Author Topic: Australian Investing Thread  (Read 764308 times)

Abundant life

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Re: Australian Investing Thread
« Reply #1450 on: November 05, 2015, 03:31:14 PM »
Quote
Scott Pape has some pretty good info. I have some Argo. It's overpriced at the moment though (price > NTA).

I think that ETF or direct investment into Vanguard are much the same. Direct investment you can do by Bpay without brokerage, so it's cheaper if you will be putting in small amounts frequently (<5000 or so). I picked the ETF instead for reasons I couldn't quite remember, maybe the fees were a bit lower? Or I wanted to view all my investments in one place? (Nabtrade)

Englin, thanks for your input. Is there a way of looking up the NTA without sourcing a balance sheet and doing the calculations yourself? Although I would like to buy at bargain prices, does that mean I'm timing the market which delays me jumping in, which is not recommended from my reading?

stripey

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Re: Australian Investing Thread
« Reply #1451 on: November 05, 2015, 04:47:56 PM »
I think they're required to disclose the NTA. For example, Argo has it on their website.

bigchrisb

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Re: Australian Investing Thread
« Reply #1452 on: November 05, 2015, 05:28:51 PM »
The ASX publishes monthly stats on LIC NTA here: http://www.asx.com.au/products/managed-funds/market-update.htm

There is also some useful info on expense ratios, and some information on REITS too.

englyn

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Re: Australian Investing Thread
« Reply #1453 on: November 05, 2015, 09:21:53 PM »
The managed funds do all the admin work for you in terms of working out your CGT calcs when you eventually redeem out. You have to do that yourself for the ETF.

Said before it can be tricky if you're not an accounting/spreadsheet geek.

Erk, that isn't something I'd considered. I assumed that since I'd be buying and selling a share of the Vanguard ETF, only the cgt on the share price I actually paid would be relevant. If I'm incorrect, can you point me at a resource that explains what I need to do? (I am a spreadsheet geek, so it doesn't need to spell it out in great detail.)

FFA

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Re: Australian Investing Thread
« Reply #1454 on: November 06, 2015, 01:51:09 AM »
https://www.ato.gov.au/Individuals/Tax-return/2015/In-detail/Publications/Personal-investors-guide-to-capital-gains-tax-2014-15/
it's all in here from the prime source..... you have 1) cgt event when you eventually sell the etf, and 2) cgt's distributed to you each year by the fund. regarding 1), you need to adjust your cost base for any tax deferred amounts received in the annual distributions. pls refer chapter C2 in the link document

marty998

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Re: Australian Investing Thread
« Reply #1455 on: November 06, 2015, 01:56:45 AM »
Buying and selling is fine and is usually pretty easy to track.

Each year you get an annual tax statement detailing the components of your distributions throughout the year. Along with franking credits, capital gains, foreign income etc, a small amount is called "tax-deferred" which is is not included in your return. Instead it is deducted from the cost base of your investment*, and thus increases your capital gain when it comes time to sell.

If you reinvest your dividends, you need to keep track of the cost base of each parcel, so you need to keep track of the tax deferred income and allocate it to each parcel.

If you hold VAS for 20 years and reinvest the dividends quarterly and add to the investment with purchases 4 times a year then you end up with 160 parcels with a whole bunch of tax deferred cost base deductions to keep track of.

That's where it gets tricky.

* Only happens if you hold it long enough, but tax deferred income cannot reduce your cost base below zero. Once it hits zero then any further tax deferred income is included in your tax return as a capital gain.

**Edit again ... thanks FFA for that link.

cakie

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Re: Australian Investing Thread
« Reply #1456 on: November 06, 2015, 04:30:16 AM »
Thanks for the link to that ATO doc FFA, I haven't had to do a tax return with investments yet :)

Has anyone put any money into P2P lending? We're considering making RateSetter a small part of our bond/cash allocation. At the moment, I'm aiming for 80% stocks, 20% VAF. Currently have $16k invested + $20k EF.

I'm thinking we might change the 20% VAF to 15% VAF, with 5% in 5-year loans with RateSetter...

steveo

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Re: Australian Investing Thread
« Reply #1457 on: November 07, 2015, 03:29:04 PM »
Hi guys - who here has an idea regarding bonds and specifically bonds within an Australian portfolio. The house will be paid off soon and I am looking to invest in probably VAF & VAS for my portfolio outside of super.

A couple of points:-

1. I reckon that shares are overvalued at the moment so I definitely want to have some money on the sideline.
2. The return of VAF is about 5% at this point. If rates increase how much will VAF go down or does it simply return around 5% ongoing.
3. I'm thinking of going for about a 50/50 asset allocation and if shares drop purchasing more shares.

Let me know your thoughts/advice.

FFA

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Re: Australian Investing Thread
« Reply #1458 on: November 08, 2015, 04:43:04 AM »
Hi guys - who here has an idea regarding bonds and specifically bonds within an Australian portfolio. The house will be paid off soon and I am looking to invest in probably VAF & VAS for my portfolio outside of super.

A couple of points:-

1. I reckon that shares are overvalued at the moment so I definitely want to have some money on the sideline.
2. The return of VAF is about 5% at this point. If rates increase how much will VAF go down or does it simply return around 5% ongoing.
3. I'm thinking of going for about a 50/50 asset allocation and if shares drop purchasing more shares.

Let me know your thoughts/advice.
I thought a lot about bonds a year ago as I was planning to FIRE and felt somehow obliged hold a decent allocation in bonds....

Where I ended up though, I hold the vast majority of my defensive assets in online savings accounts. Average yield 3.5% is less than what you mention for VAF, so maybe it's not such a smart move. But my thinking was 1) I want my defensive assets to be capital secure, 2) global monetary policy is still in the middle of an extreme central bank experimental episode and no one really knows how it will end yet, 3) similar to your view on shares, I feel bonds are overvalued nowadays (due to central bank buying/QE), 4) online savers are quite flexible and I can switch it around (e.g. if tax marginal rates change between me/spouse), 5) I was concerned the traditional inverse correlation between shares and bonds may not work this time (now low interest rates are driving shares up, and eventual interest rate hikes could cause both share and bond prices to fall together).

The Buffett quote resonated heaviliy with me, i.e. the one about bonds are supposed to give risk free returns, not return free risk.....

I made a note in my plans to re-assess it each year and see if the interest rate environment (central bank policy) normalises, then I will shift some cash into fixed interest.

Regarding your q2, I think the current 5% is certainly boosted by the falling interest rate environment. i.e. the bond yields are lower, but it is boosted by capital appreciation. If and when rates eventually rise, there will be a capital depreciation effect, that will offset the increase in rates. I have seen a rule of thumb e.g. for a 10 year bond, a 1% increase in rates leads to X% fall in bond price. Can't recall it though and it's hard to say what should be applied to VAF, those will likely by shorter tenure bonds.

edit/add : on the growth side, i'd certainly suggest some global shares to go with your VAS. I think we've had this discussion before, and recall your view that it's all correlated, but maybe the past 12 months is a good example of where global shares can come in handy to stabilise returns. of course, you could look at it the other way too, if ASX yields and franking credits were too attractive 12 months ago, that will be even more the case now !!
« Last Edit: November 08, 2015, 02:24:05 PM by FFA »

dungoofed

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Re: Australian Investing Thread
« Reply #1459 on: November 08, 2015, 03:41:24 PM »
The only things I'd add are:

1) systematic bond funds (eg VAF, VGB) tend to revert to mean over time. It is a result of the process of near-dated bonds expiring, and the principal being reinvested into similar bonds but at today's rates. The difference is purely due to speculators' view on which way rates are headed, but if you never sell then the fund can be expected to revert to the mean eventually.

2) If you're using the bonds as "dry powder" then I'd consider having some of the money in cash a la FFA's online savings accounts, and I'd also consider holding some longer-dated bonds. And maybe some gold, too.

The reason for the cash is broadly "diversity" but also because in times when money is tight (eg start of a recession) there are cases where both stocks and bonds are down as people cash out and hunker down for the storm. It's usually just a small window, if it exists at all, but at 3.5% it's not too different to VAF, is insured by the government, very low counterparty risk, etc.

The reason for some long-dated bonds would be to take advantage of a falling-rates environment. If you believe that rates are only going to increase from here then it might not be a great investment. But if you think in Australia rates could go to zero or below then something like GSBK39 from http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=GOVERNMENT_BOND could be a good investment. You'll receive 3.25% guaranteed (almost) for the next 24 years. If rates drop then people will be willing to pay you handsomely to take that guaranteed 3.25% off your hands. Just putting the option out there. Dry powder can take many forms : )

FFF

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Re: Australian Investing Thread
« Reply #1460 on: November 08, 2015, 08:05:15 PM »

Has anyone put any money into P2P lending? We're considering making RateSetter a small part of our bond/cash allocation. At the moment, I'm aiming for 80% stocks, 20% VAF. Currently have $16k invested + $20k EF.


Hi all, been reading on here for a fair while now but not a great poster. Fairly new into the investing game but have been following the MMM lifestyle for a long time, just without knowing it!

Cakie, I have been experimenting with some money in Ratesetter recently-since about August this year. Only small amounts while I get to learn the platform and fully understand the risks but with a view to hold some money in there long term. My personal view is that only the 5 year loans are worth it to me-I figure I can get a completely risk-free ~6% return (including tax implications) on my mortgage so to take on the extra risk the % returns have to be a bit higher, i.e. the ~9% returns of 5 year loans. So far, I have been impressed and am slowly increasing my money held in Ratesetter, mainly because this then diversifies me against the loans I make-the more smaller loans with more borrowers should in theory decrease the risk of default and loss of capital. Obviously, I am not going to be putting all my money in RS but for now it is a fun and interesting experiment.

If you are interested, send me a message and I can give you a link-we both earn $25 if you invest $1000. 2.5% instant return is better than nothing in my opinion.


steveo

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Re: Australian Investing Thread
« Reply #1461 on: November 09, 2015, 12:44:07 AM »
Thanks for the advice on bonds. I feel putting a chunk of change in there over the next year or so may be a smart decision. If stocks crash I can't see the bonds dropping too much which would then mean that there is a good time to reallocate my portfolio to more stocks.

chasingthegoodlife

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Re: Australian Investing Thread
« Reply #1462 on: November 11, 2015, 03:54:49 AM »
I bought my first parcel of VAS yesterday! As opposed to the managed fund. Think I will be ok tracking data for tax, we shall see.

Still really enjoying this thread. Thanks so much to everyone for sharing their knowledge.

My plan currently is to choose and purchase a global ETF then continue buying both VAS and global shares as funds allow. Don't want to get caught up in the headlines and short term movements as I am buying for a 20 year+ horizon.

Geta

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Re: Australian Investing Thread
« Reply #1463 on: November 11, 2015, 04:45:05 PM »
Hi all.  After a lot of soul searching and discussion, my wife and I have decided to revise our FIRE amount and date, and bring it forward.

Rather than buying a PPOR in Melbourne and continuing to work towards our magic number, we plan to hit a lower number - $1.5 million - and mix in a continued modest income from various sources, as we take our lives on the road and travel long term.

Our investments are currently at nil, as I'm waiting to finalise what my deferred tax bill from my business is and get up to date on that.  I expect we'll have 30-40k left over to invest right away.  From then on - all going to plan - our target is to save and invest 100k a year, which we're on track to do so far.

I also have a lump sum coming from an inheritance, which should be late this year or early next year.  I'm unsure of the figure but it's likely to be around 500-700k.

Based on these figures, we should reach our goal in around five years though we hope to find additional ways to increase our savings in the meantime.


All this leads me to my point:  In a few weeks I should have 30-40k to invest, then within a few months, a much larger amount.  I find this somewhat terrifying - not investing, but having such a large amount to invest in one hit.  I want to get it 'right'.

In my past research, I'd come to favour a mix of Vanguard funds, with a bit of cash/bonds.  How should my plans to travel full time (plan is to do it perpetually, but who really knows?) affect my spread.  I'd imagine I'd want a far greater exposure to markets outside of Aus?  What about funds like VTS/VEU which are US domiciled?  Would they be better than funds that are similar but are domiciled in Australia in this case?  What is the go with Wholesale Funds - should I look at those, particularly to invest the larger lump sum?

The overwhelming consensus around these parts, and other similar circles is for ETFs / LICs and similar products but I know my Dad is currently investing with someone who is doing covered call options.  He raves about his returns, and says it's safe.  I'm very skeptical though I've seen his figures and he has done very well over the last couple of years.  However, if it was a good long term strategy I'm sure I'd be reading about it on more forums like this one.  Does anyone have any comments on this?

I'd appreciate any insights from the like minded crowd here.  I fully intend to seek professional advice also, but my only experience with a financial planner in the past was poor, and my parents had a very bad experience in the past also, so I would like to go in prepared.

Which brings me to my last question:  Could anyone recommend a good financial planner or accountant well versed in this sort of thing, in Melbourne?

Thanks very much.

Geta

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Re: Australian Investing Thread
« Reply #1464 on: November 11, 2015, 07:08:51 PM »
In addition to holding ETF's, I also hold some LIC's, ARG, AFI, CTN. I'm looking to add to ARG and AFI and have been monitoring the NTA for a while, which has been at a premium to the share price. If you're a buy and hold investor how much emphasis are you putting on the NTA vs the share price? I'm finding myself sitting on the sidelines due to the discrepancy, whereas my strategy is telling me to invest at regular intervals. Thoughts?

dungoofed

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Re: Australian Investing Thread
« Reply #1465 on: November 11, 2015, 07:11:23 PM »
Hi Geta

Quick question before we start: when you are traveling, of which country will you be a resident? Not that I have any advice directly related to this, but it's something you might want to think about, as it affects how you and your investments are taxed, and there might be better (offshore) vehicles available to you.

Regarding selling covered calls/cash-covered puts, I started doing it a couple of months ago. It's "safe" so far as if you stick to the rules and make no mistakes you won't "blow yourself up." I aim for about 15% annualised returns but keep in mind you won't be invested for the full year so it ends up being conservatively about 11%. What's nice about it is that you receive money now which you can reinvest (eg in bonds), and this really ramps up when you have about $200K to dedicate to the strategy. The downside is that there is a fair bit of work involved, more than just buy-and-hold.

Regarding investing a lump sum, the adage goes that the best time to invest it was yesterday. The second best time is today. The maths backs this up. Having said that, a lot of people split it into two and DCA it. Another option is to buy a large chunk in bonds and use the interest payments to DCA into stocks up to your target allocation, but again the math shows that this is not ideal. Regardless, your 30K is going to look small compared to the inheritance when it comes time to invest that, so you might as well use the 30K as a chance to get used to being in the market.

VTS/VEU is one option, another common one is VGS/VAS (with optional VGE).

Geta

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Re: Australian Investing Thread
« Reply #1466 on: November 11, 2015, 10:59:34 PM »
Hi dungoofed, thanks for the reply

I actually have no idea about residency.  I guess I just figured we would be Australian residents who happened to be travelling long term, but I do have UK dual citizenship so I suppose that deserves some investigation to see whether an advantage could be gained in some way from that.

I just did some more reading on covered calls, and I believe I understand the principle of it.  I guess my skepticism arose from the fact I don't recall reading much or any about them from within FIRE circles, and when my dad was talking about it so enthusiastically my natural cynicism came to the fore!  I'll have a talk to him about it again when he's back from his own travels, and I might have a chat with the adviser he's using and look at putting some of my portfolio into that.

Ah DCA.  I've read the maths on that, and heard the quote before.  I think I'll jump headfirst into the pool when the time comes, and resolve to ignore any paper losses from blips along the way.

VTS/VEU/VGS/VAS/VGE.... it makes my head swim.  Am I right in thinking that I would want a larger exposure to international markets than if I were living and spending in Australia?

I guess I should seek some professional advice on whether US or Aus based funds would be a better fit.

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Re: Australian Investing Thread
« Reply #1467 on: November 11, 2015, 11:24:15 PM »

Has anyone put any money into P2P lending? We're considering making RateSetter a small part of our bond/cash allocation. At the moment, I'm aiming for 80% stocks, 20% VAF. Currently have $16k invested + $20k EF.


Hi all, been reading on here for a fair while now but not a great poster. Fairly new into the investing game but have been following the MMM lifestyle for a long time, just without knowing it!

Cakie, I have been experimenting with some money in Ratesetter recently-since about August this year. Only small amounts while I get to learn the platform and fully understand the risks but with a view to hold some money in there long term. My personal view is that only the 5 year loans are worth it to me-I figure I can get a completely risk-free ~6% return (including tax implications) on my mortgage so to take on the extra risk the % returns have to be a bit higher, i.e. the ~9% returns of 5 year loans. So far, I have been impressed and am slowly increasing my money held in Ratesetter, mainly because this then diversifies me against the loans I make-the more smaller loans with more borrowers should in theory decrease the risk of default and loss of capital. Obviously, I am not going to be putting all my money in RS but for now it is a fun and interesting experiment.

If you are interested, send me a message and I can give you a link-we both earn $25 if you invest $1000. 2.5% instant return is better than nothing in my opinion.

Thanks for replying FFF! I'm a bit of a lurker on here too :P

If I had known about the referral bonus before I would have done that! Whoops, got impatient last weekend and signed up. Only just transferred money across today. I'm doing a lump sum $1k invest, but think from now on I will put it in small amounts on the market. That way it won't all be going to the same borrower. I like that I can go for a slightly lower interest rate (~9.6%) and it will get taken up straight away, rather than have the money sitting around in the holding account... though if everyone does that, it will push the rates down I suppose!

FFA

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Re: Australian Investing Thread
« Reply #1468 on: November 12, 2015, 03:34:46 AM »
Hi dungoofed, thanks for the reply

I actually have no idea about residency.  I guess I just figured we would be Australian residents who happened to be travelling long term, but I do have UK dual citizenship so I suppose that deserves some investigation to see whether an advantage could be gained in some way from that.

I just did some more reading on covered calls, and I believe I understand the principle of it.  I guess my skepticism arose from the fact I don't recall reading much or any about them from within FIRE circles, and when my dad was talking about it so enthusiastically my natural cynicism came to the fore!  I'll have a talk to him about it again when he's back from his own travels, and I might have a chat with the adviser he's using and look at putting some of my portfolio into that.

Ah DCA.  I've read the maths on that, and heard the quote before.  I think I'll jump headfirst into the pool when the time comes, and resolve to ignore any paper losses from blips along the way.

VTS/VEU/VGS/VAS/VGE.... it makes my head swim.  Am I right in thinking that I would want a larger exposure to international markets than if I were living and spending in Australia?

I guess I should seek some professional advice on whether US or Aus based funds would be a better fit.
Agree with dungoofed, I suggest you look into the residency on ATO website (or call them), and/or ask your accountant if you have one. By residency I mean whether you are resident or non-resident of Australia for tax purposes. As you mention the intention is to travel long term / perpetually, depending on what actions you take aligned with this (e.g. de-register electoral roll, cancel all memberships, insurances, sell property, close bank accounts, etc) it might also influence the residency determination. Tax resident status might affect a lot of things ; it's best to clarify this first.

I think you are right as a citizen of the world your home bias to Australia should certainly be less. Just from a FX perspective, and also perhaps not getting as much tax benefit from Australian shares as you might being here, I'd suggest you want significantly higher weighting to global shares than the 50/50 default (or even higher Aus%'s adopted by many here). However, if you still consider Australia as an anchor point / potential place to retire and settle back one day, then you may not want to stray too far from the 50/50 in that case...

Covered calls. It's a legitimate income strategy but not for me personally. If you do go ahead i'd recommend that you really understand fully - how the options work (in detail including contract wordings, pricing equations, etc), all the costs involved, liquidity issues if any, what you are giving up in order to gain (e.g. capital growth upside). As they say.... no free lunches.

Lump sums, while the theoretical view is all in today, I personally favour DCA as the base case. I had a lump back in April and was not keen at all buying shares at those levels. However I abandoned my 18 month DCA program and have been throwing it in the past three months ... Many will frown on this as market timing / luck, but what can I say except that i'm glad I did ! I certainly would be kicking myself if I had followed the adage over my intuition and invested the lump in April.
« Last Edit: November 12, 2015, 04:59:50 AM by FFA »

FFA

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Re: Australian Investing Thread
« Reply #1469 on: November 12, 2015, 02:38:52 PM »
http://www.theage.com.au/business/banking-and-finance/macquarie-targets-roboadvice-at-mass-market-20151111-gkwuu9.html
and then there were two .... life about to get harder for stockspot ?

interesting they will use a fixed/flat fee model, and not tie it to macq platforms. sounds good but let's see how big that flat fee is...

marty998

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Re: Australian Investing Thread
« Reply #1470 on: November 13, 2015, 03:53:51 AM »
This will turn the market upside down and has the potential to rip the heart out of the Wealth divisions of NAB, WBC and CBA.

All the big banks are experimenting with it, but Macquarie seems to be the first to lay the cards on the table and 'disrupt' the market.

The beauty of it is the sheer volume it opens up for an incredibly cheap price:

- It is not limited by a restriction on the number of clients it can service.
- It doesn't require daily 'feed' of commissions and kickbacks like a human adviser.
- The algorithms pick the best fund/s for your circumstances, not simply the funds that are aligned to the parent Bank entity.
- You wouldn't have to pay an ongoing advice fee or an asset based % fee, and you're not locked in for the long haul by having to move all your assets to them.

The rest of the industry is going to have to play catch up on this one, or risk being left in the dark ages.

steveo

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Re: Australian Investing Thread
« Reply #1471 on: November 13, 2015, 04:00:41 AM »
The rest of the industry is going to have to play catch up on this one, or risk being left in the dark ages.

I'm not sure about this. I can't see myself paying for the service and I wonder if people with a lot of money will bother.

dungoofed

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Re: Australian Investing Thread
« Reply #1472 on: November 13, 2015, 04:39:34 AM »
I'm not convinced either.

Just off the top of my head:

1) Stockspot/Macquarie Bank roboadviser advises you to the point of trade, at which point you're on your own (including $10-15 trading fee), vs Betterment/Weathfront which are run more similar to a fund where you just transfer the money across and they take care of the rest, sans fees.

2) With the fees you're not going to want to be rebalancing on a balance less than $20K. Compare that with Betterment/Wealthfront who run efficiently with small balance accounts.

3) No fractional shares.

4) Complete "you're on your own" attitude toward taxation issues.

So far I have seen nothing "robo" in Australia that I couldn't whip up in Excel in a weekend. Furthermore it's not like the Australian ETF market is actually hard to navigate. Finally, Stockspot give you (or used to give you) their entire allocations on their website. From memory their main difference between risk profiles was the amount of exposure to VAS they suggested.

FFA

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Re: Australian Investing Thread
« Reply #1473 on: November 13, 2015, 05:14:25 AM »
One potential market i thought could be the smsf army. Of course not those who are fully DIY. But especially if it generates all the investment strategy docs needed for compliance.

On a separate point, i wonder when someone - hope vanguard read this :) - will make an ASX all world etf. Just a fund of funds 50% vas, 45 vgs, 5 vge will do nicely. Would make my life easier and im sure some others would use it too. Any idea why this isn't there already, or am i missing something?

FFF

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Re: Australian Investing Thread
« Reply #1474 on: November 13, 2015, 08:38:54 PM »


Thanks for replying FFF! I'm a bit of a lurker on here too :P

If I had known about the referral bonus before I would have done that! Whoops, got impatient last weekend and signed up. Only just transferred money across today. I'm doing a lump sum $1k invest, but think from now on I will put it in small amounts on the market. That way it won't all be going to the same borrower. I like that I can go for a slightly lower interest rate (~9.6%) and it will get taken up straight away, rather than have the money sitting around in the holding account... though if everyone does that, it will push the rates down I suppose!

No problem, you're welcome!

With regards the lump sum invest that you have done-don't forget that each month that you reinvest the capital and principal payment you are further diversifying yourself as it is a fair assumption that this will be going to a new borrower each time. So even if you don't put any further investment in there the risk should decrease over time. The way I see it is that the longer I am invested in it the more diversified across different borrowers I become. Of course it helps that RS has not seen a single default in their first year of lending through ~900 borrowers. This cannot last, I am sure, but it certainly helps boost the provision fund in the meantime.


marty998

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Re: Australian Investing Thread
« Reply #1475 on: November 15, 2015, 06:15:28 PM »
Ok guys, time to lay the cards on the table.

Since July my asset allocation in my super investments has been 55% to fixed interest and cash, 30% to Aus equities and 15% to international shares.

Today I switched it to 80% Aus equities, 10% Aus Fixed Interest and 10% International Fixed Interest.

I figure that anytime the index is below 5000 seems like an opportunistic time to buy. Could it go to 4500? Maybe, but it could just as easily snap back to 5500. I mean when you've got BHP trading at pre-mining boom levels and ANZ on a forward P/E of 9 then you would have to think the market would wake up and smell the roses one day.

I still expect BHP to fall further, but the banks are already 25% or more off their highs. Their profits may stagnate for a few years however I'm prepared to be patient and collect the dividends in the meantime.

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Re: Australian Investing Thread
« Reply #1476 on: November 15, 2015, 09:09:02 PM »
bold move, nice one ! I tend to agree asx appears good value. Weighed down lately by all the equity raisings (banks, oil and gas etc), recent sp500 dip and now this terrible paris attack.

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Re: Australian Investing Thread
« Reply #1477 on: November 16, 2015, 12:09:32 AM »
80% is quite high-conviction. Did you rebalance your existing holdings or this is for future contributions only? Also wondering what is your logic behind subbing out Intl Equity for Intl bonds?

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Re: Australian Investing Thread
« Reply #1478 on: November 17, 2015, 03:29:10 PM »
existing and future.

International equities - the currency has done its run. I can't see it falling much further. Any good performance in international equities is likely to be offset by a steadily rising $A as (IMHO) it heads back towards 75-78c.

I've really subbed international equities for Australian equities. Largely because the tax impact of international shares detracts from performance whereas tax (franking credits) is a net benefit to performance of Australian shares and (IMHO) I believe a good proportion of the returns for the next year will come from dividends, with capital gains being a bonus. If the index goes back up to 5500 - then you will see almost a 17% return being 10% capital, 5% dividends + 2% franking credits. Not hard to see that happening.

Sector allocation of international bonds reduced from 25% to 10%, and Australian bonds from 25% to 10%, and cash from 5% to nil. It doesn't really make sense for a 29 year old to have 55% weighting to conservative asset classes, except where you believe the markets will fall (as I saw happening in July with China shares burning).
« Last Edit: November 17, 2015, 03:33:19 PM by marty998 »

dungoofed

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Re: Australian Investing Thread
« Reply #1479 on: November 17, 2015, 05:11:28 PM »
Wish there was a Like button. I want to say "ok got it, no real concerns" but don't think it warrants a full "reply" like this. Now that I'm typing,...

Thanks for giving us a bit of insight into your thinking. I agree, and didn't realise you were sitting on so much dry powder. I just did my annual rebalance and fortunately VGS's bull run meant I didn't have to buy much more at these prices.

I don't really have any high-conviction ideas at the moment, just letting the portfolio do its thing while I work on a couple of projects. If you forced my hand and asked me for stock picks I'd say CAJ, IAG and BHP are worth a look. (disclosure: I'm currently selling covered calls on BHP because one of the put options I sold got exercised. The other two I haven't got further than a couple of annual statements).

IMHO bonds are the riskiest play at the moment - the discount to par value isn't enough cover the risk, and let's face it NO-ONE knows what rates are going to do. Insty responses to "chance of a US rate rise within the next three months?" swing from 30% to 70% on an almost daily basis. Seriously, no-one has a clue.

AustralianMustachio

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Re: Australian Investing Thread
« Reply #1480 on: November 17, 2015, 10:08:26 PM »
haha woo go marty! Love it. And quite a ballsy move.

Jokes aside, I very much agree with your logic. Personally I did something somewhat similar with my own (relatively small at this stage) holdings outside of super.

marty998

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Re: Australian Investing Thread
« Reply #1481 on: November 17, 2015, 10:37:43 PM »
Wish there was a Like button. I want to say "ok got it, no real concerns" but don't think it warrants a full "reply" like this. Now that I'm typing,...

Thanks for giving us a bit of insight into your thinking. I agree, and didn't realise you were sitting on so much dry powder. I just did my annual rebalance and fortunately VGS's bull run meant I didn't have to buy much more at these prices.

I don't really have any high-conviction ideas at the moment, just letting the portfolio do its thing while I work on a couple of projects. If you forced my hand and asked me for stock picks I'd say CAJ, IAG and BHP are worth a look. (disclosure: I'm currently selling covered calls on BHP because one of the put options I sold got exercised. The other two I haven't got further than a couple of annual statements).

IMHO bonds are the riskiest play at the moment - the discount to par value isn't enough cover the risk, and let's face it NO-ONE knows what rates are going to do. Insty responses to "chance of a US rate rise within the next three months?" swing from 30% to 70% on an almost daily basis. Seriously, no-one has a clue.

Yes agree bonds are the riskiest play. However I'm of the view that when the Fed does hike rates it will be a net positive for markets. They should have done it earlier this and taken everyone by surprise. Now the market is just on tenterhooks and every month that they don't raise it makes the market think there's something wrong with US economy.

haha woo go marty! Love it. And quite a ballsy move.

Jokes aside, I very much agree with your logic. Personally I did something somewhat similar with my own (relatively small at this stage) holdings outside of super.

Doing it outside of super triggers tax consequences :) much harder to deal with. Within super (unless you have an SMSF) your assets are pooled with everyone else so switching doesn't trigger anything - unless your holdings are a large % of the fund.

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Re: Australian Investing Thread
« Reply #1482 on: November 18, 2015, 12:52:57 AM »
Marty - I think that at this point your decision might pay off. I know that there is a little bit of trying to predict the future however its a pretty good asset allocation right now.

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Re: Australian Investing Thread
« Reply #1483 on: November 18, 2015, 06:38:40 AM »
haha woo go marty! Love it. And quite a ballsy move.

Jokes aside, I very much agree with your logic. Personally I did something somewhat similar with my own (relatively small at this stage) holdings outside of super.

Doing it outside of super triggers tax consequences :) much harder to deal with. Within super (unless you have an SMSF) your assets are pooled with everyone else so switching doesn't trigger anything - unless your holdings are a large % of the fund.

True, and a good point. My strategy was a bit different anyway, but similar in that I'm now more exposed to Aus shares than before. And regardless, the returns to this point alone have been very much worth it (albeit certainly not the "mustachian" way)

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Re: Australian Investing Thread
« Reply #1484 on: November 18, 2015, 04:38:35 PM »
Been trying to figure out where people are getting the $100,000 minimum to open a Vanguard wholesale fund from.

Looking at the Vanguard Australia site, it seems you would need $500,000 minimum?

https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-wholesale.jsp

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Re: Australian Investing Thread
« Reply #1485 on: November 18, 2015, 04:53:31 PM »
I reckon you are on the right horse here Marty (although I've been pretty much all-in while things have been in the 4900-5200 range).

I've also been focusing on buying Australian equities - partly because my international equities have outperformed and I've needed to rebalance, and partly because I agree with the exchange rate gains already being pretty much priced in.

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Re: Australian Investing Thread
« Reply #1486 on: November 18, 2015, 05:11:06 PM »
Been trying to figure out where people are getting the $100,000 minimum to open a Vanguard wholesale fund from.

Looking at the Vanguard Australia site, it seems you would need $500,000 minimum?

https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-wholesale.jsp

We don't have that much (well, most of us don't anyway). Many here buy the ETFs through discount brokers.


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Re: Australian Investing Thread
« Reply #1487 on: November 18, 2015, 05:18:30 PM »
I reckon you are on the right horse here Marty (although I've been pretty much all-in while things have been in the 4900-5200 range).

I've also been focusing on buying Australian equities - partly because my international equities have outperformed and I've needed to rebalance, and partly because I agree with the exchange rate gains already being pretty much priced in.

Well 3 days does not a strategy make, but my super up about $2,500 already lol.

However my buy order on VAS in the $64 range did not get filled so I'm a little disappointed. I'll leave it there for another couple of weeks just in case the index drifts down again. No rush to buy and incur brokerage and fees and interest on the margin loan.

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Re: Australian Investing Thread
« Reply #1488 on: November 18, 2015, 08:28:58 PM »
Been trying to figure out where people are getting the $100,000 minimum to open a Vanguard wholesale fund from.

Looking at the Vanguard Australia site, it seems you would need $500,000 minimum?

https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-wholesale.jsp

We don't have that much (well, most of us don't anyway). Many here buy the ETFs through discount brokers.

Weren't some people calling Vanguard direct in order to get the limit lowered?


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Re: Australian Investing Thread
« Reply #1489 on: November 20, 2015, 11:08:46 PM »
Hey everyone!

I'm 22 and have recently made the decision to put some of my hard earned savings into shares. Although that decision was easy, now the hard part is deciding which shares to purchase..

I am split between putting it all straight into an LIC such as AFIC, or splitting my funds (maybe 60/40) between AFIC and an ETF such as VAS or VHY.

Any thoughts?

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Re: Australian Investing Thread
« Reply #1490 on: November 21, 2015, 02:10:28 AM »
Been trying to figure out where people are getting the $100,000 minimum to open a Vanguard wholesale fund from.

Looking at the Vanguard Australia site, it seems you would need $500,000 minimum?

https://www.vanguardinvestments.com.au/retail/ret/investments/managed-funds-wholesale.jsp

We don't have that much (well, most of us don't anyway). Many here buy the ETFs through discount brokers.

Weren't some people calling Vanguard direct in order to get the limit lowered?

It states they will accept lower amounts at their discretion.

Any thoughts on the etf option vs the index option. I just checked the index vs etf option and on 500k the index option is about $850 extra in costs per year. That is a lot of money but does anyone know how much easier the index option is over the etf. Its definitely much more diversified.

The home loan is getting close to being paid off so I'm about to start saving into non-super investment options.

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Re: Australian Investing Thread
« Reply #1491 on: November 21, 2015, 02:12:12 AM »
Hey everyone!

I'm 22 and have recently made the decision to put some of my hard earned savings into shares. Although that decision was easy, now the hard part is deciding which shares to purchase..

I am split between putting it all straight into an LIC such as AFIC, or splitting my funds (maybe 60/40) between AFIC and an ETF such as VAS or VHY.

Any thoughts?

Its up to you. Personally I wouldn't purchase a LIC if it was trading at above market value. I would then just put it all into VAS. If you don't have much money I'd use VAS or if you are saving regularly you could even use the index option and buy in on a regular basis.

marty998

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Re: Australian Investing Thread
« Reply #1492 on: November 21, 2015, 05:06:02 AM »
Can't really go wrong with AFIC.

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Re: Australian Investing Thread
« Reply #1493 on: November 21, 2015, 10:32:56 AM »
What is wrong with our market?  Just looked up 5 year chart of XJO vs the S&P500.  XJO up 13% S&P500 up 74%!

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Re: Australian Investing Thread
« Reply #1494 on: November 21, 2015, 02:10:50 PM »
Its up to you. Personally I wouldn't purchase a LIC if it was trading at above market value. I would then just put it all into VAS.
I agree (think steveo means NAV/NTA, not market value), the past few months AFI has been 7% premium to NAV. It's a substantial premium. Just be aware you are paying 7% more than the underlying asset backing. And the dividend is being diluted by 7% (e.g. 0.3-0.4% less, maybe that's small but not negligible we often squabble about much smaller fee differentials). ARG has been even worse, up to 10% over NAV lately.

As Marty mentioned, AFI and ARG both have solid long-term reputations, so you could ignore this entry level issue and take the long view. Personally though I would prefer the index ETF over a LIC trading at premium. If you are patient to wait for those times when they are at discounts then obviously much more attractive in that case, but it doesn't come up so often lately.


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Re: Australian Investing Thread
« Reply #1495 on: November 21, 2015, 04:53:22 PM »
Its up to you. Personally I wouldn't purchase a LIC if it was trading at above market value. I would then just put it all into VAS.
I agree (think steveo means NAV/NTA, not market value), the past few months AFI has been 7% premium to NAV. It's a substantial premium. Just be aware you are paying 7% more than the underlying asset backing. And the dividend is being diluted by 7% (e.g. 0.3-0.4% less, maybe that's small but not negligible we often squabble about much smaller fee differentials). ARG has been even worse, up to 10% over NAV lately.

As Marty mentioned, AFI and ARG both have solid long-term reputations, so you could ignore this entry level issue and take the long view. Personally though I would prefer the index ETF over a LIC trading at premium. If you are patient to wait for those times when they are at discounts then obviously much more attractive in that case, but it doesn't come up so often lately.

The current premium is the reason for my indecision. I know I can wait it out and hope to buy at a discount, but I feel that I will be trying to 'time the market' more than anything which really goes against the principle of passive investing.

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Re: Australian Investing Thread
« Reply #1496 on: November 21, 2015, 05:46:48 PM »
Its up to you. Personally I wouldn't purchase a LIC if it was trading at above market value. I would then just put it all into VAS.
I agree (think steveo means NAV/NTA, not market value), the past few months AFI has been 7% premium to NAV. It's a substantial premium. Just be aware you are paying 7% more than the underlying asset backing. And the dividend is being diluted by 7% (e.g. 0.3-0.4% less, maybe that's small but not negligible we often squabble about much smaller fee differentials). ARG has been even worse, up to 10% over NAV lately.

As Marty mentioned, AFI and ARG both have solid long-term reputations, so you could ignore this entry level issue and take the long view. Personally though I would prefer the index ETF over a LIC trading at premium. If you are patient to wait for those times when they are at discounts then obviously much more attractive in that case, but it doesn't come up so often lately.

The current premium is the reason for my indecision. I know I can wait it out and hope to buy at a discount, but I feel that I will be trying to 'time the market' more than anything which really goes against the principle of passive investing.
Completely your call to decide. If you're intent is passive investment, yes market timing is not really consistent with that. Perhaps consider the split approach over the long term. e.g At times when LIC's are at >0% premium to NTA (or maybe 2% or some other tolerance you might be willing to accept), buy VAS. Otherwise, buy the LIC.

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Re: Australian Investing Thread
« Reply #1497 on: November 21, 2015, 06:24:56 PM »
What is wrong with our market?  Just looked up 5 year chart of XJO vs the S&P500.  XJO up 13% S&P500 up 74%!

Our market has been a poor performer, yes. Number of possible reasons for this. Highly concentrated on banks, staples and resources in the top end, which have all had their challenges recently.

However that chart is misleading, as it doesn't take into account dividends which are substantially higher in Australian than in the US. You should compare using the accumulation index for both.

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Re: Australian Investing Thread
« Reply #1498 on: November 21, 2015, 07:20:49 PM »
Its up to you. Personally I wouldn't purchase a LIC if it was trading at above market value. I would then just put it all into VAS.
I agree (think steveo means NAV/NTA, not market value), the past few months AFI has been 7% premium to NAV. It's a substantial premium. Just be aware you are paying 7% more than the underlying asset backing. And the dividend is being diluted by 7% (e.g. 0.3-0.4% less, maybe that's small but not negligible we often squabble about much smaller fee differentials). ARG has been even worse, up to 10% over NAV lately.

As Marty mentioned, AFI and ARG both have solid long-term reputations, so you could ignore this entry level issue and take the long view. Personally though I would prefer the index ETF over a LIC trading at premium. If you are patient to wait for those times when they are at discounts then obviously much more attractive in that case, but it doesn't come up so often lately.

That is what I meant. I don't see the point  if you are buying at a premium.

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Re: Australian Investing Thread
« Reply #1499 on: November 21, 2015, 10:36:44 PM »
Its up to you. Personally I wouldn't purchase a LIC if it was trading at above market value. I would then just put it all into VAS.
I agree (think steveo means NAV/NTA, not market value), the past few months AFI has been 7% premium to NAV. It's a substantial premium. Just be aware you are paying 7% more than the underlying asset backing. And the dividend is being diluted by 7% (e.g. 0.3-0.4% less, maybe that's small but not negligible we often squabble about much smaller fee differentials). ARG has been even worse, up to 10% over NAV lately.

As Marty mentioned, AFI and ARG both have solid long-term reputations, so you could ignore this entry level issue and take the long view. Personally though I would prefer the index ETF over a LIC trading at premium. If you are patient to wait for those times when they are at discounts then obviously much more attractive in that case, but it doesn't come up so often lately.

That is what I meant. I don't see the point  if you are buying at a premium.
The point might be if you believe AFI/ARG can outperform the index, which I believe they have a track record of doing over the long term. But not sure if they can still outperform with a 7-10% initial handicap.

Anyway, another thought/perspective, and assuming you are selecting these companies because you rate their fund management capability. AFI recently did a SPP at 5% discount. So they are more than happy to sell their own shares at 5% below the prevailing market price. This makes sense as they can invest the funds raised to buy the underlying portfolio at 7% below the market price and lock in a 2% gain.

So then, does it still make sense to buy when the fund manager (with the index beating track record) is selling at a price 5% lower ?