Author Topic: Australian Investing Thread  (Read 476360 times)

PDM

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Re: Australian Investing Thread
« Reply #2050 on: June 30, 2016, 08:35:35 PM »
Glad I bought STW a few weeks back and got in on the 84c 6 monthly div.  That VAS payout just makes no sense at all.

Hey Trevor - good to see a familiar name around here (I'm pretty new) but recognise you from Whirlpool. Particularly dropping truth bombs on fools wanting huge mortgages and to speculate on property.


Trevor Reznik

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Re: Australian Investing Thread
« Reply #2051 on: June 30, 2016, 08:53:46 PM »
Glad I bought STW a few weeks back and got in on the 84c 6 monthly div.  That VAS payout just makes no sense at all.

Hey Trevor - good to see a familiar name around here (I'm pretty new) but recognise you from Whirlpool. Particularly dropping truth bombs on fools wanting huge mortgages and to speculate on property.

Thanks mate!  You'll find this forum quite useful and a lot more rational than Whirlpool, at least I have anyway!

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Re: Australian Investing Thread
« Reply #2052 on: June 30, 2016, 09:58:31 PM »
Maybe the work experience kid at the fund accounting/administrators has mixed them all around.

The dividends in theory should get accrued in the index fund when the companies go ex, not when they get paid (at least I thought so)... ANZ, WBC, NAB all should be in the June Qtr...?

Either way...$0.19 is still way too low
Hi marty, I agree it should be accrued in the NAV once the company goes ex div. As for payment though, I understood Vanguard would need to receive the cash to pay out the cash ? And once the ETF goes ex div, then it should come out of the NAV. I don't know this for sure but that's my logic on how it should work...

marty998

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Re: Australian Investing Thread
« Reply #2053 on: July 01, 2016, 02:43:01 AM »
Maybe the work experience kid at the fund accounting/administrators has mixed them all around.

The dividends in theory should get accrued in the index fund when the companies go ex, not when they get paid (at least I thought so)... ANZ, WBC, NAB all should be in the June Qtr...?

Either way...$0.19 is still way too low
Hi marty, I agree it should be accrued in the NAV once the company goes ex div. As for payment though, I understood Vanguard would need to receive the cash to pay out the cash ? And once the ETF goes ex div, then it should come out of the NAV. I don't know this for sure but that's my logic on how it should work...

Payment date is 18 of July.. .so by then Vanguard has the cash from all the banks but not the property trusts like Westfield and Dexus which go ex on 30 June.

More I think about it the more I wonder how the hell Vanguard does it...

And how Vanguard gets the tax statement out before all the property trusts send their tax component statements out too...

Doing my head in on a Friday night

FFA

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Re: Australian Investing Thread
« Reply #2054 on: July 01, 2016, 03:56:53 AM »
Yes you're right they will have the cash to make payment. Only if they have some conservative accounting rules like they need to wait to have the cash in hand before committing to distribute it. e.g. in the unlikely event a company folds and doesn't pay it's declared dividend.

My next guess would be some capital losses being distributed, maybe on re-balancing of the index. Eg. if there are cases like SGH or others falling off the index.

marty998

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Re: Australian Investing Thread
« Reply #2055 on: July 01, 2016, 05:38:13 AM »
Yes.. that too.. SGX falling out, along with several miners.

But even at its peak SGH was under a couple of billion... in a market worth 1.7 trillion?

It's all very odd.

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Re: Australian Investing Thread
« Reply #2056 on: July 03, 2016, 06:45:16 PM »
Oh dear - worst possible outcome over the weekend election, with no clear government formed.  Looks like we might be in for another bout of uncertainty!  I topped up on a bit of VEU last week, but thinking I should add some more international exposure - torn between VTS and BRK.b 

Anyone been following the activists in AGF, a high cost LIC focused on china? Its been trading a long way below NTA for years.  I'm thinking that it might be worth doing a good scan among the other entities for things trading below NTA - on my list to look at are SOL and SVW.  Not a lot showing among the usual LICs though?  Anyone else scanning this space?

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Re: Australian Investing Thread
« Reply #2057 on: July 03, 2016, 06:54:43 PM »
Final dist's are up for Vanguard. VGS is two thirds capital gains. VAS is only 8% franked and mostly tax deferred, so I think it might be timing as I suggested earlier. The same dividend last year was 75% franked. Therefore I think those big bank dividends slipping out is likely. Perhaps no issue here if you are a long-term investor.

Hi bigchris, I bought a small parcel of SOL recently, although it is mostly TPM these days (which I am keen on). Seems to have a decent after tax NTA discount even though it is not a LIC (which is probably one of the problems as LIC would be a better structure since it has now basically become a holding structure). Great track record / family history.

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Re: Australian Investing Thread
« Reply #2058 on: July 03, 2016, 07:21:15 PM »
I also own some stock in SOL and BKW.  However, I always struggle to get to the bottom of what the parts are actually worth.  Example, from the half yearly report:

NTA = $12.24 on page 3.  This suggests a premium.
Consolidated financial position of $3748M (p22) in net assets and 239m shares ($15.68/share), roughly in line with price
Portfolio value: $5407M (p6) $22.62/share, significant discount.

Same story for its sister company BKW.

Anyone got a good handle on this?

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Re: Australian Investing Thread
« Reply #2059 on: July 03, 2016, 07:49:27 PM »
Final dist's are up for Vanguard. VGS is two thirds capital gains. VAS is only 8% franked and mostly tax deferred, so I think it might be timing as I suggested earlier. The same dividend last year was 75% franked. Therefore I think those big bank dividends slipping out is likely. Perhaps no issue here if you are a long-term investor.

Thanks FFA that makes sense, so sounds like the next VAS dividend should be quite a big one with those bank divs moving into the following quarter?

FFA

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Re: Australian Investing Thread
« Reply #2060 on: July 03, 2016, 08:35:34 PM »
I also own some stock in SOL and BKW.  However, I always struggle to get to the bottom of what the parts are actually worth.  Example, from the half yearly report:

NTA = $12.24 on page 3.  This suggests a premium.
Consolidated financial position of $3748M (p22) in net assets and 239m shares ($15.68/share), roughly in line with price
Portfolio value: $5407M (p6) $22.62/share, significant discount.

Same story for its sister company BKW.

Anyone got a good handle on this?
I look at it based on the portfolio value 5407M less the unrealised tax liability 1.1BN = After tax portfolio value = 4.3 BN -> $18.05/share. They have emphasised this in some of their analyst slides, e.g ASX announcement on 23 May 2016, "CEO sessions", slide 9. So that was my reference point when I suggested an after tax NTA discount.

I think the statutory accounts can be difficult to figure out due to consolidated accounting of the various assets.

FFA

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Re: Australian Investing Thread
« Reply #2061 on: July 04, 2016, 12:18:50 AM »
Final dist's are up for Vanguard. VGS is two thirds capital gains. VAS is only 8% franked and mostly tax deferred, so I think it might be timing as I suggested earlier. The same dividend last year was 75% franked. Therefore I think those big bank dividends slipping out is likely. Perhaps no issue here if you are a long-term investor.

Thanks FFA that makes sense, so sounds like the next VAS dividend should be quite a big one with those bank divs moving into the following quarter?
Yes Trevor I expect so if the theory is correct. ANZ/WBC/NAB are 17% of VAS and assuming their recent dividends were approx. 3% yield, that works out to 0.5% of VAS or roughly $0.35. So it seems to fit the gap between $0.18 (this year) and $0.55 (last year).

marty998

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Re: Australian Investing Thread
« Reply #2062 on: July 04, 2016, 02:10:10 AM »
Specifically the reason why those banks (plus Macquarie) pay in the 1st week of July is so that individual investors don't have to declare the income in the tax year just finished... they can wait a full year afterwards...

Ergo Vanguard is just aligning now to what would occur if you held the shares directly?

Does make the cash a little lumpy, because you get 2 in the second half of the year (July and December) and none in the first half.

Either way, September should be massive with also TLS, WES and maybe CBA included too?

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Re: Australian Investing Thread
« Reply #2063 on: July 11, 2016, 10:33:40 PM »
Hello all!

This is simply a post so that I don't have to keep using the broken search feature to try find this thread.

On page 8 at the moment, working my way up to... 42?

Incredibly insightful so far, it is awesome to have so many educated people sharing their knowledge!

Will post more about my situation, and any questions (to avoid duplication) when I finally catch up.

Ciao for now!

marty998

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Re: Australian Investing Thread
« Reply #2064 on: July 12, 2016, 01:47:18 AM »

Anyone been following the activists in AGF, a high cost LIC focused on china? Its been trading a long way below NTA for years.  I'm thinking that it might be worth doing a good scan among the other entities for things trading below NTA - on my list to look at are SOL and SVW.  Not a lot showing among the usual LICs though?  Anyone else scanning this space?

I have followed / made myself aware of the AMP China saga for quite some time. There's a lot of conflicts of interest but this exists on every responsible entity board. They have to act in the best interests of the unit holders, and not in the interests of the parent (AMP). Having AMP Capital as a unit holder as well is an additional complication, but ultimately one that can still be managed.

AMP Capital should come to the conclusion that winding up the fund is in the best interests of itself, even if it costs fees to another part of AMP.

My view is that the negative publicity alone is grounds for doing something. There is no chance AMP will be able to sell a new Asian fund to investors anytime soon given this saga that is ongoing.

Lawro

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Re: Australian Investing Thread
« Reply #2065 on: July 17, 2016, 07:45:56 AM »
I am a long time lurker but first time poster.

Firstly, thank you for all the above wisdom and creating this thread.

Secondly, my apologies for interrupting the thread with a more general query about FIRE in Australia. I am hesitant to post the below as it is slightly “how long is a piece of string” – so please be patient.

We are a family of five currently living in Middle East but wishing  to FIRE to Queensland Australia in the next few years (all being well and subject to any responses to this post!). Our house is, fortunately, paid off. It is located down the coast from Noosa on the Sunshine Coast.

Our issue is getting sufficient comfort around our predicted spending post FIRE in Australia – i.e. what is our FI number! We have created the obligatory spreadsheets etc, so think we have a decent idea, but because we are overseas it would provide additional comfort to hear from those of you actually living and raising a family in Australia. Basically we are looking to canvass opinion on what like-minded Mustachian people with similar sized families are getting by on as an annual budget (excluding mortgage and holidays).

We are probably bog standard middle class – we like the odd meal or lunch out, a good coffee, a nice bottle of wine and will probably need one second hand car – but ultimately we have fairly simple tastes.  I would also not describe us as hard-core Mustachians but because of our decent jobs and tax free income we have a paid off house and saved enough that FIRE within next three years (according to our current calculations and estimates) appears feasible.

We would be very grateful for any insights or experience any of you can offer us. Having the information could possibly help me avoid the “one more year” syndrome which my wife is starting to suspect I have a bad case of….

Many thanks in advance.

faramund

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Re: Australian Investing Thread
« Reply #2066 on: July 17, 2016, 04:59:56 PM »
I am a long time lurker but first time poster.

Firstly, thank you for all the above wisdom and creating this thread.

Secondly, my apologies for interrupting the thread with a more general query about FIRE in Australia. I am hesitant to post the below as it is slightly “how long is a piece of string” – so please be patient.

We are a family of five currently living in Middle East but wishing  to FIRE to Queensland Australia in the next few years (all being well and subject to any responses to this post!). Our house is, fortunately, paid off. It is located down the coast from Noosa on the Sunshine Coast.

Our issue is getting sufficient comfort around our predicted spending post FIRE in Australia – i.e. what is our FI number! We have created the obligatory spreadsheets etc, so think we have a decent idea, but because we are overseas it would provide additional comfort to hear from those of you actually living and raising a family in Australia. Basically we are looking to canvass opinion on what like-minded Mustachian people with similar sized families are getting by on as an annual budget (excluding mortgage and holidays).

We are probably bog standard middle class – we like the odd meal or lunch out, a good coffee, a nice bottle of wine and will probably need one second hand car – but ultimately we have fairly simple tastes.  I would also not describe us as hard-core Mustachians but because of our decent jobs and tax free income we have a paid off house and saved enough that FIRE within next three years (according to our current calculations and estimates) appears feasible.

We would be very grateful for any insights or experience any of you can offer us. Having the information could possibly help me avoid the “one more year” syndrome which my wife is starting to suspect I have a bad case of….

Many thanks in advance.
Well, we're a family of 5 - with 3 kids of high school age - who are publicly schooled, and I think we are probably similar. We spend $AUD72000 a year on what I'd call core expenses, i.e. everything besides what we give each other as whatever spending money, and our travelling/whatever fund (also doesn't include our house payments, our the costs of our second car - to try to be equivalent). I'm sure this could be reduced - but its comfortable for us, and particularly my wife who really isn't interested in ER.

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Re: Australian Investing Thread
« Reply #2067 on: July 17, 2016, 07:22:40 PM »
We would be very grateful for any insights or experience any of you can offer us.

While I don't have three young kids in my financial mix, I am FIREd and have a pretty good handle on what the expenses for my wife and I are. Our core living expenses (which covers amenities, 2 dogs, house rates/insurance/maintenance, medical, 2 cars, and groceries) is around $26K pa. Our general spending (which covers clothing, dining, and entertainment) adds another $6K pa, so $32K pa all up. Our baseline for holidays, capital projects (eg vehicle/appliance/furniture/major gadget replacements) and special events (major birthdays/anniversaries) is about $12K a year averaged over a 10 year period.

Trevor Reznik

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Re: Australian Investing Thread
« Reply #2068 on: July 17, 2016, 11:28:13 PM »
So when do STW and Vanguard send out the annual tax statements?  Thought I would have had them by now.

BattlaP

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Re: Australian Investing Thread
« Reply #2069 on: July 18, 2016, 01:43:59 AM »
So my fucking super fund seems to always be going backwards even when everything else is leaping forwards. I'm leaving my job now so I'm going to pick a new one..

Is there anywhere yet that just lets me put my own money in the funds that I want (Vanguard ETFs) and doesn't charge me extra for the privilege?
I'll be educating myself over the next couple days but if anyone has any immediate suggestions, chuck em at me.

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Re: Australian Investing Thread
« Reply #2070 on: July 18, 2016, 01:57:15 AM »
Sunsuper Have A Variety Of Indexes That They Have Vanguard Manage. ShoUld Be cheap And Give You What you want.

marty998

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Re: Australian Investing Thread
« Reply #2071 on: July 18, 2016, 02:02:29 AM »
Sunsuper Have A Variety Of Indexes That They Have Vanguard Manage. ShoUld Be cheap And Give You What you want.

I Don't Know Why You Are Posting With Initial Capitals But It Gave Me A Good Laugh Just Now

Many super funds would have had flat to small declines this year. ASX finished right where it started and Brexit caused a currency jump that would have hurt international holdings in June.

My Super performance was impacted by a decision I took back in July last year to scale back equities, and then earlier this year to dive back in when the market hit 4800. I scaled back again in June just before Brexit... .missed the fall but missed the rebound too.

In any case the market timing meant that I've done quite well this year, notwithstanding the flat markets. Won't pretend I'll get it right overtime, but this time I came out on top.

faramund

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Re: Australian Investing Thread
« Reply #2072 on: July 18, 2016, 02:59:31 AM »
So when do STW and Vanguard send out the annual tax statements?  Thought I would have had them by now.
In 2014 mine were issued on 30/7 for VAS.

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Re: Australian Investing Thread
« Reply #2073 on: July 18, 2016, 03:05:39 AM »
Sunsuper Have A Variety Of Indexes That They Have Vanguard Manage. ShoUld Be cheap And Give You What you want.

I Don't Know Why You Are Posting With Initial Capitals But It Gave Me A Good Laugh Just Now

Posting from my phone didn't work too well. I'd hoped to sneak in and fix it but was too late :)

Agree that most Super in a default balanced option went no where last year. Most places will offer you index funds you just need to find one that keeps the fees down. That would suggest an industry fund more often than not. There was a bit in the news a last year about SunSuper cutting some sort of deal with Vanguard so that they would manage their indexes. Depending on their fees they could be worth a go.

ING could be another option as they offer direct investments - a few super fund do - that would let you pick the Vanguard ETFs directly. A member direct investment option where you can pick ETFs, LICs and Stocks will cost more. For me its worth if for the transparency.

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Re: Australian Investing Thread
« Reply #2074 on: July 18, 2016, 03:12:30 AM »
I have just joined up with Sunsuper and the investment options really are great. The information they provide is so transparent. I read through some the other Super booklets and realise how hopeless the information provided is, compared to Sunsuper.

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Re: Australian Investing Thread
« Reply #2075 on: July 18, 2016, 04:13:21 PM »
I am a long time lurker but first time poster.

Firstly, thank you for all the above wisdom and creating this thread.

Secondly, my apologies for interrupting the thread with a more general query about FIRE in Australia. I am hesitant to post the below as it is slightly “how long is a piece of string” – so please be patient.

We are a family of five currently living in Middle East but wishing  to FIRE to Queensland Australia in the next few years (all being well and subject to any responses to this post!). Our house is, fortunately, paid off. It is located down the coast from Noosa on the Sunshine Coast.

Our issue is getting sufficient comfort around our predicted spending post FIRE in Australia – i.e. what is our FI number! We have created the obligatory spreadsheets etc, so think we have a decent idea, but because we are overseas it would provide additional comfort to hear from those of you actually living and raising a family in Australia. Basically we are looking to canvass opinion on what like-minded Mustachian people with similar sized families are getting by on as an annual budget (excluding mortgage and holidays).

We are probably bog standard middle class – we like the odd meal or lunch out, a good coffee, a nice bottle of wine and will probably need one second hand car – but ultimately we have fairly simple tastes.  I would also not describe us as hard-core Mustachians but because of our decent jobs and tax free income we have a paid off house and saved enough that FIRE within next three years (according to our current calculations and estimates) appears feasible.

We would be very grateful for any insights or experience any of you can offer us. Having the information could possibly help me avoid the “one more year” syndrome which my wife is starting to suspect I have a bad case of….

Many thanks in advance.
Well, we're a family of 5 - with 3 kids of high school age - who are publicly schooled, and I think we are probably similar. We spend $AUD72000 a year on what I'd call core expenses, i.e. everything besides what we give each other as whatever spending money, and our travelling/whatever fund (also doesn't include our house payments, our the costs of our second car - to try to be equivalent). I'm sure this could be reduced - but its comfortable for us, and particularly my wife who really isn't interested in ER.

We spend about $40k. Maybe a little less. We have 2 high school kids and one primary school kid. The wife and myself are both interested in ER. Our $40k includes our daughters braces so I don't think it's that tight.

Trevor Reznik

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Re: Australian Investing Thread
« Reply #2076 on: July 18, 2016, 04:41:26 PM »
So when do STW and Vanguard send out the annual tax statements?  Thought I would have had them by now.
In 2014 mine were issued on 30/7 for VAS.

Thanks mate :)

Mark31

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Re: Australian Investing Thread
« Reply #2077 on: July 18, 2016, 09:09:05 PM »
Hey Lawro,

I've been thinking for a while that it would be handy to collate mustachian household spending in one place, particularly for newcomers, and after reading your post above I've finally started a thread on that topic.

http://forum.mrmoneymustache.com/ask-a-mustachian/whats-your-(australian)-financial-year-spending/

Plus, by finally commenting on this thread I can find it easily when I want to.

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Re: Australian Investing Thread
« Reply #2078 on: July 18, 2016, 09:33:49 PM »
* With such low interest rates, is it worth getting the guaranteed 5% for paying off part of my HECS debt, as compared to the 3% I get for leaving it in the bank? Especially as that 5% option goes away at the end of the year.

I would totally take advantage of this man, I paid off a 30k HECS over a couple months in 2015 and I look back on it as a highlight of the year. The numbers will never make it the mathematically best direction but fuck it feels good being totally debt free.

I've just done my tax, and filled out my "Hecs-help benefit" form for the year. This is the first year I'll actually claim it. Science graduate, employed in a Science job, and a year post postgrad studies that I actually went over the threshold for Hecs repayments.

The Hecs-help benefit is worth ~$1800/yr at the moment, and you get it for five years (260weeks). So its not to be sniffed at.

I did a careful spreadsheet calculation, applying 2.2%CPI in the future (they apply this to Hecs debts every 1st June), and carefully, slightly conservatively, estimating my future earnings through pay rises.

Bare in mind my Hecs debt is ~$29000 currently.

I will JUST be able to take advantage of all that free HECS-HELP Benefit money! At the end of the fifth year, I'll have ~$110 of balance left! Which obviously will pay off very quickly (I'll just pay it once its all been aquitted at the start of that year and tell my employer to stop taking out HECS payments off my salary).

As this value of $110 is less than $525, there is no point in me trying to make a compulsory repayment prior to the 5% repayment bonus deadline of the end of 2016. If I did, I would just end up missing out on free money through the HECS-HELP benefit scheme for Science graduates working in a Science field.

An alternative way of looking at this, I added up all the indexation over this period, and it came to $1413.19. Much less than the final Hecs-help benefit payment (which would be $1948.61). So I'm garanteed to be in front.

If you are outside of the fields of Science, Education, or Midwifery, you wouldn't apply for this HECS-HELP Benefit. In which case your calculations might come out differently on whether or not to apply the 5% upfront.

If my salary was lower, and/or my initial Hecs debt were higher, it would be more feasible (though still probably better to put the money into investments) to take advantage of the 5% bonus now, but only as much as to reduce the balance after I've received my five years worth of Hecs Help Benefit.

Hope this helps some people :-)


Eucalyptus

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Re: Australian Investing Thread
« Reply #2079 on: July 18, 2016, 10:22:58 PM »
Pre-tax super contributions vs paying down your mortgage

This might be a useful tool for some people, in working out whether to put money into their mortgage, or instead do pre-tax super salary sacrificing.

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/super-vs-mortgage-calculator

Super seems to win, at least for me at my current pay rate (and planned PPOR mortgage-aiming to buy in 12-18months, currently renting), and current interest rates. Interestingly, I have to push the interest rates up to 8.05% to reach the break even mark, where I would be better off putting extra into the mortgage.

I did read other advice elsewhere though, saying that its a good strategy to be half paid off on your mortgage before considering extra super repayments.

Given that advice, and that if I wait a few years I'll be into the next tax bracket (and thus salary sacrificing super is more beneficial), and that I could pay off my planned mortgage well within 8 years (if that's all I concentrated on), I think that's what I'll aim to do.

Little Aussie Battler

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Re: Australian Investing Thread
« Reply #2080 on: July 18, 2016, 11:29:43 PM »
I would rather have access to my money well before I turn 60.

I also liked the risk-free nature of the return from repaying my mortgage.

Eucalyptus

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Re: Australian Investing Thread
« Reply #2081 on: July 18, 2016, 11:35:07 PM »
I would rather have access to my money well before I turn 60.

I also liked the risk-free nature of the return from repaying my mortgage.

Oh definitely. Depends on your age and situation as well, as to whether Super is a useful investment vehicle for you. And your own personal risk tolerances. For me, even though the math says that I should preference Super as much as possible over extra mortgage repayments, the thought of doing so (maintaining that PPOR debt much longer) feels pretty uncomfortable, especially when I know that I can be done of it in such a relatively short time frame.
What would be good would be if that tool could be combined for Australians with some other useful tools out there like Firecalc, etc, to help with decision making.

BattlaP

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Re: Australian Investing Thread
« Reply #2082 on: July 19, 2016, 01:10:05 AM »
Wow Sunsuper actually looks great. Switching my partner over too. Thanks everyone.

Little Aussie Battler

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Re: Australian Investing Thread
« Reply #2083 on: July 19, 2016, 05:41:48 AM »
Are people buying the index at current levels?

I'm sitting on some cash, but no asset class feels like good value right now.

marty998

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Re: Australian Investing Thread
« Reply #2084 on: July 19, 2016, 06:02:36 AM »
Hard to see value, especially at the top end.

Market will move when CBA, Wesfarmers and Telstra release their full year results in early August, and the other banks will give their 1st Qtr results updates. Until then I would expect the Australian market to be quite stable and quiet.

Expectation is that all the banks will be hurt by the extra capital required to be held which will depress earnings per share growth this year and possibly next year.

The big 4 will also need to take provisions for lending losses against Arrium, Dick Smith and Slater & Gordon to name just a few. Potentially there are other large institutional lending losses out there that we don't know about (oil and gas industry perhaps?)

SS

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Re: Australian Investing Thread
« Reply #2085 on: July 20, 2016, 02:43:46 AM »
Hi! Just wondering if anyone has thoughts on this.. I've slowly started investing in Vanguard's Life Strategy High Growth Fund but it only puts 18.8% of my money in the US market. AFAIK, we have a lower safe withdrawal rate here than in the US. With MMM (and others in the field) relying on, and recommending Vanguard's Total Market Index Fund in the US, would it be better for Aussies to invest solely in the VTS ETF to mimic the MMM path? It's hard to come across ER stories where they have invested in international markets - they all seem to point to VTSMX/VTSAX. The argument I've heard against diversifying internationally is that many US companies are international in nature already.

marty998

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Re: Australian Investing Thread
« Reply #2086 on: July 20, 2016, 02:57:22 AM »
Hi! Just wondering if anyone has thoughts on this.. I've slowly started investing in Vanguard's Life Strategy High Growth Fund but it only puts 18.8% of my money in the US market. AFAIK, we have a lower safe withdrawal rate here than in the US. With MMM (and others in the field) relying on, and recommending Vanguard's Total Market Index Fund in the US, would it be better for Aussies to invest solely in the VTS ETF to mimic the MMM path? It's hard to come across ER stories where they have invested in international markets - they all seem to point to VTSMX/VTSAX. The argument I've heard against diversifying internationally is that many US companies are international in nature already.

You need to bear in mind currency risk. Our A$ can be very volatile, and will likely put a dampner on returns (both positive and negative)

In goods times such as a resources boom, a rising Aussie dollar will partly offset any gains in rising global markets. Conversely in bad times a falling dollar will partly offset losses in falling global markets.

There are windows where the strategy works beautifully (rising markets, falling Aussie and vice-versa) but they are rare.

steveo

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Re: Australian Investing Thread
« Reply #2087 on: July 20, 2016, 06:47:53 AM »
SS - one other point that I would make is that I'm not convinced or anywhere close to convinced that our SWR is below 4%. Our stock market returns including dividends have been very good.

The problem I see with the ASX is diversification.

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Re: Australian Investing Thread
« Reply #2088 on: July 20, 2016, 02:48:57 PM »
Are people buying the index at current levels?

I'm sitting on some cash, but no asset class feels like good value right now.
I just did my 1st bit of 'market timing' yesterday...bought vgs instead of vas. I was low on vgs, but overweight on emerging markets so total international was already high. I'll still buy vas next month regardless, but I went against my spreadsheet

Trevor Reznik

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Re: Australian Investing Thread
« Reply #2089 on: July 22, 2016, 11:50:35 AM »
OK so I finally have my tax statements from STW and vanguard and I'm doing my tax return using MyTax (god etax was better).  It won't let me claim my margin loan interest against 'dividends' since I have no dividend income, because it's 'managed fund distributions' from these ETFs.  There's no 'managed fund deductions' section, so I'm thinking I have to claim this under...

Other deductions

You may claim at this section:

"debt deductions incurred in earning assessable income that are not disallowed under the thin capitalisation rules and have not been claimed elsewhere"

marty998

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Re: Australian Investing Thread
« Reply #2090 on: July 22, 2016, 08:08:18 PM »
All ends up being treated the same whether dividend deductions or other. I wouldn't worry too much about being completely correct with the deduction categorisations.

ATO won't penalise you if you can prove you are trying to do the right thing.

Lawro

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Re: Australian Investing Thread
« Reply #2091 on: July 22, 2016, 11:47:23 PM »
Many thanks Faramund, Ozstache, and Steveo for taking time to reply on the annual cost of living query I posted above - we really appreciated it.

Mark31 superb work with starting the new thread, this is very helpful for us to plough through.

Thanks all!

andrewjohnporter

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Re: Australian Investing Thread
« Reply #2092 on: July 23, 2016, 02:40:38 PM »
Hi all,

I came across the MMM blog and since then I’ve been spending hours poring through the content of this site, many other sites, podcasts and videos. I did notice that the problem was that nearly all the content was focused on the US or UK market so I’m glad I found this thread to find out how this thinking relates to Australia (still working through the 42 pages of comments!).

Are there any other decent financial education Australian blogs/podcasts/books out there? So far I’ve found the following:
-   https://barefootinvestor.com/
-   A couple of bits on http://forums.whirlpool.net.au/
-   http://fpa.com.au/blog/
-   Free financial courses (not focused on any particular market: https://www.coursera.org
-   The below site and those particular articles:
        https://www.intelligentinvestor.com.au/the-ins-and-outs-of-index-investing-pt-1
        https://www.intelligentinvestor.com.au/the-ins-and-outs-of-index-investing-pt-ii
-   www.justinbrand.com.au (haven’t checked this aussie blogger out fully yet)
-   www.moneysmart.gov.au
-   ASX free courses: http://www.asx.com.au/education/online-courses.htm
-   Anita Bell Books
-   Pete Wargent Books

I’m originally from the UK and so have less idea of what you can do in Oz and also a little confused by some of the acronyms used here. In the UK you have two types of incentivised Tax ‘free’ wrappers in the form of Pensions (0% tax on your contributions until you withdraw after the 55+ age limit) and ISAs (lets you invest in the stock market with no capital gains tax – can withdraw at any time). It seems the government is a bit less accommodating to investors in Oz.

-   Are there any saving/investment schemes in Oz that are the equivalent to an ISA or is the only option Super?


From my googling it seems that the only tax efficient method of saving in Australia is with a Super. The problem there lies in that you won’t be able to access the money there until you’re 60.

-   Should you be putting money in your Super or putting it towards your Early Retirement Plan? (I guess, if you can, it’s best to do both and maybe lower the Early Retirement target as you’ll be covered later on by your Super income)

Another benefit that I see in Australia in franking credits.

-   Does this mean (if you are in a higher tax bracket) that your asset allocation should be more heavily targeted at the Aussie market as you’ll automatically receive a 30% boost to your dividend earnings from tax savings?

Although a problem I see in the Australia market is that it’s dominated by a few Banks and Oil/Mining companies. I feel that it could increase the risk being over exposed in the ASX especially when there could be a turndown in property and the emergence of P2P lending firms which I think could impact the banking sector heavily.

I’ve also read that the Australia stock exchange is ‘less efficient’ and therefore fund managers have a better chance of achieving higher returns than in more efficient markets:

-   Are index funds/ETF’s in Australia not as good an option over funds as they are in the UK and US?

I would like to diversify by having money in Shares and Rental Property in the future. From me it looks like any rental income gained is just added to all your other annual income and will be taxed depending on the tax bracket that puts you in.

-   For example, if you earn 80,000 from your job and then another $20,000 from your rental income the rental income is taxed at 37%. Ignoring possible tax deductions is that right?

I suppose the more you look into things the more questions you have and it’s best just to get started with something like an All World Index as your core and then adjust as you learn more. Apologies if some of these points have already been covered but this thread is crazily long!

Maybe it would be a good idea to collect all relevant information for resources, investments, etc somewhere?

Cheers,

Porter
« Last Edit: July 23, 2016, 02:46:20 PM by andrewjohnporter »

faramund

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Re: Australian Investing Thread
« Reply #2093 on: July 23, 2016, 06:02:09 PM »
Hi all,

I came across the MMM blog and since then I’ve been spending hours poring through the content of this site, many other sites, podcasts and videos. I did notice that the problem was that nearly all the content was focused on the US or UK market so I’m glad I found this thread to find out how this thinking relates to Australia (still working through the 42 pages of comments!).

Are there any other decent financial education Australian blogs/podcasts/books out there? So far I’ve found the following:
-   https://barefootinvestor.com/
-   A couple of bits on http://forums.whirlpool.net.au/
-   http://fpa.com.au/blog/
-   Free financial courses (not focused on any particular market: https://www.coursera.org
-   The below site and those particular articles:
        https://www.intelligentinvestor.com.au/the-ins-and-outs-of-index-investing-pt-1
        https://www.intelligentinvestor.com.au/the-ins-and-outs-of-index-investing-pt-ii
-   www.justinbrand.com.au (haven’t checked this aussie blogger out fully yet)
-   www.moneysmart.gov.au
-   ASX free courses: http://www.asx.com.au/education/online-courses.htm
-   Anita Bell Books
-   Pete Wargent Books

I’m originally from the UK and so have less idea of what you can do in Oz and also a little confused by some of the acronyms used here. In the UK you have two types of incentivised Tax ‘free’ wrappers in the form of Pensions (0% tax on your contributions until you withdraw after the 55+ age limit) and ISAs (lets you invest in the stock market with no capital gains tax – can withdraw at any time). It seems the government is a bit less accommodating to investors in Oz.

-   Are there any saving/investment schemes in Oz that are the equivalent to an ISA or is the only option Super?


From my googling it seems that the only tax efficient method of saving in Australia is with a Super. The problem there lies in that you won’t be able to access the money there until you’re 60.

-   Should you be putting money in your Super or putting it towards your Early Retirement Plan? (I guess, if you can, it’s best to do both and maybe lower the Early Retirement target as you’ll be covered later on by your Super income)

Another benefit that I see in Australia in franking credits.

-   Does this mean (if you are in a higher tax bracket) that your asset allocation should be more heavily targeted at the Aussie market as you’ll automatically receive a 30% boost to your dividend earnings from tax savings?

Although a problem I see in the Australia market is that it’s dominated by a few Banks and Oil/Mining companies. I feel that it could increase the risk being over exposed in the ASX especially when there could be a turndown in property and the emergence of P2P lending firms which I think could impact the banking sector heavily.

I’ve also read that the Australia stock exchange is ‘less efficient’ and therefore fund managers have a better chance of achieving higher returns than in more efficient markets:

-   Are index funds/ETF’s in Australia not as good an option over funds as they are in the UK and US?

I would like to diversify by having money in Shares and Rental Property in the future. From me it looks like any rental income gained is just added to all your other annual income and will be taxed depending on the tax bracket that puts you in.

-   For example, if you earn 80,000 from your job and then another $20,000 from your rental income the rental income is taxed at 37%. Ignoring possible tax deductions is that right?

I suppose the more you look into things the more questions you have and it’s best just to get started with something like an All World Index as your core and then adjust as you learn more. Apologies if some of these points have already been covered but this thread is crazily long!

Maybe it would be a good idea to collect all relevant information for resources, investments, etc somewhere?

Cheers,

Porter
So.. many points..

I do think super (besides dividend imputation, and using debt gearing) is pretty much the only tax-efficient structure,

So, yes, if someone wants to retire early, most people need some sort of outside-of-super funds. Although there is some sort of 'financial hardship' clause that lets you access some super before 60 - I don't know the details of that, and I'm at least working on the assumption that there's no point in me trying to access it.

I hold shares independently, as well as a bit of VAS and VHY. With some shares, I receive an annual tax statement, and part of that indicates a section about foreign tax paid - and then there's a non-obvious process that the ATO does which they say aims at treating that tax on the same terms as if it was paid on income earned in Australia - which gives some of the effects of dividend franking credits on foreign income.

On your last two questions - yes - any dividend+franking credits, rent or whatever income is taxed at your marginal rate - unless its in super.

Also, not all shares pay 30% franking credits - with some its lower, even to sometimes being 0. It essentially depends on how much company tax the shares pay.

Lastly, as to how biases towards mining and bank shares, I agree - my solution is to hold individual stocks with a more even spread. I have around 50 different holdings (primarily because I enjoy doing so) - but I've seen some claims that once you have 10 different holdings you have largely the same diversity benefits as an index. So, given my biases, a possible approach would be to find the list of holdings of VHY (VHY is vanguard's high dividend index) - and pick 10 of them (making sure you don't choose more than 2 banks and not more than 2 mining stocks - these companies are all good dividend payers and are medium-to-large in size). Then split your money evenly between them - or do the same but also allocate money to VAS (and maybe VHY) to further increase your balance.

marty998

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Re: Australian Investing Thread
« Reply #2094 on: July 24, 2016, 02:30:33 AM »
Yup... no special treatment for passive income over employment, or income from "personal exertion" as the ATO describes it*

It's all added to your total income line, then you knock off deductions and you arrive at taxable income. The only type of income with a different tax rate is capital gains on assets held for longer than a year - 50% of the gain is added to your income.

* The tax law, when defining whether something is income or capital, calls something income if it falls within the "ordinary concepts and usages of mankind", except where legislation negates this.

I've always liked that phrase...

terrier56

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Re: Australian Investing Thread
« Reply #2095 on: July 25, 2016, 12:24:36 AM »

-   Are there any saving/investment schemes in Oz that are the equivalent to an ISA or is the only option Super?


From my googling it seems that the only tax efficient method of saving in Australia is with a Super. The problem there lies in that you won’t be able to access the money there until you’re 60.

It is true that super is your best option and for most this will be locked away until your 60 but this doesn't mean you have to wait this long until you retire. To combat this fact I have built a model in excel which works on the following principle.

You only need the 4% draw-down of your fund outside of super not to run out until you get to 60. You can do some calculations on this to get a better idea but basically works like this.

If you can live off 40K per year and have 500k inside super and 500k outside you should be able to comfortably retire around age 48. It is not guaranteed to work in every market scenario but no draw down gives 100% and you can always go back to work.

SS

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Re: Australian Investing Thread
« Reply #2096 on: July 25, 2016, 10:13:31 PM »
Thanks for the replies Steveo and Marty998. Your points on currency fluctuation, SWR and the lack of ASX diversification have been noted. I'm thinking I'll keep the Vanguard LS HGF and have some direct VTSMX/VTSAX here and there also - best and worst of both worlds I guess.

nnls

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Re: Australian Investing Thread
« Reply #2097 on: July 25, 2016, 10:24:08 PM »

-   Are there any saving/investment schemes in Oz that are the equivalent to an ISA or is the only option Super?


From my googling it seems that the only tax efficient method of saving in Australia is with a Super. The problem there lies in that you won’t be able to access the money there until you’re 60.

It is true that super is your best option and for most this will be locked away until your 60 but this doesn't mean you have to wait this long until you retire. To combat this fact I have built a model in excel which works on the following principle.

You only need the 4% draw-down of your fund outside of super not to run out until you get to 60. You can do some calculations on this to get a better idea but basically works like this.

If you can live off 40K per year and have 500k inside super and 500k outside you should be able to comfortably retire around age 48. It is not guaranteed to work in every market scenario but no draw down gives 100% and you can always go back to work.

Thats kind of how I am working my plan, I am putting a bit extra into super for the tax benefits and will focus on retirement saving to get me to age 60, when I can then access my super

Eucalyptus

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Re: Australian Investing Thread
« Reply #2098 on: July 25, 2016, 10:28:18 PM »

-   Are there any saving/investment schemes in Oz that are the equivalent to an ISA or is the only option Super?


From my googling it seems that the only tax efficient method of saving in Australia is with a Super. The problem there lies in that you won’t be able to access the money there until you’re 60.

It is true that super is your best option and for most this will be locked away until your 60 but this doesn't mean you have to wait this long until you retire. To combat this fact I have built a model in excel which works on the following principle.

You only need the 4% draw-down of your fund outside of super not to run out until you get to 60. You can do some calculations on this to get a better idea but basically works like this.

If you can live off 40K per year and have 500k inside super and 500k outside you should be able to comfortably retire around age 48. It is not guaranteed to work in every market scenario but no draw down gives 100% and you can always go back to work.

Thats kind of how I am working my plan, I am putting a bit extra into super for the tax benefits and will focus on retirement saving to get me to age 60, when I can then access my super

Yeah, the option to go back to work is far more feasible between the ages of 48 and 60, than 60+ (especially if you haven't worked from 48-60...).

Anyone have any thoughts on what a good indicator might be to go back to work in the first few years of your FIRE, based on market performance? What is a good guideline? Eg, your portfolio loses 5% in a calendar year?

marty998

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Re: Australian Investing Thread
« Reply #2099 on: July 26, 2016, 02:40:18 AM »
I actually don't think a capital movement/loss would matter too much if your plan is to live off dividends. Dividends across the market as a whole tend to be quite stable even in times of volatility.

If you plan to sell a portion of capital each year to fund the 4% SWR then you may run into difficulty.