Author Topic: Australian Investing Thread  (Read 689020 times)

iloveanimals

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Re: Australian Investing Thread
« Reply #2700 on: February 04, 2017, 01:57:38 AM »
Annual Spend Question. I have read many a time here that people have budgets of anywhere from 20 - 40k per year and some live in Sydney and have kids. I have to ask - how do you do it? Any chance you can give me a high level break down?
We track our spending and come within +/-5% of what we budget. Just the two of us now, own home (4 bedder), 2 dogs, two newish cars, Canberra area. Here's our 2017 top level budget to give you an idea of how much we spend in each category:



As you can see, we make a clear distinction between essential living and discretionary expenses, including splitting the two cars we have between these groups as only one car is considered essential. As such, we consider our essential living expenses to be just under $20K for a year.

To clarify some of the large discretionary items: holidays includes a one week OS trip plus multiple local trips, major purchase includes replacement lounge room furniture after my youngest son moved out plus a new big screen TV just because, and spending covers eating out once a week plus discretionary stuff we individually occasionally buy.

While $20K represents our bare bones living budget, about another $15K of the discretionary budget puts us into the comfortable zone and, in our view, the remainder puts us squarely into spendypants territory.

Thanks so much for that level of detail and explanation. I think the way you have broken out the discretionary section is very smart. Thanks again this is something that I can really measure ourselves against. Cheers.

iloveanimals

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Re: Australian Investing Thread
« Reply #2701 on: February 04, 2017, 05:48:13 PM »
Ok so me and my wife are at an impasse.

Wife: Wants to invest up to 200k approx into Wholesale VAS Fund (over a 3 year period) & also wants to put about 20k into VTS. Her reasoning: Better level of franking credits through VAS and hopefully higher returns and growth over the very long term for VTS & VAS.
 
Me: Just want  to keep building our Vanguard Balanced Wholesale Fund as I think there is quite a bit of cross over with VAS/VTS already our Balanced Fund.

A quick overview for those who don't know our situation:

Wanting to start working part-time in 2-3 years, then FIRE a few years after that. We own our PPOR and have already invested $900k into the Vanguard Wholesale Balanced Fund which our aim is to keep revisiting dividends for the next 7-10 years. Hence why we are discussing what will cover us for part time work stage until we can draw on dividends from the Balanced Fund.

Any takers to advise? Thanks.

misterhorsey

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Re: Australian Investing Thread
« Reply #2702 on: February 04, 2017, 06:43:11 PM »
My initial gut response is that you're still tweaking around the edges, adding greater complexity without a huge return.  But then I thought I'd actually model it for you to see if my gut instinct was right.

I've tried attaching a pdf of the spreadsheet.  As well as the excel sheet.  Disclaimer. I'm no excel whiz so it might be a rather idiosyncratic use of formulas.

But, based on the following assumptions:

- balanced wholesale fund allocations is according to the target allocations here: https://www.vanguardinvestments.com.au/retail/ret/investments/product.html#/fundDetail/wholesale/portId=8121/?overview

- The additional $200k to VAS and $20k to VTS is added to the existing $900k balanced fund in one go.

- for simplicity, I've treated VTS as 'international', even though the Vanguard fund is not just US.

Then,

- Your fund holdings become Wholesale Balanced Fund + VAS + VTS
- Australian shares go from 22% to 35.56% of all funds.
- International/US goes from 17% down to 15.45% of all funds.
- Overall 50/50 Growth/Risk goes to 59.64/40.18%

In conclusion, your vanguard holdings will:
- have increased exposure to growth assets
- increased exposure to international assets, but as a proportion of the overall fund, it will have a reduced exposure!
 
It's worth modelling this stuff otherwise you end up tossing up ideas around without really realising their effect.

I think you mentioned that you thought you may have been a little conservative in your choice of fund.  I'm not sure that this is really the case as I also seem to recall you were pretty risk averse at the time. And capital preservation was a concern too. However, this could be a way of tweaking to give your funds a greater growth allocation.

My suggestions would be to:
- ramp up the international allocation, if you dare. 
- go VGS instead of VTS.  It's unhedged, is denominated in Australian dollars and allows for dividend reinvestment.

But there are many other complicating factors I won't go into. Super, CGT, dividends etc etc. But at least this gives you a foundation of data to look at and play around with.

DISCLAIMER: I don't actually endorse what you are proposing as a strategy btw. I just thought Id crunch some numbers, and if you heart is set on it i thought I'd set out some alternative things to think about.

Edit: Typos, sigh.
« Last Edit: February 07, 2017, 04:12:49 AM by misterhorsey »

steveo

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Re: Australian Investing Thread
« Reply #2703 on: February 04, 2017, 06:49:07 PM »
My opinion is to stick with the balanced fund. If you really want to have more risk exposure than you should use a higher growth fund.

Your wife appears to want a 100% stock portfolio ? Is that correct ? Or does she want the balanced fund plus the other funds ?

If she wants a 100% stock portfolio I think it's not really a good idea. I accept it can work out really well over the longer term but it's more risky and to me it doesn't make a lot of sense. I think it's better to have some diversification. Even if she does want a 100% stock portfolio I think the split is important. So I would work out how much in Aussie and how much in International. I would do this anyway if you are going to do it yourself.

If you are going with the balanced fund plus the other funds I don't like it all. Let the balanced fund handle all of that without you worrying about it at all. The balanced fund is great beacuse all you do is save money. That is it. It's simple and easy to maintain.

If you choose to DIY then I would work out how much bonds/cash you want as a percentage and then how much between international and domestic. So just say you choose 80/20 stocks/bonds and 50% international/domestic then you just invest so that the end outcome works out like that. I do this myself with a different asset allocation but I use ETF's. I like the ETF's because we invest regularly and they have low fees.

In stating all of that I think whatever option you take it's going to work out because you are using low cost index options. I just don't think an all over the place approach makes a lot of sense.


cakie

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Re: Australian Investing Thread
« Reply #2704 on: February 04, 2017, 07:41:45 PM »
Annual Spend Question. I have read many a time here that people have budgets of anywhere from 20 - 40k per year and some live in Sydney and have kids. I have to ask - how do you do it? Any chance you can give me a high level break down?
We track our spending and come within +/-5% of what we budget. Just the two of us now, own home (4 bedder), 2 dogs, two newish cars, Canberra area. Here's our 2017 top level budget to give you an idea of how much we spend in each category:



As you can see, we make a clear distinction between essential living and discretionary expenses, including splitting the two cars we have between these groups as only one car is considered essential. As such, we consider our essential living expenses to be just under $20K for a year.

To clarify some of the large discretionary items: holidays includes a one week OS trip plus multiple local trips, major purchase includes replacement lounge room furniture after my youngest son moved out plus a new big screen TV just because, and spending covers eating out once a week plus discretionary stuff we individually occasionally buy.

While $20K represents our bare bones living budget, about another $15K of the discretionary budget puts us into the comfortable zone and, in our view, the remainder puts us squarely into spendypants territory.

Thanks so much for that level of detail and explanation. I think the way you have broken out the discretionary section is very smart. Thanks again this is something that I can really measure ourselves against. Cheers.
+1 doing our 2017 budget atm, and this is very helpful. Cheers!

marty998

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Re: Australian Investing Thread
« Reply #2705 on: February 04, 2017, 08:40:15 PM »
I love February. It's reporting season! It's also dividend declaration season :)

For those interested, and those who have direct share holdings, here are the results release dates (per running tally on ABC News):

7/2: SCA Property, Transurban
8/2: BWA Trust, Carsales.com, CIMIC, Rio Tinto
9/2: AGL, AMP, Suncorp
13/2: Amcor, Ansell, Aurizon, Bendigo & Adelaide Bank, JB HiFI, Newcrest, Perseus Mining
14/2: Challenger, Cochlear, GPT, Invocare, Orora, Paladin
15/2: CBA, Computershare, CSL, Dexus, Inghams, Mt Gibson Iron, Sims, Sonic, Vicinity, Westfarmers
16/2: Evolution, Goodman, Mirvac, Origin, South32, Star Entertainment, Sydney Airport, Tatts Group, Telstra, Treasury Wine
17/2: ASX, Bellamy's, DUET, Link Administration, Mantra, Medibank, Northern Star, Primary Health, Santos, Virgin, Whitehaven Coal
20/2: Beach Energy, Bluescope, Brambles, Charter Hall Retail, GWA, NIB, Worley Parsons,
21/2: BHP, Caltex, Flexigroup, Healthscope, Independence Group, Monadelphous, Oil Search, Scentre, Seek, Specialty
22/2: APA, Atlas, CocaCola Amatil, Fairfax, Fletcher Building, Fortescue, IAG, IOOF, McMillan Shakespeare, Qube, Stockland, Vocus, Woodside
23/2: Adelaide Brighton, Alumina, Ardent Leisure, Crown, Iuka, Investa, MYOB, Oceana Gold, Oz Minerals, Perpetual, Qantas, Ramsay Healthcare, Reece, Sandfire, Village Roadshow, Westfield Corp
24/2: Billabong, Charter Hall Group, Orocobre, Super Retail,
27/2: Boart Longyear, LendLease, QBEm Spark,
28/2: AWE, Harvey Norman, Spotless Group

« Last Edit: February 04, 2017, 08:44:58 PM by marty998 »

nofriends

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Re: Australian Investing Thread
« Reply #2706 on: February 04, 2017, 09:26:24 PM »
surprised ABC left out those three:

06/2: NAB
17/2: ANZ
21/2: Westpac

those are only 3rd quarter trading updates, but still quite significant given their weight

marty998

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Re: Australian Investing Thread
« Reply #2707 on: February 05, 2017, 05:09:58 AM »
surprised ABC left out those three:

06/2: NAB
17/2: ANZ
21/2: Westpac

those are only 3rd quarter trading updates, but still quite significant given their weight

1st quarter actually - their year end date is September 30. It's interesting though, based on the 2016 results, CBA makes as much profit in 6 months as NAB does in almost a year. And with ANZ hiving off all of its International arms and potentially all of its Wealth Management divisions too, we may soon be calling it a big 2 system, instead of a big 4.

Macquarie Bank's year end is 31 March, so they will have a Q3 trading update shortly as well.

Line to look at (as if it wasn't already important) is the earnings per share figure. All the banks struggled last year under the weight of the 2015 capital raisings to grow EPS, indeed most went backwards. Some more bad figures could define where the market will head for the next 6-12 months.

Jimmy9

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Re: Australian Investing Thread
« Reply #2708 on: February 05, 2017, 04:51:30 PM »
Gday Aussie investors,
Just finished reading this thread, has been an eye opener and a wealth of knowledge...Much appreciated :)

I have started my own thread in the case studies forum if any seasoned pros care to impart some nuggets of wisdom into my financial plan (didn't want to butt in on this thread).

Keep up the good work...

Louis XIV

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Re: Australian Investing Thread
« Reply #2709 on: February 05, 2017, 05:37:31 PM »
Hi Everyone,

I've been reading through this thread and I think I've formulated my plan but I'm hoping some strangers on the internet will hold my hand  & tell me its okay (or terrible...)

I'm hoping to invest around $12,000 this year in $4,000 (roughly quarterly) chunks with a proposed allocation of:
45% VAS
45% VGS
10% VGE

I will probably purchase it as:
Q1: VAS ($4k)
Q2: VGS ($4k)
Q3: VAS ($1.4k), VGS, ($1.4k) VGE ($1.2k) 
Q4: ??? whatever is needed to get it back to 45%/45%/10%

So I guess my questions are:
1. Is my allocation bad, if so what would you change and why?
2. When I execute say the Q3 trade with commsec, do I get charged $30 or is it $30 for VAS buy, $30 for VGS buy, $30 for VGE buy?
3. As I understand it because these are all Aus domiciled, tax shouldn't be too complicated, Vanguard will send me a detail sheet and I just have to plug the numbers in from it? Is this assumption correct?

stashgrower

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Re: Australian Investing Thread
« Reply #2710 on: February 05, 2017, 06:02:09 PM »
Wow, all this activity :D

Ozstache - I really like your breakdown, very clear. Thanks, I'm inspired to rearrange my categories into those overall buckets.

FFA - Thanks for your reasoning. Haha, I'm not attached to my pros/cons list. They are the thoughts rattling in my head. I'm happy to be shown with logic if I should think it through differently! I admire the knowledge and experience on this forum, and the objective viewpoints!

VAS/VHY etc. Thanks, folks, I'm still reading and learning.




FFA

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Re: Australian Investing Thread
« Reply #2711 on: February 05, 2017, 08:26:18 PM »
Hi Everyone,

I've been reading through this thread and I think I've formulated my plan but I'm hoping some strangers on the internet will hold my hand  & tell me its okay (or terrible...)

I'm hoping to invest around $12,000 this year in $4,000 (roughly quarterly) chunks with a proposed allocation of:
45% VAS
45% VGS
10% VGE

I will probably purchase it as:
Q1: VAS ($4k)
Q2: VGS ($4k)
Q3: VAS ($1.4k), VGS, ($1.4k) VGE ($1.2k) 
Q4: ??? whatever is needed to get it back to 45%/45%/10%

So I guess my questions are:
1. Is my allocation bad, if so what would you change and why?
2. When I execute say the Q3 trade with commsec, do I get charged $30 or is it $30 for VAS buy, $30 for VGS buy, $30 for VGE buy?
3. As I understand it because these are all Aus domiciled, tax shouldn't be too complicated, Vanguard will send me a detail sheet and I just have to plug the numbers in from it? Is this assumption correct?
2. Brokerage is per trade so you will pay 3x in Q3.
1. Due to 2, I'd reconsider simplifying to 50/50 VAS/VGS. If you really want some emerging market exposure, maybe check your Super if you have an option there, it will be much easier than mucking around here with the 10% weighting and incurring the extra brokerage fees. I started investing in VGE with a small weighting myself but am now doing this very thing to just hold it in Super.
3. Yes you will get a tax statement from vanguard, and it should pre-fill but you might just need to verify it. They are Aus domicile so no W8-BN form required.

potm

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Re: Australian Investing Thread
« Reply #2712 on: February 05, 2017, 09:40:40 PM »
Also Commsec should charge $20 per trade as long as you use their accounts and do it online etc. There's cheaper out there.
I'd agree with FFA that it's not worth adding VGE for the numbers you mentioned. Any additional benefit (if any at all) will be eating up by the extra brokerage.

marty998

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Re: Australian Investing Thread
« Reply #2713 on: February 05, 2017, 11:54:10 PM »
NAB cash earnings down 1% at $1.6 billion for the quarter.

Admittedly there was not a lot of detail in the release, other than income up 1% and expenses up a whopping 5%. Bad debts provisions were down, when limited the fall in earnings to just 1%.

Low growth environment... credit growth is stalling, which might end up being a good thing for the economy as everyone deleverages.

iloveanimals

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Re: Australian Investing Thread
« Reply #2714 on: February 06, 2017, 12:27:47 PM »

- International/US goes from 17% down to 15.45% of all funds..

My suggestions would be to:
- ramp up the international allocation, if you dare. 
- go VGS instead of VTS.  It's unhedged, is denominated in Australian dollars and allows for dividend reinvestment.

DISCLAIMER: I don't actually endorse what you are proposing as a strategy btw. I just thought Id crunch some numbers, and if you heart is set on it i thought I'd set out some alternative things to think about.
MisterHorsey, I am blown away with the amount of effort you have gone to answer my question! Thanks. The breakdown was very helpful.  I have a few of questions:

- I am confused as to why our international exposure would be lower in if put more money into VTS or VGS?
- You say ramp up international funds "if you dare" - why do you say that, since so many here always suggest more international exposure?
- Your Disclaimer suggests that if you were in our shoes you would be doing something very different, and I am curious to know if you would share that with me - don't worry I won't hold you to anything!

Again thanks very much!!!!!
 

iloveanimals

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Re: Australian Investing Thread
« Reply #2715 on: February 06, 2017, 12:34:36 PM »
My opinion is to stick with the balanced fund. If you really want to have more risk exposure than you should use a higher growth fund.

Your wife appears to want a 100% stock portfolio ? Is that correct ? Or does she want the balanced fund plus the other funds ?

If she wants a 100% stock portfolio I think it's not really a good idea. I accept it can work out really well over the longer term but it's more risky and to me it doesn't make a lot of sense. I think it's better to have some diversification. Even if she does want a 100% stock portfolio I think the split is important. So I would work out how much in Aussie and how much in International. I would do this anyway if you are going to do it yourself.

If you are going with the balanced fund plus the other funds I don't like it all. Let the balanced fund handle all of that without you worrying about it at all. The balanced fund is great beacuse all you do is save money. That is it. It's simple and easy to maintain.

If you choose to DIY then I would work out how much bonds/cash you want as a percentage and then how much between international and domestic. So just say you choose 80/20 stocks/bonds and 50% international/domestic then you just invest so that the end outcome works out like that. I do this myself with a different asset allocation but I use ETF's. I like the ETF's because we invest regularly and they have low fees.

In stating all of that I think whatever option you take it's going to work out because you are using low cost index options. I just don't think an all over the place approach makes a lot of sense.

Thanks Steveo. My wife wants to keep the Balanced Fund as is and then add VTS/VGS + VAS. So think that is probably where we will land unless we come up with something more amazing. Cheers!

marty998

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Re: Australian Investing Thread
« Reply #2716 on: February 06, 2017, 01:08:42 PM »

- International/US goes from 17% down to 15.45% of all funds..

My suggestions would be to:
- ramp up the international allocation, if you dare. 
- go VGS instead of VTS.  It's unhedged, is denominated in Australian dollars and allows for dividend reinvestment.

DISCLAIMER: I don't actually endorse what you are proposing as a strategy btw. I just thought Id crunch some numbers, and if you heart is set on it i thought I'd set out some alternative things to think about.
MisterHorsey, I am blown away with the amount of effort you have gone to answer my question! Thanks. The breakdown was very helpful.  I have a few of questions:

- I am confused as to why our international exposure would be lower in if put more money into VTS or VGS?
- You say ramp up international funds "if you dare" - why do you say that, since so many here always suggest more international exposure?
- Your Disclaimer suggests that if you were in our shoes you would be doing something very different, and I am curious to know if you would share that with me - don't worry I won't hold you to anything!

Again thanks very much!!!!!
 

It goes up in absolute dollars, but down as a % of your total investments. This is based on your nominated $20k extra to VTS (international), but 10x as much - $200k - extra to VAS (Australia).


steveo

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Re: Australian Investing Thread
« Reply #2717 on: February 06, 2017, 02:09:53 PM »
My opinion is to stick with the balanced fund. If you really want to have more risk exposure than you should use a higher growth fund.

Your wife appears to want a 100% stock portfolio ? Is that correct ? Or does she want the balanced fund plus the other funds ?

If she wants a 100% stock portfolio I think it's not really a good idea. I accept it can work out really well over the longer term but it's more risky and to me it doesn't make a lot of sense. I think it's better to have some diversification. Even if she does want a 100% stock portfolio I think the split is important. So I would work out how much in Aussie and how much in International. I would do this anyway if you are going to do it yourself.

If you are going with the balanced fund plus the other funds I don't like it all. Let the balanced fund handle all of that without you worrying about it at all. The balanced fund is great beacuse all you do is save money. That is it. It's simple and easy to maintain.

If you choose to DIY then I would work out how much bonds/cash you want as a percentage and then how much between international and domestic. So just say you choose 80/20 stocks/bonds and 50% international/domestic then you just invest so that the end outcome works out like that. I do this myself with a different asset allocation but I use ETF's. I like the ETF's because we invest regularly and they have low fees.

In stating all of that I think whatever option you take it's going to work out because you are using low cost index options. I just don't think an all over the place approach makes a lot of sense.

Thanks Steveo. My wife wants to keep the Balanced Fund as is and then add VTS/VGS + VAS. So think that is probably where we will land unless we come up with something more amazing. Cheers!

I think that this is pretty stupid from a portfolio perspective but like I said previously you are using low cost index funds. I think that means that you are going to be completely okay. Just enjoy your life.

Louis XIV

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Re: Australian Investing Thread
« Reply #2718 on: February 06, 2017, 04:08:01 PM »
Thanks FFA, I did some back of napkin math and yeah it makes no sense to worry about VGE at this point if its fee per purchase allotment. I'll go VAS/VGS 50:50 and worry about emerging markets at a later date, maybe once I'm over the $100k mark.

misterhorsey

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Re: Australian Investing Thread
« Reply #2719 on: February 06, 2017, 05:11:38 PM »

- International/US goes from 17% down to 15.45% of all funds..

My suggestions would be to:
- ramp up the international allocation, if you dare. 
- go VGS instead of VTS.  It's unhedged, is denominated in Australian dollars and allows for dividend reinvestment.

DISCLAIMER: I don't actually endorse what you are proposing as a strategy btw. I just thought Id crunch some numbers, and if you heart is set on it i thought I'd set out some alternative things to think about.
MisterHorsey, I am blown away with the amount of effort you have gone to answer my question! Thanks. The breakdown was very helpful.  I have a few of questions:
It's no biggie. I enjoy putting basic spreadsheets together. You can't predict the future. Predictions and projections about ongoing performance are of limited use.  But using a spreadsheet can set up a framework to allow you to understand a range of possible performances, so you can have an understanding of the upside/downside you may experience.

Plus, I am a big cycling fan and I did it while watching the Jayco SunTour on telly.  Cycling can be a very tedious sport to watch (zzz zzz zzz).

- I am confused as to why our international exposure would be lower in if put more money into VTS or VGS?
As Marty pointed out above, your overall allocation to International is decreased even though you are putting more money in.  If you play with the spreadsheet you can increase the amount you've allocated to international and increase the % allocation.  I.e. instead of putting another 200k/20k into Aus/International, put in 100k/120k  Aus/International and see what happens.

- You say ramp up international funds "if you dare" - why do you say that, since so many here always suggest more international exposure?
Everyone understands that Australia is 2% of the world economy, and that having 100% of your investments in Australia is not diversifying, and so an extensive overseas allocation makes investing sense.  But still, almost everyone has a sizable home bias in their investments. In some ways it makes sense as it's the economy you work, spend and live in. But it doesn't make investing sense if you value diversification.

Plus currency fluctuations give me, and many others, the heebeejeebies.  The theory is that currency fluctuations smooth out over time.  As far as I can see, if the $AUD goes down in value against the $USD and your investments decline in value, it's compensated by the greater value of the dividends you receive from those investments. 

I'm happy drip feeding investments into unhedged international funds as it all smooths out. However, putting lump sums into overseas investments I find particularly psychologically challenging. As I mentioned previously, I am addicted to price watching. Just got to focus on the long term I guess.

- Your Disclaimer suggests that if you were in our shoes you would be doing something very different, and I am curious to know if you would share that with me - don't worry I won't hold you to anything!
Actually, it's not that I'd be doing something different. And I really can't imagine what it would be like to be in your shoes.  What may feel comfortable to me may not make sense to your and your partner. So I don't really have an alternative strategy.

Rather, I'm just not convinced that the purchases you are contemplating really fits into any overall strategy that is designed to achieve your longterm objectives, while minimising admin and management overhead. It just looks a little fussy, designed to address an objective about yield,  but adds on a bit more management without really achieving all that much other than an adjustment to asset allocation (which in practice does the opposite of what you want, ie. by decreasing overall international exposure). Bear in mind it's easier to critique your strategy as you are open about sharing it. 

So my suggestion is to take a step back. Identify what you want to do.  What asset allocation you want to achieve. And then try build a strategy to get you there.



NotSure

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Re: Australian Investing Thread
« Reply #2720 on: February 06, 2017, 07:17:28 PM »
You could also use Yodlee MoneyCenter website to track expenses, ANZ Money Manager was using them before it shutdown its services.

https://moneycenter.yodlee.com/

It's free to use, just link your Australian banks, shares etc.

stashgrower

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Re: Australian Investing Thread
« Reply #2721 on: February 07, 2017, 08:09:08 AM »
I think there was discussion of this upthread, but getting a bit lost now :) If aiming to deposit into super or ex-super shares 1-2 times per year, does it matter when? Meaning general choice of months, not stock market timing. Thanks.

iloveanimals

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Re: Australian Investing Thread
« Reply #2722 on: February 07, 2017, 05:33:54 PM »
So my suggestion is to take a step back. Identify what you want to do.  What asset allocation you want to achieve. And then try build a strategy to get you there.

Thanks very much. We are now doing this and taking our time to do more reading etc. Again amazed at how generous you have been with your time and sharing your wisdom. P.S. be careful cycling...my wife had a fairly bad accident this time last year. Great sport - but so dangerous. Hope that Australia get's much better at providing cycle paths that are safe. Cheers!

iloveanimals

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Re: Australian Investing Thread
« Reply #2723 on: February 07, 2017, 05:35:10 PM »

- International/US goes from 17% down to 15.45% of all funds..

My suggestions would be to:
- ramp up the international allocation, if you dare. 
- go VGS instead of VTS.  It's unhedged, is denominated in Australian dollars and allows for dividend reinvestment.

DISCLAIMER: I don't actually endorse what you are proposing as a strategy btw. I just thought Id crunch some numbers, and if you heart is set on it i thought I'd set out some alternative things to think about.
MisterHorsey, I am blown away with the amount of effort you have gone to answer my question! Thanks. The breakdown was very helpful.  I have a few of questions:

- I am confused as to why our international exposure would be lower in if put more money into VTS or VGS?
- You say ramp up international funds "if you dare" - why do you say that, since so many here always suggest more international exposure?
- Your Disclaimer suggests that if you were in our shoes you would be doing something very different, and I am curious to know if you would share that with me - don't worry I won't hold you to anything!

Again thanks very much!!!!!
 

It goes up in absolute dollars, but down as a % of your total investments. This is based on your nominated $20k extra to VTS (international), but 10x as much - $200k - extra to VAS (Australia).


Thanks Marty. I now get it!!

iloveanimals

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Re: Australian Investing Thread
« Reply #2724 on: February 07, 2017, 05:38:02 PM »
I think that this is pretty stupid from a portfolio perspective but like I said previously you are using low cost index funds. I think that means that you are going to be completely okay. Just enjoy your life.
Thanks Steveo for your no nonsense response. Love the "just enjoy your life" part!

nofriends

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Re: Australian Investing Thread
« Reply #2725 on: February 08, 2017, 01:50:13 AM »
@iloveanimals
this article came out just in time for you:
https://www.vanguardinvestments.com.au/retail/ret/articles/insights/research-commentary/portfolio-construction/planning-a-holiday.jsp

Quote:
Investors may set unrealistic desired returns based on a variety of influences including their own investment experiences (good and bad), historic returns over various periods, lists of the latest highest-performing managed funds, media reports and investment advertising.

Unsurprisingly, [...] an investor's desired return is often much higher than their required return. In turn, this can lead to investor taking excessive risks in the pursuit of achieving those higher, unrealistic returns.

misterhorsey

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Re: Australian Investing Thread
« Reply #2726 on: February 08, 2017, 04:08:06 AM »
Thanks very much. We are now doing this and taking our time to do more reading etc. Again amazed at how generous you have been with your time and sharing your wisdom. P.S. be careful cycling...my wife had a fairly bad accident this time last year. Great sport - but so dangerous. Hope that Australia get's much better at providing cycle paths that are safe. Cheers!

Good to hear.  I'd recommend Bernstein's 4 Pillars as a great comprehensive overview.  From memory it gives a good grounding in index investing, but then it get's a bit detailed and prescriptive about designing a portfolio. https://www.goodreads.com/book/show/79351.The_Four_Pillars_of_Investing

And looking for articles or interviews with John Bogle are great.

Just remember that you're in the unique position of coming to this forum and asking for advice after having done the hard yards of saving a big stash.

Sorry to hear about your wife's accident.  I agree that there are risks with cycling, but i'm fortunate to live in inner melb where there are extensive trails, and I think the health benefits outweigh the dangers. One guy I know has actually written about it!

http://www.mrmoneymustache.com/2013/06/13/bicycling-the-safest-form-of-transportation/

iloveanimals

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Re: Australian Investing Thread
« Reply #2727 on: February 09, 2017, 08:34:02 PM »
Hi Again!
I have a question that I hope doesn't sound too stupid. It relates to return on investments in funds for the units/shares you hold over a long period of time. I had made the assumption that these units overtime "mature"  (especially for defensive assets like Fixed Interest and Bonds) - meaning because you have held them for a period of time, in the background some sort of mathematical equation takes place to provide a better return for those unit holders.

I know  there is the Growth return which is capital growth and I know there are distributions - the dividend income, however I also thought there was some level of "maturity" occurring in the background. So to paint a clearer picture - I would have thought that if I own 100 units and have held them for 1 year and then someone else buys the same amount - 100 units - but has only held them for 1 week - it seems as though we would both receive the exact amount of distribution regardless of time held for those units. I know in theory they may have bought the units for a higher price (but the reverse could be true). If this is the case, then I am thinking  investors may wait to put there money in very close to distribution payment dates.  I get the feeling that many of you could be rolling your eyes about now! :) Thanks!
« Last Edit: February 09, 2017, 08:47:10 PM by iloveanimals »

deborah

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Re: Australian Investing Thread
« Reply #2728 on: February 09, 2017, 09:21:55 PM »
What sorts of "units" are you talking about? If you own shares, on the date of the dividend you get your 6 monthly payment (dividend) - whether you have owned them for 2 days or for the whole six months since the last payment. In theory, the market anticipates the dividend, and if you bought the shares 2 days before the dividend, you have to pay more than if you bought them 2 days after the dividend date (in theory, the price would be x - dividend amount, if x was the price 4 days ago).

Other investments work differently, and can have some maturity.

iloveanimals

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Re: Australian Investing Thread
« Reply #2729 on: February 09, 2017, 10:01:41 PM »
What sorts of "units" are you talking about? If you own shares, on the date of the dividend you get your 6 monthly payment (dividend) - whether you have owned them for 2 days or for the whole six months since the last payment. In theory, the market anticipates the dividend, and if you bought the shares 2 days before the dividend, you have to pay more than if you bought them 2 days after the dividend date (in theory, the price would be x - dividend amount, if x was the price 4 days ago).

Other investments work differently, and can have some maturity.

Thanks Deborah - my investment is in the Vanguard Wholesale Balanced Fund, so I purchased units. The reason why I am asking this forum is because Vanguard customer service are giving me conflicting information. Cheers.

deborah

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Re: Australian Investing Thread
« Reply #2730 on: February 09, 2017, 11:17:45 PM »
Sorry, I didn't explain myself well. I meant that if your fund was just in equities, there wouldn't be any maturity because of the way the underlying investments perform.

iloveanimals

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Re: Australian Investing Thread
« Reply #2731 on: February 09, 2017, 11:40:08 PM »
Sorry, I didn't explain myself well. I meant that if your fund was just in equities, there wouldn't be any maturity because of the way the underlying investments perform.
Ok - its half equities the rest cash/bonds...so this is where I thought the "maturity" would come into play - but Vanguard saying no, just growth of unit value of the fund, which is the part I don't get.  Cheers

deborah

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Re: Australian Investing Thread
« Reply #2732 on: February 09, 2017, 11:54:26 PM »
Neither cash nor bonds have maturity in the way you are talking about - both respond to the market.

sirdeets

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Re: Australian Investing Thread
« Reply #2733 on: February 09, 2017, 11:56:51 PM »
Warning: Stock picking post.

I read a good book last month - David Dreman - "Contrarian Investment Strategies".

This book + some double checking of some of the commentary (about low PE investing outperforms) has lead me to sell out of my remaining Index funds (held >12months) and go purely into individual companies. 

I've invested in about 20 companies, US and Aus, and have used a mixture of Dreman and also Ben Graham / Warren Buffet style approaches.  I had a pretty big chunk to do this with as sold an apartment, and the 20 trades were all free using Nab.

Roughly my approach has been grabbing out of favour stocks with low PE compared to their industry that is unjustified, with good balance sheets (current assets compared to current liabilities), not paying a premium on book value compared to industry, some EPS growth, no -EPS in recent history, no risk of obsoleteness due to the internet, with extra points for media hysteria on the company.  I'm aiming to rebalance yearly unless things get way out of wack on the info that lead to the initial purchase.

I've been doing this for years but my approach had been 80% index, 20% stock picking.  Now I'm 100% individual companies. I just hit the 12 month mark of last's years purchases are have now rebalanced, they were PRY, CSR, ORG which had phenomenal returns.  My purchases over the last few months have been, AUS:  AYS, BKW, CLX, CWN, MXI, SDI, TPM, UOS, VOC, VRT, AGI, FXL.  USA: IBM, AAPL.  I've bought in "chips" of either 10k, or "half chips" 5k.  As an e.g. Apple was a chip, MXI was a half chip. If I'm convinced, I'll buy a chip, if I think it's risky, I'll do a half chip.  Anyway, this is probably going to be a yearly post, people may be interested in how I'm going as an experiment.

Any feedback welcome.  Also, does anything know any smart tools on tracking performance?  I'm talking auto comparison to an index, working out various ratios etc.  I've got spreadsheets for taxation purposes, but calcs on performance are very manual and time consuming.
« Last Edit: February 10, 2017, 12:17:24 AM by sirdeets »

iloveanimals

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Re: Australian Investing Thread
« Reply #2734 on: February 09, 2017, 11:57:06 PM »
Neither cash nor bonds have maturity in the way you are talking about - both respond to the market.
Ok - thanks for clearing that up. So Vanguard are right - just distributions and growth of unit value. Cheers.

potm

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Re: Australian Investing Thread
« Reply #2735 on: February 10, 2017, 01:29:28 AM »
Warning: Stock picking post.

I read a good book last month - David Dreman - "Contrarian Investment Strategies".

This book + some double checking of some of the commentary (about low PE investing outperforms) has lead me to sell out of my remaining Index funds (held >12months) and go purely into individual companies. 

I've invested in about 20 companies, US and Aus, and have used a mixture of Dreman and also Ben Graham / Warren Buffet style approaches.  I had a pretty big chunk to do this with as sold an apartment, and the 20 trades were all free using Nab.

Roughly my approach has been grabbing out of favour stocks with low PE compared to their industry that is unjustified, with good balance sheets (current assets compared to current liabilities), not paying a premium on book value compared to industry, some EPS growth, no -EPS in recent history, no risk of obsoleteness due to the internet, with extra points for media hysteria on the company.  I'm aiming to rebalance yearly unless things get way out of wack on the info that lead to the initial purchase.

I've been doing this for years but my approach had been 80% index, 20% stock picking.  Now I'm 100% individual companies. I just hit the 12 month mark of last's years purchases are have now rebalanced, they were PRY, CSR, ORG which had phenomenal returns.  My purchases over the last few months have been, AUS:  AYS, BKW, CLX, CWN, MXI, SDI, TPM, UOS, VOC, VRT, AGI, FXL.  USA: IBM, AAPL.  I've bought in "chips" of either 10k, or "half chips" 5k.  As an e.g. Apple was a chip, MXI was a half chip. If I'm convinced, I'll buy a chip, if I think it's risky, I'll do a half chip.  Anyway, this is probably going to be a yearly post, people may be interested in how I'm going as an experiment.

Any feedback welcome.  Also, does anything know any smart tools on tracking performance?  I'm talking auto comparison to an index, working out various ratios etc.  I've got spreadsheets for taxation purposes, but calcs on performance are very manual and time consuming.

My only comment to you is that to be careful of using benchmarks to rate companies. Each company has to be judged on it's own merits. Numbers can be very malleable and there can be all sorts of reasons why something is the way it is. You are probably pretty switched on and aware of this.
I prefer to invest in a much smaller number of stocks that I can understand and monitor closely. Less diversification but my 20th best idea for a stock is not going to be any where near as good as my 1st (assuming I have some ability to pick a good stock).

misterhorsey

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Re: Australian Investing Thread
« Reply #2736 on: February 10, 2017, 04:44:22 AM »
Not sure if this has been posted before, but Vanguard have launched an 'Anti-Dr Strangelove' index!

https://www.vanguardinvestments.com.au/retail/ret/investments/product.html#/fundDetail/wholesale/portId=8122/?overview

Not quite an 'ethical fund'. But no smokes and no nukes! And no 'controversial weapons'?

I wonder how they delineate the razor thin line between 'controversial weapons' and 'non controversial weapons'?

Kinda weird.

FFA

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Re: Australian Investing Thread
« Reply #2737 on: February 10, 2017, 04:59:54 AM »
Also, does anything know any smart tools on tracking performance?  I'm talking auto comparison to an index, working out various ratios etc.  I've got spreadsheets for taxation purposes, but calcs on performance are very manual and time consuming.
Hi sirdeets, I use the investsmart free tool. It does the dividends and gives you a total return. You might just need to enter a VAS purchase at the same time to create the comparison against index.

Sharesight is a better version I believe but the free tool is limited to 1 portfolio and 10 holdings, so may not fit your needs. And the minimum subscription at $25/month for me is not worth it I'm happy enough with investsmart's free version...

I also keep a spreadsheet but good to have this as a cross check and an easier way to get the total return.

sirdeets

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Re: Australian Investing Thread
« Reply #2738 on: February 10, 2017, 07:03:59 AM »
Thanks FFA - looks good.

marty998

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Re: Australian Investing Thread
« Reply #2739 on: February 11, 2017, 03:50:01 AM »
Not sure if this has been posted before, but Vanguard have launched an 'Anti-Dr Strangelove' index!

https://www.vanguardinvestments.com.au/retail/ret/investments/product.html#/fundDetail/wholesale/portId=8122/?overview

Not quite an 'ethical fund'. But no smokes and no nukes! And no 'controversial weapons'?

I wonder how they delineate the razor thin line between 'controversial weapons' and 'non controversial weapons'?

Kinda weird.

Do you remember a company called "Metal Storm"?

That was a controversial weapon. It's usually clear cut.

Sorry, I didn't explain myself well. I meant that if your fund was just in equities, there wouldn't be any maturity because of the way the underlying investments perform.
Ok - its half equities the rest cash/bonds...so this is where I thought the "maturity" would come into play - but Vanguard saying no, just growth of unit value of the fund, which is the part I don't get.  Cheers

lets talk through something odd that can happen when material new subscriptions and redemptions are made to a fund.

For vanguard funds (and any other ETF) the value of the units include the accrued income. Say for example a vanguard fund holds a bond or a stock worth $1,000, and the fund is made up of 1,000 units so the unit price is $1 on 1 January 2017, and you own all of it.

Lets say the stock or bond the fund is holding pays a coupon or dividend of $50 on February 15, and assume no other value changes.

The value of your units is now $1.05 each ($1,050). If someone else wants to buy into the fund they need to subscribe for units at $1.05 each. Lets say they subscribe for 1000 units too.

The fund now has $2,100 of value in it. Lets assume no other transactions until the end of the quarter.

The fund has income of $50 earned on Feb 15. It therefore pays a distribution of $0.025 per unit to each investor on 31 March. So you only get income of $25, but the value of your fund is $1,025.

Now here's the thing. There are some fund managers that will adjust for this by paying out $100 and then fix it up on the investors' annual tax statement (deem that you have the $50 as income and the other guy gets $50 of capital returns). It's administratively simple for the bean counters to do for a fund with few investors. It's not really possible for a fund with half a million investors going in and out at various times with hundred of stocks in the portfolio.

« Last Edit: February 11, 2017, 03:54:44 AM by marty998 »

FFA

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Re: Australian Investing Thread
« Reply #2740 on: February 11, 2017, 09:55:54 PM »
just to make clear in that example no-one gained or lost, but the value shifted between income/capital gain.

- if there was no second investor, it would have been $50 income.
- with the second investor, it was $25 income and $25 capital gain. (and the second investor received $25 income and $25 capital loss).

so ultimately in both cases the bond coupon goes to the investor who "earned" it, and the second investor who come in afterwards does not benefit, if you consider the overall picture of income plus capital. I acknowledge this still has implications for people especially depending on their tax situation.... managed funds aren't perfect, but I think the benefits outweigh downsides!

LonerMatt

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Re: Australian Investing Thread
« Reply #2741 on: February 12, 2017, 01:50:21 AM »
Hey everyone, it's the dude who started this thread, then fell in love with a girl off tinder, moved to the UK for two years, moved back to Australia and now lives in Canberra.

A few recent things have spurred me back to MMM and ER in general, but instead of typing all that out I'm seeking some criticism. In short: I used to have a small idea what I was doing investing, but things have changed and I've been ignoring things, my priorities have changed so I'm seeking to come to grips with all that's different in the world. I'm here to ask your help: do you think the asset allocation below meets my goals? and do you think that there's anything I should read, consider or learn more about?

Basically:
- Over the next 2-3 years (before I'm 30, so 2 years and 8 months) I want to go from ~55k net worth to 100k invested and 10k in an emergency fund
- I am aiming for modest returns 1-3% over inflation
- Short term: modest growth while I goof around and try my hand at a few different ways to earn $ (3-5 years)
- Long term: be able to pay a large chunk of change towards a property (5-10 years)
- I am risk adverse, prefer money to stagnate rather than lose it (in the long term, short term doesn't bother me)
- Set and forget, I can't be fucked tracking things daily and honestly had to look up nabtrade to work out what my NW was

So here's what I'm thinking:
50k stocks: I've read VAS and VGS are the simplest way to go, I'd want to weigh this towards VGS as the cash and bonds are Australian, so this is my only globalised asset
30k bonds: whatever is going, probably 5-10 year bonds
20k cash: just because I want to take time off, while I'm hoping I can earn as I learn and do what I want the liquidity is important

A friend (limeandpepper) has got me thinking that there maybe I should put more in stocks, but having moved to England where (even though I got a job) I had to wait 2 months for a paycheck I really like the safety of cash.

Your thoughts would be appreciated, I hope everyone is well :)
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limeandpepper

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Re: Australian Investing Thread
« Reply #2742 on: February 12, 2017, 05:15:42 AM »
A friend (limeandpepper) has got me thinking that there maybe I should put more in stocks, but having moved to England where (even though I got a job) I had to wait 2 months for a paycheck I really like the safety of cash.

Oh HAI! ;)

I was initially surprised about your generous allocation to bonds, because the common (albeit perhaps not necessarily always accurate) idea is that when you're younger you allocate more in shares and less in bonds... but then considering the generous yield of bonds in Australia, I'm thinking you could be on to something! I'm also keen to hear the thoughts of others here in regards to all this. :D

deborah

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Re: Australian Investing Thread
« Reply #2743 on: February 12, 2017, 12:41:10 PM »
GENEROUS YIELD IN BONDS IN AUSTRALIA - you must be kidding. They were good until about 20 years ago, then they weren't as good as the interest rates you get from high interest accounts.

marty998

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Re: Australian Investing Thread
« Reply #2744 on: February 12, 2017, 01:32:19 PM »
GENEROUS YIELD IN BONDS IN AUSTRALIA - you must be kidding. They were good until about 20 years ago, then they weren't as good as the interest rates you get from high interest accounts.

I think she means in comparison to global bonds yields.... we are still quite high.

mjr

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Re: Australian Investing Thread
« Reply #2745 on: February 12, 2017, 01:35:36 PM »
Interest rates are on the way up, so bonds will be on the way down.  10 years as bond duration sounds too long to me under such conditions.  5 years max.

misterhorsey

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Re: Australian Investing Thread
« Reply #2746 on: February 12, 2017, 09:00:50 PM »
Basically:
- Over the next 2-3 years (before I'm 30, so 2 years and 8 months) I want to go from ~55k net worth to 100k invested and 10k in an emergency fund
- I am aiming for modest returns 1-3% over inflation
- Short term: modest growth while I goof around and try my hand at a few different ways to earn $ (3-5 years)
- Long term: be able to pay a large chunk of change towards a property (5-10 years)
- I am risk adverse, prefer money to stagnate rather than lose it (in the long term, short term doesn't bother me)
- Set and forget, I can't be fucked tracking things daily and honestly had to look up nabtrade to work out what my NW was

A few conflicting things here.  Self identified as 'risk adverse'. But:
- happy to have money stagnate over the long term than 'lose it'.
- 'short term doesn't bother me' - which I'm taking to read you're comfortable with a bit of volatility.

Reason why I think it's conflicting is that money stagnating over a long time is actually losing value over the long term due to inflation (which is admittedly a bit low at the moment).  The thing that got me into investing originally was not necessarily chasing amazing returns, although that was part of it. It was recognising that cash, although secure and a handy buffer, is a poorly performing asset class over the long term. So in short, buying into stocks helped me mitigate the risk of the value of cash eroding over time.

If you are comfortable with short term volatility, then long term investments shouldn't phase you.

The only catch with this is when you want to buy a property.  If this is a certainty in 5 years, then I think a portfolio shouldn't have too much weighting towards stocks.  What if in Year 4 everything dives by #% percent. It would be annoying. If buying a house in 10 years is a certainty, then I think you can afford a bit more volatility over the time frame and could have a greater weighting towards stocks.

But the thing is, nothing is ever really certainly about the way you plan your life and what actually pans out.

I've personally gone around 95% stocks. Accepting volatility in exchange for maximum flexibility, but also resigned to not buying property in the short to medium term.

misterhorsey

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Re: Australian Investing Thread
« Reply #2747 on: February 12, 2017, 09:01:29 PM »
Hey everyone, it's the dude who started this thread, then fell in love with a girl off tinder, moved to the UK for two years, moved back to Australia and now lives in Canberra.

Oh and thanks for starting the thread!

LonerMatt

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Re: Australian Investing Thread
« Reply #2748 on: February 13, 2017, 02:24:04 AM »
GENEROUS YIELD IN BONDS IN AUSTRALIA - you must be kidding. They were good until about 20 years ago, then they weren't as good as the interest rates you get from high interest accounts.

A bond I own yields 5.75%, my high interest account yields 3.5%. Granted if rates increase then that won't be as good a deal any more, but it's not bad. Unless there's something I'm missing, which there often is.

Basically:
- Over the next 2-3 years (before I'm 30, so 2 years and 8 months) I want to go from ~55k net worth to 100k invested and 10k in an emergency fund
- I am aiming for modest returns 1-3% over inflation
- Short term: modest growth while I goof around and try my hand at a few different ways to earn $ (3-5 years)
- Long term: be able to pay a large chunk of change towards a property (5-10 years)
- I am risk adverse, prefer money to stagnate rather than lose it (in the long term, short term doesn't bother me)
- Set and forget, I can't be fucked tracking things daily and honestly had to look up nabtrade to work out what my NW was

A few conflicting things here.  Self identified as 'risk adverse'. But:
- happy to have money stagnate over the long term than 'lose it'.
- 'short term doesn't bother me' - which I'm taking to read you're comfortable with a bit of volatility.

Reason why I think it's conflicting is that money stagnating over a long time is actually losing value over the long term due to inflation (which is admittedly a bit low at the moment).  The thing that got me into investing originally was not necessarily chasing amazing returns, although that was part of it. It was recognising that cash, although secure and a handy buffer, is a poorly performing asset class over the long term. So in short, buying into stocks helped me mitigate the risk of the value of cash eroding over time.

If you are comfortable with short term volatility, then long term investments shouldn't phase you.

The only catch with this is when you want to buy a property.  If this is a certainty in 5 years, then I think a portfolio shouldn't have too much weighting towards stocks.  What if in Year 4 everything dives by #% percent. It would be annoying. If buying a house in 10 years is a certainty, then I think you can afford a bit more volatility over the time frame and could have a greater weighting towards stocks.

But the thing is, nothing is ever really certainly about the way you plan your life and what actually pans out.

I've personally gone around 95% stocks. Accepting volatility in exchange for maximum flexibility, but also resigned to not buying property in the short to medium term.

Alright thanks for the in-depth response, got a few things to explain:

1. Stagnation is a missed opportunity, but it's not a risky one. I am happy with cash in the bank knowing that it might not be earning as much as stocks, or anything else, because it's still fundamentally cash. $10k is still 10K and it's still worth a lot (even if exactly what it buys changes slightly), baring massive changes what 10k can buy me today and next year is pretty similar, so I'm venturing nothing but an opportunity to risk the money. Which in my way of seeing the world, is less risky.

2. If I invested 10k and the price halved I wouldn't be happy. If I invested 10k and I got 5% return instead of 10% return because of a more conservative portfolio I'd be happy.

3. You're right about buying a house and when. Let's just say that <5 years would be very surprising, but between 5-10 years would be more expected.

4. I think the general advice seems to be add more stocks, which I'm listening to for sure.
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FFA

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Re: Australian Investing Thread
« Reply #2749 on: February 13, 2017, 03:14:52 AM »
A bond I own yields 5.75%, my high interest account yields 3.5%. Granted if rates increase then that won't be as good a deal any more, but it's not bad. Unless there's something I'm missing, which there often is.
Hi LonerMatt, which HISA is that one, or did you mean 3.05%? The best I can find these days is 3.00-3.05%

For the bond yielding 5.75% you may need to check if that's nominal yield or the current yield. Nominal yield means the bond interest divided by the face value, which could be a lot less than the current value (and therefore current yield might be much less). The other thing is the credit risk. If it's a government bond or corporate, and if corporate what is the risk of default. You can always find better interest rates but usually they come with more risk attached. Sometimes that can be worth taking too. But generally the cash/ fixed interest serves a defensive function in the portfolio, i.e. better to take risk with your shares.