Author Topic: Australian Investing Thread  (Read 2612113 times)

GT

  • Magnum Stache
  • ******
  • Posts: 3033
  • Age: 49
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #3300 on: July 17, 2017, 10:19:43 PM »
If you're relying on her bank account for savings (and the interest it generates) then you're likely missing out on better deals available online like ING.

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

If you're planning on a PPOR in the next year or two, keeping it at cash would be more advantageous than an ETF, however with $100K, you may be able to get into the Vanguard Wholesale funds, so it could be worthwhile, depending on when you'd want to access the cash for you PPOR purchase.

As the lesser earner in our family unit I have cash we haven't allocated to jobs yet (and when it's not all used up supporting extended Mat Leave) sitting in an ING account under my name.  Anything else sits on our home loan.

AussieLad

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Australian Investing Thread
« Reply #3301 on: July 17, 2017, 11:27:11 PM »
If you're relying on her bank account for savings (and the interest it generates) then you're likely missing out on better deals available online like ING.

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

If you're planning on a PPOR in the next year or two, keeping it at cash would be more advantageous than an ETF, however with $100K, you may be able to get into the Vanguard Wholesale funds, so it could be worthwhile, depending on when you'd want to access the cash for you PPOR purchase.

As the lesser earner in our family unit I have cash we haven't allocated to jobs yet (and when it's not all used up supporting extended Mat Leave) sitting in an ING account under my name.  Anything else sits on our home loan.

Thanks for your reply.
That's a valid point, will look into merging a day-to-day account, and setting up a higher interest savings account then the poor 1.9% we are currently getting.

Have read a fair bit into ETF's, though don't know much about the Wholesale Funds.
From a quick look, they have the higher initial buy-in but then also have higher management costs.

What's the difference between them? There must be a benefit to the Wholesale fund I would imagine?


marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #3302 on: July 18, 2017, 03:14:17 AM »
What's the difference between them? There must be a benefit to the Wholesale fund I would imagine?

Comment doesn't necessarily apply to Vanguard but the entire world of Finance is devoted to coming up with complicated names and structures that are impossible to understand, so that they can extract as much money from you as possible without you knowing.

e.g.
- a wholesale fund sounds cheaper than retail but may include investments that are riskier for a normal retail investor.
- add the word "structured" to the name of the fund and you can double you management fee
- add the word "hedge" to the name of the fund and you can double your management fee again plus add a performance fee of 20% of outperformance.

Name your firm after a big mountain (Everest, K2) or some other far away object in the universe (Magellan, Orion, Anteras etc) and you're pretty much a Fund Manager who can charge whatever they like...


Ozstache

  • Pencil Stache
  • ****
  • Posts: 866
  • Age: 56
  • Location: Oztralia
Re: Australian Investing Thread
« Reply #3303 on: July 18, 2017, 03:15:17 AM »
A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.

misterhorsey

  • Bristles
  • ***
  • Posts: 382
Re: Australian Investing Thread
« Reply #3304 on: July 18, 2017, 03:32:22 AM »
If you're relying on her bank account for savings (and the interest it generates) then you're likely missing out on better deals available online like ING.

A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

If you're planning on a PPOR in the next year or two, keeping it at cash would be more advantageous than an ETF, however with $100K, you may be able to get into the Vanguard Wholesale funds, so it could be worthwhile, depending on when you'd want to access the cash for you PPOR purchase.

As the lesser earner in our family unit I have cash we haven't allocated to jobs yet (and when it's not all used up supporting extended Mat Leave) sitting in an ING account under my name.  Anything else sits on our home loan.

Thanks for your reply.
That's a valid point, will look into merging a day-to-day account, and setting up a higher interest savings account then the poor 1.9% we are currently getting.

Have read a fair bit into ETF's, though don't know much about the Wholesale Funds.
From a quick look, they have the higher initial buy-in but then also have higher management costs.

What's the difference between them? There must be a benefit to the Wholesale fund I would imagine?

I'm a little unclear on whether you are you referring to the price difference between:

- ETFs v Wholesale Funds?
or
- Wholesale Funds v Retail Funds.

In terms of fees it goes, from lower to higher (assuming the fund is comprised of the same asset class/index):

ETF -> Wholesale Fund (Single Index, i.e International Shares) -> Wholesale Fund (Diversified, i.e. mix of different indexes) -> Retail Fund (Single Index) -> Retail Fund (Life Strategy).

I'm assuming that the increasing fees along this scale reflect lower economies of scale, and complexity of the fund structure/greater amounts of admin to service. 

Taking the VAS ETF as an example, the fees are ETF 0.14%, Wholesale 0.18%, Retail 0.75%. 

Retail does seem quite a bit steeper than the other options, but remember it rachets down once you hit certain thresholds (i.e 0.35% for all amounts over $100k).

But someone else may be able to provide a bit more nuanced insight into what you get for the greater fee.

From my brief time in a Vanguard Retail fund I don't recall many more bells and whistles than the Wholesale fund I am in now.  Which leads me to think it's purely economies of scale.






deborah

  • Senior Mustachian
  • ********
  • Posts: 16198
  • Age: 14
  • Location: Australia or another awesome area
Re: Australian Investing Thread
« Reply #3305 on: July 18, 2017, 03:35:45 AM »
A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.
My understanding is that if you have a joint account, you can split the interest earnt whichever way makes sense to you in your tax return, so long as you have documented the reason for the distribution. If that is true, there is no need for a separate one-name account.

Ozstache

  • Pencil Stache
  • ****
  • Posts: 866
  • Age: 56
  • Location: Oztralia
Re: Australian Investing Thread
« Reply #3306 on: July 18, 2017, 04:01:30 AM »
A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.
My understanding is that if you have a joint account, you can split the interest earnt whichever way makes sense to you in your tax return, so long as you have documented the reason for the distribution. If that is true, there is no need for a separate one-name account.

That is true, however I expect you are far more likely to raise an audit flag with the ATO by modifying the default 50/50 split of interest distribution they expect to see. Best to stay under the ATO audit radar wherever you can IMO and setting up accounts this way is very easy to do.

deborah

  • Senior Mustachian
  • ********
  • Posts: 16198
  • Age: 14
  • Location: Australia or another awesome area
Re: Australian Investing Thread
« Reply #3307 on: July 18, 2017, 04:17:39 AM »
A combined account for the two of you for day to day banking requirements and an online one set up in her name may be a better option.

My wife and I arrange our bank accounts this way.
My understanding is that if you have a joint account, you can split the interest earnt whichever way makes sense to you in your tax return, so long as you have documented the reason for the distribution. If that is true, there is no need for a separate one-name account.

That is true, however I expect you are far more likely to raise an audit flag with the ATO by modifying the default 50/50 split of interest distribution they expect to see. Best to stay under the ATO audit radar wherever you can IMO and setting up accounts this way is very easy to do.
Some time ago, I got a letter from the ATO about this very thing. I rang them up. After  lengthy conversation (at first they said what I was doing was wrong), they said it was OK. So, yes, it is a radar item.

misterhorsey

  • Bristles
  • ***
  • Posts: 382
Re: Australian Investing Thread
« Reply #3308 on: July 18, 2017, 08:04:06 AM »

Thanks for the tip! Yes you're right. They include a notice in the Forms and Notices section. That would have been handy to have known.  3 days is ample time for a bit of quick selling!

I don't actually recall receiving any email alerting me to this.

I use a web page monitoring service (specifically https://visualping.io) that lets me know when Vanguard posts a new notice to that section of their website.

Thanks for the tip Kivex. 

AussieLad

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Australian Investing Thread
« Reply #3309 on: July 18, 2017, 05:05:31 PM »

Taking the VAS ETF as an example, the fees are ETF 0.14%, Wholesale 0.18%, Retail 0.75%. 


I guess this is what I was alluding to.
What incentive is there to pay an extra 0.04% (and the higher buy-in) for Wholesale compared to the standard VAS ETF?

misterhorsey

  • Bristles
  • ***
  • Posts: 382
Re: Australian Investing Thread
« Reply #3310 on: July 18, 2017, 06:14:24 PM »
The only advantage I can really think of is the fund allows you to drip feed small amounts into the fund.  Even though the Wholesale fact sheet states that minimum contributions is $5k a pop, they don't police this and I've regularly put in 3 figure amounts.

I'm not sure about the higher buy in, but there's no brokerage on the fund contribution (which is no doubt included in the price anyway).

But if you have a more DIY inclination, are more likely to invest via irregular lump sums (rather than regularly drip feed), are attracted to focused indexes (as opposed to diversified funds), then an ETF way is probably the way to to go.

Oh one last thing, if you are drip feeding into a fund, when it comes time to draw down, if you wanted to take small amounts out as you need, it's probably more administratively straightforward to withdraw small amounts from a fund than if you wanted to sell out of ETFs you 'lump summed' into.  Just from a record keeping / capital gains tracking perspective.  Spreadsheets are great but they don't come naturally to everyone!

kivex

  • 5 O'Clock Shadow
  • *
  • Posts: 21
Re: Australian Investing Thread
« Reply #3311 on: July 19, 2017, 01:53:41 AM »
The only advantage I can really think of is the fund allows you to drip feed small amounts into the fund.  Even though the Wholesale fact sheet states that minimum contributions is $5k a pop, they don't police this and I've regularly put in 3 figure amounts.

The Vanguard rep that I spoke to said that if you wanted to contribute to a new wholesale fund then there is a $5k initial requirement, however after that you can send a minimum of $100 to that fund.

JuicyCrab

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 36
  • Location: Perth - Australia
Re: Australian Investing Thread
« Reply #3312 on: July 19, 2017, 03:40:25 AM »
The only advantage I can really think of is the fund allows you to drip feed small amounts into the fund.  Even though the Wholesale fact sheet states that minimum contributions is $5k a pop, they don't police this and I've regularly put in 3 figure amounts.

I'm not sure about the higher buy in, but there's no brokerage on the fund contribution (which is no doubt included in the price anyway).

But if you have a more DIY inclination, are more likely to invest via irregular lump sums (rather than regularly drip feed), are attracted to focused indexes (as opposed to diversified funds), then an ETF way is probably the way to to go.

Oh one last thing, if you are drip feeding into a fund, when it comes time to draw down, if you wanted to take small amounts out as you need, it's probably more administratively straightforward to withdraw small amounts from a fund than if you wanted to sell out of ETFs you 'lump summed' into.  Just from a record keeping / capital gains tracking perspective.  Spreadsheets are great but they don't come naturally to everyone!

I was working through the whole Fund vs ETF dilemma for a while and after running some spreadsheet calcs, the wholesale fund never came out the winner expense wise (and this was when I was using a high brokerage of $19.95/transaction too!).

The ETF option can be completely optimised too by using cheap brokerage, so I recently switched to CMC Markets ($11/trade) to really bring down those transaction costs.

1 purchase every month of $3k-$5k, the brokerage + management fees beats the wholesale fund in an accumulation phase, especially for larger balances.

I believe a wholesale fund would benefit someone in a drawdown phase, but even then if you were heavily invested in Australian shares, you could simply allocate dividends to yourself as cash payments rather than a DRP and bypass any brokerage costs.

Food for thought :)

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #3313 on: July 19, 2017, 07:15:39 AM »
For some there can be behavioural advantages to the fund option, where you make a BPay and take the closing price. Mainly for those who dislike the execution, or get distracted by the many moving prices and mysterious three letter codes that could juice your returns (or otherwise). However, if you're disciplined then I agree the ETF route is slightly more cost efficient.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Australian Investing Thread
« Reply #3314 on: July 20, 2017, 04:47:04 AM »
http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.


Ozstache

  • Pencil Stache
  • ****
  • Posts: 866
  • Age: 56
  • Location: Oztralia
Re: Australian Investing Thread
« Reply #3315 on: July 20, 2017, 05:11:16 AM »
http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Australian Investing Thread
« Reply #3316 on: July 20, 2017, 06:47:22 AM »
http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

lush

  • Stubble
  • **
  • Posts: 114
Re: Australian Investing Thread
« Reply #3317 on: July 21, 2017, 11:50:36 PM »
http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

lush

  • Stubble
  • **
  • Posts: 114
Re: Australian Investing Thread
« Reply #3318 on: July 22, 2017, 12:14:27 AM »

SMH Article on investment loans :

http://www.smh.com.au/money/investing/investors-falling-foul-of-rules-on-taxdeductible-interest-20170720-gxf3qe.html

Very interesting and then that got me thinking that I have an investment loan tied to an offset account which I have filled to match the loan amount -effectively not paying the interest, however if I remove the funds and have to start paying interest again, my account has assured me that is not breaking any tax laws. He said that I can remove and top up whenever I want with no issues. Is he right? Thanks.

marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #3319 on: July 22, 2017, 02:12:40 AM »
Taking money out of offset is fine. Taking money out of redraw for non-investment purposes is a bad idea.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Australian Investing Thread
« Reply #3320 on: July 22, 2017, 07:10:09 PM »
http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

I don't have a clue where we spend all our money on. We don't get any payments from the government. We do own our house so we don't pay rent or a mortgage. Sometimes we would go over 40k but it wouldn't be much over and typically because something important breaks. For instance the hot water system or the oven or the washing machine. I just checked our living expenses and they are $40,300 based upon how much we earn less how much we save. The only issue here is sometimes we may have to spend some of our savings. This is really rare and we typically note it down so we know when we've gone over our budget in a year. To be fair this year I haven't noted it down and I know that we've done it but it wouldn't be anymore than $1000.

We spend $200-$300 per week on groceries. Internet access is about $60 per month. $18 per month for one phone. My phone is free from work. We occasionally eat out - it used to be once or twice a year but we've been doing this once per month. We have one car. The kids expenses are the difficult things because they randomly come up.

I'm interested in how you can spend $50k but this is dependent on not paying rent or mortgage. I should add that I tend not to pay for anything like books, TV shows, movies etc. I basically don't pay for digital content but watch and read whatever I want. The Internet has made stuff that people pay a tonne for available for free for everyone else.
« Last Edit: July 22, 2017, 07:27:42 PM by steveo »

onewayfamily

  • 5 O'Clock Shadow
  • *
  • Posts: 92
Re: Australian Investing Thread
« Reply #3321 on: July 23, 2017, 10:51:26 AM »
$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

For what it's worth our spending with 2 young kids before we left Australia was around $37,000 for everything (including full-time childcare x 2) except rent. We also weren't eligible for any government payments since we started working full-time a few years before that.

JuicyCrab

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 36
  • Location: Perth - Australia
Re: Australian Investing Thread
« Reply #3322 on: July 23, 2017, 09:52:35 PM »
$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

For what it's worth our spending with 2 young kids before we left Australia was around $37,000 for everything (including full-time childcare x 2) except rent. We also weren't eligible for any government payments since we started working full-time a few years before that.

Hey mate, just wondering after having your little ones how that affected your household budget? We've recently had a little girl and I've been pretty anxious about my financial plans being blown out of the water because of it. Just looking for another Aus MMM parents opinion :)

Cheers

onewayfamily

  • 5 O'Clock Shadow
  • *
  • Posts: 92
Re: Australian Investing Thread
« Reply #3323 on: July 23, 2017, 10:24:21 PM »
Hey mate, just wondering after having your little ones how that affected your household budget? We've recently had a little girl and I've been pretty anxious about my financial plans being blown out of the water because of it. Just looking for another Aus MMM parents opinion :)
Cheers

Honestly kids really aren't that expensive except for childcare. Clothes/Toys - mostly thrift stores, hand-me-downs and gifts; Food - if you keep them healthy and just keep trying to cook what you normally do, it's essentially just an extra 20-30% added on, so nothing serioius, at least until they get a bit older. If you can make do without getting more space wherever you live that's fantastic - we had a spare bedroom already so we've never really had to move just to get extra space for the kids - the two of them have basically always slept in the same room and they got used to it just fine.

The only thorn, like I mentioned, is childcare. If you or your partner want to be a stay at home parent (a more than full-time job) then that's fine and won't cost you any extra other than the lost earnings. But if you're like us, and need at least some childcare, it can be expensive. We've realised it's also a lot better for the kids to learn to socialise properly.

The only other thing that comes to mind that's a lot more expensive, is travel. It's a non-essential but we love travelling and now that we're FIRE'd we feel like we're not living our lives to the fullest if we're not either travelling or planning our next trip. Now every flight is 4 tickets :-( and travel/accomodation is also a lot more complicated than when you're backpacking alone or as a couple.

Gremlin

  • Pencil Stache
  • ****
  • Posts: 582
Re: Australian Investing Thread
« Reply #3324 on: July 24, 2017, 12:22:56 AM »
My boy just turned 12 and is eating everything in sight.  Our food budget has been hammered as a result.  Apparently it gets cheaper again when they leave home!

Ozstache

  • Pencil Stache
  • ****
  • Posts: 866
  • Age: 56
  • Location: Oztralia
Re: Australian Investing Thread
« Reply #3325 on: July 24, 2017, 02:36:07 AM »
Our core living costs this year are approximately $35K for two of us and exclude luxuries like our second car, big holidays, major purchases and helping others. Our 10 year major expense budget, which covers these excluded items and more, works out to be $25K pa for just us (hence my statement that $60K pa covers all of our wildest dreams) and another $10K pa that we channel into helping others.

lush

  • Stubble
  • **
  • Posts: 114
Re: Australian Investing Thread
« Reply #3326 on: July 24, 2017, 02:37:26 PM »
http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

I don't have a clue where we spend all our money on. We don't get any payments from the government. We do own our house so we don't pay rent or a mortgage. Sometimes we would go over 40k but it wouldn't be much over and typically because something important breaks. For instance the hot water system or the oven or the washing machine. I just checked our living expenses and they are $40,300 based upon how much we earn less how much we save. The only issue here is sometimes we may have to spend some of our savings. This is really rare and we typically note it down so we know when we've gone over our budget in a year. To be fair this year I haven't noted it down and I know that we've done it but it wouldn't be anymore than $1000.

We spend $200-$300 per week on groceries. Internet access is about $60 per month. $18 per month for one phone. My phone is free from work. We occasionally eat out - it used to be once or twice a year but we've been doing this once per month. We have one car. The kids expenses are the difficult things because they randomly come up.

I'm interested in how you can spend $50k but this is dependent on not paying rent or mortgage. I should add that I tend not to pay for anything like books, TV shows, movies etc. I basically don't pay for digital content but watch and read whatever I want. The Internet has made stuff that people pay a tonne for available for free for everyone else.

Thanks for that information.
We don't have a mortgage to pay. I looked at our expenses and it averages out to be $3.5 - per month - not including new appliances / repairs ( this year alone we had to get a new fridge, washing machine, cooktop, hot water system, roof repairs, fireplace repairs, pool renovations and plumbing repairs).  We also own a large pool and a large garden. Costs associated with running these alone can add up. We own only a 15 year old car and keep all our living expenses as low as possible. I worked out that without even getting out of bed our monthly costs to keep the lights on (so to speak) is about $1100. I am hesitant to underestimate a realistic figure to FIRE on as the last thing I want to have to do is be forced back into the workforce because of poor planning. I think the only way to reduce our costs significantly would be to downsize, however reluctant to do that since we really love our house and where we live.



deborah

  • Senior Mustachian
  • ********
  • Posts: 16198
  • Age: 14
  • Location: Australia or another awesome area
Re: Australian Investing Thread
« Reply #3327 on: July 24, 2017, 02:51:40 PM »
Yes, it's interesting that appropriate house selection plays such a big role in when you are FI - even ignoring whether or not it is in a HCOL area.

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Australian Investing Thread
« Reply #3328 on: July 24, 2017, 03:56:33 PM »
http://www.smh.com.au/money/super-and-funds/australia-nears-the-top-in-global-ranking-of-retiree-wellbeing-20170719-gxeb3s.html

Has anyone read this article. I'm interested in how they get their figures. I think the idea is the pension provides for a base level of expenses and Super simply tops up that spending. The amount you need though looks really low.

I reckon the $60k a couple in retirement they state is pretty bang on to be comfortable in Oz. We spend that now with plenty of little luxuries thrown in, so could easily do it over the long haul.

We spend about $40k now with 3 kids. I don't think you need anywhere near $60k. This is based on owning your own home.

$40k? really? That's fantastic. What does that breakdown look like? We are a couple with no kids and and I know that if we take out repairs and holidays then its 50k. Do you get government payments for your children? Sorry to be so nosy, but am amazed at the 40k figure.

I don't have a clue where we spend all our money on. We don't get any payments from the government. We do own our house so we don't pay rent or a mortgage. Sometimes we would go over 40k but it wouldn't be much over and typically because something important breaks. For instance the hot water system or the oven or the washing machine. I just checked our living expenses and they are $40,300 based upon how much we earn less how much we save. The only issue here is sometimes we may have to spend some of our savings. This is really rare and we typically note it down so we know when we've gone over our budget in a year. To be fair this year I haven't noted it down and I know that we've done it but it wouldn't be anymore than $1000.

We spend $200-$300 per week on groceries. Internet access is about $60 per month. $18 per month for one phone. My phone is free from work. We occasionally eat out - it used to be once or twice a year but we've been doing this once per month. We have one car. The kids expenses are the difficult things because they randomly come up.

I'm interested in how you can spend $50k but this is dependent on not paying rent or mortgage. I should add that I tend not to pay for anything like books, TV shows, movies etc. I basically don't pay for digital content but watch and read whatever I want. The Internet has made stuff that people pay a tonne for available for free for everyone else.

Thanks for that information.
We don't have a mortgage to pay. I looked at our expenses and it averages out to be $3.5 - per month - not including new appliances / repairs ( this year alone we had to get a new fridge, washing machine, cooktop, hot water system, roof repairs, fireplace repairs, pool renovations and plumbing repairs).  We also own a large pool and a large garden. Costs associated with running these alone can add up. We own only a 15 year old car and keep all our living expenses as low as possible. I worked out that without even getting out of bed our monthly costs to keep the lights on (so to speak) is about $1100. I am hesitant to underestimate a realistic figure to FIRE on as the last thing I want to have to do is be forced back into the workforce because of poor planning. I think the only way to reduce our costs significantly would be to downsize, however reluctant to do that since we really love our house and where we live.

We live in a small 4 bedroom house in a modern area. All of our running costs are low. We don't have a pool or a large backyard. I estimate our housing costs to be about $700 per month.

I completely agree with you when it comes to estimating your expenses accurately. If you get that wrong you aren't retiring on whatever WR you think you are but something higher and potentially unsustainable.

Don't get me started on things breaking. This year so far it's been the oven and the washing machine. Last year we had the hot water system, I think the TV (it was either last year or the year before), one of the kids laptops and the dishwasher.

AussieLad

  • 5 O'Clock Shadow
  • *
  • Posts: 10
Re: Australian Investing Thread
« Reply #3329 on: July 24, 2017, 11:17:23 PM »
Hi all,

Some extremely useful information on here.
Having a read through peoples opinion on super accounts - seems like the majority are pretty happy with either Sunsuper or Australian Super.

I am currently with REST, seemingly being charged 0.56% for their Core Strategy I landed with my first casual job in year 10... (http://www.rest.com.au/member/products/rest-pension/fees-and-charges-(1)/investment-fees)

Am I right in saying Sunsuper uses Vanguard ETF's for the following (which appear on page 20 of the PDF on Sunsuper's website (https://www.sunsuper.com.au/publications/documents/sunsuper-for-life-guide.pdf)
Aust Shares - Index: 0.08% fee
Intl Shares - Index: 0.09% fee

In which case I would reduce fees by 0.48% on my super if I change?
If that is the case, have I been oblivious to this fact for the beginning of my working life, or have I missed something?

Appreciate any help.


potm

  • Pencil Stache
  • ****
  • Posts: 554
Re: Australian Investing Thread
« Reply #3330 on: July 25, 2017, 01:49:37 AM »
There's extra admin fee of 0.1% as well for Sunsuper. It's still the cheapest index option if you want to set all your own percentages.
Hostplus would be the cheapest if you are happy with their percentage.
Some industry funds have been outperforming index options with their default balanced options even with the added fees in recent years.

marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #3331 on: July 25, 2017, 02:43:15 AM »
RESTS's Core Strategy option has been a fantastic performer over the last 10 years - consistently they outperform benchmarks, by several % points.

Cutting your nose to spite your face if you are going to switch on the basis they are a wee bit higher in regards to fees.

chasingthegoodlife

  • Bristles
  • ***
  • Posts: 351
Re: Australian Investing Thread
« Reply #3332 on: July 25, 2017, 02:50:30 PM »
Deborah - so true. Most other expenses can be wiggled a bit if something else comes up but committing to a large housing expense really raises the bar for FIRE.

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.

marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #3333 on: July 25, 2017, 03:37:10 PM »

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.

I'd rather pay 5c a litre more for petrol, or 20c a loaf extra for bread in Perth than pay $0.5-1m more for housing in Sydney.

deborah

  • Senior Mustachian
  • ********
  • Posts: 16198
  • Age: 14
  • Location: Australia or another awesome area
Re: Australian Investing Thread
« Reply #3334 on: July 25, 2017, 03:44:45 PM »
Deborah - so true. Most other expenses can be wiggled a bit if something else comes up but committing to a large housing expense really raises the bar for FIRE.

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.
In general I would agree with you. However, everything in Canberra costs more. Petrol is at least TWENTY CENTS a litre more here than at my parents place EVERY TIME. Eating out costs a lot more than Melbourne (admittedly I was used to Brunswick, which has a lot of the cheap eateries, before I came here). When I have traveled around Australia, remote places really have high prices for everything except houses and the non-tourist services (because people tend to be paid less - unless it's a mining town).

Fresh Bread

  • Magnum Stache
  • ******
  • Posts: 3410
  • Location: Australia
  • Insert dough/bread/crust joke
Re: Australian Investing Thread
« Reply #3335 on: July 25, 2017, 06:48:16 PM »
I know that just within Sydney, prices for goods and services vary wildly. We should do something like the economist's burger index.

A family size takeaway pizza is $25 at my local shops. I can't remember how much smashed avo on toast is, it's been a while. A coffee starts at $3.50. My electrician is $80/hr.

Eta: Petrol... I hear on the radio "cheapest petrol today in Sydney is at blah blah" and it's always 20c cheaper or more than where I am.
« Last Edit: July 25, 2017, 06:53:28 PM by Freshwater »

stripey

  • Pencil Stache
  • ****
  • Posts: 768
  • Age: 124
  • Location: Australia
Re: Australian Investing Thread
« Reply #3336 on: July 25, 2017, 10:19:49 PM »

It seems to me that housing costs are the main difference between HCOL and LCOL areas in OZ (others may disagree), although Perth does seem to have higher prices for many other things compared to the east.

I'd rather pay 5c a litre more for petrol, or 20c a loaf extra for bread in Perth than pay $0.5-1m more for housing in Sydney.

Depends whether wages come into it or not. I'm making $35k more in Sydney than I was in Perth last year. My husband is about the same. So at least for us in the accumulation phase it makes more sense to be in Sydney right now...

(Eating out here in Sydney is notably cheaper 9 times out of 10, not that we do that much. We go a a really fancy cafe and say to each other 'Aha! Perth prices')

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #3337 on: July 26, 2017, 06:14:51 AM »
There's extra admin fee of 0.1% as well for Sunsuper. It's still the cheapest index option if you want to set all your own percentages.
Hostplus would be the cheapest if you are happy with their percentage.
Some industry funds have been outperforming index options with their default balanced options even with the added fees in recent years.
Yeah I've been noticing that too, all the default balanced options for Hostplus, Sunsuper, Australian Super seem to have been easily outperforming their index alternatives in the past 1-3 years. Maybe infrastructure investments, poor fixed interest (index) performance, ...? I've been meaning to look into it more closely to try and understand what's causing it. Superannuationfreak might already know? Anyway I think I'll stick with the index approach as switching at times like these usually doesn't work out well!

BRAFRA

  • 5 O'Clock Shadow
  • *
  • Posts: 16
  • Location: Sydney, Australia
Re: Australian Investing Thread
« Reply #3338 on: July 26, 2017, 06:52:26 AM »
Hi all

I want to thank you all for sharing your knowledge over the last 66 pages, pretty impressive and educational !

I would like some advise about my situation:
- late 20s
- temporary resident in OZ for close to 1y, should have PR in 1 more year.
- salary $125k so 37% bracket, no medicare levy with the temporary visa.
- should save $55k per year based on the current trend.
- own 1 apartment in my home country ~$100k, ~$70k in savings in my home country, $80k of shares of my previous company locked for 2 more years, around $100k sitting in an ANZ savings account (2.55% pre-tax :/ ).

I plan to buy a house in OZ in ~2 years after moving to Brisbane or Sydney, obviously if I can afford it with the current markets. In the meantime, I would like to invest the $100k from ANZ.

I would like your point of view on the few points below:
- First home super saving scheme $15k/y. I have the feeling I am eligible for the first home buyer thing even if I own a house overseas. Works only if I buy a house. If I don't, no idea what happens to the money. So wait 1 more year before looking at this option.
- No point adding more in the regular super. Too young. May leave the country in a few years and will get hammered with 38% tax if I want to get the $$ before 60+. If I stay, the money can't really be used for the house.
- Don't want to buy a home in a city I don't know "well".
- No benefit in investing in VAS for the franking credits due to my tax bracket.
--> best solution that comes to my mind: invest all in VGS , with the volatility of the AUD being a big risk. Use the $100k to access the wholesale managed funds.

kiwiozearlyretirement

  • 5 O'Clock Shadow
  • *
  • Posts: 96
Re: Australian Investing Thread
« Reply #3339 on: July 26, 2017, 10:08:05 AM »
I would be interested in some real world returns from these industry super funds.

We have hesta, gesb and sun super.

I used the investment return calculator http://www.moneychimp.com/features/portfolio_performance_calculator.htm
which averages out your additions i.e. assuming people are contributing monthly. But it also works if you have made no contributions. You have to exclude any monies taken to pay for insurances etc to compare apples with apples.
Over the last 5 years I have had the following returns per annum on the growth options
hesta 5.6%
gesb 9.98%
sun super 10.8% per annum (10 months only - since they started the index low fees option ostensibly managed by vanguard - 33% balanced, 33% au 33% international)


comparatively my vanguard ETFs 14% (post tax) over the last 12 months. But these are heavily AU ETFs (VHY/VAS) at 59%

Consequently I have rolled over my hesta (which is supposed to be one of the top performing industry funds according to chant west) to gesb.

I would be interested to see what others experience had been from the various funds.

I never quite trust what the funds report as their returns.

banksie_82

  • 5 O'Clock Shadow
  • *
  • Posts: 20
Re: Australian Investing Thread
« Reply #3340 on: July 26, 2017, 07:14:41 PM »
I am constantly amazed by how few people understand the maths of imputation credits. It doesn’t matter what tax rate you are on, you still get the benefit.

If a company pays you $70 in dividends, 100% franked, they are actually paying you $100 : $70/(1-0.3) - with 0.3 being the company tax rate.

The trick is, they are putting $70 into your account and $30 to the tax man. Think of it as PAYG tax, but at a rate of 30% regardless of your marginal rate. Honestly, I don’t know why they don’t just say “$100 with $30 tax withheld”. It would make it simpler for a lot of people to compare the yield of different products.

Come tax time, you tell the tax man that you have earnt $100, but already paid $30 tax on it. If you owe more, or less, than the $30, then the difference will be paid in one direction or the other.

So, BRAFRA, you still get the benefit of franking credits from VAS regardless of your tax rate.

Arapiles

  • 5 O'Clock Shadow
  • *
  • Posts: 13
Re: Australian Investing Thread
« Reply #3341 on: July 26, 2017, 10:10:02 PM »
Hi all,

This is a terrific thread.  I had a question that has been covered somewhat but not entirely in the past.  Like many, I'm conscious of the small size of the Australian market and have been keen to diversify my shareholdings with a stronger international focus.  Of course, there are ETFs like VTS that are listed on the ASX that offer that possibility.  I've been also researching direct purchase of shares in listed American companies (rather than the index) on the U.S market.  I know that there has been some reduction in international brokerage costs especially by Australian providers like CommSec over the last few years.  But the conditions (including minimum holding amounts) still seem overly restrictive and/or expensive.  Does anyone have experience with stake.com.au?  I'm conscious that it is something of a start-up so there are some risks inherent in joining this first-mover.  But it is offering 0% on brokerage which, depending on the amount and regularity of an investment strategy, could lead to significant savings.  They seem to be funding their business model through taking a slice on currency exchange.

Cheers
Arapiles

JamesSyd

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: Australian Investing Thread
« Reply #3342 on: July 26, 2017, 10:34:05 PM »
Hi all,

This is a terrific thread.  I had a question that has been covered somewhat but not entirely in the past.  Like many, I'm conscious of the small size of the Australian market and have been keen to diversify my shareholdings with a stronger international focus.  Of course, there are ETFs like VTS that are listed on the ASX that offer that possibility.  I've been also researching direct purchase of shares in listed American companies (rather than the index) on the U.S market.  I know that there has been some reduction in international brokerage costs especially by Australian providers like CommSec over the last few years.  But the conditions (including minimum holding amounts) still seem overly restrictive and/or expensive.  Does anyone have experience with stake.com.au?  I'm conscious that it is something of a start-up so there are some risks inherent in joining this first-mover.  But it is offering 0% on brokerage which, depending on the amount and regularity of an investment strategy, could lead to significant savings.  They seem to be funding their business model through taking a slice on currency exchange.

Cheers
Arapiles
Stake don't charge you brokerage in a transparent way. They sort of do though via fx conversion. Pretty sure they charge something like 0.8% to convert the money into USD. So it's clever marketing since they can say there's no brokerage

Sent from my SM-G925I using Tapatalk


Arapiles

  • 5 O'Clock Shadow
  • *
  • Posts: 13
Re: Australian Investing Thread
« Reply #3343 on: July 26, 2017, 11:21:59 PM »
Thanks.  I did make note of the fact that they are taking a slice on currency conversion (in the last sentence of my post), which is also openly disclosed on their website.  That said - having used both the commercial banks and now stake to exchange AUD into USD - stake compares favourably (though admittedly I'm still using them in the stage prior to move to zero brokerage so the exchange rates quoted might only be more favourable for a limited time as they are still charging brokerage).  I'm frankly amazed at the poor conversion rates offered by the major four banks, especially Westpac.  I know there are other possibilities for currency conversion outside of the four banks.  But I instinctively like the simplicity of the stake model which incorporates both reasonable currency conversion and simple brokerage services on the same platform.

JamesSyd

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: Australian Investing Thread
« Reply #3344 on: July 27, 2017, 12:46:44 AM »
Thanks.  I did make note of the fact that they are taking a slice on currency conversion (in the last sentence of my post), which is also openly disclosed on their website.  That said - having used both the commercial banks and now stake to exchange AUD into USD - stake compares favourably (though admittedly I'm still using them in the stage prior to move to zero brokerage so the exchange rates quoted might only be more favourable for a limited time as they are still charging brokerage).  I'm frankly amazed at the poor conversion rates offered by the major four banks, especially Westpac.  I know there are other possibilities for currency conversion outside of the four banks.  But I instinctively like the simplicity of the stake model which incorporates both reasonable currency conversion and simple brokerage services on the same platform.
My opinion is that their currency conversion isn't reasonable even though it's better than the banks. Wholesale fx markets are basically 0% wide which you can have access to via a broker like IB. downside is that IB isn't as accessible or easy to use for some

misterhorsey

  • Bristles
  • ***
  • Posts: 382
Re: Australian Investing Thread
« Reply #3345 on: July 27, 2017, 02:04:30 AM »
As Australian investors I think we're all mindful of how small our economy is relative to the rest of the world, and how concentrated our economy is on a few key sectors - resources and financials.  Home bias may not be recommended for most investors, but at least if you're a US investor your home bias still gives you an enormous diversity of businesses to invest in.

I'm trying to tidy up some of my legacy investments (i.e. why hold Telstra, BHP, NAB and WBC if I also hold VAS?). I'm also trying to increase my international exposure - but finding it psychologically hard to quit my positions in direct shares (whether they are in losing or winning positions).

For some perspective I thought I'd use the Vanguard tool to do a comparison of VGS (MCSI World ex Aus) and VAS (S&P 300) and the results were rather sobering. So I thought I might share it for those who aren't familiar with this stuff:

https://tool.vanguardinvestments.com.au/mstar/au/fundcompare.htm?site_code=ret##target=fct&selectedFund0=F00000UPZO&selectedFund1=F000002TI7

Just in case the link doesn't work:

Portfolio top 10 holdings - % of assets
VGS - 10.76%
VAS - 45.65

Also, top 10 holdings for VGS are Apple, Microsoft, Amazon, Johnson & Johnson, Facebook, Exxon, JP Morgan, Alphabet (Google) and Nestle

Top 10 holdings for VAS are CBA, WBA, ANZ, NAB, BHP, CSL, Telstra, Wesfarmers, Woolworths, Macquarie

VGS seems rather tech heavy, but they are globally dominant companies - furthermore there is so much more diversification given the top 10 companies only account for 10%.  Whereas the only Australian company in the top 10 of VAS that gets me excited is CSL, and the top 10 accounts for half of the entire fund.

Buying unhedged international funds used to make me very nervous given the currency volatility - but I'm starting to terms with the fact that over the long run, currency risk evens out*.

So I'm now coming to the conclusion that being so concentrated in Australia is the real risk - particularly if a significant part of our market is profitable due to the never ending leveraging of residential real estate.  I guess I don't feel as confident that the companies making up the Top 10 of VAS (and top half of the fund by value) will be as successful at creating value, driving innovation, and growing profits as much as the companies in the Top 10 of VGS.

Thoughts?

* Currency risk, i.e. Possible bad scenario. You buy VGS when the dollar is at USD 0.60, then the dollar climbs to parity USD 1. The value of your investment declines, which sucks, but to compensate, your dividends get a boost.  Then the dollar floats back down to the 'average' eventually . I appreciate there are further complexities here as well that I don't quite understand. Like the way the Australian market and currency is a risk on asset class as viewed by international investors.


steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Australian Investing Thread
« Reply #3346 on: July 27, 2017, 02:44:57 AM »
misterhorsey - I agree with your analysis however I still have and intend to keep a bunch of money in ASX. The benefits of high dividend payments that are franked means I can't draw the trigger on what I consider the most rational portfolio which to me is a balanced portfolio between stocks and bonds where the stock proportion of your portfolio is 100% international stocks and the bond proportion 100% domestic bonds.

The sanest portfolio to me is VGS/VAF based upon your risk portfolio. That is basically a sit back and do nothing forever knowing that you've done the absolute best that you can.

misterhorsey

  • Bristles
  • ***
  • Posts: 382
Re: Australian Investing Thread
« Reply #3347 on: July 27, 2017, 07:42:37 AM »
Thanks for your thoughts Steveo.

I agree with you that we can design our 'most rational' portfolio, and then there's the portfolio we can actually live with. The latter may have certain compromises to account for risk profile, practical considerations or legacy issues.

My current allocation is approximately 65 / 30 / 5, Aus equities / International equities / cash. I've done a quick calculation that tells me I can increase international to 40% without too many tears or tax consequences.

I'll probably keep a substantial amount in VAS though. It was a position I built up when I changed from a stock picker to an indexer. So while it may be sub-optimal now, it was a huge improvement on my diversification before. One step at a time I guess.

Unless you start with a blank slate, or are capable of pressing reset on your portfolio without emotion, it can be quite a challenge to renovate your portfolio overnight. I'm find it a challenge to act on present day prices due to a habit of giving too much weight to historical prices, i.e. VGS is expensive compared to Nov '16....

Edit: garbled grammar
« Last Edit: July 27, 2017, 05:57:49 PM by misterhorsey »

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Australian Investing Thread
« Reply #3348 on: July 27, 2017, 05:54:40 PM »
misterhorsey - I'm good at just buying and not looking at the price. I also like having VGS in my portfolio. I also can't stop myself from purchasing VAS and I also have a chunk of money in one companies shares in the ASX because that is where I work.

Ideally I'll get to 1/3 each of ASX (including direct shares and VAS and maybe some LIC's), VGS and VAF outside of super. I have an industry super fund with the high growth option that I just leave alone.

I am pretty good at just sticking to my portfolio and not tinkering with it.

misterhorsey

  • Bristles
  • ***
  • Posts: 382
Re: Australian Investing Thread
« Reply #3349 on: July 27, 2017, 06:46:47 PM »
I plan to buy a house in OZ in ~2 years after moving to Brisbane or Sydney, obviously if I can afford it with the current markets. In the meantime, I would like to invest the $100k from ANZ.


I thinking investing cash into the stockmarket isn't a great idea if you have a firm plan to buy a house within 2 years.  Too much volatility within that time frame to justify the risk to your capital/deposit.

After 2 years if you're lucky the stockmarket has kicked on and house prices have fallen or stabilised = Winner! Perhaps it's not as likely with current valuations, but another scenario is the stockmarket tanks in two years, but house prices have had another spurt - in that scenario would you still be happy to buy or would you wait it out til markets recover?

If the plan to buy a house in 2 years is non-negotiable and is your life's purpose (like most Australians!!) then I'd keep it in cash.  But if you are more flexible then and happy to reassess in 2 years then maybe allocating all or part of your savings to equities isn't too bad.

War Story: I kept a large amount of cash as I thought about buying a house from around 2010 to 2014...missed a significant amount of Stockmarket gains, as well as house prices gains in the process, before I gave up on buying a house and went all equities.

My Lesson?  The plans you make can sometimes change according to the conditions in the future that you can't predict when you first make those plans.