Author Topic: Australian Investing Thread  (Read 1317782 times)

Zebu12

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Re: Australian Investing Thread
« Reply #4400 on: February 04, 2019, 10:56:07 PM »
Hey Folks,

I need some input from fellow Aussies.  ( or anyone for that mater!! ) . I have  a rather large portfolio iím handling and trying to get sorted.

 I posted it over in the case studies area:
https://forum.mrmoneymustache.com/case-studies/help-with-a-huge-$-portfolio-(australia)/


Welcome some feedback!! cheers
« Last Edit: February 04, 2019, 11:00:57 PM by Zebu12 »

Trevor Reznik

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Re: Australian Investing Thread
« Reply #4401 on: February 06, 2019, 12:52:18 AM »
Love it when AU$ drops.  VGS up 2% today.

itchyfeet

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Re: Australian Investing Thread
« Reply #4402 on: February 06, 2019, 11:42:34 AM »
Maybe I see FX risk as being a major risk as I live outside Australia.

In late 2014 I negotiated to take a job OS and agreed to get paid in USD. At the time I negotiated we agreed to an FX rate of 0.95, as the AUD had just started dropping after years near parity with the USD, and I proposed to my employer to use the average FX rate of the 3 preceding years.

I moved OS in early 2015 and the FX rate has averaged around 0.75 the past four years.

I accidentally received a 30% pay rise.

I am very happy with how things have played out and I would not want to find myself on the other side of this and be drawing down on a portfolio that suddenly dropped 30% and didnít recover for 4 years, and shows no signs of recovering.

The AUD is notoriously volatile which is a big reason itís a popular currency with FX traders. Meanwhile the GBP has dropped 25% or so against the Euro since 2016. Currencies move quite violently all the time, amd often unpredictably.

On the other hand in the past 20 years the Australian economy has grown pretty much by around to 2-4% every year. Consistently.

The volatility (risk) between the Australian economy and the AUD is not comparable.

I do agree that some diversity away from Australia makes 100% good sense (who knows what could befall Australia), and I am targeting 30% of my stash, but I canít agree with the conclusion that having too much invested in Australia is the riskiest thing you can do as an Australian resident. There must be much more risky things to do with ones money 😁.

@Andy R thanks for your ideas on hedging foreign investments. I have started looking into this after your comments.


deborah

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Re: Australian Investing Thread
« Reply #4403 on: February 06, 2019, 12:32:34 PM »
Volatility depends on your comparison. For instance, if you compare the AUD to the Canadian dollar, they are almost lock step - because the two countries have similar economies.

If you live somewhere, it makes sense to have a bias toward that currency - not all, or most. As @itchyfeet says, 30% is a lot if youíre on the wrong end of it. Keeping in home currency avoids that at the risk of the country going bad. There is the oft cited comparison with Argentina. In 1900, the two countries with the wealthiest citizens in the world were Australia and Argentina. This changed. Depending on the comparison, weíre still there, but Argentina is nowhere near where it was. We can be dismissive towards our politicians and our businesses and our response to environmental issues, and can see places where itís possible that weíre losing ground, so that we could be this centuryís Argentina. On the other hand, we may not. A century is not long when youíre talking about ER and retirements of up to 60 or 70 years.

Zebu12

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Re: Australian Investing Thread
« Reply #4404 on: February 13, 2019, 10:50:24 PM »
Hoping someone can explain why 10year  AUD bond yields have dropped so fast in the last  few months.

https://tradingeconomics.com/australia/government-bond-yield

I get how bonds pricing works. But i must be missing something here.

From my perspective:
- seems the likely hood of an interest rate increase has evaporated - and next move may be down - if not sideways (here and the US) . So wouldnt that mean there is less risk of a bond yield dropping (ie govt issuing bonds at a higher rate) - hence the bond should hold its value?

- also seems there has been a big influx of cash into bonds as the storm clouds build. So wouldn't that push demand prices up? (or does it work in reverse - more people want bonds - so govt issues more at lower rates?  (But wasn't the last 10year  bond issued 2.75%?

mjr

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Re: Australian Investing Thread
« Reply #4405 on: February 14, 2019, 02:19:38 AM »
I am by no means an expert in this area, so these are my idle thoughts only.

Looks to me like a bunch of money went into bonds as the share market took its tumble in late 2018/early 2019.  As you say, this demand for bonds pushed their price up.  Bond yields move in the opposite direction to bond prices and down they went.

marty998

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Re: Australian Investing Thread
« Reply #4406 on: February 15, 2019, 12:48:15 AM »
Five year chart of VAS (in yellow) against VHY (black) in share price performance terms. VHY obviously has a slightly higher yield, but damn, not enough to make up for this gap.
« Last Edit: February 15, 2019, 12:50:21 AM by marty998 »

Trevor Reznik

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Re: Australian Investing Thread
« Reply #4407 on: February 15, 2019, 01:18:18 AM »
Five year chart of VAS (in yellow) against VHY (black) in share price performance terms. VHY obviously has a slightly higher yield, but damn, not enough to make up for this gap.

I wonder what happens to these 'high yield' ETFs in a GFC type scenario if dividends are being cut.  Your stock tanks, it keeps spewing out its worth in dividends, it tanks some more, then a few of the big companies within it cut their dividend and are cast out of the 'high yield' index, sold cheap.  Eventually the crisis is over, prices recover, dividends are reinstated and your ETF buys the companies back at a much higher price.  Bought high, sold low, bought high.