numerous other complex portfolios I devised), which I guess is sector-picking rather than stock-picking.

Sorry for the ramble, but over the past few months I've been adding to a very long-winded document/diary with new thoughts on asset allocation, questions, and other investment stuff (totalling about 34 pages at the moment) and looking back I think a lot of what I came up with, like that 9-fund portfolio (and worse!), was overcomplicating something that really should be as simple as possible and as cheap (MER and brokerage-wise) as possible. I'd hate to be rebalancing a 20-ETF portfolio with my ~6 yearly chunks..

potm

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Re: Australian Investing Thread
« Reply #1268 on: August 22, 2015, 04:45:13 AM »
Transferring shares between HINs in your name is very easy. You just fill out a form and hand it to the broker you want to transfer the shares too. There shouldn't be any charge. Just make sure when you are signing up for the commsec account to tell them to make a new HIN for you instead of using your existing one with CMC.

I learn everything I can about the company and it's ability to make profits. A simple ratio is totally inadequate for analysing a single company. At 21 I knew very little of what I know now and I wouldn't be surprised if in another 5 years I will say the same thing about myself now. I consider investing to be a lifelong learning journey or at least until I have more than enough and no longer enjoy it.

There was some discussion of cross listed ETFs a while back in this thread. I believe its more than just the franking credits you miss out on. The withholding taxes on non-us share dividends are not claimable as tax credits.

I view the point of indexing as achieving the average performance of the market. Most people here believe that it's not possible for to beat the market so low cost indexing is the best way. This is contradicted by trying to weigh certain sectors more with different ETFs. There really is no right answer for asset allocation, its up to you.
Have you calculated the practicalities of maintaining 9 ETFs though? 9 times 6 contributions a year  is 54. 54 times 11 is $594.

BondiCigar

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Re: Australian Investing Thread
« Reply #1269 on: August 22, 2015, 06:13:26 AM »
Oh there's no way I could see myself with a 9 ETF portfolio having come full circle in my asset allocation mindset.
At the moment I'm planning for my contributions to be separate and go fully into one ETF, rather than splitting them in 3 or however many ETFs I have, and I don't think I'll be adding any more to the list unless I switch future international contributions to VGS. Having said that, my savings rate (in $ not %) should about double next year so even if I'm alternating between 3 ETFs I'll be making quarterly purchases for each of them.
I will definitely look into the full tax implications before my next purchase of international shares and continue accordingly, in all likelihood I glossed over it when I went through this thread earlier and VGS is the objectively better option.
You didn't address the emerging markets aspect though, and with such a small part of the world cap would you suggest maybe VAS/VGS until I've made about 8-10 contributions into VGS, so that a full contribution into VGE doesn't overweight emerging markets?

FFA

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Re: Australian Investing Thread
« Reply #1270 on: August 22, 2015, 04:37:40 PM »
You didn't address the emerging markets aspect though, and with such a small part of the world cap would you suggest maybe VAS/VGS until I've made about 8-10 contributions into VGS, so that a full contribution into VGE doesn't overweight emerging markets?
Maybe this is for potm, but when I said 50/50 vas/vgs it was just to keep it simple as your question was for someone starting out. yeah i'd just add vge in line with market cap if you are so inclined. Excluding the emerging markets is also a valid option, especially for smaller portfolios and practicality/simplicity reasons.

The comparison vgs (with some vge) vs vts/veu is very lineball. I'm actually doing vts/veu myself (around 45/55 split). Partly because I started before vgs existed. I did consider changing it over, but found it was six vs half dozen. In addition to the other pros/cons mentioned, vts/veu are more liquid but vgs/vge have DRP's.
« Last Edit: August 22, 2015, 04:40:45 PM by FFA »

potm

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Re: Australian Investing Thread
« Reply #1271 on: August 22, 2015, 07:59:39 PM »
Yes you can add emerging markets when your portfolio gets significant enough. There's also frontier markets but I don't believe we have an asx listed etf for those.

BuyInGloom

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Re: Australian Investing Thread
« Reply #1272 on: August 22, 2015, 10:16:33 PM »
Hey guys, I've been reading through this thread for a while and have learnt so much from it, so many thanks for all the great insight posted here!

Right now I'm trying to get my head around a decent asset allocation for an Australian investor. A 50/50 split (Australia/Rest of World) seems to be what is generally recommended here and can be achieved by simply investing into the VAS and VGS ETF's in equal proportions.

Now, Australia only represents around 2% of the global market cap. Which means that if we truly diversified by market cap we would invest only 2% of our money in Australia. My interpretation of the reasons we increase this allocation to 50%, is:
a)   To take advantage of franked dividends.
b)   To avoid withholding tax on dividends from foreign countries.
c)   To protect the value of our currency (if the AUD rises and we have 98% invested overseas we lose a lot of money)
d)   Because we are familiar with the Australian market, and therefore more knowledgeable when it comes to picking stocks. This doesn't really apply to ETF's though...

I am totally onboard with this rationale, but what I donít quite understand is how a 50/50 VAS/VGS portfolio enforces this allocation.

The ASX 200, which VAS largely replicates, gains 43% of its revenues from countries outside of Australia. Therefore, if we use geographical revenue to determine our allocation, a 50/50 VAS/VGS split is actually closer to a 30/70 Australia/International split.

My question is, why are we using domicile as the measure for allocation of our investments rather than geographical revenue? I would have thought the latter is a more accurate indicator?

A good article to read regarding this can be found here: http://www.capitalinternational.com.au/_pdf/Australia_NewGeo_Media_Release.pdf
Motley Fool also posted a good summary of this article here: http://www.fool.com.au/2014/01/31/the-hidden-risks-lurking-in-your-portfolio/

If geographical revenue is a more accurate measure for determining international diversification, then itíd possible to create a fully diversified portfolio using ASX stocks exclusively. For example you could start with 75% VAS, then decrease the 57% Australian weight with a couple of individual stocks that gain more revenues from overseas. It would probably also be a good idea to sprinkle in a few companies from sectors that VAS is underweight in, like health care and tech. And there you have it, a fully internationally diversified portfolio with all the tax advantages of holding Australian stocks.

I'm pretty sure I'm missing something and am planning on investing in International ETFís anyway, but why isn't this plan feasible?

dungoofed

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Re: Australian Investing Thread
« Reply #1273 on: August 22, 2015, 10:35:00 PM »
That's a big question : )

Some of the others here might be able to give a better answer. I've hardly thought about it beyond basically being aware of where certain companies get their income, but even then a percentage of the international exposure/risk is hedged away by the finance department.

Also, don't forget that even if you are rational there is no guarantee the same applies to Mr Market. "Australia" tanks and the "overseas revenue generators" also take a hit.

Would like to hear what others have to say on this. Thanks for the links.

potm

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Re: Australian Investing Thread
« Reply #1274 on: August 22, 2015, 11:13:30 PM »

If geographical revenue is a more accurate measure for determining international diversification, then itíd possible to create a fully diversified portfolio using ASX stocks exclusively. For example you could start with 75% VAS, then decrease the 57% Australian weight with a couple of individual stocks that gain more revenues from overseas. It would probably also be a good idea to sprinkle in a few companies from sectors that VAS is underweight in, like health care and tech. And there you have it, a fully internationally diversified portfolio with all the tax advantages of holding Australian stocks.

I'm pretty sure I'm missing something and am planning on investing in International ETFís anyway, but why isn't this plan feasible?

Franked dividends only come from Australian revenue with tax actually paid to the ATO. There's no correct allocation but 50% VAS and 50% VGS gives some level of franking as well as a lot of diversification. I would hardly call VAS plus a few other companies a fully internationally diversified portfolio.

deborah

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Re: Australian Investing Thread
« Reply #1275 on: August 23, 2015, 01:29:53 AM »
I've read some arguments for instance http://www.canberratimes.com.au/money/investing/at-last--the-horrible-truth-about-the-stock-market-20150813-giymyg.html that franking credits are the only reason that shares are worth investing in. If that is true, an Australian bias gives you and advantage.



FFA

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Re: Australian Investing Thread
« Reply #1276 on: August 23, 2015, 05:27:36 AM »
There's no correct allocation but 50% VAS and 50% VGS gives some level of franking as well as a lot of diversification.
+1... it's more art than science, and I believe consistency is better than accuracy in this case (i.e. just pick an AA somewhere in the middle ground and stick to it long term).

AustralianMustachio

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Re: Australian Investing Thread
« Reply #1277 on: August 23, 2015, 06:20:52 AM »
I've read some arguments for instance http://www.canberratimes.com.au/money/investing/at-last--the-horrible-truth-about-the-stock-market-20150813-giymyg.html that franking credits are the only reason that shares are worth investing in. If that is true, an Australian bias gives you and advantage.

I can't see how that could be true. If it was US and other international shares wouldn't be worth investing in, since they don't have franking.

BuyInGloom

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Re: Australian Investing Thread
« Reply #1278 on: August 23, 2015, 08:58:01 AM »
Also, don't forget that even if you are rational there is no guarantee the same applies to Mr Market. "Australia" tanks and the "overseas revenue generators" also take a hit.

This exact thought came to me while I was writing this post :) If the property bubble bursts and the banks drag the ASX down then they could more than likely take companies that earn their entire revenue overseas down with them. So that may be one good reason for holding stocks in different domiciles. Can anyone think of more?

Franked dividends only come from Australian revenue with tax actually paid to the ATO.

Thatís a good point, however International shares still aren't as tax effective as Australian shares due to the withholding tax on dividends (at least for non-US shares)

There's no correct allocation but 50% VAS and 50% VGS gives some level of franking as well as a lot of diversification. I would hardly call VAS plus a few other companies a fully internationally diversified portfolio.

Yeah, it doesn't compare to the diversification of VAS + VGS, thatís true. But, I'm not convinced with the benefits of diversification once you go past 30 odd holdings anyway, as long as they are balanced geographically and by sector. So 300+ stocks (my example portfolio) vs. 1900+ stocks (VAS+VGS) rests fine with me.

I'm more concerned about whether itís more accurate to calculate my asset allocation via geographical revenue, rather than by domicile. Each school of thought results in massively different Australian/International share allocations, so if you use domicile to calculate your allocation (assuming geographical revenue is correct) then you could end up with a much smaller percentage of Australian exposure than you planned for.  Which means a massive chunk of your funds miss out on the tax efficiency of investing domestically. 

The Falcon

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Re: Australian Investing Thread
« Reply #1279 on: August 23, 2015, 03:13:56 PM »
I've read some arguments for instance http://www.canberratimes.com.au/money/investing/at-last--the-horrible-truth-about-the-stock-market-20150813-giymyg.html that franking credits are the only reason that shares are worth investing in. If that is true, an Australian bias gives you and advantage.

I can't see how that could be true. If it was US and other international shares wouldn't be worth investing in, since they don't have franking.

A rubbish piece of spruiking from Marcus, contains a few kernels of truth but most is plainly misleading and self serving.

Clearly, nobody can be trusted except for Marcus. The solution ; subscribe to his newsletter / tipping service, then get him to manage your portfolio through his job at Patterson Securities. Pathetic.

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Re: Australian Investing Thread
« Reply #1280 on: August 23, 2015, 03:28:43 PM »
SPI futures down 100 points for this morning's opening.

Cue proverbial newspaper articles about blood on the floor and $30billion being wiped off the market etc.

FFA

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Re: Australian Investing Thread
« Reply #1281 on: August 23, 2015, 07:08:28 PM »
There's no correct allocation but 50% VAS and 50% VGS gives some level of franking as well as a lot of diversification. I would hardly call VAS plus a few other companies a fully internationally diversified portfolio.

Yeah, it doesn't compare to the diversification of VAS + VGS, thatís true. But, I'm not convinced with the benefits of diversification once you go past 30 odd holdings anyway, as long as they are balanced geographically and by sector. So 300+ stocks (my example portfolio) vs. 1900+ stocks (VAS+VGS) rests fine with me.

I'm more concerned about whether itís more accurate to calculate my asset allocation via geographical revenue, rather than by domicile. Each school of thought results in massively different Australian/International share allocations, so if you use domicile to calculate your allocation (assuming geographical revenue is correct) then you could end up with a much smaller percentage of Australian exposure than you planned for.  Which means a massive chunk of your funds miss out on the tax efficiency of investing domestically.
depends if you are willing and able to actively invest the global shares. It's a massive list of companies to pick out the shares and continually monitor. I agree diversification has diminishing benefits, but if it's available and cheap, why not take it ? There is a risk you can get hit, even with large "blue chip" type companies, e.g. bp. There can be unexpected events/scandals. So you have to hope you don't get unlucky.

re: domicile vs geography. from pragmatic perspective people will use domicile. perhaps when we say 50/50 it already acknowledges globalisation and asx gives you some exposure indirectly. otherwise the suggested split might be more like 25/75 (or closer to Australia's relative market cap). I don't think the tax advantages alone can justify going to 50/50. And if you're worried about the FX you can always invest in international (hedged) funds, so logically that should only explain a small fraction if you allow for some hedging cost.

bigchrisb

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Re: Australian Investing Thread
« Reply #1282 on: August 23, 2015, 07:39:22 PM »
A bit of blood today, and another two toes into the water for me - parcels of VAS and ANZ.  Wonder how deep the panic will go?

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Re: Australian Investing Thread
« Reply #1283 on: August 23, 2015, 08:09:57 PM »
SPI futures down 100 points for this morning's opening.

Cue proverbial newspaper articles about blood on the floor and $30billion being wiped off the market etc.

"The worlds richest lost a combined $250 billion today"

But they'll gain it back because they won't sell any of it, and then in a few years we will be seeing articles "The worlds richest gained $500 billion because of income inequality"

dungoofed

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Re: Australian Investing Thread
« Reply #1284 on: August 23, 2015, 08:30:20 PM »
Just a quick note to say thanks to all!  I'll try to stop refreshing that portfolio and I will just stick with the plan.  Bloody buyers remorse shouldn't apply to investing.

Hi Shaz - I thought of you when I tuned into the markets this morning. Hope you're holding out, don't do anything rash. 

A bit of blood today, and another two toes into the water for me - parcels of VAS and ANZ.  Wonder how deep the panic will go?

I've gotta wait a bit before getting in. The way things are looking I'm going to be called next month on a put I sold at the beginning of the month.

On the plus side, I've got a fair chunk of money sitting in yen. I was initially going to repatriate and invest it in a couple of months but Deborah in another thread pointed out that when the ASX dives the AUD also tends to dive so I was keeping it as my "crisis investing stash." Didn't think I'd be looking to deploy it so soon though lol.

englyn

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Re: Australian Investing Thread
« Reply #1285 on: August 23, 2015, 08:39:56 PM »
The intelligent answers (and questions!) on this thread are awesome. Thanks all and keep it coming!

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Re: Australian Investing Thread
« Reply #1286 on: August 23, 2015, 10:01:42 PM »
A bit of blood today, and another two toes into the water for me - parcels of VAS and ANZ.  Wonder how deep the panic will go?
Hard to know... it seems just the timing of the bank capital raisings, against the external uncertainties (china mkt plunging, US long overdue correction, EU ongoing instability in Greece). Maybe the Fed will come to the party yet again and delay/extend their lift off hahaha.

For me personally , i'm still seeing it as a buying opp. I've been underinvested and holding too much cash since early this year (we had a lump sum selling off property when relocating back to Oz), quietly hoping for ASX to fall back to low 5000's but thinking it extremely unlikely. Ironically when it actually happens, you start to question and second-guess. So I keep trying hard to remember back to my original notion that these are good buying levels !!

Shaz_Au

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Re: Australian Investing Thread
« Reply #1287 on: August 23, 2015, 11:19:25 PM »
Thanks!  No I haven't done anything rash yet. I think I've just accepted it now.  Actually I am thinking about using the small amount of funds I have been saving for the next purchase now to buy another smaller amount of VAS.  Or I might just balance things up a bit better while the buying for VTS and VEU are all cheaper.

Can't do much with Australia's bloody slow inter-bank transfers though, anyone would think they are still are still doing these by check or in physical cash or something!

Just a quick note to say thanks to all!  I'll try to stop refreshing that portfolio and I will just stick with the plan.  Bloody buyers remorse shouldn't apply to investing.

Hi Shaz - I thought of you when I tuned into the markets this morning. Hope you're holding out, don't do anything rash. 

A bit of blood today, and another two toes into the water for me - parcels of VAS and ANZ.  Wonder how deep the panic will go?

I've gotta wait a bit before getting in. The way things are looking I'm going to be called next month on a put I sold at the beginning of the month.

On the plus side, I've got a fair chunk of money sitting in yen. I was initially going to repatriate and invest it in a couple of months but Deborah in another thread pointed out that when the ASX dives the AUD also tends to dive so I was keeping it as my "crisis investing stash." Didn't think I'd be looking to deploy it so soon though lol.

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Re: Australian Investing Thread
« Reply #1288 on: August 24, 2015, 12:25:38 AM »
Can't do much with Australia's bloody slow inter-bank transfers though, anyone would think they are still are still doing these by check or in physical cash or something!
haha I had the same issue today... waiting for money to come across. but still wanted to get something today, so took the opportunity to rebalance my super % (shifting some cash into oz shares and rebalancing international shares too).

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Re: Australian Investing Thread
« Reply #1289 on: August 24, 2015, 01:36:50 AM »
Can't do much with Australia's bloody slow inter-bank transfers though, anyone would think they are still are still doing these by check or in physical cash or something!
haha I had the same issue today... waiting for money to come across. but still wanted to get something today, so took the opportunity to rebalance my super % (shifting some cash into oz shares and rebalancing international shares too).

Same day transfers between CBA accounts... best of the bunch because it is the only one that has updated its core banking platform from the stone age system the others are running on.

If the index hits 4800 I'm tempted to throw all my super into Oz shares. Currently 5% in cash, 50% in Fixed Interest, 30% in Aus shares and 15% in International shares.

Rebalanced towards Fixed Interest at the right time in July..thought it would be a 6 month play, could turn out to be a 1 month play.

The Falcon

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Re: Australian Investing Thread
« Reply #1290 on: August 24, 2015, 02:09:44 AM »
dumped MPL at 224.5cps and bought VAS at 6412cps at the bell.

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Re: Australian Investing Thread
« Reply #1291 on: August 24, 2015, 02:19:21 AM »
depends if you are willing and able to actively invest the global shares. It's a massive list of companies to pick out the shares and continually monitor. I agree diversification has diminishing benefits, but if it's available and cheap, why not take it ? There is a risk you can get hit, even with large "blue chip" type companies, e.g. bp. There can be unexpected events/scandals. So you have to hope you don't get unlucky.

Yeah, I donít think I'm going to go down this path myself. I was just interested in exploring if that was a plausible investment strategy.

re: domicile vs geography. from pragmatic perspective people will use domicile. perhaps when we say 50/50 it already acknowledges globalisation and asx gives you some exposure indirectly. otherwise the suggested split might be more like 25/75 (or closer to Australia's relative market cap). I don't think the tax advantages alone can justify going to 50/50. And if you're worried about the FX you can always invest in international (hedged) funds, so logically that should only explain a small fraction if you allow for some hedging cost.

Interesting. So when people talk about 50/50 Australian/International share allocation being close to an optimal split, they may already be taking into account the massive slice of international exposure on the ASX. It makes a lot more sense to think about it in terms of geographical revenue for me, because then you can easily see how an individual stock effects your Australian/International allocation. If you had a large CSL holding (which gains 90% of revenues from overseas) and fully counted it as part of your Australian allocation, then that would result in a notable disharmony between your perceived allocation and actual allocation of Australian/International shares.

FFA

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Re: Australian Investing Thread
« Reply #1292 on: August 24, 2015, 05:00:23 AM »
Interesting. So when people talk about 50/50 Australian/International share allocation being close to an optimal split, they may already be taking into account the massive slice of international exposure on the ASX. It makes a lot more sense to think about it in terms of geographical revenue for me, because then you can easily see how an individual stock effects your Australian/International allocation. If you had a large CSL holding (which gains 90% of revenues from overseas) and fully counted it as part of your Australian allocation, then that would result in a notable disharmony between your perceived allocation and actual allocation of Australian/International shares.
hi Buyingloom (timely name!), not sure about others but when I suggest 50/50 is for a simple approach - two fund index portfolio. For "lazy" investors that want to cover global equities efficiently and easily. I think if you're actively investing in direct shares, then definitely you need to weigh up the individual companies and construct the portfolio accordingly. Agree theoretically geographical revenue and margin drivers are what's important. But pragmatically the index funds are based on domicile so that is what people will tend to use in an applied sense. hope it helps.

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Re: Australian Investing Thread
« Reply #1293 on: August 24, 2015, 05:06:48 AM »
dumped MPL at 224.5cps and bought VAS at 6412cps at the bell.

I had a plan to dump a handful (or two) of legacy direct holdings and switch into VAS/IOZ... portfolio tidy up exercise. But having second thoughts since many of these blue chips have been hammered so badly. It's tempting just to hang on to most of them, especially the bank and mining shares, until the cycle turns again.

AustralianMustachio

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Re: Australian Investing Thread
« Reply #1294 on: August 24, 2015, 10:16:02 AM »

Interesting. So when people talk about 50/50 Australian/International share allocation being close to an optimal split, they may already be taking into account the massive slice of international exposure on the ASX. It makes a lot more sense to think about it in terms of geographical revenue for me, because then you can easily see how an individual stock effects your Australian/International allocation. If you had a large CSL holding (which gains 90% of revenues from overseas) and fully counted it as part of your Australian allocation, then that would result in a notable disharmony between your perceived allocation and actual allocation of Australian/International shares.

I think that thinking in terms of geography isn't the best way to consider Australian shares / international shares split. With indexing, the approach is to avoid selecting stocks and simply attempting to capture the entire market returns. The Australian market is a very small slice of the entire market, therefore one should give it a smaller weighting vs international. That's the basic premise.

However franking credits, currency exchange, and higher dividend yields on ASX shares all point people to a higher weighting of ASX than the 2-3% market cap. And there's the law of diminishing returns when it comes to diversification. Hence what people say - it's not an exact science, more a personal choice.

The other idea of international investing is being exposed to industries that aren't particularly well developed in the ASX such as IT, technology companies, etc.

marty998

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Re: Australian Investing Thread
« Reply #1295 on: August 24, 2015, 03:25:47 PM »
Dow down another 500 odd points overnight.

The AUD has been absolutely smashed as well. Trading around US$0.71 and GBP 0.45

Oil fell 5% to close around about US$38, Iron Ore under US$47

We'll open somewhere around 4900 then god knows what will happen when Shanghai and Shenzhen open... Chinese Government should just close the markets and re-open in 3 years time.

"When the earnings are stalling
There'll be days like this
When the markets are falling
There'll be days like this
When the brokers are calling
There'll be days like this
Yeah my mamma told me, there'll be days like this"


(With apologies to Van Morrison)

FFA

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Re: Australian Investing Thread
« Reply #1296 on: August 24, 2015, 03:56:32 PM »
Can't do much with Australia's bloody slow inter-bank transfers though, anyone would think they are still are still doing these by check or in physical cash or something!
haha I had the same issue today... waiting for money to come across. but still wanted to get something today, so took the opportunity to rebalance my super % (shifting some cash into oz shares and rebalancing international shares too).
on second thoughts, maybe I should be thankful for slow transfers for stopping me invest even more money too early, ha!

dungoofed

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Re: Australian Investing Thread
« Reply #1297 on: August 24, 2015, 04:26:08 PM »
I think the biggest tell that there is still a way to go are the analysts that are calling the bottom, "ASX fundamentals are good," etc.

I had to laugh at the SMH's timing with their "now might be the time to reconsider gold" article today. Clearly it was written before the last two days' trading.

edit: for those of you who have bought stocks on margin before, usually how long would you expect it to take before investors' margin calls were triggered?
« Last Edit: August 24, 2015, 04:28:55 PM by dungoofed »

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« Reply #1298 on: August 24, 2015, 06:40:12 PM »
it's all happening lol : )

I lost 2 and a half month's salary in one day (24 August).

My LVR on my margin loan was 70% a few weeks ago.  Now it is 77%, and I'm getting close to a margin call.

bigchrisb

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Re: Australian Investing Thread
« Reply #1299 on: August 24, 2015, 07:29:25 PM »
edit: for those of you who have bought stocks on margin before, usually how long would you expect it to take before investors' margin calls were triggered?

When I was margin called a couple of times in the GFC, it followed the following process:

For my AU broker (ANZ/Etrade in this case)
- I got alerts when my margin loan entered buffer (in my case 5%).
- When I hit margin, I got a call from the broker saying that a margin call had been triggered, after the market close on the day it was triggered.  I had to either show evidence of my depositing funds to the account, put through sell orders for the next day, or nominate securities to sell the next day.
- I was told that if I didn't do either of these, that the lender would start liquidating positions on my behalf the next day.

For my Interactive Brokers account
- It was calculated live.
- From what I understood form the T's and C's, they would start liquidating live as soon at it was breached.  I never tested this.

However, the magnitude of the current falls is piddly compared to the GFC - one would have to be pretty highly leveraged to be getting margin calls this far in, and I'd expect it to be a minor effect.  Drop another 20% and a totally different story!

(I've been chipping in more stock while this has been going on - I still believe that in the long term its a reasonable time to be buying).