Author Topic: Australian Investing Thread  (Read 761507 times)

LittleAussieBattler

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Re: Australian Investing Thread
« Reply #150 on: September 14, 2014, 12:45:35 AM »
potm is right about how dividend yield is calculated. In the past financial year a lot of companies have been setting target dividend payout ratios of about 80%, however quite a few of these companies are ASX300 stocks and do not currently have the revenue to sustain such ratios. In this case the best way to look for yield stocks is to look at about the past 5 years history of payments and make sure the ratio is sustained.

From Debt to Net in 3 Years.

deborah

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Re: Australian Investing Thread
« Reply #151 on: September 14, 2014, 05:16:10 AM »

Primm

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Re: Australian Investing Thread
« Reply #152 on: September 14, 2014, 05:27:31 AM »
Ha! Shows how little he knows.

"It's not a good idea to put stocks into your bottom drawer and forget about them." Um, why not George?

LittleAussieBattler

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Re: Australian Investing Thread
« Reply #153 on: September 14, 2014, 05:38:31 AM »
Because the whole finance industry wouldn't be able to screw us in transaction fees if we did that :)
From Debt to Net in 3 Years.

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Re: Australian Investing Thread
« Reply #154 on: September 16, 2014, 04:40:11 AM »
Hey fellow Aussie mustachians!

Thanks for this wonderful, informative thread. I am learning a lot.

I have a question about investing. Bear in mind I am a newbie and in no way established like many of you seem to be! Which amazes and inspires me, by the way!

I have a 10k emergency fund in a high interest savings account and another 10k ready to plug into an investment fund. I have decided on Vanguard but undecided between the retail managed funds and the ETFs.

RMFs: min 5k to start, regular deposits can be made as little as $100, fees 0.70 - 0.90% p.a.
ETFs: no min to start, brokerage fees mean larger/fewer deposits, fees 0.05 - 0.30% p.a.

If I go with RMFs, I'd choose 2x 5k investments from either the property fund, the Australian shares funds or international funds. And add more to it later to have a balance of property/Aust/international. I also like the idea of being able to direct debit from my salary straight in there so I don't spend the cash on other things...

If I go with ETFs, I'd use the full 10k to create a spread across property/Aust/international funds, probably 20% property/ 50% Aust/ 30% intl... I like the idea that I can do this right away even with just a 10k investment, but I don't like that I'd have to build up elsewhere another 'stache to plug into it down the track.

What do others think? I am itching to get into it but wanted to get advice first... :)

This_Is_My_Username

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« Reply #155 on: September 16, 2014, 05:14:38 AM »
etf are the best in the long run.

after a while, you will have 50k, and be paying an additional 0.6% = $300pa.

when you have $200k, you will be paying an additional 0.6% = $1,200pa.

Black Dog

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Re: Australian Investing Thread
« Reply #156 on: September 16, 2014, 08:53:39 AM »
Hi everyone
Great thread!
Im new here, so thought I would drop a line. I have been reading the MMM blog for a while now, and occasionally scanning the forum - but this is a first post here. I am on a couple of other 'investment forums' trying to learn, so I may already know some of you from there?

At this point in many ways I guess I am still very anti-mustachian. But my circumstances are fairly unique. I am a high income earner, and have very few expenses. I am provided with a house, car, phone and international flights as part of my work package. Although I am an Australian citizen Im not a resident - therefore I don't pay taxes in Australia. I have started using pocketbook to track my expenses (great tool btw), and some of what I see is pretty scary. Ive calculated I spend about $60k/pa just on normal 'living' plus I have purchased a fair few one off items in the last 12months (a boat, laser eye surgery, a big legal bill etc) which pushed it up to about $100k for the last 12months (like I said - Im not very mustachian yet).

At this point my investments are all in RE - I don't have anything in the share market.
In Australia I have property worth about $3.00m and cash about $200k. I have a couple of properties in Russia worth about $400k.
Total debt is about $2mil in Aud and another $300k in Russia.

I don't have a PPOR - and no non-investment debt.

I am in the process of setting up a trading account online so I can purchase some stocks, and by the sounds of it the Vangard fund is pretty popular in these circles. So I will probably start there.

I have a payment of $500k coming due in early 2005. Im hoping to have the cash to pay for it, but may need to leverage a bit into the properties to cover it. This will be a non-deductible payment.

Anyway. Thats me - look forward to chatting with you all.

Black Dog.

AustralianMustachio

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Re: Australian Investing Thread
« Reply #157 on: September 17, 2014, 01:58:05 AM »
Australia has a tax treaty the US which allows Australians to be taxed under our country's tax laws, not the normal 30% withholding tax on outgoing US payments.

Investing in VTS means that you get paid in USD converted to AUD, which I read under Australian tax law is treated as foreign sourced income.  Does anyone know the tax rate for foreign sourced income?

Primm

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Re: Australian Investing Thread
« Reply #158 on: September 17, 2014, 02:06:56 AM »
My understanding is that it's included in your assessable income and taxed at whatever your rate is. You can claim an offset for anything that you've paid such as tax on foreign distributions.

But I haven't done it yet, so I'm happy to be corrected if I'm wrong.

johnnydoe

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Re: Australian Investing Thread
« Reply #159 on: September 17, 2014, 02:12:06 AM »
Hey all, just wanted to post some Australia specific information that might help Australian Mustachians that are starting out:

Asset returns
Report on asset returns that have occurred in the last 20 years is available at: http://www.russell.com/au/assets/pdfs/insights/R_RPT_ASX_Report_V1F_1405_WEB-1.pdf
Bonds, floating rate notes, stocks
Floating Rate Notes: http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=FLOATING_RATE_NOTE
Australian Corporate Bonds: http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=CORPORATE_BOND
Australian Government Bonds: http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=GOVERNMENT_BOND
Bond and stock Index funds available through Vanguard Australia: https://www.vanguardinvestments.com.au/retail/ret/investments/overview.jsp
Salary packaging your superannuation
www.smartsalary.com.au
Vanguard Australia Tools
https://www.vanguardinvestments.com.au/retail/ret/education/tools.jsp
Compound interest calculator
https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/compound-interest-calculator
Net worth/expenses trackers
ANZ Money manager: http://www.anz.com.au/ANZ-MoneyManager/
Alternatively, Pocketbook:
https://getpocketbook.com/
Australian Economic dashboard
http://www.russell.com/au/insights/market-insights/
Australian Institutions
Reserve Bank of Australia: http://www.rba.gov.au/
Australian Prudential Regulation Authority: http://www.apra.gov.au/Pages/default.aspx
Australian Productivity Commission: http://www.pc.gov.au/
Australian Bureau of Statistics: http://www.abs.gov.au/

Interesting (free) research:
The Australia Institute: http://www.tai.org.au/
Australian Centre for Financial Studies: http://www.australiancentre.com.au/

deborah

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Re: Australian Investing Thread
« Reply #160 on: September 17, 2014, 03:32:22 AM »
Great stuff johnnydoe!

DrowsyBee

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Re: Australian Investing Thread
« Reply #161 on: September 17, 2014, 05:49:44 AM »
Johnnydoe,

Thank you.

I've been reading so much mustachian stuff from the states over the last few months and recently got back to Australia thinking...well that's all well and good, but now I need Australian resources and Australian people to talk to.

Luckily there's the Canberra meet-up this weekend.

I'll be looking through all these links in the meantime!

bigchrisb

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Re: Australian Investing Thread
« Reply #162 on: September 21, 2014, 09:14:00 PM »
What are people seeing as best value for their Australian share exposure at the moment?  I'm usually a big fan of the LIC's, but they are trading at premiums, so bought some VAS this month.

Any other alternatives on people's radar at present?

superannuationfreak

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Re: Australian Investing Thread
« Reply #163 on: September 21, 2014, 09:45:52 PM »
What are people seeing as best value for their Australian share exposure at the moment?  I'm usually a big fan of the LIC's, but they are trading at premiums, so bought some VAS this month.

Any other alternatives on people's radar at present?

It's a tricky one.  I want diversification (ideally more value exposure) outside of financials and mining stocks but struggle to go more extreme in my international exposure (I'm at about 60% of equities which is a touch outside my comfort zone).  I really don't like the Small Ordinaries index and it has been consistently outperformed by active management (I'm 95% indexed and the evidence is in favour of indexing for large caps/international but not for Australian Small Caps).

VAS and/or old-school LICs (when not at a significant premium) would also be my primary Australian purchases as costs matter.
I purchased some FGX in the 'launch' and thought about QVE.  The fees/donations are higher than I'd usually consider so I'll only ever hold a small amount.
If I were adding substantially to (SMSF or non-SMSF) Super at the moment I'd also consider the Realindex Wholesale Australian Small Companies fund as a stand-alone.
In an SMSF I'd consider the ETFs MVW or QOZ as they are less top-heavy but I'm a bit wary of their small AUM and possibility for turnover/capital gains outside super.
« Last Edit: September 21, 2014, 09:47:55 PM by superannuationfreak »

potm

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Re: Australian Investing Thread
« Reply #164 on: September 21, 2014, 10:13:00 PM »
I much prefer ETFs over LICs with their often hidden tax liabilities, especially when they are trading at a premium!

Share market looks like it's going on sale. Hoping this momentum continues, looking forward to picking up some more investments.

marty998

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Re: Australian Investing Thread
« Reply #165 on: September 21, 2014, 10:16:09 PM »
Ouch. ASX getting hammered today.

ANZ @ $30 looks enticing. If I had the balls I'd buy FMG but who knows where the iron ore price will bottom out.

Cashup

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Re: Australian Investing Thread
« Reply #166 on: September 22, 2014, 12:37:44 PM »
Great Thread
Just logging in to follow at this stage...:))

The Falcon

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Re: Australian Investing Thread
« Reply #167 on: September 24, 2014, 04:01:44 PM »
What are people seeing as best value for their Australian share exposure at the moment?  I'm usually a big fan of the LIC's, but they are trading at premiums, so bought some VAS this month.

Any other alternatives on people's radar at present?

Yep, no great value in the LICs...prob only Whitefield if you like it.

Just bought first tranche in debt recycling scheme, I have a STG portfolio loan (4.90%),
Family Trust has a sub account, the idea is I can slightly neg gear if need be as trust has quite a lot of income.

Bought this week ;

VHY / 60%
SOL / 20%
BRK-B / 20%

I'll be drawing down twice a year and DCA into the likes of VHY (will be largest holding), big OZ LICs when at discount to NTA, and 20-30% in BRK-B / VTS / MKL and a few other US direct shares over time. This is a forever portfolio.

« Last Edit: September 24, 2014, 04:05:17 PM by The Falcon »

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Re: Australian Investing Thread
« Reply #168 on: September 24, 2014, 04:55:23 PM »
I was just wondering what those of you interested in ethical investing think about the Rockefeller Brothers Fund divesting from oil & gas: http://thinkprogress.org/climate/2014/09/22/3570338/rockefeller-divestment-announcement/

I'm looking at purchasing Vanguard ETFs but the mining heaviness of Aust industry concerns me, mostly for ethical reasons.

Also, are there any other good blogs that you read regularly, some that contain some similar perspectives as MMM?



bigchrisb

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Re: Australian Investing Thread
« Reply #169 on: September 24, 2014, 06:49:03 PM »
Falcon - what brokerage/means are you using to buy direct US shares?  I had an account with IB (with its own set of issues), and don't currently have a good option for US shares. 

MsRichLife

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Re: Australian Investing Thread
« Reply #170 on: September 24, 2014, 06:50:51 PM »
Also, are there any other good blogs that you read regularly, some that contain some similar perspectives as MMM?

An Australian newsletter I enjoy is The Daily Reckoning Australia. They have a variety of analysts that present interesting views on global and Australian economics and investing. Some bearish, some bullish, but always well considered.

http://www.dailyreckoning.com.au/

The Falcon

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Re: Australian Investing Thread
« Reply #171 on: September 24, 2014, 07:12:18 PM »
Falcon - what brokerage/means are you using to buy direct US shares?  I had an account with IB (with its own set of issues), and don't currently have a good option for US shares.

For US stocks I get stitched up by Lonsec at 1% Bro. Don't really care though as i'm not a trader...long game only. Lonsec takes care of Portfolio Admin/reporting  and I just need to fire off an email and its taken care of. Not cheap, but convenient. Use them for both ASX and NYSE , in SMSF and Family trust.
« Last Edit: September 24, 2014, 07:15:28 PM by The Falcon »

MsRichLife

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Re: Australian Investing Thread
« Reply #172 on: September 24, 2014, 10:48:16 PM »
Hi everyone,

I've just recently updated my Discretionary Family Trust and plan to start using it for investing. I started the following thread seeking answers to some investment related questions because I didn't want to clog up this thread.

http://forum.mrmoneymustache.com/investor-alley/using-a-discretionary-family-trust-for-investing/msg407559/#msg407559

Hopefully some of you are structure gurus and can help me with some of the finer points of investing with a DFT.

Thanks in advance

MsRL

The Falcon

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Re: Australian Investing Thread
« Reply #173 on: September 25, 2014, 04:30:10 AM »
Also, are there any other good blogs that you read regularly, some that contain some similar perspectives as MMM?

Not directly MMM related, but I do enjoy imbibing in Tim McAleenan Jr.s koolaid, along with Vanguard AU articles.

Other blogs I find have just too much useless noise, too much speculation and short term drama.

Rather than blogs, I'd recommend these timeless classics for your bookshelf in no particular order ;

A random walk down Wall Street, Burton Malkiel
Motivated Money, Peter Thornhill
Buffett, the making of an American Capitalist, Roger Lowenstein
Common sense on mutual funds, John Bogle




charms

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Re: Australian Investing Thread
« Reply #174 on: September 25, 2014, 04:50:03 AM »
Thanks guys!

banksie_82

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Re: Australian Investing Thread
« Reply #175 on: September 25, 2014, 04:42:54 PM »

I just wanted to get peoples thoughts on LICs v ETFs.

For the sake of the argument, assume that the fees are roughly the same (0.10 - 0.25%)

Now assume that the ETFís are traded in an efficient market (i.e. they always reflect the movements of the underlying index) while the LICS may trade at a discount or premium.

I see LICs as a superior investment for the following reasons. But I would like to know what others think.

Actively managed, but in a buy and hold way. So someone, probably much better informed than me, is thinking about what companies are doing well and which ones arenít. I know some people here refuse to acknowledge that actively managed can possible be any better than passive, but the evidence would suggest otherwise on some of the old school LICís, even if only by a fraction of a percent pa.

Dividend is usually 100% franked with LICís, as opposed to ~70% with domestic ETF, so better tax outcomes.

Ease of accounting. The dividend is just like any other company, div + franking credit (sometimes a cap gain). To me the ETFís complicate it for no real gainÖ you have div, franking, interest, foreign income, cap gains, etc.

In my limited experience, LICís tend to have a more dependable and predictable dividend. 

Share Purchase Plan (SPP) with LICís. Most now have a SPP every year for $15k with a set price. This is effectively a free option on the shares that can occasionally turn out to be quite profitable in the short term.

Some LICís have dividend reinvestment plans (DRP) with a discount to the current price.

So, assuming that you agree with the above, what is an acceptable premium to pay for all these benefits? 0.5%? 2.0%? Or do you use the spread to your advantage (which I agree is ideal, but not always practical) and only buy when thereís a discount, and only sell when thereís a premium and play with ETFís at all other times?

terrier56

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Re: Australian Investing Thread
« Reply #176 on: September 25, 2014, 05:09:57 PM »
Actively managed, but in a buy and hold way. So someone, probably much better informed than me, is thinking about what companies are doing well and which ones arenít. I know some people here refuse to acknowledge that actively managed can possible be any better than passive, but the evidence would suggest otherwise on some of the old school LICís, even if only by a fraction of a percent pa.

Here's where I see a flaw in the LIC. Moving funds around incurs fees. These fees ultimately cut into your long term gain since it has been proven that no fund managers methods seem to have an edge against the market (debatable though but that's the theory). not sure where you have the evidence for the old school LICs? but hey if there is on can you kindly post it up here? :)

bigchrisb

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Re: Australian Investing Thread
« Reply #177 on: September 25, 2014, 05:51:13 PM »
Actively managed, but in a buy and hold way. So someone, probably much better informed than me, is thinking about what companies are doing well and which ones arenít. I know some people here refuse to acknowledge that actively managed can possible be any better than passive, but the evidence would suggest otherwise on some of the old school LICís, even if only by a fraction of a percent pa.

Here's where I see a flaw in the LIC. Moving funds around incurs fees. These fees ultimately cut into your long term gain since it has been proven that no fund managers methods seem to have an edge against the market (debatable though but that's the theory). not sure where you have the evidence for the old school LICs? but hey if there is on can you kindly post it up here? :)

Most of the old school LICs have out-performed the ASX over the medium term (10 - 15 years).  For example, see:
AFI - up to 10 years of data http://www.afi.com.au/Investment-performance.aspx
MLT - up to 15 years of data http://milton.com.au/sites/default/files/MILTON%20Annual%20Report%202014_DRAFT%20V8.pdf
ARG - up to 15 years of data http://www.argoinvestments.com.au/portfolio-performance/share-price-performance

In all cases, the longest time period has had a slight out-performance over the all ords accumulation index.  I suspect (but can't prove) that their hefty weighting to financials, and leaner weighting to resources has helped them, as they have been well aligned with the global hunt for yield.  I tried to do some regression to back out if this accounted for all the differences, but didn't get anything significant from the analysis.



terrier56

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Re: Australian Investing Thread
« Reply #178 on: September 25, 2014, 06:12:21 PM »
Actively managed, but in a buy and hold way. So someone, probably much better informed than me, is thinking about what companies are doing well and which ones arenít. I know some people here refuse to acknowledge that actively managed can possible be any better than passive, but the evidence would suggest otherwise on some of the old school LICís, even if only by a fraction of a percent pa.

Here's where I see a flaw in the LIC. Moving funds around incurs fees. These fees ultimately cut into your long term gain since it has been proven that no fund managers methods seem to have an edge against the market (debatable though but that's the theory). not sure where you have the evidence for the old school LICs? but hey if there is on can you kindly post it up here? :)

Most of the old school LICs have out-performed the ASX over the medium term (10 - 15 years).  For example, see:
AFI - up to 10 years of data http://www.afi.com.au/Investment-performance.aspx
MLT - up to 15 years of data http://milton.com.au/sites/default/files/MILTON%20Annual%20Report%202014_DRAFT%20V8.pdf
ARG - up to 15 years of data http://www.argoinvestments.com.au/portfolio-performance/share-price-performance

In all cases, the longest time period has had a slight out-performance over the all ords accumulation index.  I suspect (but can't prove) that their hefty weighting to financials, and leaner weighting to resources has helped them, as they have been well aligned with the global hunt for yield.  I tried to do some regression to back out if this accounted for all the differences, but didn't get anything significant from the analysis.

Indeed I will be interested to see if that trend continues for another 15 years. But I won't bet on it. indexes for this skeptic.

bigchrisb

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Re: Australian Investing Thread
« Reply #179 on: September 25, 2014, 06:39:07 PM »
Indeed.  However, for the three largest to have done it consistently over a decade plus, after fees and taxes, makes me think there may be something to it.  I hedge my bets, and buy LICs when they are at a discount and ETF's when they are not.

The Falcon

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Re: Australian Investing Thread
« Reply #180 on: September 25, 2014, 07:52:05 PM »
Terrier56 , turnover is very low in the traditional LICs...they are in no way like a typical MF. The Big LICs may have slightly less frictional costs than an index ETF which is always rebalancing, particularly strategy ETFs. They are very tax aware. I've been to small presos by Argo and AFI in Sydney this year and its clear that after tax performance is their number one priority.

Big LICs when cheap, ETFs when not is a solid approach imho....potential for some out performance in theory, but wont go too far from the index.

Even the great Burton Malkiel has recommended snapping up close ended funds when they are at big discounts to NTA.
« Last Edit: September 25, 2014, 07:57:11 PM by The Falcon »

banksie_82

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Re: Australian Investing Thread
« Reply #181 on: September 25, 2014, 08:06:52 PM »
Thanks for posting those links, bigchrisb. I concede that the outperformance by all of them could have something to do with the fact they all tend to be heavy on financials and light on mining, which has turned out well when comparing against the All Ords/ASX200. You could debate whether this is luck or good management until the cows come home.

Terrier56, I understand the argument that active management increases fees, but given that the fees of the major LICís are often marginally less than Australian ETFís, surely this point is moot?

For what itís worth, Iím willing to pay a slight premium for LICs, in the order of 1 - 2%. Since Iím investing for the very long term I believe this is a reasonable price to pay for what I see are good financial benefits. In saying that though, any more of a premium than this, and itís ETFs all the way.

bigchrisb

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Re: Australian Investing Thread
« Reply #182 on: September 25, 2014, 08:47:09 PM »
One other issue you should consider in the LIC/ETF debate comes from their structure.

ETFs are required to distribute all income (100% payout ratio), which will come at your own tax rate.  LIC's have the discretion to distribute income.  That puts the payout ratio in the hands of the exec of the LIC.  That has a couple of impacts:

- Do you trust the LIC to keep paying dividends?  I see more risk in the LIC's with strong family cross-shareholdings here.  Examples being CIN (Rydge) and SOL/BKW (Milner).  I don't believe this risk is too large, as evidenced by my holding of these stocks.  But it is there should one of them decide to go rogue?

- Tax consequences.  Most LICs have a payout ratio of less than 1.  That means that some of the dividends received get reinvested within the LIC.  As my tax rate is higher than the company tax rate, this works out beneficially for me (I'd be reinvesting it anyway). If I was a lower tax entity, this would be less favorable - paying the tax from a 100% payout on an ETF would result in slightly more post tax dollars to reinvest (tax rate lower than company tax rate). 

On the topic of turnover, I haven't looked at the numbers lately (last time I dug through the annual reports for the LIC's and the ETFs - I looked at VAS and STW), the turnover rate on the ETFs was actually slightly higher than the LICs.

I find that the information on MMM (and other US based forums) is very useful, but sometimes when I do my own due diligence on the Aus market and dig through to primary data, I get answers that diverge somewhat from the general forum consensus - the above being a couple of examples.
« Last Edit: September 25, 2014, 08:51:23 PM by bigchrisb »

AustralianMustachio

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Re: Australian Investing Thread
« Reply #183 on: September 26, 2014, 01:19:13 AM »
Hey guys, put this in the Australian property thread first but figured it's probably more suited to this thread. I have a couple of questions about Australian REITs.

I want to invest in real estate but the high prices and my aversion to borrowing are keeping me out of the market at the moment. On MMMs blog he mentions how REITs are a passive way of accomplishing the same thing as real estate. However from what I've read Australian REITs are only invested in Australian commercial property.

1) Are there any Australian REITs that invest in residential property?
2) How correlated are Australian commerical and residential property?
3) If property prices go up, but rents don't, does the price of the REIT benefit in any way? Or are they simply tied to rental prices?
4) Are there any Australian REITs that move in line with the prices of Australian property?

Pretty much, I'm wondering if there an investment out there that gives me something similar to Australian investment property, which I don't have to pay hundreds of thousands of dollars for.

Wadiman

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Re: Australian Investing Thread
« Reply #184 on: September 26, 2014, 05:20:00 PM »
Hey guys, put this in the Australian property thread first but figured it's probably more suited to this thread. I have a couple of questions about Australian REITs.

I want to invest in real estate but the high prices and my aversion to borrowing are keeping me out of the market at the moment. On MMMs blog he mentions how REITs are a passive way of accomplishing the same thing as real estate. However from what I've read Australian REITs are only invested in Australian commercial property.

1) Are there any Australian REITs that invest in residential property?
2) How correlated are Australian commerical and residential property?
3) If property prices go up, but rents don't, does the price of the REIT benefit in any way? Or are they simply tied to rental prices?
4) Are there any Australian REITs that move in line with the prices of Australian property?[/color][/color]

Pretty much, I'm wondering if there an investment out there that gives me something similar to Australian investment property, which I don't have to pay hundreds of thousands of dollars for.

I don't have a detailed understanding of REITs but there are a number with residential or mixed property holdings.  Suggest you have a close look at the index-based REITs - State Street's SLF and Vanguard's VAP.  They both hold Stockland and Mirvac which have residential components.

terrier56

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Re: Australian Investing Thread
« Reply #185 on: September 26, 2014, 05:57:51 PM »

1) Are there any Australian REITs that invest in residential property?
2) How correlated are Australian commerical and residential property?
3) If property prices go up, but rents don't, does the price of the REIT benefit in any way? Or are they simply tied to rental prices?
4) Are there any Australian REITs that move in line with the prices of Australian property?

Pretty much, I'm wondering if there an investment out there that gives me something similar to Australian investment property, which I don't have to pay hundreds of thousands of dollars for.

I think your biggest concern should be yield. Most yields of the comercial sector (about 7%) sit well above yields from the residential sector (4-5%).

I think what you are really looking for is a trust that speculates on property after capital gains?
Even if you could buy these speculation RIETs I would advise against them. the greater fool theory will run out eventually and you should look to only buy investments with at least 5 years of future growth. 

Make no mistake Australia have not found the "holy grail of investment". That is property can not have both 0% risk and the highest gains at the same time. It is simply a castle in the air.

AustralianMustachio

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Re: Australian Investing Thread
« Reply #186 on: September 26, 2014, 06:52:03 PM »
Thanks terrier and Wadiman.

I have my concerns with australian property as well, I'm just looking into it as a small fraction of my portfolio in the future (hence the interest in REITs rather than an investment property). I've looked into VAP, which looks like the best option at this stage. However I just want to learn more about the underlying investments, since I haven't looked into REITs as much as shares yet

terrier56

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Re: Australian Investing Thread
« Reply #187 on: September 26, 2014, 07:58:54 PM »
My take on RIETs is just like any other asset class diversity is key. It is a high yield low risk asset with diversification. Makes up about 20% of my portfolio (5% A-RIETs and 15% international RIETs).

I guess the big downside is the low tax evasion although I wouldn't go without them. Low correlation to stocks makes them a great hedge.

bigchrisb

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Re: Australian Investing Thread
« Reply #188 on: September 26, 2014, 09:16:03 PM »
I hold about 10% of portfolio in REITS.

A couple of things that are important to me about REITS:

- Understand  that most REITS are a stapled security, which includes property and often a management company / developer business.  The risks of owning property (collecting rents) are different to the risks of playing property developer.
- REITS in Australia tend to be non residential property as a landlord (office, retail, industrial, hotels depending on the REIT).  Most of the residential exposure (e.g. SGP, MGR, ALZ) are exposed as developers.  I'm not aware of any that act as a landlord model for residential property.  Probably because the objective metrics are terrible when compared against the objective metrics in the other classes!
- Beware leverage.   Most REITS have some internal leverage.  Great in boom times, didn't work out so well in the GFC.  Particularly relevant if you are thinking of buying with leverage - leverage on leverage gets pretty scary pretty quickly.
-A REIT is a structure, rather than an asset class.  For example, there are listed companies (as opposed to REITS) that own property.  Two that come to mind are AHD (the Rydges hotels, Thredbo, and a range of cinemas here and in Europe), and UOS, with a portfolio of Malaysian property.

In theory, REITS should help with portfolio theory and smoothing volatility.  In practice, over recent years they have been pretty correlated with stocks, so less effective as hedge as property has been in the past.

travelbug

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Re: Australian Investing Thread
« Reply #189 on: September 28, 2014, 04:28:26 PM »
Hi
what a great Aussie thread!

I have a few Qs for you guys who are well-versed in long term investing. I have always invested for short term gain, but we are looking to invest some large sums of money into the share market for the long term to create a passive income stream.

The first step of our moving towards FI, I suppose.

I am looking to purchase 4-5 individual stocks (blue chip, 100% franked) and then have been wondering which index fund you would recommend?

And if I may be so rude; I would like to ask you what annual dividend % are you returning on stocks and index funds (or whatever else you invest in) please? I am calculating our investment return at 5%, but am becoming confused with the return %s on etrade...

Thanks
TB

PS: also been watching the stock market, but have decided to hold due to the drop and G12 summit etc...hoping to pick up some extra shares, fingers crossed! WDYT?

AustralianMustachio

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Re: Australian Investing Thread
« Reply #190 on: September 28, 2014, 07:05:59 PM »
Hi travelbug, have a look through the thread as we've discussed index funds in Australia in quite a lot of detail already. Vanguard fully diversified funds, iShares, index ETFs which track the ASX200 (VAS), high yield index (VHY) and US top 500 companies (VTS), LICs vs ETFs, and now REITs (VAP) have all already been covered by knowledgeable people here.

Edit - for more info, check out the ishares and vanguard websites. You can get past performance figures, comparisons, etc.
« Last Edit: September 28, 2014, 07:08:53 PM by AustralianMustachio »

The Falcon

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Re: Australian Investing Thread
« Reply #191 on: September 29, 2014, 09:31:48 PM »
Anyone doing any topping up at the moment with ASX200 in the 52xx range? I bought some VAS for SMSF and Family trust this morning on open.

terrier56

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Re: Australian Investing Thread
« Reply #192 on: September 30, 2014, 01:03:28 AM »
Anyone doing any topping up at the moment with ASX200 in the 52xx range? I bought some VAS for SMSF and Family trust this morning on open.

I don't keep spare cash for these situations. I just buy each month. Do u think it has bottomed? I guess it looks like a bit of a bargain considering last months price lol.

The Falcon

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Re: Australian Investing Thread
« Reply #193 on: September 30, 2014, 01:12:36 AM »
No idea if its bottomed, that's something nobody knows...Just feels good to buy on the dips lol

Wadiman

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Re: Australian Investing Thread
« Reply #194 on: September 30, 2014, 04:49:58 AM »
Missed this morning as I didn't have funds in my cash trading account - arrgh!

AustralianMustachio

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Re: Australian Investing Thread
« Reply #195 on: September 30, 2014, 08:02:06 AM »
Falcon I bought a little extra VAS today myself with the same thinking.

Whilst on the topic of VAS, can anyone explain why the franking level of the ETF is 77-78%, while the fund version which tracks the same ASX300 index, has dividends which are franked at 90%?

https://static.vgcontent.info/crp/intl/auw/docs/funds/factsheets/ret/viasf.pdf?20140929|093000

https://static.vgcontent.info/crp/intl/auw/docs/etfs/profiles/VAS_profile.pdf?20140929|093000

Notch

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Re: Australian Investing Thread
« Reply #196 on: September 30, 2014, 06:04:08 PM »
I'm not sure why.

But the average distribution for the past five years is 3.97% for the fund and 4.59% for the ETF.

superannuationfreak

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Re: Australian Investing Thread
« Reply #197 on: September 30, 2014, 06:31:31 PM »
I suspect it's the higher expenses lowering the distribution and allowing a higher proportion (but the same dollar amount) of franking credits.

The Falcon

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Re: Australian Investing Thread
« Reply #198 on: September 30, 2014, 09:28:24 PM »
I think you might be on to something Superannuationfreak

This_Is_My_Username

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Re: Australian Investing Thread
« Reply #199 on: October 01, 2014, 12:27:46 AM »
I have my concerns with australian property as well, I'm just looking into it as a small fraction of my portfolio in the future (hence the interest in REITs rather than an investment property).

If you are a home owner, you probably have a very large percentace of your portfolio in property already - in the form of your primary place of residence (PPOR)