Author Topic: Australian Investing Thread  (Read 1219886 times)

mjr

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Re: Australian Investing Thread
« Reply #4150 on: August 18, 2018, 05:56:09 PM »
The brokerage fees on buying is a capital cost which becomes part of the cost base.  Your buy example is correct.

When you're selling, the brokerage costs are apportioned equally across the number of shares you are selling and lower the capital gain.


kiwiozearlyretirement

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Re: Australian Investing Thread
« Reply #4151 on: August 20, 2018, 08:56:09 AM »
Is anyone invested with beta shares A200 with its nice low fees. I was all excited as it seems pretty close to VAS and apparently the additional 100 companies only add another 3% of total worth to the index (VAS 300 vs beta shares 200). But did anyone notice the dividend for beta shares was 0.20 per unit. Seem woeful compared with VAS 1.02 also considering beta shares is already $104 per unit and VAS is still $80. What's going on aren't they tracking a similar index?


To save people time looking it up:
https://www.betashares.com.au/fund/australia-200-etf/


The fund inception date was 7 May 2018 and from what I can tell there has only been one dividend distribution so far...assuming that would only be for a partial quarter, which could explain the relative lower dividend? Or I could be missing something?

Also sounds like Beta Shares started at $100 whereas VAS started at $50 a unit many years ago.

thanks for your ideas. But even if Beta shares are $100 you might except the dividend distribution to be half of VAS for example. Not 20% of it.  It shouldn't matter if it is a partial quarter as you just have to own the shares on the distributions record date. Unless some companies paid distributions early that quarter e.g. April.

Guess I will watch them

Gremlin

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Re: Australian Investing Thread
« Reply #4152 on: August 20, 2018, 07:27:48 PM »
Is anyone invested with beta shares A200 with its nice low fees. I was all excited as it seems pretty close to VAS and apparently the additional 100 companies only add another 3% of total worth to the index (VAS 300 vs beta shares 200). But did anyone notice the dividend for beta shares was 0.20 per unit. Seem woeful compared with VAS 1.02 also considering beta shares is already $104 per unit and VAS is still $80. What's going on aren't they tracking a similar index?


To save people time looking it up:
https://www.betashares.com.au/fund/australia-200-etf/


The fund inception date was 7 May 2018 and from what I can tell there has only been one dividend distribution so far...assuming that would only be for a partial quarter, which could explain the relative lower dividend? Or I could be missing something?

Also sounds like Beta Shares started at $100 whereas VAS started at $50 a unit many years ago.

thanks for your ideas. But even if Beta shares are $100 you might except the dividend distribution to be half of VAS for example. Not 20% of it.  It shouldn't matter if it is a partial quarter as you just have to own the shares on the distributions record date. Unless some companies paid distributions early that quarter e.g. April.

Guess I will watch them

Most companies report yearly or half-yearly results in February.  Typically those that pay a div/distribution will then do so in March/April with an ex div date late Feb/early March.  So a fund incepting in May will "miss" most of the quarter's divs that would typically get paid in April. 

Also, any divs/distributions accruing would be based on the monies invested at the time the underlying securities were paying out.  But they need to be paid out to anyone holding the ETF when it goes ex-distribution.  For a mature fund, the difference in volumes shouldn't be that great, but for a completely immature fund, you can get some funny distributions in the first few periods.  This will settle down as the ETF matures.

asosharp

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Re: Australian Investing Thread
« Reply #4153 on: August 21, 2018, 07:07:30 AM »
Currently having a debate with someone about renting spare rooms in your home. I said that there's CGT when a non-relative rents your room.

The other person said how would the government know if a room in your house has been rented if you don't declare the income in your tax. I disagreed.

Thoughts?

deborah

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Re: Australian Investing Thread
« Reply #4154 on: August 21, 2018, 06:08:33 PM »
My understanding is that there is CGT no matter who it is unless they are an extremely close relative.

But you can negatively gear, and get paid for maintenance of the room and the common areas of the house. Whatís not to like?

GT

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Re: Australian Investing Thread
« Reply #4155 on: August 21, 2018, 06:40:42 PM »
It's what the politicians do with their spouses houses/apartments in Canberra, and they also claim the allowance to pay for it.

Andy R

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Re: Australian Investing Thread
« Reply #4156 on: August 21, 2018, 07:47:25 PM »
Politicians don't rent out the spare room. They move out entirely and rent it out for up to 6 years and still get it GST free due to a specific law known as the 6 year rule.

PDM

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Re: Australian Investing Thread
« Reply #4157 on: August 21, 2018, 08:15:14 PM »
Currently having a debate with someone about renting spare rooms in your home. I said that there's CGT when a non-relative rents your room.

The other person said how would the government know if a room in your house has been rented if you don't declare the income in your tax. I disagreed.

Thoughts?
So you're not debating actual tax law - you're debating fraud.

Basically it is a question of how much fraud your friend is comfortable with. Its illegal - your friend just has to weight up the risk of getting caught (and the moral aspect of fraud). I'd be concerned about the ATO's data sharing these days. In the era of big data it wouldn't be hard at all to work out that you've rented a room in your house. So much paper trail - a lease, a bond deposited with the RTA, a regular occurring payment (or will it be cash?).

https://www.ato.gov.au/About-ATO/Access,-accountability-and-reporting/In-detail/How-we-use-data-matching/?anchor=Sources_of_thirdparty_information#Sources_of_thirdparty_information

Little Aussie Battler

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Re: Australian Investing Thread
« Reply #4158 on: August 21, 2018, 08:30:40 PM »
...or a disgruntled former tenant who notifies the ATO.

Eucalyptus

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Re: Australian Investing Thread
« Reply #4159 on: August 23, 2018, 04:04:19 AM »
...or a disgruntled former tenant who notifies the ATO.


Not hard to notify the ATO or another government agency incidentally these days. You often have to supply your residential address. Many things the ATO cross-references with information supplied to other departments.


Much better to do it properly.

marty998

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Re: Australian Investing Thread
« Reply #4160 on: August 23, 2018, 05:31:32 AM »
...or a disgruntled former tenant who notifies the ATO.


Not hard to notify the ATO or another government agency incidentally these days. You often have to supply your residential address. Many things the ATO cross-references with information supplied to other departments.


Much better to do it properly.

Not hard for the IT guys at the ATO to write a script trawling gumtree, airbnb, Facebook groups etc as well.

Eucalyptus

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Re: Australian Investing Thread
« Reply #4161 on: August 25, 2018, 04:40:07 AM »
...or a disgruntled former tenant who notifies the ATO.


Not hard to notify the ATO or another government agency incidentally these days. You often have to supply your residential address. Many things the ATO cross-references with information supplied to other departments.


Much better to do it properly.

Not hard for the IT guys at the ATO to write a script trawling gumtree, airbnb, Facebook groups etc as well.


Yep ;-)

Evasion

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Re: Australian Investing Thread
« Reply #4162 on: August 27, 2018, 02:53:02 AM »
Hello,

I am a long time lurker who recently became more serious about FI. I already own some shares through Acorns / Raiz (purchased before I realised I could do just as well myself through a broker). I also own some VDHG ETF.
I have been looking at diversifying a bit or buying something less Australian focused for my next 5k investment bundle.

Comparing VGS to IWLD it seems that the latter has lower ER (0.16 Vs 0.18), is tracking the same index, and has way lower share price (32 AUD Vs about 70)

Given that Vanguard is usually the go to company, what's the catch? Tempted to go for IWLD instead of VGS but was wondering whether I missed a difference between the ETFs.

Interested in opinions of people who own IWLD and others!

Thank you for your help and sorry if this is a noob question, first message on this thread (that I've read entirely a few months ago;))

marty998

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Re: Australian Investing Thread
« Reply #4163 on: August 27, 2018, 03:38:14 AM »
Hello,

I am a long time lurker who recently became more serious about FI. I already own some shares through Acorns / Raiz (purchased before I realised I could do just as well myself through a broker). I also own some VDHG ETF.
I have been looking at diversifying a bit or buying something less Australian focused for my next 5k investment bundle.

Comparing VGS to IWLD it seems that the latter has lower ER (0.16 Vs 0.18), is tracking the same index, and has way lower share price (32 AUD Vs about 70)

Given that Vanguard is usually the go to company, what's the catch? Tempted to go for IWLD instead of VGS but was wondering whether I missed a difference between the ETFs.

Interested in opinions of people who own IWLD and others!

Thank you for your help and sorry if this is a noob question, first message on this thread (that I've read entirely a few months ago;))

The share price doesn't matter if it tracks the same index. They will both go up and down by the same % value each day, less the differential in the management fee.

At the end of the day you are buying Tip-Top bread from either Woolworths or Coles. Occasionally one will be cheaper than the other.

marty998

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Re: Australian Investing Thread
« Reply #4164 on: August 27, 2018, 03:41:08 AM »
And bloody hell, I'm amazed at how easily Acorns and companies like them have managed to dupe so many people into paying away such a high proportion of their well earned.

On a % basis, the fees are criminal, they make the Banks look like angels.

PDM

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Re: Australian Investing Thread
« Reply #4165 on: August 27, 2018, 03:55:32 AM »
Hello,

I am a long time lurker who recently became more serious about FI. I already own some shares through Acorns / Raiz (purchased before I realised I could do just as well myself through a broker). I also own some VDHG ETF.
I have been looking at diversifying a bit or buying something less Australian focused for my next 5k investment bundle.

Comparing VGS to IWLD it seems that the latter has lower ER (0.16 Vs 0.18), is tracking the same index, and has way lower share price (32 AUD Vs about 70)

Given that Vanguard is usually the go to company, what's the catch? Tempted to go for IWLD instead of VGS but was wondering whether I missed a difference between the ETFs.

Interested in opinions of people who own IWLD and others!

Thank you for your help and sorry if this is a noob question, first message on this thread (that I've read entirely a few months ago;))

No catch, to compare you need to look at the Net Asset Value.
IWLD - $34.34 https://www.morningstar.com.au/ETFs/NewsAndQuotes/IWLD
VGS - $71.83 https://www.morningstar.com.au/ETFs/NewsAndQuotes/VGS

These are both pretty close to the share price of each and represent the value of each share's portion of the fund's underlying assets and cash at the end of the trading day.

VGS is a much much larger fund, which may give you more comfort? Both are trading at the top of their 52 week range, with VGS at all time highs. This reflects a the weakness in the AUD and strength in the US economy - I think.



Evasion

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Re: Australian Investing Thread
« Reply #4166 on: August 27, 2018, 05:21:07 AM »
And bloody hell, I'm amazed at how easily Acorns and companies like them have managed to dupe so many people into paying away such a high proportion of their well earned.

On a % basis, the fees are criminal, they make the Banks look like angels.

Hey marty, thanks for your response.
Not sure what you mean, when I look at the PDS of Acorns and adding all fees (and i've done this a few times)
I'm at about 0.56% p.a which I consider quite decent for a diversified portfolio (compared to 0.9% for Vanguard managed retail funds for example).
Having said that you have to invest lump sumps quickly (what I did) because if you just use the round up function at the beginning it is indeed a rip off imo.
Is this what you mean or is there something I missed?

Thanks for your response PDM, I had figured they were extremely similar but was confused about differential in share price.

FFF

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Re: Australian Investing Thread
« Reply #4167 on: August 28, 2018, 06:59:01 PM »
Hi all, couple of unrelated questions to hopefully draw on the combined wisdom of the forum. Thanks in advance!

1. Does anyone invest their super with Hostplus in their direct investment option, Choiceplus? I've started with them for FY2018 and haven't been able to find any info about when they pay the proceeds from franking credits? I used to be with ING's DIO and they paid whenever there was a distribution (and then adjusted slightly where necessary at FY end), but when they screwed up their fee structure I moved to Choiceplus. When Choiceplus didn't pay any franking credits with my first distribution from VAS, I assumed that it would be after end of FY. 2 months later, still nothing.

Anyone have any prior experience with franking credits from Choiceplus and when they get paid?

2. Has anyone done any 'debt recycling' with their mortgage and home equity? There's obviously a lot more subtlety to it than this but, if you are ahead of your mortgage payments, the general structure is to refinance mortgage to current mortgage value and obtain a line of credit based on the already built up home equity. The main reason is to then use this LOC to invest in the market and use the distributions to pay the LOC interest and enjoy the capital growth - the interest payable on the LOC is then tax-deductable. Kind of like negative-gearing for the market, I suppose.

I'm investigating options and rates at the moment, not necessarily thinking that now is the best time to invest a sizeable amount but I want to be ready to capitalise on any market drops. Of course, I can just redraw the equity as it stands but this wouldn't be tax-deductable if invested. Depending on the rates available the LOC option might not be viable, however, I'm interested to hear if anyone has any experience in doing the above? Would you do it again; anything you'd wish you'd know before; things to watch out for?

itchyfeet

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Re: Australian Investing Thread
« Reply #4168 on: August 28, 2018, 08:23:53 PM »
I will leave your first question as I have no knowledge or experience with that Superfund.

Re: making geared investments, I think itís ok but you have to be very aware of the risks.

Say you buy 50% of your shares with cash and 50% with debt amd then unfortunately the share market drops 20% and you are forced to sell the shares for any reason (eg: you lost your job and canít service the loan). You will have lost 40% of your savings in the process and not 20%.

With gearing both gains and losses are multiplied.

You need to be careful.
  1. You need to be honest with yourself about the risks you are taking
  2. You need to have a strong stomach if your portfolio drops in value, which could be the case for several years
  3. You probably want some income protection insurance if you canít service the debt without your job.

The positive news is that there is a good probability that over the long term the returns from the market will be higher than the interest rate on the LOC as you are taking far more risk than the bank is taking. In the short term you might lose on the gamble.

Personally, I have been quite heavily geared most of my working life, and it has worked out for me. I have managed to stay employed. But I will say that as I have got older, and the amount of equity at risk has got bigger, and as I have got closer to FIRE, my appetite for leverage has decreased. That said, I am still quite leveraged compared to most on this forum with debt equaling about 30% of my net worth (23% of total assets). When I FIRE this will be <10%, Maybe even 0.
« Last Edit: August 28, 2018, 08:32:03 PM by itchyfeet »

Andy R

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Re: Australian Investing Thread
« Reply #4169 on: August 28, 2018, 08:35:18 PM »
Of course, I can just redraw the equity as it stands but this wouldn't be tax-deductable if invested.

Why not? It is what the equity is used for that determines deductability, not where it comes from.
Get some tax advice from an accountant, but I am 99% sure it would be tax deductible.

marty998

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Re: Australian Investing Thread
« Reply #4170 on: August 30, 2018, 03:41:52 AM »
It would be deductible but you then have a mixed purpose loan and you have to apportion interest and then you have to apportion every repayment and it becomes a cock up very quickly.

Don't ever mix loans. Once you piss in a pot of water you can't un-mix it

marty998

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Re: Australian Investing Thread
« Reply #4171 on: August 30, 2018, 03:43:38 AM »
And bloody hell, I'm amazed at how easily Acorns and companies like them have managed to dupe so many people into paying away such a high proportion of their well earned.

On a % basis, the fees are criminal, they make the Banks look like angels.

Hey marty, thanks for your response.
Not sure what you mean, when I look at the PDS of Acorns and adding all fees (and i've done this a few times)
I'm at about 0.56% p.a which I consider quite decent for a diversified portfolio (compared to 0.9% for Vanguard managed retail funds for example).
Having said that you have to invest lump sumps quickly (what I did) because if you just use the round up function at the beginning it is indeed a rip off imo.
Is this what you mean or is there something I missed?

Thanks for your response PDM, I had figured they were extremely similar but was confused about differential in share price.

Yes sorry... I was referring to the people who only use the round up thing. Seems a waste of time and cents/sense

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #4172 on: August 30, 2018, 01:41:26 PM »
I started with Acorns because I wanted to do something and it seemed harmless and small. Then, when I learned a bit more, I opened up the Vanguard account and emptied the Acorns one and put everything there. Never looked back.

TJEH

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Re: Australian Investing Thread
« Reply #4173 on: September 02, 2018, 10:00:52 PM »
I was diagnosed with a serious illness this year. My shelf life is maybe 1-5 years. I want to put a good financial plan in place for my wife and kids (preschool and early primary school age).

Current Assets:
- We have a total of just over 2 million in cash, super and shares, breakdown as follows:
- Cash:   $930k (approx $300k in $GBP, the rest in $AUD....no reason to hold the $GBP)
- Super:  $566k (fairly evenly split between my wife and I)
- Shares: $595k ($250k in my wife's name, $345k in my name)

Other Financials:
- We own our house, valued at approx 400k
- We have no debt
- We are both in our mid forties
- I earn approx $150k + super
- My wife earns approx $170k + super
- Incomes are variable, as we are both contractors

I've continued to work since, the diagnosis, though reduced to approx four days per week due to the multitude of appointments. I've just taken around 6 weeks off for a medical procedure, but am returning to work two days\week. I might bump this up to 3-4 days, but might not. Ultimately, at some point I will not be able to work, so I'm balancing the need to continue life as normal vs spending my time how I choose. It might seem like an easy decision given the situation, but sometimes these things are not straight forward.

My wife is working full time, although this will also be affected by my health. As she is a contractor (as am I), we just get paid for the hours we work, with no other entitlements. Her ability to work in her current capacity will also be affected when I'm no longer about (trying to balance work and commuting with solely looking after two young school age kids).

I handle all the finances at the moment. My wife has a good overall understanding of the picture, but perhaps lacks the finer details. She is willing to learn more, especially now!

Prior to the diagnosis, I was slowly investing the cash into shares (VAS, VEU, VTS, VGS, MVW), split equally between my wife and I. Included in my share balance of $345k are approx $140k of blue chip shares I held before I discovered indexing, most of which I plan to sell.

Since the diagnosis I've been sitting back wondering what to do with the financial plan.

- Continue the same?
- Invest more in my name, as my salary is likely to decrease in the coming months\years?
- Invest more into super (e.g. salary sacrifice plus make non concessional contributions)?
- None of the above?
- Any CGT on my assets when they pass to my wife?

I would really appreciate any advice or insights from the collective knowledge on this thread - thanks in advance.


englyn

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Re: Australian Investing Thread
« Reply #4174 on: September 03, 2018, 01:30:46 AM »
TJEH, so sorry to hear about the illness.
Others are likely to be able to answer your questions better, but my input: at $1.5M + home out of super, the both of you have enough to FIRE. If 4% of $1.5M doesn't cover your expenses, put your effort into controlling your expenses. Might be worth seeing a fee-for-service financial planner about your questions for peace of mind & efficient use of your time.

bigchrisb

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Re: Australian Investing Thread
« Reply #4175 on: September 03, 2018, 02:06:52 AM »
I was diagnosed with a serious illness this year.
I would really appreciate any advice or insights from the collective knowledge on this thread - thanks in advance.

Sorry to hear about this - its hard news to take and your brain must be processing a thousand things.  I had a diagnosis about three years ago (albeit degenerative rather than acute) when I was also pretty much FI, but not RE.  I stressed a lot about the future, about the potential of not being able to work, and the trade off between a high current income (with associated stress), and not knowing how much future work capacity I would have, or my partner would have if things turned downhill and she became a carer. 

I slogged away for about two years after diagnosis, padding the stash and adding (financial) safety nets, and working out bucket lists. In hindsight, I wish I'd prioritized work and finances less - my health has been a lot better since hanging up the full time boots, despite having a first kid in that same time.  Babies are a very different sort of stress!  20/20 hindsight says I should have focused on family, friends and ticking off the bucket list.  Although, over the 3 and a bit years saving, investing and booming investment returns resulted in net worth going up from about $1.5 to $3.3m, so I probably feel more relaxed than had those 3 years been less lucrative. 

Take a deep breath and have a good think.  I found these issues really hard to think though as its depressing to think about life expectancy.  However, processing them helped me a great deal in coming to terms with myself. A couple of questions I'd be asking myself:
1. Do I have any insurance coverage, either in or out of super.  While its nasty to think about, if you have some life insurance in super, it would help to support a family without you. 
2. You have $2m of investable assets, plus a paid off house.  Even without your income, this could support the family for a long (perhaps indefinite) time.  Your wife still has the ability to work too.
3. The kids are primary school and pre-school - they need a lot of time now, but that won't be forever.  Even if you didn't earn an investment cent, and neither of you worked a paid hour, you could still spend $200k a year post tax (more like $300k a year pre-tax, akin to your incomes) for a decade.
4. Is it my role to enable FIRE for my surviving spouse after I'm unable to work, or to support my "half" of the costs of parenting through to my kids reaching adulthood?  I came to the realisation that my spouse could (and may actually want) to work in the after time. 
5. Do you really enjoy your work?  Knowing that your horizon just got closer, is work what you would choose to do with your time, or would you rather focus on other things?  For me, changing focus helped deal with the diagnosis and has improved the health outcomes (and I'm now doing a little contract work).

So, I'd get your headspace  sorted out on those issues.  You have enough assets that you can both take a career break for a few years and be just fine.  But you need to decide what you actually want to do.

In terms of assets and investments, some more questions:
Why so much cash, and why the GBP?
What do you expect your healthcare costs to be?  I've found that while I have some out of pocket costs (a few grand a year), getting really sick in Australia isn't actually that expensive.  Its the elective stuff that costs $$. 
Look into super rules for early release.  Both incapacity (TPD), and terminal illness (2 years life expectancy) can be conditions of release.  I ended up putting more into super for the lower medium term tax rates, knowing that if I deteriorated that I'd be able to set up a disability pension. 

As for CGT and other estate issues, I didn't do a lot of research.  Mostly because the course of my diagnosis is reduced function rather than reduced life expectancy, and I didn't want to mentally head down another rabbit hole.

Good luck - its a tough head space to be in. Feel free to PM me if you want to talk more.

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #4176 on: September 03, 2018, 04:53:13 AM »
TJEH, thereís nothing I could say, that sucks so bad on every level. I canít answer your questions, not even remotely qualified. What I would say is: go to an estate planner ASAP and talk about your options regarding trusts and all. Obviously have a will.

So the only other thing I think is, you guys have enough money. Your kids are young, invested money will double every 10 years, thatís almost $8m when they are in their early 20s. There is no reason for you to work another hour. If it were me, Iíd take the time and spend it with them, fill their lives with you. Spend time with family, friends, travel and do all those things youíve ever wanted to. You and your wife can take a break from work. Obviously itís your decision, thereís no wrong choice. Hug.

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TJEH

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Re: Australian Investing Thread
« Reply #4178 on: September 03, 2018, 05:58:58 AM »
Thanks everyone, lots of sensible advice.

Stopping work has definitely crossed my mind. If you asked me what I would do in this situation prior to my diagnosis, I would have almost certainly have said I'd quit. Spending more time with my family is very good advice and something I would not regret. My only reason for considering more work is my need (misguided or otherwise) to contribute while I can, and for something to distract me from sitting at home thinking too much about everything.
 
Our expenses are currently more than 4% of our funds outside of super. There is definitely some room to make changes here, and both of us stopping work would give us more opportunities to improve. Having said that, we'd probably start spending more on travel. I guess that even though it would still exceed 4%, and thus eat into the stash, it would only be temporary and would clearly have many benefits.

We have a will, although it is old (prior to having kids), my wife is the sole beneficiary.

Happy to have any recommendations for financial\estate planners (Melbourne based would be good).

TJEH

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Re: Australian Investing Thread
« Reply #4179 on: September 03, 2018, 06:24:30 AM »
bigchrisb, you are right, my brain has been overloaded on many fronts. When you know you are leaving behind a family, your first thoughts are making sure you can do everything to leave them in a good position. The temptation to pad the stash out is certainly there. Having said that, I think our position is pretty good, so I should give serious thought to some alternatives. We have been working towards FIRE and have gotten pretty close, so the option to do it is a good one. With very young kids it can be hard to take the leap though, knowing how long they are dependent on you for.

I have around $270k of tpd and life insurance inside super, so that's another buffer that can be tapped into when the time comes - cue cheery thoughts :D

Your insights are very useful, and I need to think more about it. So far the health issue hasn't really slowed me down too much, so I'm fortunate in that respect. This also means I've done an excellent job in not thinking too deeply about it all. My brain starts to hurt when I do! Even writing this down has made me realize I should make the most of my current situation (diagnosis=bad, day-day functionality=pretty good!)

To answer your questions:

Why so much cash, and why the GBP?

Lots of saving and not much investing, until the last couple of years anyway. I couldn't bring myself to invest a large lump sum, so have invested it in 20k increments per month. With the returns over the last couple of years, perhaps I should have gone the lump sum route, though if the market had tanked I would be thinking the opposite. Regarding the GBP, we lived and worked in the UK for a few years. It is currently getting virtually no return. I know I need to transfer it back, but keep waiting for the rate to improve. Stupid, I know!

What do you expect your healthcare costs to be?  I've found that while I have some out of pocket costs (a few grand a year), getting really sick in Australia isn't actually that expensive.  Its the elective stuff that costs $$. 

So far they have been minimal. I shudder to think how much they would have been if I had to pay for them myself. In that respect, I consider myself extremely fortunate to be Australian, just about everything has been covered by the pubic system. I haven't given too much thought to future costs, they I don't envisage it to change much. Well, unless I run out of PBS entitlements, or want to get my hands on something not covered by the PBS. Although my prognosis is not great, there are plenty of new drugs coming, though the cost of these is astronomical if funding them yourself.

Look into super rules for early release.  Both incapacity (TPD), and terminal illness (2 years life expectancy) can be conditions of release.  I ended up putting more into super for the lower medium term tax rates, knowing that if I deteriorated that I'd be able to set up a disability pension. 

I've heard of others in my situation getting early access to super. Is there a benefit in taking it now vs leaving it there? My wife is the binding beneficiary.


MrThatsDifferent

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Re: Australian Investing Thread
« Reply #4180 on: September 03, 2018, 06:33:10 AM »
Thanks everyone, lots of sensible advice.

Stopping work has definitely crossed my mind. If you asked me what I would do in this situation prior to my diagnosis, I would have almost certainly have said I'd quit. Spending more time with my family is very good advice and something I would not regret. My only reason for considering more work is my need (misguided or otherwise) to contribute while I can, and for something to distract me from sitting at home thinking too much about everything.
 
Our expenses are currently more than 4% of our funds outside of super. There is definitely some room to make changes here, and both of us stopping work would give us more opportunities to improve. Having said that, we'd probably start spending more on travel. I guess that even though it would still exceed 4%, and thus eat into the stash, it would only be temporary and would clearly have many benefits.

We have a will, although it is old (prior to having kids), my wife is the sole beneficiary.

Happy to have any recommendations for financial\estate planners (Melbourne based would be good).

Awww man, until this happens to you, you never know what youíd do. Look for STEP accredited estate planner. Definitely get your will updated. Consider visiting a therapist to talk things out. Your financial situation is extraordinary. You and your wife have done everything right. Youíve provided and your family is set for several lifetimes. You donít have to work to stay out of the house.

Gremlin

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Re: Australian Investing Thread
« Reply #4181 on: September 03, 2018, 05:57:37 PM »
We have a will, although it is old (prior to having kids), my wife is the sole beneficiary.

I've heard of others in my situation getting early access to super. Is there a benefit in taking it now vs leaving it there? My wife is the binding beneficiary.
I wish you and your family all the best with the coming months and years, TJEH.

It may be worth talking to a lawyer about reviewing your will and potentially updating your binding beneficiary.  I know there are a couple of different schools of thought here, but one school suggests that you might consider leaving your assets, including any payout through super/life insurance, in a testamentary trust.  You can have your spouse and kids as beneficiaries.  It was explained to me that one advantage is that distributions to the beneficiaries are taxed as if they are adults and not kids, which effectively means that distributions to the kids are not hit with the punitive tax rates for minors.  This can substantially reduce the tax burden for your spouse into the future whilst your kids are growing to adulthood.

TJEH

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Re: Australian Investing Thread
« Reply #4182 on: September 04, 2018, 12:35:59 AM »
MrThatsDifferent - thanks, for your suggestions, will look into them. You are right about not needing work to get out of the house, I think we all need a reminder about that.

Gremlin - thanks, you have reminded me about testamentary trusts. I did think about them previously, though as a way of passing on both my wife and my assets when we are both gone. The solution of having my assets pass to a testamentary trust sounds well worth looking into.

marty998- thanks, i think I qualify...ummm, hooray....sort of :D

If anything, this might be a good nudge for all you good people to consider the worst, as cheery as that is, and make some plans. I was a bit lazy\naive in this respect, thinking we had saved plenty and that I lead a healthy lifestyle and would be fine. It's all a bit gloomy, but it will lessen the stress if the worst should happen.

marty998

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Re: Australian Investing Thread
« Reply #4183 on: September 04, 2018, 05:19:32 AM »

Gremlin - thanks, you have reminded me about testamentary trusts. I did think about them previously, though as a way of passing on both my wife and my assets when we are both gone. The solution of having my assets pass to a testamentary trust sounds well worth looking into.


This also protects your kids if your wife remarries someone who turns out to be of questionable character and sees a pot of gold and helps themselves (sorry to throw that out there, I don't mean to be a downer!).

Chug

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Re: Australian Investing Thread
« Reply #4184 on: September 04, 2018, 05:58:23 PM »
Hello all, first time poster and in need of some guidance / direction.

I've always been keen on investing in something but never had the guts or knowledge to do anything. I am a complete novice when it comes to shares, superannuation and the like. The only real thought I've had about investing is in real estate and again, haven't had the guts to buy anything.

My current situation in a nutsell:
- The wife and I paying off the mortgage on our home.
- About $35k in savings.
- Home equity around $350k.
- $15k new car loan.

The wife is not interested when I try talking to her about investing our money rather than just have it sitting in the offset. Sure it's important to have cash in case of an emergency, but I want to set up something for the future, obviously in preparation for retirement (I'm 31 so that is a long long way off).

Throw me some suggestions please. I'm keen to learn.

middo

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Re: Australian Investing Thread
« Reply #4185 on: September 04, 2018, 07:36:32 PM »
Hello all, first time poster and in need of some guidance / direction.

I've always been keen on investing in something but never had the guts or knowledge to do anything. I am a complete novice when it comes to shares, superannuation and the like. The only real thought I've had about investing is in real estate and again, haven't had the guts to buy anything.

My current situation in a nutsell:
- The wife and I paying off the mortgage on our home.
- About $35k in savings.
- Home equity around $350k.
- $15k new car loan.

The wife is not interested when I try talking to her about investing our money rather than just have it sitting in the offset. Sure it's important to have cash in case of an emergency, but I want to set up something for the future, obviously in preparation for retirement (I'm 31 so that is a long long way off).

Throw me some suggestions please. I'm keen to learn.

Others will chime in here, but a couple of ideas from my personal perspective:

  • Make sure you are putting as much as you can into super (up to $25,000 p.a. in total is very tax effective)
  • Don't buy property as an investment.  Australian property does not add up when you look hard at it.
  • Get Scott Papes book and have a read.  It isn't the only solution, but may help you work out what you (and she) want for your future.
  • I would suggest you keep your 35K as an emergency fund, but as you save more, invest that into a broad based stock index fund, such as Argo (Australian) or Vanguard as widely suggested here.

GT

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Re: Australian Investing Thread
« Reply #4186 on: September 04, 2018, 07:40:38 PM »
Hello all, first time poster and in need of some guidance / direction.

I've always been keen on investing in something but never had the guts or knowledge to do anything. I am a complete novice when it comes to shares, superannuation and the like. The only real thought I've had about investing is in real estate and again, haven't had the guts to buy anything.

My current situation in a nutsell:
- The wife and I paying off the mortgage on our home.
- About $35k in savings.
- Home equity around $350k.
- $15k new car loan.

The wife is not interested when I try talking to her about investing our money rather than just have it sitting in the offset. Sure it's important to have cash in case of an emergency, but I want to set up something for the future, obviously in preparation for retirement (I'm 31 so that is a long long way off).

Throw me some suggestions please. I'm keen to learn.

Check how your thought process fits in with this.

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333550/#msg1333550

TJEH

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Re: Australian Investing Thread
« Reply #4187 on: September 05, 2018, 05:02:30 AM »

Gremlin - thanks, you have reminded me about testamentary trusts. I did think about them previously, though as a way of passing on both my wife and my assets when we are both gone. The solution of having my assets pass to a testamentary trust sounds well worth looking into.


This also protects your kids if your wife remarries someone who turns out to be of questionable character and sees a pot of gold and helps themselves (sorry to throw that out there, I don't mean to be a downer!).

Good point too marty998. I have told my wife I am going to come back and haunt her if she does anything dodgy, so I'll add this to the list :)

steveo

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Re: Australian Investing Thread
« Reply #4188 on: September 05, 2018, 04:47:32 PM »
Hello all, first time poster and in need of some guidance / direction.

I've always been keen on investing in something but never had the guts or knowledge to do anything. I am a complete novice when it comes to shares, superannuation and the like. The only real thought I've had about investing is in real estate and again, haven't had the guts to buy anything.

My current situation in a nutsell:
- The wife and I paying off the mortgage on our home.
- About $35k in savings.
- Home equity around $350k.
- $15k new car loan.

The wife is not interested when I try talking to her about investing our money rather than just have it sitting in the offset. Sure it's important to have cash in case of an emergency, but I want to set up something for the future, obviously in preparation for retirement (I'm 31 so that is a long long way off).

Throw me some suggestions please. I'm keen to learn.

I would pay off the car loan with $35k in savings. I figure that the car loan has a high interest rate and you won't be able to beat that via savings.

You can invest into index funds if you want too or you can pay off your house. I choose to pay off my house first but it depends on your mortgage interest rate compared to index funds returns. Paying off your mortgage gives you a tax free guaranteed return but if your mortgage rate is 2% then over time I think the market should beat that return.

You need to spend some time working through your investing options but it's not really hard:-

1. ETF's - you can use these to create a simple portfolio that will do really well. You could just buy VGS or you could have some bonds and Australian shares as well.
2. Vanguard diversified funds.

I would look at bogleheads for some ideas. I use a simple 3 found portfolio outside of super - VGA, VAS & VAF. If I was in your position I wouldn't buy any bonds until you are close to retirement and the house is paid off.

Andy R

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Re: Australian Investing Thread
« Reply #4189 on: September 05, 2018, 07:31:54 PM »
Anyone have thoughts on how to set up an allocation where you have half your money in direct property?
For instance, a 60/40 allocation would mean 40 of the remaining 50% not in direct-property is in fixed interest, leaving only 10% of your wealth and 20% of your non direct-property invested in equities.

I wonder if a good idea is to release a big chunk of equity from the property, and leave it sitting there offsetting the loan, and in a crash, I could draw down from that until the market recovers, and this would allow me to be fully invested with my other half in stocks for maximum growth.

Appreciate any thoughts on this.

MedusaMo

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Re: Australian Investing Thread
« Reply #4190 on: September 09, 2018, 02:36:51 AM »
Hi everyone, first-time poster with a question about investment order, PPOR after other investments.

I'm renting at the moment, a little burned on property after a PPOR-turned-investment turned sour and netted me a loss.
I've stashed the equity remaining from the property sale in two places:

high-interest savings account - this carries a 6-month living expenses buffer (I work on contract) plus extra with a vague notion of using it all for a house deposit sometime in the future
ETFs 25k - dipping my toes in VAS, VTS, VEU, A200

I'm toying with whether I am going to be sick of renting soon and want to buy a place to live in, and what I should do with my money in the meantime to grow it but have it somewhat available. I see stuff about LICs and DSSPs, which would be fine for my income level but not if I want to pull the whole lot out at some stage and shift it to a PPOR.

When work is stable I'm living off half my income. My ultimate goal is FI or at least enough of a buffer that gives me the freedom to choose which work I'd like to do.

The guides I see for investment order talk about paying off your PPOR first, then investing elsewhere.

Does anyone have experience with doing this the other way around? Which are good investments to make if you then want to switch to paying off your home?


PDM

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Re: Australian Investing Thread
« Reply #4191 on: September 09, 2018, 04:46:58 AM »
That selection of ETFs doesn't make sense to me.
Why VAS and A200? That is a lot of doubling up.
Why VEU and VTS? US market + Rest of world excluding US?

MedusaMo

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Re: Australian Investing Thread
« Reply #4192 on: September 09, 2018, 05:52:35 AM »
That selection of ETFs doesn't make sense to me.
Why VAS and A200? That is a lot of doubling up.
Why VEU and VTS? US market + Rest of world excluding US?

I was thinking of leaving that detail out because I didn't want to distract from my question.

Got VAS, then saw A200 had better MER so bought that in another batch, why would 'doubling up' be an issue? I went for roughly half aus, half ex-aus (mostly US), so I just buy a batch of something when I have enough for a trade.

PDM

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Re: Australian Investing Thread
« Reply #4193 on: September 09, 2018, 03:56:37 PM »
Ok, to answer the question, it depends. Particularly on your view of the Australian property market. If you think it is currently a massive bubble and likely to strongly correct/crash then don't buy.

My wife and I don't own any property but may buy in the coming years. We've invested in ETFs and largely reduced our exposure to the ASX and Aussie economy (excluding our jobs). I'm pretty bearish on the AUD, Australian property and the ASC.

We do have a probably too large cash position in a "high" interest saver to use for a deposit if we do want to buy.

The order of investment advice is very situational dependent. If you already had a large loan then paying it off quickly is a guaranteed 4-5% return and you're not taxed on it. If you don't have any property then it depends on whether you're able to rent and still save a bunch to invest.

Also skewed by our massively inflated property prices.

deborah

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Re: Australian Investing Thread
« Reply #4194 on: September 09, 2018, 05:22:19 PM »
The investment order is optimal financially - it gives an order if you have everything - debt, PPOR... Few of us have everything.

However, there are other things in our lives to be considered. Many people also want to have investments even when they are paying off debt. Pure financial optimisation would be against this. But it gives more diversity, which reduces overall risk.

Your choices are your own. You need to be happy with what youíre doing.

Having the investment order as a starting point makes you justify your choices to yourself.

MedusaMo

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Re: Australian Investing Thread
« Reply #4195 on: September 10, 2018, 05:59:00 AM »
Ok, to answer the question, it depends. Particularly on your view of the Australian property market. If you think it is currently a massive bubble and likely to strongly correct/crash then don't buy.

My wife and I don't own any property but may buy in the coming years. We've invested in ETFs and largely reduced our exposure to the ASX and Aussie economy (excluding our jobs). I'm pretty bearish on the AUD, Australian property and the ASC.

We do have a probably too large cash position in a "high" interest saver to use for a deposit if we do want to buy.

The order of investment advice is very situational dependent. If you already had a large loan then paying it off quickly is a guaranteed 4-5% return and you're not taxed on it. If you don't have any property then it depends on whether you're able to rent and still save a bunch to invest.

Also skewed by our massively inflated property prices.

Thanks. I might refine the balance of my ETFs etc over time. I work in the resources industry on contract, so if mining dries up I want to be exposed to other industries, not have my income and investments tied up in the same basket.

I'm at the limit of the ING saver balance where the interest drops back to the base rate and considered opening a saver account at another bank to put more in, but the interest rate is just so low... I figure I should do something better with the money beyond keeping a 20% deposit if I have no immediate plans to buy.

If you buy property, would you sell off your ETFs to pay down the mortgage or would you keep them and at most use any dividends on the mortgage?

One strategy I saw was renting first and with the extra saved (I do save) buying up LICs on a DSSP (reinvested, tax-deferred), then when it's time to buy switch off the reinvestment and take the dividend as payment towards the mortgage. I have run some calcs on doing this after different years as I was concerned it would still take ages to pay back the loan (even if I leave buying till late I'd like it paid off before I hit 60). It looks like I could pay it off without selling off the investments, but it was a pretty rough calculator and I might be missing a few tax considerations.
Probably getting in the weeds here in my own situation, should ask an accountant.


Andy R

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Re: Australian Investing Thread
« Reply #4196 on: September 10, 2018, 06:54:11 AM »
Have you had a look at RAMS bonus saver. I think it's around 3%

I think you have it backwards. Debt recycling is where you get a loan for PPOR (which is not deductible), and as you save more than the repayments, you pay it into the loan and then borrow it back out to invest in shares. Then the interest on what you borrowed out is now tax deductible. Doing it the way you described doesn't make much sense. It would be better to just sell the shares once you buy the PPOR, pay it into the PPOR loan and redraw it out to rebuy the shares. This turns your debt from non-deductible to deductible (ie free money from the govt)

PDM

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Re: Australian Investing Thread
« Reply #4197 on: September 10, 2018, 11:18:46 PM »
Ok, to answer the question, it depends. Particularly on your view of the Australian property market. If you think it is currently a massive bubble and likely to strongly correct/crash then don't buy.

My wife and I don't own any property but may buy in the coming years. We've invested in ETFs and largely reduced our exposure to the ASX and Aussie economy (excluding our jobs). I'm pretty bearish on the AUD, Australian property and the ASC.

We do have a probably too large cash position in a "high" interest saver to use for a deposit if we do want to buy.

The order of investment advice is very situational dependent. If you already had a large loan then paying it off quickly is a guaranteed 4-5% return and you're not taxed on it. If you don't have any property then it depends on whether you're able to rent and still save a bunch to invest.

Also skewed by our massively inflated property prices.
I work in the resources industry on contract, so if mining dries up I want to be exposed to other industries, not have my income and investments tied up in the same basket.

I'm at the limit of the ING saver balance where the interest drops back to the base rate and considered opening a saver account at another bank to put more in, but the interest rate is just so low... I figure I should do something better with the money beyond keeping a 20% deposit if I have no immediate plans to buy.

If you buy property, would you sell off your ETFs to pay down the mortgage or would you keep them and at most use any dividends on the mortgage?

One strategy I saw was renting first and with the extra saved (I do save) buying up LICs on a DSSP (reinvested, tax-deferred), then when it's time to buy switch off the reinvestment and take the dividend as payment towards the mortgage. I have run some calcs on doing this after different years as I was concerned it would still take ages to pay back the loan (even if I leave buying till late I'd like it paid off before I hit 60). It looks like I could pay it off without selling off the investments, but it was a pretty rough calculator and I might be missing a few tax considerations.
Probably getting in the weeds here in my own situation, should ask an accountant.

We don't plan on selling the ETFs to buy a home - instead paying a 20% deposit with cash money. The idea of the ETFs is to distribution reinvest and let it grow, then keep that for FIRE. Then pay off the mortgage.

It probably isn't the optimal use of a chunk of cash - keeping it in RAMS saver 3% - sort of treading water against inflation - however with a tentative plan to look at buying in the next few years or so it doesn't make too much sense to us to buy into an ETF. I like a longer investment timeframe - 7+ years maybe?




« Last Edit: September 10, 2018, 11:23:56 PM by PDM »

MedusaMo

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Re: Australian Investing Thread
« Reply #4198 on: September 11, 2018, 06:14:08 AM »
Have you had a look at RAMS bonus saver. I think it's around 3%

I think you have it backwards. Debt recycling is where you get a loan for PPOR (which is not deductible), and as you save more than the repayments, you pay it into the loan and then borrow it back out to invest in shares. Then the interest on what you borrowed out is now tax deductible. Doing it the way you described doesn't make much sense. It would be better to just sell the shares once you buy the PPOR, pay it into the PPOR loan and redraw it out to rebuy the shares. This turns your debt from non-deductible to deductible (ie free money from the govt)

I haven't looked into debt recycling yet, interesting, thanks.

MedusaMo

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Re: Australian Investing Thread
« Reply #4199 on: September 11, 2018, 06:18:34 AM »
Ok, to answer the question, it depends. Particularly on your view of the Australian property market. If you think it is currently a massive bubble and likely to strongly correct/crash then don't buy.

My wife and I don't own any property but may buy in the coming years. We've invested in ETFs and largely reduced our exposure to the ASX and Aussie economy (excluding our jobs). I'm pretty bearish on the AUD, Australian property and the ASC.

We do have a probably too large cash position in a "high" interest saver to use for a deposit if we do want to buy.

The order of investment advice is very situational dependent. If you already had a large loan then paying it off quickly is a guaranteed 4-5% return and you're not taxed on it. If you don't have any property then it depends on whether you're able to rent and still save a bunch to invest.

Also skewed by our massively inflated property prices.
I work in the resources industry on contract, so if mining dries up I want to be exposed to other industries, not have my income and investments tied up in the same basket.

I'm at the limit of the ING saver balance where the interest drops back to the base rate and considered opening a saver account at another bank to put more in, but the interest rate is just so low... I figure I should do something better with the money beyond keeping a 20% deposit if I have no immediate plans to buy.

If you buy property, would you sell off your ETFs to pay down the mortgage or would you keep them and at most use any dividends on the mortgage?

One strategy I saw was renting first and with the extra saved (I do save) buying up LICs on a DSSP (reinvested, tax-deferred), then when it's time to buy switch off the reinvestment and take the dividend as payment towards the mortgage. I have run some calcs on doing this after different years as I was concerned it would still take ages to pay back the loan (even if I leave buying till late I'd like it paid off before I hit 60). It looks like I could pay it off without selling off the investments, but it was a pretty rough calculator and I might be missing a few tax considerations.
Probably getting in the weeds here in my own situation, should ask an accountant.

We don't plan on selling the ETFs to buy a home - instead paying a 20% deposit with cash money. The idea of the ETFs is to distribution reinvest and let it grow, then keep that for FIRE. Then pay off the mortgage.

It probably isn't the optimal use of a chunk of cash - keeping it in RAMS saver 3% - sort of treading water against inflation - however with a tentative plan to look at buying in the next few years or so it doesn't make too much sense to us to buy into an ETF. I like a longer investment timeframe - 7+ years maybe?

Yeah, your strategy to keep was my initial thinking too.

I don't know what else to do with a mid-term holding. Seems caught between low risk/low interest and the longer term volatile options.

Thanks