Author Topic: Australian Investing Thread  (Read 1033559 times)

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #3950 on: March 30, 2018, 09:03:21 PM »
Not a dumb question (there is no such thing!)

The basic rule that money invested doubles every 10 years is based on the assumption that the investments will see an average growth rate of around 7% per annum.

This is based on the Rule of 72:

https://en.wikipedia.org/wiki/Rule_of_72

So the time period for doubling depends on the actual growth rate of your investments.  According to the table in the wiki article, 5% growth will take 14 years to double, whereas a growth rate of 12% amounts to 6 years.

Growth in your investments is typically expressed as a percentage figure.  It usually includes a capital growth component (i.e. the price of shares), combined with income (i.e. dividends), less fees and taxes.

So whether you choose to reinvest or spend your dividends will affect your average growth rate over a given period. If you reinvest, your average growth will be higher and doubling will be quicker, but if you spend your dividends you will lower your growth rate and it will take longer to double.

But if spending your dividends means putting food on the table then it's not a bad thing to do, even if it makes it longer for your stash to grow.

Thanks so much misterhorsey for taking the time to answer my question. That makes sense. I thought it might be too good to be true to double the money and pull the dividends. I was hoping to get the franking credits benefits, assuming that still exists.

potm

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Re: Australian Investing Thread
« Reply #3951 on: March 30, 2018, 10:56:31 PM »
Just in case you were not aware, even if you reinvest the dividends, you still get the benefits of the franking credits.
Reinvesting the divs is the same as receiving the divs and then buying more shares/units. It makes no difference tax wises.
« Last Edit: April 01, 2018, 02:55:41 AM by potm »

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #3952 on: March 31, 2018, 04:05:25 AM »
Just in case you were not aware, even if you reinvest the dividends, you still get the benefits of the franking credits.
Reinvesting the divs is the same as receiving the divs and then buyer more shares/units. It makes no difference tax wises.

Oh gotcha, thanks!

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #3953 on: April 02, 2018, 05:19:34 PM »
Hey all, stocks are crashing. Is this buy time that everyone has been wishing for? I only have Vanguard total life strategy high growth account. I stopped adding to it to build up cash to buy property but still unsure of that. Do I keep investing or hoard cash? I hate watching my account dwindle, but I know thatís the game. Pep talk please.

steveo

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Re: Australian Investing Thread
« Reply #3954 on: April 02, 2018, 08:15:01 PM »
Hey all, stocks are crashing. Is this buy time that everyone has been wishing for? I only have Vanguard total life strategy high growth account. I stopped adding to it to build up cash to buy property but still unsure of that. Do I keep investing or hoard cash? I hate watching my account dwindle, but I know thatís the game. Pep talk please.

Honestly a falling market if you keep buying is a good thing. The problem with the market going up consistently is that you probably retire at a peak. If you just keep investing through the down times I think you likelihood of retirement failure is going to be pretty low.

itchyfeet

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Re: Australian Investing Thread
« Reply #3955 on: April 02, 2018, 08:25:55 PM »
Crashing is a bit too strong a term I would say. If you invested 12 month ago in  the ASX200 youíd Still be in front. Same canít be said for Sydney real estate.

I can only offer a few thoughts:
 1. If your investment horizon for buying a house is less than a couple of years then the volatility of stocks probably means itís not a suitable investment for you at this time.
2. If your investment horizon is more than a couple of years then the best time to invest is today. Time in the market is a more consistently reliable strategy than timing the market. Buy and just forget about it.

That being said, I am in the camp of those that believe that there is a higher probability of interest rates rising in the next few years, rather than staying as they are or decreasing further, and this will be a very very strong headwind to growth in stock prices (and company earnings), and especially residential real estate, in the short to medium term.

But, even though I have this view history tells me that most probably I will be wrong, my crystal ball is not at all reliable, and so I just keep accumulating assets in the confident belief that when I look back 20 or 30 years from now it will look to have been a great decision in hindsight irrespective of the short term noise that may or may not impact prices in the next few years.

In relation to residential real estate in Sydney or Melbourne, if I was a first home buyer I would be careful. I see it as a slightly different situation to stocks as a first home buyer is likely to be 80-90% leveraged, meaning that even a correction of 20% could wipe out 100% or more of the buyers equity, which could become dramatic if a sale is forced (eg: divorce, relocation for work etc). If I was a first home buyer I would still pursue my ambitions of home Ownership, but with interest rates so low today I would want a 25% deposit - just in case I have to sell in the next 5 years.





steveo

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Re: Australian Investing Thread
« Reply #3956 on: April 02, 2018, 10:16:26 PM »
But, even though I have this view history tells me that most probably I will be wrong, my crystal ball is not at all reliable, and so I just keep accumulating assets in the confident belief that when I look back 20 or 30 years from now it will look to have been a great decision in hindsight irrespective of the short term noise that may or may not impact prices in the next few years.

This is how I view the markets. I just keep buying. I know that if I don't have to sell (so keep some bonds/cash if you are getting close to the drawdown phase) then I should end up miles ahead over the long term.

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #3957 on: April 03, 2018, 04:03:15 AM »
Thanks all. My plan is a simple one: get $250k each in my super and Vanguard by early 50s, leave in for 10 years. Then have enough cash reserves and some p/t work to make it through those 10 years. We were thinking of getting a place next year, living in for 5 years, then renting it out while we traveled during our 10 year journey. Still not sure about that part. Iíve managed to build up a little emergency cash now, so Iím fine to keep DCA with Vanguard, but maybe Iíll stop checking daily? Lol.

Red_Gold

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Re: Australian Investing Thread
« Reply #3958 on: April 04, 2018, 08:38:19 PM »
Greetings fellow Aussie Mustashians! Long time reader, first time poster to this informative thread. Iíve been investing in individual shares and Vanguard managed fund for almost a decade but it was only after I discovered MMM and the concept of FIRE it all came together for me and I really upped my saving/investing game. As Iíve been following MMM, Bogleheads and other US based resources Iíve been investing for growth with 80% of my funds in VDHG. Recently Iíve discovered Strong Money Australia blog and his dividend focused approach to FIRE.  I need help understanding the pros and cons of the two approaches (Bogleheads vs Thornhill). Personally I know that selling shares for income in retirement will not be easy for me, as I will struggle with seeing my small leanfire portfolio diminish further in years that market is down. My FIRE is 15-20 years away, Iíll be close to 60 and I really donít fancy hustling at that age.
I am equally uncomfortable having majority of my net worth tied to one country, as great as Australia is. Iíve been reading investment books for years and the message of diversification sunk in deep. However, the prospect of reaching my FIRE goals sooner with dividend investing (ie needing smaller nest egg to generate required income), combined with not needing to sell shares in order to fund my retirement is extremely attractive.
Your two cents on this matter will be appreciated.

steveo

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Re: Australian Investing Thread
« Reply #3959 on: April 05, 2018, 01:42:46 AM »
@Red_Gold - I have an allocation of 40/40/20 Aussie/International/Bonds. I intend to retire with a cash buffer of 50k as well.

I invest only in VAS, VGS & VAF outside of super. I split my super into the right combination of international and Aussie indexes available to me. I want to hold all my bonds and cash outside of Super.

I'm not a fan of relying on dividends.

Red_Gold

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Re: Australian Investing Thread
« Reply #3960 on: April 05, 2018, 03:27:30 AM »
@Red_Gold - I have an allocation of 40/40/20 Aussie/International/Bonds. I intend to retire with a cash buffer of 50k as well.

I invest only in VAS, VGS & VAF outside of super. I split my super into the right combination of international and Aussie indexes available to me. I want to hold all my bonds and cash outside of Super.

I'm not a fan of relying on dividends.

Thanks for your reply. Couple of questions: what are your reasons for not taking the dividend route? What is your plan for withdrawing funds in retirement prior to accessing super? Will you live off cash reserve, then sell bonds to replenish it and sell stocks in turn to re balance your portfolio?   

mjr

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Re: Australian Investing Thread
« Reply #3961 on: April 05, 2018, 08:59:58 AM »
Betashares coming out with an Australian shares ETF at half the cost of VAS.

https://www.betashares.com.au/campaigns/a200_is_coming/?utm_source=website&utm_medium=slider&utm_content=A200

At the very least, I hope this puts some cost pressure on Vanguard.

steveo

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Re: Australian Investing Thread
« Reply #3962 on: April 05, 2018, 11:35:21 PM »
@Red_Gold - I have an allocation of 40/40/20 Aussie/International/Bonds. I intend to retire with a cash buffer of 50k as well.

I invest only in VAS, VGS & VAF outside of super. I split my super into the right combination of international and Aussie indexes available to me. I want to hold all my bonds and cash outside of Super.

I'm not a fan of relying on dividends.

Thanks for your reply. Couple of questions: what are your reasons for not taking the dividend route? What is your plan for withdrawing funds in retirement prior to accessing super? Will you live off cash reserve, then sell bonds to replenish it and sell stocks in turn to re balance your portfolio?

I think focusing on dividends:-

1. Requires too much work. If you choose to pick individual stocks you have to research the stocks.
2. Will suffer from pushing you towards buying assets that may under perform. If you buy individual stocks those stocks may under perform. If you pick an ETF the ETF may under perform.
3. Mightn't work going forward. Dividends have worked great due to tax benefits. If those benefits go (which is already being talked about) then the advantage may disapear.

Basically I think the best option is to just stick to the average because the average will beat 95% of investors.

My draw down strategy is to use firstly cash which includes dividends and interest, then sell bonds and then sell stocks. I don't intend to re-balance but would consider it if I have a tonne of bonds/cash and the market has crashed. So I will probably end up 100% stocks at some point. If stocks do increase significantly I will also probably sell off some stocks to get cash/bonds but again I have no real plan for this.

I also think my cash reserves are listed above at too high a level for me personally and I'm going to go for 20k not 50k. The reason being is that I will have 6 months wages when I quit due to long service leave. I think 6 months wages plus 20k should last me 2 years without drawing down on my portfolio.

Red_Gold

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Re: Australian Investing Thread
« Reply #3963 on: April 06, 2018, 09:20:57 PM »
@Red_Gold - I have an allocation of 40/40/20 Aussie/International/Bonds. I intend to retire with a cash buffer of 50k as well.

I invest only in VAS, VGS & VAF outside of super. I split my super into the right combination of international and Aussie indexes available to me. I want to hold all my bonds and cash outside of Super.

I'm not a fan of relying on dividends.

Thanks for your reply. Couple of questions: what are your reasons for not taking the dividend route? What is your plan for withdrawing funds in retirement prior to accessing super? Will you live off cash reserve, then sell bonds to replenish it and sell stocks in turn to re balance your portfolio?

I think focusing on dividends:-

1. Requires too much work. If you choose to pick individual stocks you have to research the stocks.
2. Will suffer from pushing you towards buying assets that may under perform. If you buy individual stocks those stocks may under perform. If you pick an ETF the ETF may under perform.
3. Mightn't work going forward. Dividends have worked great due to tax benefits. If those benefits go (which is already being talked about) then the advantage may disapear.

Basically I think the best option is to just stick to the average because the average will beat 95% of investors.

My draw down strategy is to use firstly cash which includes dividends and interest, then sell bonds and then sell stocks. I don't intend to re-balance but would consider it if I have a tonne of bonds/cash and the market has crashed. So I will probably end up 100% stocks at some point. If stocks do increase significantly I will also probably sell off some stocks to get cash/bonds but again I have no real plan for this.

I also think my cash reserves are listed above at too high a level for me personally and I'm going to go for 20k not 50k. The reason being is that I will have 6 months wages when I quit due to long service leave. I think 6 months wages plus 20k should last me 2 years without drawing down on my portfolio.

Strong Money Australia focuses on dividend paying LICs with proven track record of matching or outperforming indexes but that's all I know about his approach. It does look like going forward governments policies might affect how Australian companies pay their dividends and the amount they pay, definitely a risk that should be considered.

As for draw down strategy you described, that would live you with 100% in equities while needing to sell portions of it for income. You are ok with selling stocks in bear market? Is there another income stream like rental income coming in or something? Otherwise that approach is way above my own risk tolerance.

steveo

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Re: Australian Investing Thread
« Reply #3964 on: April 07, 2018, 06:57:49 AM »
@Red_Gold - I have an allocation of 40/40/20 Aussie/International/Bonds. I intend to retire with a cash buffer of 50k as well.

I invest only in VAS, VGS & VAF outside of super. I split my super into the right combination of international and Aussie indexes available to me. I want to hold all my bonds and cash outside of Super.

I'm not a fan of relying on dividends.

Thanks for your reply. Couple of questions: what are your reasons for not taking the dividend route? What is your plan for withdrawing funds in retirement prior to accessing super? Will you live off cash reserve, then sell bonds to replenish it and sell stocks in turn to re balance your portfolio?

I think focusing on dividends:-

1. Requires too much work. If you choose to pick individual stocks you have to research the stocks.
2. Will suffer from pushing you towards buying assets that may under perform. If you buy individual stocks those stocks may under perform. If you pick an ETF the ETF may under perform.
3. Mightn't work going forward. Dividends have worked great due to tax benefits. If those benefits go (which is already being talked about) then the advantage may disapear.

Basically I think the best option is to just stick to the average because the average will beat 95% of investors.

My draw down strategy is to use firstly cash which includes dividends and interest, then sell bonds and then sell stocks. I don't intend to re-balance but would consider it if I have a tonne of bonds/cash and the market has crashed. So I will probably end up 100% stocks at some point. If stocks do increase significantly I will also probably sell off some stocks to get cash/bonds but again I have no real plan for this.

I also think my cash reserves are listed above at too high a level for me personally and I'm going to go for 20k not 50k. The reason being is that I will have 6 months wages when I quit due to long service leave. I think 6 months wages plus 20k should last me 2 years without drawing down on my portfolio.

Strong Money Australia focuses on dividend paying LICs with proven track record of matching or outperforming indexes but that's all I know about his approach. It does look like going forward governments policies might affect how Australian companies pay their dividends and the amount they pay, definitely a risk that should be considered.

As for draw down strategy you described, that would live you with 100% in equities while needing to sell portions of it for income. You are ok with selling stocks in bear market? Is there another income stream like rental income coming in or something? Otherwise that approach is way above my own risk tolerance.

I definitely don't want to sell stocks in a downturn however I think that my approach should give me 5-10 years before I have to do that. If there is a bear market at that point I'm okay with it. Ideally there is a raging bull market  during that time and then I would probably sell some stocks but not a lot. My understanding is that financially the chances of failure when retired are typically poor returns and selling stocks within the first 5 - 10 years. If you avoid that you should be good.

If you think that is above your risk tolerance I suggest holding more bonds. I don't completely dislike the dividend approach that you have listed above but I still prefer to stick with my approach which I think has a lot more data to validate the approach. The dividend approach may be good but there is a whole bunch of money in AUD assets and that approach mightn't work in the future.

Red_Gold

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Re: Australian Investing Thread
« Reply #3965 on: April 08, 2018, 01:18:55 AM »
@Red_Gold - I have an allocation of 40/40/20 Aussie/International/Bonds. I intend to retire with a cash buffer of 50k as well.

I invest only in VAS, VGS & VAF outside of super. I split my super into the right combination of international and Aussie indexes available to me. I want to hold all my bonds and cash outside of Super.

I'm not a fan of relying on dividends.

Thanks for your reply. Couple of questions: what are your reasons for not taking the dividend route? What is your plan for withdrawing funds in retirement prior to accessing super? Will you live off cash reserve, then sell bonds to replenish it and sell stocks in turn to re balance your portfolio?

I think focusing on dividends:-

1. Requires too much work. If you choose to pick individual stocks you have to research the stocks.
2. Will suffer from pushing you towards buying assets that may under perform. If you buy individual stocks those stocks may under perform. If you pick an ETF the ETF may under perform.
3. Mightn't work going forward. Dividends have worked great due to tax benefits. If those benefits go (which is already being talked about) then the advantage may disapear.

Basically I think the best option is to just stick to the average because the average will beat 95% of investors.

My draw down strategy is to use firstly cash which includes dividends and interest, then sell bonds and then sell stocks. I don't intend to re-balance but would consider it if I have a tonne of bonds/cash and the market has crashed. So I will probably end up 100% stocks at some point. If stocks do increase significantly I will also probably sell off some stocks to get cash/bonds but again I have no real plan for this.

I also think my cash reserves are listed above at too high a level for me personally and I'm going to go for 20k not 50k. The reason being is that I will have 6 months wages when I quit due to long service leave. I think 6 months wages plus 20k should last me 2 years without drawing down on my portfolio.

Strong Money Australia focuses on dividend paying LICs with proven track record of matching or outperforming indexes but that's all I know about his approach. It does look like going forward governments policies might affect how Australian companies pay their dividends and the amount they pay, definitely a risk that should be considered.

As for draw down strategy you described, that would live you with 100% in equities while needing to sell portions of it for income. You are ok with selling stocks in bear market? Is there another income stream like rental income coming in or something? Otherwise that approach is way above my own risk tolerance.

I definitely don't want to sell stocks in a downturn however I think that my approach should give me 5-10 years before I have to do that. If there is a bear market at that point I'm okay with it. Ideally there is a raging bull market  during that time and then I would probably sell some stocks but not a lot. My understanding is that financially the chances of failure when retired are typically poor returns and selling stocks within the first 5 - 10 years. If you avoid that you should be good.

If you think that is above your risk tolerance I suggest holding more bonds. I don't completely dislike the dividend approach that you have listed above but I still prefer to stick with my approach which I think has a lot more data to validate the approach. The dividend approach may be good but there is a whole bunch of money in AUD assets and that approach mightn't work in the future.

There is an interesting discussion going on re: Living off dividends? https://forum.mrmoneymustache.com/investor-alley/living-off-dividends-89677/
Covers some points I was interested in when I posted my question here. It appears closed end funds in US are similar to Australian LICs. Of course you can't compare the economies of US and AUS but even in US people who favor investing for dividends are in minority. I will be sticking with VDHG for now, while continuing to educate myself on other routes to FIRE. I will probably switch to a more conservative Vanguard Life Strategy ETF closer to retirement date.

I wasn't aware that selling shares within first 10 years increases the likelihood of failure. I will be taking this into consideration. Thank you for taking time to reply!

superannuationfreak

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Re: Australian Investing Thread
« Reply #3966 on: April 08, 2018, 04:47:16 AM »

I wasn't aware that selling shares within first 10 years increases the likelihood of failure.

Note that it's not specifically selling shares that increases the likelihood of failure.  Particularly bad returns in the first few years before or after retirement (if no longer earning/saving) are what will increase the likelihood of failure.  In some cases this may mean you're selling shares, but you may well be selling shares to rebalance, to move to a more conservative asset allocation or to take advantage of lower tax rates (when not earning a wage or earning a lower wage) to take capital gains.

It's total returns (after tax and fees) that matter, not whether that is from dividends or capital gains.  Globally, dividend-paying shares were hurt plenty during the GFC.  The fact that many kept paying dividends didn't make up for the loss in the short term.

bigchrisb

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Re: Australian Investing Thread
« Reply #3967 on: April 08, 2018, 04:12:07 PM »

There is an interesting discussion going on re: Living off dividends? https://forum.mrmoneymustache.com/investor-alley/living-off-dividends-89677/
Covers some points I was interested in when I posted my question here. It appears closed end funds in US are similar to Australian LICs. Of course you can't compare the economies of US and AUS but even in US people who favor investing for dividends are in minority. I will be sticking with VDHG for now, while continuing to educate myself on other routes to FIRE. I will probably switch to a more conservative Vanguard Life Strategy ETF closer to retirement date.

I wasn't aware that selling shares within first 10 years increases the likelihood of failure. I will be taking this into consideration. Thank you for taking time to reply!

Keep in mind that the tax treatment in different countries will impact discussion on dividends vs buybacks as methods of capital returns.  Most discussion is focused on the US market, where tax treatment of dividends makes buybacks more tax efficient.  In the Australian market, the current franking system changes the picture a bit - if your tax rate is below the company tax rate, dividends are more efficient that buybacks or reinvestment by the company.  If your marginal tax rate is below the company rate, it is more tax efficient to pay a dividend.  A large part of our market is super funds, on something between 0 and 15% rates,  and they are not shy as an institutional block in voicing their views to companies.  I suspect this is one of the reasons that Australian payout ratios are so high. 

Don't get me started on shorten's proposal to favor pooled super at the cost to those who self manage, but that's a post for another day.

Red_Gold

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Re: Australian Investing Thread
« Reply #3968 on: April 09, 2018, 05:34:59 PM »

I wasn't aware that selling shares within first 10 years increases the likelihood of failure.

Note that it's not specifically selling shares that increases the likelihood of failure.  Particularly bad returns in the first few years before or after retirement (if no longer earning/saving) are what will increase the likelihood of failure.  In some cases this may mean you're selling shares, but you may well be selling shares to rebalance, to move to a more conservative asset allocation or to take advantage of lower tax rates (when not earning a wage or earning a lower wage) to take capital gains.

It's total returns (after tax and fees) that matter, not whether that is from dividends or capital gains.  Globally, dividend-paying shares were hurt plenty during the GFC.  The fact that many kept paying dividends didn't make up for the loss in the short term.

I took it to mean selling shares for income in the first 10 years increase chance of failure not selling shares to rebalance your portfolio. Is my understanding incorrect?

I was operating on the principle that 4% withdrawal will come out of dividends/capital growth and the principal amount will remain the same. One might as well sell shares to realize that growth, I am fine with that. But I would be very nervous if I had to touch principal amount in order to fund my retirement, that's the main reason I found dividend based approach appealing.  Is my understanding of 4% rule correct? I understand that there will be years when market is down and then one needs to employ various contingency plans like reducing withdrawal rate, finding other sources of income etc. I guess spending chunk of principal would be understandable in those years, especially if leaving inheritance is not a priority. I am aiming for leanfire and don't have a big margin for error hence my reluctance to touch principal.

I suspect dividend proponents would argue that if you rely on dividend income to live and companies keep paying than share values don't matter all that much. As long as you are getting that payout. Like I said before, I like the idea of living off dividends but I am extremely uncomfortable putting my eggs in an all Australian basket and unlike Strong Money Australia I don't have the luxury of building an all Australian dividend paying portfolio of LICs and diversifying into international ETFs after. I am not young and not on high income, I have only one chance to get it right.
« Last Edit: April 09, 2018, 05:49:21 PM by Red_Gold »

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Re: Australian Investing Thread
« Reply #3969 on: April 12, 2018, 03:43:20 AM »
Betashares coming out with an Australian shares ETF at half the cost of VAS.

https://www.betashares.com.au/campaigns/a200_is_coming/?utm_source=website&utm_medium=slider&utm_content=A200

At the very least, I hope this puts some cost pressure on Vanguard.


Interesting! ASX 200 at 0.07% MER
vs
Vanguard VAS ASX 300 at 0.14% MER


I think the ASX 200 is 86% of our sharemarket


ASX300 only gives you another 3% of it. Of course, 100 small caps of diversification. But maybe not worth the MER difference? Hmm

anguyen

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Re: Australian Investing Thread
« Reply #3970 on: April 12, 2018, 06:58:59 PM »
What an amazing thread Aussie fellows :)

If you don't mind me picking your brain, I've opened a Vanguard account purely for the purpose of teaching / gifting it to my daughter.

So it will be a very long term investment here. At the moment I'm splitting 1/1/1 between cash in saving/Vanguard LifeStrategy High Growth Fund/Vanguard Index International Shares Fund.

I do realise that LifeStrategy High Growth Fund actually has Index International Shares Fund in there as well so not sure whether that's the best way to structure it.

Also with this 10-15 years long term solution with about $100/week investment - what would you would do?

one piece at a time

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Re: Australian Investing Thread
« Reply #3971 on: April 12, 2018, 09:11:17 PM »
What an amazing thread Aussie fellows :)

If you don't mind me picking your brain, I've opened a Vanguard account purely for the purpose of teaching / gifting it to my daughter.

So it will be a very long term investment here. At the moment I'm splitting 1/1/1 between cash in saving/Vanguard LifeStrategy High Growth Fund/Vanguard Index International Shares Fund.

I do realise that LifeStrategy High Growth Fund actually has Index International Shares Fund in there as well so not sure whether that's the best way to structure it.

Also with this 10-15 years long term solution with about $100/week investment - what would you would do?

Sounds like you're locking in a high fee structure (due to small amounts) in order to attract tax on earnings (due to minor status of the child). Why use real money for training? Consider https://www.asx.com.au/education/sharemarket-game.htm or similar.

If you want to gift some significant capital to allow lifestyle changes (eg a car, uni w/o part time work, a trip somewhere) then why not do it as a lump sum?

....just some points to consider! YMMV


middo

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Re: Australian Investing Thread
« Reply #3972 on: April 12, 2018, 09:14:44 PM »
What an amazing thread Aussie fellows :)

If you don't mind me picking your brain, I've opened a Vanguard account purely for the purpose of teaching / gifting it to my daughter.

So it will be a very long term investment here. At the moment I'm splitting 1/1/1 between cash in saving/Vanguard LifeStrategy High Growth Fund/Vanguard Index International Shares Fund.

I do realise that LifeStrategy High Growth Fund actually has Index International Shares Fund in there as well so not sure whether that's the best way to structure it.

Also with this 10-15 years long term solution with about $100/week investment - what would you would do?

Sounds like you're locking in a high fee structure (due to small amounts) in order to attract tax on earnings (due to minor status of the child). Why use real money for training? Consider https://www.asx.com.au/education/sharemarket-game.htm or similar.

If you want to gift some significant capital to allow lifestyle changes (eg a car, uni w/o part time work, a trip somewhere) then why not do it as a lump sum?

....just some points to consider! YMMV

I played the sharemarket game many years ago as a student, and have seen it being played currently in the high school I work at.  While the aim is to get kids more financially literate, the actual lesson is that to win the game you need to pick the speculative stocks that will have massive capital growth in a short period of time.  It is more a form of gambling than investing.

anguyen

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Re: Australian Investing Thread
« Reply #3973 on: April 12, 2018, 09:20:32 PM »
Sounds like you're locking in a high fee structure (due to small amounts) in order to attract tax on earnings (due to minor status of the child). Why use real money for training? Consider https://www.asx.com.au/education/sharemarket-game.htm or similar.

If you want to gift some significant capital to allow lifestyle changes (eg a car, uni w/o part time work, a trip somewhere) then why not do it as a lump sum?

Thanks for your response.

Sorry I wasn't being clear. My child is not even 1 year old yet so that's still far away. I was meaning we allocate $100 each week from now into those accounts, and gradually introduce the concept of investing to our kid and encourage investment thinking (by seeing how small amount week by week - making money work, compounded gain, etc.).

And those account by 10-15 years hopefully can be a meaningful present once my kid is financially responsible enough to know what to do with it.

With the game, surely I'd probably introduce that at some stage, however, like middo mentioned., it involves a lot of stock picking (unless you are buying an index fund) so I'm not quite sure whether it suits a passive investor. Maybe my kid will like it, maybe not - we'll see.

Any feedback on 1/1/1 between cash in saving/Vanguard LifeStrategy High Growth Fund/Vanguard Index International Shares Fund?

steveo

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Re: Australian Investing Thread
« Reply #3974 on: April 12, 2018, 09:28:13 PM »
@anguyen - based on the time frame I would put all of the money into Vanguard Index International Shares Fund. I think for that type of investment it is the best option.

misterhorsey

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Re: Australian Investing Thread
« Reply #3975 on: April 13, 2018, 07:16:21 PM »
I would actually stick it all in the Lifestrategy fund for the diversification across Australia v International, Shares v Fixed interest and property (however small).

If the exercise is serving dual purposes of investment and education, I think it would be worth giving them a heads up of the advantages of this kind of diversification, by exposing them to it.

Not that you can actually see the yearly rebalancing. But you could augment it with this chart:

http://insights.vanguard.com.au/VolatilityIndexChart/ui/retail.html

https://static.vgcontent.info/crp/intl/auw/docs/resources/2017-index-chart-brochure.pdf?20180301|083814

which shows the difference performance of assets, and the value of spreading it across these assets, over a long period of time.

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Re: Australian Investing Thread
« Reply #3976 on: April 15, 2018, 03:39:40 PM »
Thanks for your response.

Sorry I wasn't being clear. My child is not even 1 year old yet so that's still far away. I was meaning we allocate $100 each week from now into those accounts, and gradually introduce the concept of investing to our kid and encourage investment thinking (by seeing how small amount week by week - making money work, compounded gain, etc.).

And those account by 10-15 years hopefully can be a meaningful present once my kid is financially responsible enough to know what to do with it.

With the game, surely I'd probably introduce that at some stage, however, like middo mentioned., it involves a lot of stock picking (unless you are buying an index fund) so I'm not quite sure whether it suits a passive investor. Maybe my kid will like it, maybe not - we'll see.

Any feedback on 1/1/1 between cash in saving/Vanguard LifeStrategy High Growth Fund/Vanguard Index International Shares Fund?

OK, it looks like the tax man would still consider it your money. https://www.ato.gov.au/Individuals/Investing/In-detail/Children-and-under-18s/Children-s-share-investments/

I'm not convinced of the value of having a separate account for children's investment. Why not simply run a family book (spreadsheet) and keep track of "their" money separately. Teaching people that book-values and budgeted amounts are separate from actual bank accounts is a valuable thing too. I had to explain to my cousin that whilst it was a good idea to have a budget for various things, that didn't mean she actually had to open 10 different savings accounts just so that each budget item had its own corresponding account.

FWIW we do run separate transaction accounts for the kids, but they only get $5 per week. This has been enough to teach them prioritization and delayed gratification as well as to introduce the concept of capitalistic rent seeking (interest). My son is very excited about the last one ;)

anguyen

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Re: Australian Investing Thread
« Reply #3977 on: April 15, 2018, 10:15:30 PM »
I'm not convinced of the value of having a separate account for children's investment. Why not simply run a family book (spreadsheet) and keep track of "their" money separately.

I actually do keep track of that - and I'm not setting up separate account just to it's in their name. I'm actually want to be flexible enough in the future in term of tax distribution as well as optimise capital gain tax (prevent ownership changing on the account).

Not sure if I'm making sense or I'm way over my head.

one piece at a time

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Re: Australian Investing Thread
« Reply #3978 on: April 15, 2018, 10:57:21 PM »
https://www.ato.gov.au/Individuals/Investing/In-detail/Children-and-under-18s/Your-income-if-you-are-under-18-years-old/?page=3#Summary_of_how_income_is_taxed_if_you_are_under__160_18

My understanding is that any earnings on that money will be taxed at a high rate if the money is in the child's name. The government explicitly stops you using your under 18 child's low income status as a way to reduce tax. I also don't think the amounts you are talking about justify a trust fund. I'm not an accountant though, so you might need to pay a few hundred dollars to get a professional opinion.

BattlaP

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Re: Australian Investing Thread
« Reply #3979 on: April 16, 2018, 03:53:02 PM »
https://www.ato.gov.au/Individuals/Investing/In-detail/Children-and-under-18s/Your-income-if-you-are-under-18-years-old/?page=3#Summary_of_how_income_is_taxed_if_you_are_under__160_18

My understanding is that any earnings on that money will be taxed at a high rate if the money is in the child's name. The government explicitly stops you using your under 18 child's low income status as a way to reduce tax. I also don't think the amounts you are talking about justify a trust fund. I'm not an accountant though, so you might need to pay a few hundred dollars to get a professional opinion.

I have an account set up with Vanguard for my minor, so that the Investor Name is "Mr BattlaP A/C Miss Mini Battla". I'm assuming that this money is considered and taxed as being mine until such a time as I give her full control - am I right or wrong?

anguyen

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Re: Australian Investing Thread
« Reply #3980 on: April 16, 2018, 04:56:02 PM »
I have an account set up with Vanguard for my minor, so that the Investor Name is "Mr BattlaP A/C Miss Mini Battla". I'm assuming that this money is considered and taxed as being mine until such a time as I give her full control - am I right or wrong?

Exactly my question as well, unfortunately Vanguard customer support wasn't of much help and telling me to talk to my accountant. I have yet to receive a financial tax statement for the account so I'm not quite sure how that work out yet.

mjr

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Re: Australian Investing Thread
« Reply #3981 on: April 16, 2018, 05:40:00 PM »
It's not Vanguard's job to give you tax advice, their behaviour is perfectly appropriate.

Just call the ATO.

PDM

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Re: Australian Investing Thread
« Reply #3982 on: April 16, 2018, 06:16:56 PM »
https://www.ato.gov.au/Individuals/Investing/In-detail/Children-and-under-18s/Your-income-if-you-are-under-18-years-old/?page=3#Summary_of_how_income_is_taxed_if_you_are_under__160_18

My understanding is that any earnings on that money will be taxed at a high rate if the money is in the child's name. The government explicitly stops you using your under 18 child's low income status as a way to reduce tax. I also don't think the amounts you are talking about justify a trust fund. I'm not an accountant though, so you might need to pay a few hundred dollars to get a professional opinion.

I have an account set up with Vanguard for my minor, so that the Investor Name is "Mr BattlaP A/C Miss Mini Battla". I'm assuming that this money is considered and taxed as being mine until such a time as I give her full control - am I right or wrong?

My limited reading into this that you'll pay tax on the distribution as the 'trustee'.
http://moneymag.com.au/shares-kids-tax/

I think by doing it in your name (https://www.marketindex.com.au/buying-shares-for-a-child) with the a/c you own the shares but they are the beneficiary.

ATO website not very clear on the matter.

anguyen

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Re: Australian Investing Thread
« Reply #3983 on: April 16, 2018, 06:24:50 PM »
My limited reading into this that you'll pay tax on the distribution as the 'trustee'.
http://moneymag.com.au/shares-kids-tax/

I think by doing it in your name (https://www.marketindex.com.au/buying-shares-for-a-child) with the a/c you own the shares but they are the beneficiary.

ATO website not very clear on the matter.

Thanks for that PDM. It's hard to find any black and white document regarding this. If I'm paying tax for this it should be fine as I'll be only missing out on $4xx tax free - compared to having to setup a trust.

And there won't be a capital gain event when time comes so that's good as well.

lush

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Re: Australian Investing Thread
« Reply #3984 on: April 17, 2018, 09:33:19 PM »
Hi All - For those with familiar with the Vanguard Balanced Fund and VAS - you might have noticed June distributions can be significant, and soon after the re-invest price seems to drop also sometimes significantly. I am trying to work out if it is better to hold off until after June to invest to make the most of what could be low re-investment costs OR invest before end of June to get in on the larger distribution anticipated - however this will come with tax implications which I don't really need. I am currently not reliant on living off the distributions.

Yes this is probably considered timing the market and know that some will say just invest when you can and forget the timing :). Thanks.
« Last Edit: April 17, 2018, 09:34:59 PM by lush »

PDM

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Re: Australian Investing Thread
« Reply #3985 on: April 17, 2018, 10:57:58 PM »
Hi All - For those with familiar with the Vanguard Balanced Fund and VAS - you might have noticed June distributions can be significant, and soon after the re-invest price seems to drop also sometimes significantly. I am trying to work out if it is better to hold off until after June to invest to make the most of what could be low re-investment costs OR invest before end of June to get in on the larger distribution anticipated - however this will come with tax implications which I don't really need. I am currently not reliant on living off the distributions.

Yes this is probably considered timing the market and know that some will say just invest when you can and forget the timing :). Thanks.

Personally, I've never liked VAS. It tracks the ASX300 which is basically banks, mining, two grocery stores and a couple of telcos. The current Royal Commission into Banks is already hammering bank share prices. Any downturn in property prices is likely to greatly impact the banks further and consumer spending.

A major appeal of ETFs is the opportunity to play in a bigger ocean - not just splashing about in the piddling pond that is the ASX.


PDM

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Re: Australian Investing Thread
« Reply #3986 on: April 17, 2018, 11:03:35 PM »
I'd also keep in mind what your superannuation fund is invested in. The typical portfolio already holds most of these stocks. So you might be concentrating risk?

anguyen

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Re: Australian Investing Thread
« Reply #3987 on: April 18, 2018, 01:16:08 AM »
not just splashing about in the piddling pond that is the ASX.

Hm what is the one that track US market? Sorry I'm a bit green.

marty998

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Re: Australian Investing Thread
« Reply #3988 on: April 18, 2018, 02:13:51 AM »
not just splashing about in the piddling pond that is the ASX.

Hm what is the one that track US market? Sorry I'm a bit green.

VTS is the one I think - believe there is also a currency hedged one too but can't remember off the top of my head.

PDM

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Re: Australian Investing Thread
« Reply #3989 on: April 18, 2018, 02:15:08 AM »
not just splashing about in the piddling pond that is the ASX.

Hm what is the one that track US market? Sorry I'm a bit green.

VTS is the US whole market.
There are a few that have US exposure.

https://www.vanguardinvestments.com.au/retail/ret/investments/product.html#/productType=etf


Eucalyptus

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Re: Australian Investing Thread
« Reply #3990 on: April 18, 2018, 09:59:09 PM »
There are also a few non-vanguard options


http://www.etfwatch.com.au/data-analysis?fund_type_search=1&region_search=&industry_search=&fund_size_search=&inception_form_search=&inception_to_search=&include_search_etf=ETF



For example, you can get ishares small cap 600 US for 0.07 MER which is very reasonable.


Lots of options :-)

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Re: Australian Investing Thread
« Reply #3991 on: April 23, 2018, 09:02:44 PM »
Has anybody got any VEU or VAE dividends yet? I had set up payment options in computershare but nothing has come through yet. I thought they were to be paid by last week? My Argo dividends always came through pretty promptly, but this year I'm using share purchase plan.

EDIT: my VAE shares are set up for reinvestment, VEU came through earlier in the year. This was all pretty obvious on "computershare" but a bit baffling on the bank trading website.
« Last Edit: April 25, 2018, 03:17:06 PM by one piece at a time »

kiwiozearlyretirement

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Re: Australian Investing Thread
« Reply #3992 on: April 25, 2018, 10:39:21 AM »
Yes vanguard dividends.
My dividends ex supervcame through but my SMSF dividends with vhy were taxed at 100 percent withholding tax. Anyone got any ideas why?
This is the first time I have received dividends in the smsf.

Mysterious and concerning

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Re: Australian Investing Thread
« Reply #3993 on: April 25, 2018, 03:18:24 PM »
Could you ask Vanguard what extra forms you need to send for them to waive the withholding tax?

marty998

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Re: Australian Investing Thread
« Reply #3994 on: April 25, 2018, 03:37:10 PM »
Yes vanguard dividends.
My dividends ex supervcame through but my SMSF dividends with vhy were taxed at 100 percent withholding tax. Anyone got any ideas why?
This is the first time I have received dividends in the smsf.

Mysterious and concerning

Nothing is ever taxed at 100% - Withholding tax is taken at the top marginal rate of 45%.


kiwiozearlyretirement

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Re: Australian Investing Thread
« Reply #3995 on: April 26, 2018, 09:43:57 AM »
Oh well phoned vanguard and it is because they do not have record of the tax file number or abn.
So now will have to wait till tax time to get the money back. I never had this problem with vanguard etfs outside of super so maybe itís how they treat companies.

Guess we must have missed some correspondence regarding tax file numbers .....

marty998

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Re: Australian Investing Thread
« Reply #3996 on: May 02, 2018, 05:51:35 AM »
Hopefully you have gotten onto Computershare and updated it now, otherwise you'll have the same problem in July.


marty998

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Re: Australian Investing Thread
« Reply #3997 on: May 02, 2018, 05:54:56 AM »
Sorry if this has been posted before, just seen today Betashares had an ASX 200 offering for just 0.07% management costs.

Quite a bit lower than Vanguard, wonder if VAS will try and compete?

PDM

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Re: Australian Investing Thread
« Reply #3998 on: May 08, 2018, 05:41:21 PM »
Any thoughts on the budget? Seems  bit meh to me. Most useful analysis I read referred to the government 'keeping their powder dry' to buy votes in the lead up to the election.

It is hard not to get frustrated with the politics of budgets. Also the language used in the media which frames it as "Winners vs Losers". "Are you a winner from the budget?" etc. Surely on some level the aim should be to improve the overall society not pick winners and losers?

mjr

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Re: Australian Investing Thread
« Reply #3999 on: May 08, 2018, 06:36:49 PM »
Woohoo.  Non-super balance touched the million dollar mark today.  It took a dive when I moved the $540k into super 18 months ago.  So  now I have greater than a million in super and outside of it.

Retiring come new financial year.