Author Topic: Australian Investing Thread  (Read 568399 times)

FFA

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Re: Australian Investing Thread
« Reply #1650 on: January 10, 2016, 03:34:47 PM »
I'm all in on VHY at the moment and FFA keeps frowning at the strategy.
my frowns are not having any influence though :)

anyway, it's horses for courses and I applaud you for making your own decision, for your own reasons and planning.

just to clarify my thinking is mainly around diversification.

I feel having some international exposure is a key consideration. especially if you have a lifestyle involving regular international travel, plans to live abroad for periods of time, etc. And the range of companies available in global markets is just so much wider than we have here.

Regarding the type of oz exposure, whether VAS or VHY or some small cap in the mix. I feel these are second order considerations. Less impact. As I suggested to cakie, if you want to keep it simple, leaving out small cap is also a valid option. The thing I worry most about is ASX concentration. That's why i'm looking at adding some MVW as a VAS/IOZ substitute. for me it's a slightly more important issue than the small cap, but that's just me. we each need to decide based on our own judgement and plans.

FFA

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Re: Australian Investing Thread
« Reply #1651 on: January 10, 2016, 03:46:30 PM »
Just to feedback to this thread re: earlier idea/initiative of a potential wiki/forum (I think it was around Christmas time if you're searching back up the thread).

We did discuss quite a bit over the new year period. This is my version of where we got to... Superannuationfreak, dungoofed - pls add your comments too, and feel free to correct if I got it wrong -

- we feel this MMM Australian Investing thread is already serving a useful/adequate function as a forum (not so good as a wiki /info source due to lack of structure)
- we're all a bit time constrained right now to take on a major initiative (even me, believe it or not !)
- between us we had slightly different priorities / constraints
- I've been keen for a while to write an eBook, so have decided to draft something on Simple Investing. Several forum members are helping me review, it should be out in the coming weeks. I will let you know once out.
- dungoofed is still keen on the wiki/forum and so it's still on the backburner. I'm also happy to help. So pls let dungoofed know if you want to be involved / have any ideas. If we see more demand/interest it has a better chance to happen.

slothman

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Re: Australian Investing Thread
« Reply #1652 on: January 11, 2016, 08:33:32 AM »
I feel having some international exposure is a key consideration. especially if you have a lifestyle involving regular international travel, plans to live abroad for periods of time, etc.

Hi FFA, could you please explain how international exposure might assist my goal of living abroad for mini retirements? I've got some funds in VGS but no where near the ~40-50% of portfolio that it ought to be. Just hoping you can elaborate a little more on the importance of international exposure for someone a few years out from FIRE and wanting to rely solely on a steady passive income stream during mini retirements.
« Last Edit: January 11, 2016, 08:35:54 AM by slothman »

deborah

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Re: Australian Investing Thread
« Reply #1653 on: January 11, 2016, 01:54:05 PM »
I feel having some international exposure is a key consideration. especially if you have a lifestyle involving regular international travel, plans to live abroad for periods of time, etc.

Hi FFA, could you please explain how international exposure might assist my goal of living abroad for mini retirements? I've got some funds in VGS but no where near the ~40-50% of portfolio that it ought to be. Just hoping you can elaborate a little more on the importance of international exposure for someone a few years out from FIRE and wanting to rely solely on a steady passive income stream during mini retirements.
For one reason, just look at the last couple of years. Then, the AUD was on par with the USD, now, it's 70% of the USD. That would mean a 30% haircut in your income if you were living overseas and everything else stayed the same. If you were international and everything stayed the same you wouldn't get that haircut.
« Last Edit: January 11, 2016, 02:47:22 PM by deborah »



FFA

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Re: Australian Investing Thread
« Reply #1654 on: January 11, 2016, 02:25:27 PM »
hi slothman, yes what Deborah said is what I had in mind. basically to help protect your purchasing power abroad. the diversification is the bigger reason for me, but overseas purchasing power is an important consideration if you have a more international lifestyle.

steveo

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Re: Australian Investing Thread
« Reply #1655 on: January 11, 2016, 06:53:12 PM »
hi slothman, yes what Deborah said is what I had in mind. basically to help protect your purchasing power abroad. the diversification is the bigger reason for me, but overseas purchasing power is an important consideration if you have a more international lifestyle.

What if you intend to live in Australia ? Does that change the picture. I intend to have international shares but primarily for diversification. I don't intend to live or travel much overseas.

deborah

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Re: Australian Investing Thread
« Reply #1656 on: January 11, 2016, 11:26:42 PM »
hi slothman, yes what Deborah said is what I had in mind. basically to help protect your purchasing power abroad. the diversification is the bigger reason for me, but overseas purchasing power is an important consideration if you have a more international lifestyle.

What if you intend to live in Australia ? Does that change the picture. I intend to have international shares but primarily for diversification. I don't intend to live or travel much overseas.

Diversification. Also, remember that 100 years ago many countries in South America had pretty high standards of living, and look at where they have been for all our lifetimes. A country like Australia with a small population and not much diversity of country income (we've been relying on the mining boom for example) can easily slip down like those countries did. If that happens during your lifetime, international exposure allows you to retain your own standard of living.



steveo

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Re: Australian Investing Thread
« Reply #1657 on: January 11, 2016, 11:33:21 PM »
hi slothman, yes what Deborah said is what I had in mind. basically to help protect your purchasing power abroad. the diversification is the bigger reason for me, but overseas purchasing power is an important consideration if you have a more international lifestyle.

What if you intend to live in Australia ? Does that change the picture. I intend to have international shares but primarily for diversification. I don't intend to live or travel much overseas.

Diversification. Also, remember that 100 years ago many countries in South America had pretty high standards of living, and look at where they have been for all our lifetimes. A country like Australia with a small population and not much diversity of country income (we've been relying on the mining boom for example) can easily slip down like those countries did. If that happens during your lifetime, international exposure allows you to retain your own standard of living.

I agree but it comes at a cost and additional risk as well. We have such great benefits with franking credits and you miss some of that plus you are exposed to currency movements.

I have already diversified and I will diversify basically just via international shares however its a tough call to make at times.

deborah

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Re: Australian Investing Thread
« Reply #1658 on: January 12, 2016, 12:29:37 AM »
hi slothman, yes what Deborah said is what I had in mind. basically to help protect your purchasing power abroad. the diversification is the bigger reason for me, but overseas purchasing power is an important consideration if you have a more international lifestyle.

What if you intend to live in Australia ? Does that change the picture. I intend to have international shares but primarily for diversification. I don't intend to live or travel much overseas.

Diversification. Also, remember that 100 years ago many countries in South America had pretty high standards of living, and look at where they have been for all our lifetimes. A country like Australia with a small population and not much diversity of country income (we've been relying on the mining boom for example) can easily slip down like those countries did. If that happens during your lifetime, international exposure allows you to retain your own standard of living.

I agree but it comes at a cost and additional risk as well. We have such great benefits with franking credits and you miss some of that plus you are exposed to currency movements.

I have already diversified and I will diversify basically just via international shares however its a tough call to make at times.
Yes, I really struggle too. A year ago I realised that I was far too Australian, and I have diversified a bit since then, but not enough.



Astatine

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Re: Australian Investing Thread
« Reply #1659 on: January 12, 2016, 01:12:15 AM »
Just to feedback to this thread re: earlier idea/initiative of a potential wiki/forum (I think it was around Christmas time if you're searching back up the thread).

We did discuss quite a bit over the new year period. This is my version of where we got to... Superannuationfreak, dungoofed - pls add your comments too, and feel free to correct if I got it wrong -

- we feel this MMM Australian Investing thread is already serving a useful/adequate function as a forum (not so good as a wiki /info source due to lack of structure)
- we're all a bit time constrained right now to take on a major initiative (even me, believe it or not !)
- between us we had slightly different priorities / constraints
- I've been keen for a while to write an eBook, so have decided to draft something on Simple Investing. Several forum members are helping me review, it should be out in the coming weeks. I will let you know once out.
- dungoofed is still keen on the wiki/forum and so it's still on the backburner. I'm also happy to help. So pls let dungoofed know if you want to be involved / have any ideas. If we see more demand/interest it has a better chance to happen.


Thanks for the update!! I look forward to reading the ebook. Not sure what your writing style will be but I always find it easier to understand things with a few simple examples. Otherwise it's all a bit abstract and not real.

stripey

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Re: Australian Investing Thread
« Reply #1660 on: January 12, 2016, 01:45:38 AM »
Just to feedback to this thread re: earlier idea/initiative of a potential wiki/forum (I think it was around Christmas time if you're searching back up the thread).

We did discuss quite a bit over the new year period. This is my version of where we got to... Superannuationfreak, dungoofed - pls add your comments too, and feel free to correct if I got it wrong -

- we feel this MMM Australian Investing thread is already serving a useful/adequate function as a forum (not so good as a wiki /info source due to lack of structure)
- we're all a bit time constrained right now to take on a major initiative (even me, believe it or not !)
- between us we had slightly different priorities / constraints
- I've been keen for a while to write an eBook, so have decided to draft something on Simple Investing. Several forum members are helping me review, it should be out in the coming weeks. I will let you know once out.
- dungoofed is still keen on the wiki/forum and so it's still on the backburner. I'm also happy to help. So pls let dungoofed know if you want to be involved / have any ideas. If we see more demand/interest it has a better chance to happen.


Thanks for the update!! I look forward to reading the ebook. Not sure what your writing style will be but I always find it easier to understand things with a few simple examples. Otherwise it's all a bit abstract and not real.

Me too. Can't contribute anything as I am far too much of a novice.

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Re: Australian Investing Thread
« Reply #1661 on: January 12, 2016, 02:09:51 AM »
I'm new to the forums but have really enjoyed reading this thread. I have a lot to learn!

FFA

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Re: Australian Investing Thread
« Reply #1662 on: January 12, 2016, 02:17:36 PM »

http://www.abc.net.au/news/2016-01-12/many-australians-dying-with-large-superannuation-balances/7082628

Quote
"The vast majority of people don't spend their superannuation recklessly, and if anything perhaps a little bit the opposite," Dr Reeson said. "People are very risk averse and spend at a relatively slow rate, which potentially means that many people will die still with significant superannuation balances." The study is based on previously unpublished data from the Australian Taxation Office (ATO) and super funds going back to 2004.

deborah

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Re: Australian Investing Thread
« Reply #1663 on: January 12, 2016, 07:03:58 PM »
So what? Of course people need more money in their later retirement than earlier. Research has shown that the last eight years of life are very expensive with medical expenses and associated care expenses. Also, most of the people who have actually died with superannuation balances have died young - and have not had lingering illnesses and associated care expenses. Life expectancy in Australia is about 81, yet our superannuation system with its 9% rate didn't start until 24 years ago. That means that no-one has a full working life of superannuation, and so any research on how people use their superannuation is based upon people who had superannuation for only a small part of their working lives, or who were wealthy and were young enough to use the John Howard reforms to add lots of money into superannuation (remember that you cannot add money to superannuation after 65 unless you are working). It also means they died young.
« Last Edit: January 12, 2016, 10:30:42 PM by deborah »



FFA

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Re: Australian Investing Thread
« Reply #1664 on: January 12, 2016, 10:12:53 PM »
The insight for me was the level of focus/planning on accumulation, versus the spending/drawdown phase. Which tends towards overaccumulation and/or conservative spend patterns in retirement...

Let's wait and see what comes this year on Super/tax reform. Lots of these kind of articles and thinktank proposals lately (CGT, etc). The Govt could latch on to this as evidence Super is being misused/too generous. I recall at my first employer they used to give 5 weeks leave instead of 4 weeks annual leave. However people weren't keeping up and were accumulating leave. So the company said fine if you don't need it we will just revert back to the normal..... People started taking holidays quick smart then !!

deborah

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Re: Australian Investing Thread
« Reply #1665 on: January 12, 2016, 11:22:54 PM »
One problem is the progressive nature of superannuation draw downs - from 4% per year before you are 65 when you are younger to 14% at 95. This means you almost have to only draw down the minimum in the early years to be able to have anything in the later years to draw down, or leave a substantial proportion in accumulation phase, even though you cannot add anything to it after 65 if you are retired. While 81 is the average life expectancy, if you are a couple and you both reach 60, on average one of you will live past 90 (see http://learn.nab.com.au/life-expectancy-and-retirement/).



AustralianMustachio

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Re: Australian Investing Thread
« Reply #1666 on: January 14, 2016, 02:56:00 AM »
I would use an LIC such as QVE and WAM for small cap exposure - rationale - less researched area of the market, less efficient area, easier for a manager to actually outperform. The index at the small end of the ASX is a joke, cluttered up with speculative miners (which are now re listing as speculative vitamin companies selling to China).

QVE seems like the best for me, and am considering investing in it. The manager is conservative and dividend focused, and has a long history of outperformance in general, and especially in the small cap area. This is their unlisted small cap fund:

http://www.iml.com.au/IML/main/index.php?select=performance&PID=5

I was invested in MVW at one stage, but changed my mind (i chopped and changed investment strategies too much, so not a reflection on it as an investment). I think there could be a problem with turnover for that ETF though, with too much buying and selling to maintain their equal weights, vs the index which is very much not equal weighted. It's also quite small if i remember correctly

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Re: Australian Investing Thread
« Reply #1667 on: January 14, 2016, 04:00:05 AM »
One problem is the progressive nature of superannuation draw downs - from 4% per year before you are 65 when you are younger to 14% at 95. This means you almost have to only draw down the minimum in the early years to be able to have anything in the later years to draw down, or leave a substantial proportion in accumulation phase, even though you cannot add anything to it after 65 if you are retired. While 81 is the average life expectancy, if you are a couple and you both reach 60, on average one of you will live past 90 (see http://learn.nab.com.au/life-expectancy-and-retirement/).

You might have to draw it down out of super but that doesn't mean you have to spend it.

My dad's super pension just goes straight into a savings account....

FFA

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Re: Australian Investing Thread
« Reply #1668 on: January 14, 2016, 03:34:18 PM »
I was invested in MVW at one stage, but changed my mind (i chopped and changed investment strategies too much, so not a reflection on it as an investment). I think there could be a problem with turnover for that ETF though, with too much buying and selling to maintain their equal weights, vs the index which is very much not equal weighted. It's also quite small if i remember correctly
thanks AustralianMustachio , I was hoping for your feedback since you'd mentioned MVW... I noted the turnover issue, although MV claim it's not excessive, and that it can add value since it's rebalancing. Anyway there's always trade-offs and i'm prepared to accept this for better diversification. ASX200/300 have a concentration issue (just look at top 4 holdings, and compare with VGS as an example) which for me is the bigger concern. So I swapped my IOZ for MVW the other day. Still holding the majority of my oz ETF in VAS. While MVW is a small ETF the liquidity is slightly better than IOZ, but not as good as VAS these days.

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Re: Australian Investing Thread-Optimising pre-tax Super inputs prior to FIRE
« Reply #1669 on: January 15, 2016, 04:24:10 AM »
Hi All

I'm new to MMM, thanks for this great thread. Bio: 31, single dad, Adelaide, small savings so far (waiting for a little more from divorce settlement), hoping to start Vangaurd ETFs soon. I'm keen to get more frugal and Mustachio'd (now that I choose my own non-consumerist path!) and FIRE around the time my daughter enters adulthood (about 16 years). Then I want to enjoy my freedom and travel (and pick and choose the occasional piece of work to my liking. I'm a scientist). I'm currently I'm in the 32.5% tax bracket. Maybe in a few years I'll creep into the next one through slight increases in pay (not due to CPI), then that's probably about where my salaried earning potential will end unless I change fields entirely.

I'm sure those of you who are pre FIRE and have this game sorted, already have an optimised procedure for determining exactly how much to put into super PRE-tax. As I aim to FIRE well before the current Age 60 preservation age (and I'd bank that will increase by the time I get there maybe up to a few years), it makes sense to have a nice balanced ratio of non-super and super investments. I'm fairly confident that the 9.5% employer contributions I get, for the remaining ~16 years before I FIRE, would be below the optimum minimum to have in there. Likely, it would be better if I do some pre-tax contributions to take advantage of pre-tax dollars. But the question is, exactly how much? If I put in too much (up to allowed amount), I won't be able to put in much into my non-super investments. This could mean I run short of $$ prior to hitting preservation age.

Is there an easy way to work this out? I have been playing with FIRECalc the last couple of days (just discovered it) and figure I could keep playing with numbers on that (and with the aid of other calculators) increasing the pre-tax $$$ and decreasing inputs to non super investments, until I find a happy medium???

Also, would it be better to wait a few years (maybe five or six) until I put start doing pre-tax super contributions. In the meantime I put the full amount I can save into my non-super investments, then when I get into the next tax bracket (37%) I start pre-tax super contributions as well, but put a larger amount in to make up for the few years I haven't? Pros: 1. non super investments do better earlier, and have longer to compound. 2. By waiting I get better leverage on my tax at 37% rather than 32.5%. Cons: 1. less time for super to compound. 2. Earnings on the super investment have less tax (I think?) so it might be a wash.

The way I'm using FIREcalc so far, I'm trying to avoid failure (and by avoid, I mean minimise probablilty of it happening-not 100%). That's the goal with this calculation. As FIREcalc doesn't simultaneously take into account the potential failure rate of the super stash, having a higher % failure rate of the non-super investment isn't as big a deal if the super stash is rather large. But this is harder to take into account, as I'm putting the Super income in just as a regular "pension" type income in one of the FIREcalc tabs...also I've just been assuming 3.5%SWR for the super stash (whatever that amount happens to be on preservation)...just being slightly conservative on the 4%SWR based on what I've read in some threads on MMM for the Australian situation.

Should I just keep it simple and do one calculation based on two main FIREcalc calculations:
1. Assume maximum pre-tax super input. (a) Calculate left over savings for non super investments for pre-preservation age FIRE (PreSPAFIRE...hehe). Assume no super tax advantage.
2.  Do FIREcalc for the 13 years of PreSPAFIRE only using (a). As long as this is a high %, all is good.
3.  Do FIREcalc for the x number of years of PostSPAFIRE, using what the super would be to, by fudging it so that I pretend I'm 13 years older than I currently am. As long as this is a high % then maxing on non super investments is fine.

Screwing this method up though, I could miss out on FIRE at an earlier date, if things aren't quite optimised.

Thanks all in advance...apologies if I've confused the way I've written this up, or done too many questions in one post. I guess I could just do a little extra pre-tax Super for now and just concentrate on being happy-stingy. There are other things to add into the mix too, like buying a PPOR (rent currently) at some point. 
« Last Edit: January 15, 2016, 05:45:18 AM by oysters »

deborah

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Re: Australian Investing Thread
« Reply #1670 on: January 15, 2016, 06:40:58 AM »
You are 31, you will die when you are 83 (on average), and you will retire at 41, and be able to access super at 60. So you will have 10 years to accumulate your retirement, have 19 years of retirement pre-super age, and 23 years post super age. You should be able to work out your allocations from there.

However, at the moment, superannuation is a very good deal, and they are going to cut it back. You might think (like me) that they could grandfather your existing super (continue to treat it like they do at the moment), in which case you might allocate more of the super component now, and less later (after what ever the new provisions are in place). If you do this, don't forget to allocate more to pre-super retirement later.



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Re: Australian Investing Thread
« Reply #1671 on: January 15, 2016, 08:04:03 AM »
Deb, I think he said he'll retire in 16 years, so at 47, with 13 years to bridge to 60. The proportion of the allocation at FIRE is roughly 1/3rd invested and 2/3rd super.

OP there is no single formula we use, since it depends on your personal views on what the govt is going to do to super, and whether you think they will grandfather the current conditions.  I agree with Deborah that super is likely to get worse, not better and grandfathering of current conditions is likely. Both contributions and super earnings are taxed at 15% in the accumulation phase.

Are you using FIREsim or cFIREsim? The latter is a bit easier to use I think.

If you are feeling  that you wanted to make the most of the current super provisions then I'd put in the highest pretax amount allowable, and then invest the rest.

If you are dubious about super,  then invest more outside.

Don't forget you can track your progress, and adjust accordingly as you go along. Whatever you decide you'll need 13 years expenses outside of super.
Journalling at Happy Aussie Downshifter

FFA

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Re: Australian Investing Thread
« Reply #1672 on: January 15, 2016, 03:23:25 PM »
hi oysters, welcome, nice to see another adelaidean !

I must confess I didn't use firecalc, so can't offer much there.

I used a simple approach. e.g. 3.5% SWR = 1/0.035 = multiplier of 29 . Let's say 30 to make the maths easier and include a small buffer.

If your FIRE expenses are 25k per year (please substitute your own number). Required stash = $25k * 30 = $750k

As per happy's two thirds in Super / one third ex Super --> 500k in Super / 250k ex Super.

Or perhaps 50/50 is a more flexible target to accumulate towards e.g. 375k in / 375k ex Super. Assuming there is some flexibility retained to top up Super rapidly at the end, you can always shift in that direction but not the reverse.


Aussiegirl

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Re: Australian Investing Thread
« Reply #1673 on: January 15, 2016, 04:26:17 PM »
I agree with Deborah and Happy that the conditions on super will get worse.   Some changes they will grandfather, or phase in, but if I were looking at + 20 years till I could access super (which I am), then I'd assume that most changes will have been phased in over that time.  I'm assuming:
1.  Income from super will no longer be tax free in pension mode.  I assume it will be your marginal tax rate less 15%.
2.  Capital gains in your superfund in pension mode will be taxed at 15%.
3.  Non-concessional contributions limits will come down in a big way.
4.  You won't be able to take lump sums from your super, it will be an income stream only.
5. They will increase the age at which you can access super to 5years less Than the pension.
And in the short term:
5.  The tax benefits for contributions will be scaled back.

I have put extra into super, as does my hubby.   But, for us, the benefits are probably starting to be out weighed by the legislative risk.  Once the tax benefits are scaled back,that will probably be the end of our extra contributions.

Personally, I would work out the split as per Happy and then I would save 10% -15% more outside of super than those numbers suggest.  Might be a tad more expensive tax wise but it will give you more flexibility. 

Another thing to keep in mind is the tax implications of your super on death.  If the beneficiary isn't a dependent (spouse, financially dependent child living at home etc) then they will pay tax on the inheritance from super - but not on assets in your own name. 

deborah

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Re: Australian Investing Thread
« Reply #1674 on: January 15, 2016, 06:29:08 PM »
Let's look at these one at a time:

1.  Income from super will no longer be tax free in pension mode.  I assume it will be your marginal tax rate less 15%. Agree
2.  Capital gains in your superfund in pension mode will be taxed at 15%. Agree
3.  Non-concessional contributions limits will come down in a big way. Agree
4.  You won't be able to take lump sums from your super, it will be an income stream only. NO - people need lump sums to move into care, to downsize... Lump sums help the government because they go out of the low tax environment, and the government encourages people to take their money out of the super environment already by making the percent you withdraw larger each year. There is no evidence that people are reducing their super to get more pension (although there is evidence to suggest that people without the pension were trying to get the pension for the health care card, but that has almost certainly been fixed by the latest changes).
5. They will increase the age at which you can access super to 5 years less Than the pension. Agree - but I am not confident of this, as it would put a lot of people onto the disability pension. According to the ABS  just under a quarter of people who have retired give the reason as 'own sickness, injury or disability'. It appears that there is already an extra burden on the disability pension because of the rise from 55 to 56 which happened last year.

And in the short term:
5.  The tax benefits for contributions will be scaled back.
Agree

I really think this is all going to happen sooner rather than later because otherwise is will completely miss the baby boomers - who are a bigger generation than the two after them, and are the cause everyone is so concerned. The last five years of the baby boomers were affected by the change from 55 - 60.



dungoofed

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Re: Australian Investing Thread
« Reply #1675 on: January 15, 2016, 11:40:50 PM »
Loving the conversation here lately.

Quote
The index at the small end of the ASX is a joke, cluttered up with speculative miners (which are now re listing as speculative vitamin companies selling to China).

LOL! Best description I've seen.

Regarding diversification and VAS, I think in reality I'll wait until there is a passive "ex-ASX20" or mid-cap index (probably based on http://au.spindices.com/indices/equity/sp-asx-midcap-50). And until it does I'll use it as an excuse to pick stocks from the "small-cap value" end of town : )

If I knew for sure none were forthcoming then I'd choose one "value" ETF (preferably systematic/passive) and one small-cap or micro-cap ETF (would consider active management).

Regarding tax-sheltering, I wish Australia would move to an "ISA" model like they have in the UK, or a Roth model like in the US. Having said that, I think it'll just be another year or two before your average Joe has offshore accounts in tax-sheltered locations. These are no longer just for hedge funds. Much simpler, you just pay CGT at the end when you repatriate the money to Australia, or according to the rules of whichever country you retire to.

FFA

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Re: Australian Investing Thread
« Reply #1676 on: January 16, 2016, 05:06:33 AM »
I think it'll just be another year or two before your average Joe has offshore accounts in tax-sheltered locations. These are no longer just for hedge funds. Much simpler, you just pay CGT at the end when you repatriate the money to Australia, or according to the rules of whichever country you retire to.
i'm surprised , I thought it would be very difficult these days. They had an amnesty recently, after which I thought the ATO was going to be very tough on any offshore undeclared income/gains. I hope so too personally, i'm quite against tax avoidance/sheltering (whether legal or not, I feel the principle is very wrong).

Regarding the changes to Super/CGT/etc. I've given up trying to predict. I'm just going to wait, and re-adjust strategy afterwards if necessary. My basic assumption on Super is that it will need to remain tax advantaged (although the extent of advantage should be reduced). So I don't expect the basic strategy/idea to change, i.e. prioritise investment for your post 60/65 years in Super, and keep the rest outside Super.

dungoofed

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Re: Australian Investing Thread
« Reply #1677 on: January 16, 2016, 06:04:34 AM »
Right, my understanding too is that you only run into trouble if you don't declare things. Turnbull has offshore investments and these are all above-board. It would just take one international tax attorney to put it all together and offer above-board products to the public and the ruse would be up, everyone would have money offshore somewhere.

(add Bitcoin for the transactions in and out the country and it no longer has to be above-board - heh)

I'm a big fan of more competition between governments when it comes to treatment of your money. You can't expect money to hang around if it is treated better elsewhere.

FFA

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Re: Australian Investing Thread
« Reply #1678 on: January 16, 2016, 04:12:12 PM »
sorry for being thick, but where's the benefit if you need to declare it ? That should mean you pay Australian tax on it (perhaps with some foreign tax credit if the other country has a tax treaty with Australia, perhaps unlikely if it's a tax haven i'd expect).

Anyway, i'm in the camp that hopes they crackdown on this, as part of the whole tax revamp. Easier said than done. But there's not much point equalising Super, CGT and whatever else, if you just allow people to bypass it anyway.

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dungoofed

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Re: Australian Investing Thread
« Reply #1680 on: January 16, 2016, 04:40:18 PM »
sorry for being thick, but where's the benefit if you need to declare it ? That should mean you pay Australian tax on it (perhaps with some foreign tax credit if the other country has a tax treaty with Australia, perhaps unlikely if it's a tax haven i'd expect).

You supposedly pay CGT (with a tax credit) when you repatriate, but there is no CGT during accumulation. Think of all the reinvested dividends, CGT events from liquidating one fund and purchasing another more suitable one, etc over a 30 year period and it starts to add up. Also, if you get to choose exactly when to repatriate and therefore pay CGT then you have flexibility to wait for a time where Australia may have lowered the CGT rate.

It's not all roses though - you are at the whim of another jurisdiction and their laws, and the US is currently pressuring many of these "havens."

Note that there are two issues which are often conflated: 1) jurisdictions setting tax rates that make them attractive places to do business, and 2) jurisdictions that have financial secrecy laws. Neither are necessarily "bad" - sovereign nations should be allowed to choose how they tax the populace, and should be free to decide whether their citizens have the right to financial secrecy. I find it an interesting conversation that reaches to the roots of what it means to be a sovereign nation, but it's possibly not suited to this thread. If I was more confident with my knowledge in this area I'd give some specific examples relevant to the Australian case but to be honest I haven't looked into it beyond what you can find with a few simple google searches.

FFA

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Re: Australian Investing Thread
« Reply #1681 on: January 16, 2016, 06:34:03 PM »
Agree we probably better call time out / start separate thread, or we'll end up in a political/philosophical tax discussion !

Coming back to ASX diversification, I think it's helpful to keep the issues separate, even though they are related -

1. Concentration of the core index ASX200/300
2. Diversification/bias by company size (e.g. small cap bias). This then leads to the third issue of active vs passive management, due to the problems with the small cap index.

Often the suggested solution to 1 is 2, and hence these issues get intertwined. But it's also possible to address point 1 separately, e.g. in my case, using MVW in conjunction with VAS.

englyn

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Re: Australian Investing Thread
« Reply #1682 on: January 17, 2016, 08:35:08 PM »
Gah, the ASX still dropping.
This is the first drop I've seen since I've been investing. My net worth dropped noticeably over 2015 despite >50% savings rate. I can't even rejoice that shares are on sale so I can buy more, because I already did.
Must. Stay. The. Course. Must. Not. Look. At. Nabtrade.

FFA

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Re: Australian Investing Thread
« Reply #1683 on: January 17, 2016, 09:33:12 PM »
yup I've been feeling that way a little too... it's a good test/reminder to have a 20% correction. I was starting to question whether my asset allocation was too safe, and thinking of increasing %shares / reducing %cash. But a few eye-popping (or perhaps eye-watering) glances at Nabtrade since the new year have left me feeling the asset allocation can stay where it is ! Agree with you, it's times like these it's important to stay the course.

BattlaP

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Re: Australian Investing Thread
« Reply #1684 on: January 17, 2016, 11:39:18 PM »
I've been steadily moving in my cash, gone from 30% cash to 20% so far. ASX is cheaper than when I first bought into the market. Fire sale!

ynotme

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Re: Australian Investing Thread
« Reply #1685 on: January 18, 2016, 01:21:24 AM »
I'm putting my new savings into cash so I can see something going up in value. Just sticking my head in the sand regarding my shares and not looking. I'm happy with what I'm holding so figure it will go up eventually. I'm not expecting it to go up this year as I think it will be a volatile year even if it doesn't fall too much further.

bigchrisb

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Re: Australian Investing Thread
« Reply #1686 on: January 18, 2016, 02:18:21 AM »
I'm in the same boat.  Already committed the spare funds I had.  Currently putting anything saved into the market, but it doesn't come close to making up the difference.   Feels really painful - mostly because I'm angry at myself that I can't put more money in at current prices.

However, having been through this a couple of times, while it hurts while its dropping, it feels pretty good in hindsight. 

Hopefully things keep slowly falling/bumbling along for another year or two so I can keep padding the portfolio.  Staying employed through one last financial crisis is probably what I need to close out the home straight.

potm

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Re: Australian Investing Thread
« Reply #1687 on: January 18, 2016, 02:45:21 AM »
Focus on the earnings and not the prices guys. Reporting season begins in a couple of weeks. I'm hoping for some good results.

happy

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Re: Australian Investing Thread
« Reply #1688 on: January 18, 2016, 02:58:58 AM »
  Staying employed through one last financial crisis is probably what I need to close out the home straight.
Agree. My retirement is planned for just under 3 years…I'd rather the correction that seems inevitable comes now.  If we have a long slow correction over several years  I might even need  to delay.
Journalling at Happy Aussie Downshifter

Eucalyptus

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Re: Australian Investing Thread
« Reply #1689 on: January 18, 2016, 05:17:33 AM »
Hey all.

Wondering what fellow Aussies use as a tool to determine correlation between different ETFs? As a scientist I understand the concept of correlation implicitly, and could run it myself if I can get ahold of the raw data on performance for ETFs, though that is painful and feels too much like work (both finding each index' data and then taking the time to clean up the data to run it). There seems to be a few online websites that allow you to select different ETFs and generate correlations automatically, but they rarely have many if any of the common ETFs that seem to be available to Aussie investors.

Been reading some interesting stuff on correlation and diversificaiton of index funds (makes total math sense to do so if possible, to me anyway), so while I'm in early stages of building a stash I wouldn't mind setting in a bit of negative correlation, in some funds other than traditional negatives like bonds, cash etc. They probably won't be big parts of the stash, probably a few 5% allocations in things that corrrelate less to the Aus and US markets.

But yeah need to figure what. Apart from Asian whole of market funds, they are pretty easy to pick out (vs say VGS, VAS) but they scare the bejebus out of me so I would never go there apart from a few token thousand dollars towards the end...

Cheers!

marty998

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Re: Australian Investing Thread
« Reply #1690 on: January 18, 2016, 01:12:40 PM »
Hey all.

Wondering what fellow Aussies use as a tool to determine correlation between different ETFs? As a scientist I understand the concept of correlation implicitly, and could run it myself if I can get ahold of the raw data on performance for ETFs, though that is painful and feels too much like work (both finding each index' data and then taking the time to clean up the data to run it). There seems to be a few online websites that allow you to select different ETFs and generate correlations automatically, but they rarely have many if any of the common ETFs that seem to be available to Aussie investors.

Been reading some interesting stuff on correlation and diversificaiton of index funds (makes total math sense to do so if possible, to me anyway), so while I'm in early stages of building a stash I wouldn't mind setting in a bit of negative correlation, in some funds other than traditional negatives like bonds, cash etc. They probably won't be big parts of the stash, probably a few 5% allocations in things that corrrelate less to the Aus and US markets.

But yeah need to figure what. Apart from Asian whole of market funds, they are pretty easy to pick out (vs say VGS, VAS) but they scare the bejebus out of me so I would never go there apart from a few token thousand dollars towards the end...

Cheers!

When the world is burning, everything will go down.

The serious answer is that it's impossible to predict correlation in the future - you can only analyse it after the fact.

You can however look up the constituents of an index to see commonalities (e.g. CBA and WBC will be in all Asian index funds that include Australia, so you will double up if you buy one of those and VAS or STW).

Gold probably counts as a true uncorrelated asset class. It's the only commodity that seems to have escapes the recent carnage.

Ozlady

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Re: Australian Investing Thread
« Reply #1691 on: January 18, 2016, 02:11:32 PM »
Watching this stock market gyration like a hawk...of course the portfolio has taken a hit but overall still up ...so if dividends are still dripping in...bah!

Instead gotta tell myself , mindset shift..it's a sale ! get ready to buy !  SO instead of doom and gloom attitude wasting time, research on WHICH shares to buy and when the market drops more (4500 anyone?) lets go shopping!


Eucalyptus

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Re: Australian Investing Thread
« Reply #1692 on: January 18, 2016, 08:44:59 PM »

When the world is burning, everything will go down.

The serious answer is that it's impossible to predict correlation in the future - you can only analyse it after the fact.


Yep, fully aware of the fact of relying on the past to predict the future. That is, however, the fundamental basis of statistics. The finesse comes in by knowing how reliable your statistic potentially is and taking that into account. If we ignore that ability to use that finesse, we may as well also diversify by betting on everything going at the TAB... ;-)

faramund

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Re: Australian Investing Thread
« Reply #1693 on: January 18, 2016, 08:51:55 PM »
At times like this, I try to... lie back and think of the dividends. I've had shares since 2000 (admittedly not much back then), and ups and downs in share prices is just what the market does. But dividends, they just keep going up and up and up, and when I retire, that's what I intend to live off. 

Although, I'm also short of spare cash at the moment, so I can't buy in at these great prices, but in the next 2 months, there should be a fair chunk rolling in, and it won't take long for it to roll on into the market.

Shaz_Au

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Re: Australian Investing Thread
« Reply #1694 on: January 19, 2016, 05:39:54 PM »
Guys,
A hot index tip for you; I just bought VTS @ $138.00, that means it's about to drop like a stone :)
Cheers,
Shaz

Eucalyptus

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Re: Australian Investing Thread-Stockspot.com.au
« Reply #1695 on: January 21, 2016, 10:52:23 PM »
Does anyone here use Stockspot? I just discovered them. Seem similar in some ways to the US Betterment (though I don't know too much about Betterment as its irrelevant to me as an Aussie).

The fees are pretty low, really (much lower than the range of differences in MERs between aus available ETFs, so basically no big deal), and go down as your portfolio grows. Bearing in mind they dont charge brokerage for inputs or rebalancing, the fees are lower than what they appear too.

Seems like they have a pretty good strategy. Quite diversified aus available ETFs, and I think they tailor the diversification for each individual. If you know what you are doing a fair bit and have a strategy in mind they might listen to you?

Maybe I'll give them a go to start with. The idea of not having to think as much about my portfolio, do detailed reporting, etc, is pretty tempting for the low cost. I can spend my thoughts and effort (and stress) thinking more about my job and concentrating on increasing my savings rate...either of which as time investments would make up for the low fee increase.

superannuationfreak

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Re: Australian Investing Thread-Stockspot.com.au
« Reply #1696 on: January 22, 2016, 12:49:41 AM »
Does anyone here use Stockspot?

...

The fees are pretty low, really...

Unfortunately the typical ongoing fee is 0.077% per _month_ not per year (as well as a fixed admin fee).

This adds up to 0.924% p.a. which is more than a diversified all-in-one index fund costs from Vanguard or Colonial (Wholesale).

If you want cheap and are investing more than about $6,000 p.a. then all you really need is two ETFs (I like VAS and VGS for most people but there are other options out there) and an online savings account for your defensive allocation.  If you want an even simpler all-in-one solution then one of the funds from Vanguard or Colonial is still better value.

dungoofed

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Re: Australian Investing Thread
« Reply #1697 on: January 22, 2016, 02:38:18 AM »
+1

Quote
No brokerage costs – we don’t charge brokerage and as such are often a more cost effective solution particularly for people with smaller portfolios.

Assuming DIY ETFs to the tune of 12 trades per year at $9/trade, Stockspot is a more cost effective solution for anyone with a balance up to $11,688.

Eucalyptus

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Re: Australian Investing Thread-Stockspot.com.au
« Reply #1698 on: January 22, 2016, 03:45:09 AM »
Does anyone here use Stockspot?

...

The fees are pretty low, really...

Unfortunately the typical ongoing fee is 0.077% per _month_ not per year (as well as a fixed admin fee).

This adds up to 0.924% p.a. which is more than a diversified all-in-one index fund costs from Vanguard or Colonial (Wholesale).

If you want cheap and are investing more than about $6,000 p.a. then all you really need is two ETFs (I like VAS and VGS for most people but there are other options out there) and an online savings account for your defensive allocation.  If you want an even simpler all-in-one solution then one of the funds from Vanguard or Colonial is still better value.

Oh, thanks for pointing out the month vs year issue. I misread that, thought it was 0.077 per year, oops!

Yeah, at that price I'll definitely stick with the DIY version, more than worth it.

Eucalyptus

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Re: Australian Investing Thread
« Reply #1699 on: January 22, 2016, 03:46:38 AM »
+1

Quote

Assuming DIY ETFs to the tune of 12 trades per year at $9/trade....

Where do you get $9/trade? :-) I havent found that low yet in my search