Author Topic: Australian Investing Thread  (Read 617225 times)

FFA

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Re: Australian Investing Thread
« Reply #3100 on: May 09, 2017, 11:02:52 PM »
I don't see much key man risk in the traditional LIC's. Maybe of these 5, I rate Frank Gooch at MLT the highest and if he disappeared it might leave a gap. The risks I see are - NTA discounts (even if you're buying at a discount, it could get bigger), concentration risk. These LIC's are even heavier in the banks than the index itself. There are so many other products now both ETF's and LIC's that help you diversify, some examples I've posted about and hold include MVW, EX20, MVS (ETF's) and PIC. I also hold ARG of the five traditional LIC's mentioned. There is nothing wrong with them at all, especially at NTA discounts, but I'd just pick one or two instead of all five, and then add some other products that improve the diversification of your underlying investment and avoid having all your eggs in the traditional LIC basket (unlikely but just in case).

I don't think you can look at the franking of VAS vs traditional LIC's in isolation. Even more so as a driver to decide your asset allocation. You need to think about total returns - capital, income, tax. Not just one aspect of tax. The key reason to invest globally is access to a whole raft of companies like Google, Amazon, Apple, Facebook, etc that you have no hope of accessing in the Australian market which is 2-3% of global equities. The Oz market is very small and very concentrated. Historically it has held up very well versus global indices but that may not be the case forever, so these are the factors I'd be thinking about
What do you think about reversion to the mean theory? Australian shares (ASX200 All Ordinaries) has had 9.1% return over the last 30 years. That`s very good.

A silly question. Can a LIC go bust/bankrupt and all their shareholders lose money? Can that happen to an ETF (such as Vanguard)?
I generally agree with reversion to the mean, but trying to predict the timing is the difficult part. Most experts (including vanguard) are saying expect much lower returns over the next 30 years because we start at higher valuations (e.g. P/E) and low interest rates.

Not a silly question at all. Best always to be skeptical of any investment. Yes anything's possible. Check on any gearing/leverage being used in the investment mandate. Funds investing in microcaps or other illiquid markets may have to suspend redemptions for periods. I avoid synthetic ETF's where they use options or other derivatives, you always want the ETF to be holding the underlying assets directly, i.e. "replication of the index". There's always a risk of fraud/rogue trading which I think is probably less at a Vanguard or a traditional LIC where there is less of a performance fee / bonus incentive. I think these risks a generally very low if you stick to mainstream LIC/ETF's. But it wouldn't heard to spread your investments around a little just to limit the risk. Very low probability but very high consequence if it were to ever happen!

Realist35

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Re: Australian Investing Thread
« Reply #3101 on: May 10, 2017, 04:44:19 AM »
I don't see much key man risk in the traditional LIC's. Maybe of these 5, I rate Frank Gooch at MLT the highest and if he disappeared it might leave a gap. The risks I see are - NTA discounts (even if you're buying at a discount, it could get bigger), concentration risk. These LIC's are even heavier in the banks than the index itself. There are so many other products now both ETF's and LIC's that help you diversify, some examples I've posted about and hold include MVW, EX20, MVS (ETF's) and PIC. I also hold ARG of the five traditional LIC's mentioned. There is nothing wrong with them at all, especially at NTA discounts, but I'd just pick one or two instead of all five, and then add some other products that improve the diversification of your underlying investment and avoid having all your eggs in the traditional LIC basket (unlikely but just in case).

I don't think you can look at the franking of VAS vs traditional LIC's in isolation. Even more so as a driver to decide your asset allocation. You need to think about total returns - capital, income, tax. Not just one aspect of tax. The key reason to invest globally is access to a whole raft of companies like Google, Amazon, Apple, Facebook, etc that you have no hope of accessing in the Australian market which is 2-3% of global equities. The Oz market is very small and very concentrated. Historically it has held up very well versus global indices but that may not be the case forever, so these are the factors I'd be thinking about
What do you think about reversion to the mean theory? Australian shares (ASX200 All Ordinaries) has had 9.1% return over the last 30 years. That`s very good.

A silly question. Can a LIC go bust/bankrupt and all their shareholders lose money? Can that happen to an ETF (such as Vanguard)?
I generally agree with reversion to the mean, but trying to predict the timing is the difficult part. Most experts (including vanguard) are saying expect much lower returns over the next 30 years because we start at higher valuations (e.g. P/E) and low interest rates.

Not a silly question at all. Best always to be skeptical of any investment. Yes anything's possible. Check on any gearing/leverage being used in the investment mandate. Funds investing in microcaps or other illiquid markets may have to suspend redemptions for periods. I avoid synthetic ETF's where they use options or other derivatives, you always want the ETF to be holding the underlying assets directly, i.e. "replication of the index". There's always a risk of fraud/rogue trading which I think is probably less at a Vanguard or a traditional LIC where there is less of a performance fee / bonus incentive. I think these risks a generally very low if you stick to mainstream LIC/ETF's. But it wouldn't heard to spread your investments around a little just to limit the risk. Very low probability but very high consequence if it were to ever happen!
Thank a lot for such a knowledgeable reply:).

If we say index funds (such as VAS or VGS) will have an average accumulation growth of 5% over the next 15 years, would that be an underestimate or overestimate in your opinion? I am creating a spreadsheet with some projections of our portfolio and years to retirement. It includes both properties and shares, so I have assumed 5% capital growth for IPs and 5% accumulation growth (with dividends reinvested) for shares.

FFA

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Re: Australian Investing Thread
« Reply #3102 on: May 10, 2017, 05:24:42 AM »
I think 5% total return for VAS/VGS is a reasonable/safe assumption for long-term. Historical has been more like 8-10%. Given the current high levels, we should expect less, maybe 6-8%, so I'd say 5% is on the underestimate side. If you expect any less than that it would not make sense to invest in shares, i.e. the risk is not warranted. However it's never a straight line so 5% p.a. over 15-20 years could see any given year up or down 20% (or 50% in a real market meltdown). These kind of numbers can misrepresent the volatility and people who don't appreciate that will freak out and sell at the bottoms. No comment on IP's as it really depends a lot on the IP, location etc.

Realist35

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Re: Australian Investing Thread
« Reply #3103 on: May 10, 2017, 07:54:03 AM »
I think 5% total return for VAS/VGS is a reasonable/safe assumption for long-term. Historical has been more like 8-10%. Given the current high levels, we should expect less, maybe 6-8%, so I'd say 5% is on the underestimate side. If you expect any less than that it would not make sense to invest in shares, i.e. the risk is not warranted. However it's never a straight line so 5% p.a. over 15-20 years could see any given year up or down 20% (or 50% in a real market meltdown). These kind of numbers can misrepresent the volatility and people who don't appreciate that will freak out and sell at the bottoms. No comment on IP's as it really depends a lot on the IP, location etc.
Cool, I'll plug in 6% in my spreadsheet, that will give me earlier retirement haha

Itchyfeet

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Re: Australian Investing Thread
« Reply #3104 on: May 11, 2017, 09:16:42 AM »
I really don't see how IPs in any Oz cap city can have cap gains of 5% pa over the next 15-30 years. They are already pretty unaffordable.

Maybe 3%+ net rental yield.

Really, what is the driver for growth beyond pure speculation?


Ozstache

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Re: Australian Investing Thread
« Reply #3105 on: May 11, 2017, 03:42:50 PM »
I really don't see how IPs in any Oz cap city can have cap gains of 5% pa over the next 15-30 years. They are already pretty unaffordable.

Maybe 3%+ net rental yield.

Really, what is the driver for growth beyond pure speculation?

Property fans say continued under supply driven mainly by population growth through immigration will keep growth going. 

Itchyfeet

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Re: Australian Investing Thread
« Reply #3106 on: May 11, 2017, 10:15:11 PM »
Well, I guess we will have to wait and see as I certainly don't have a crystal ball.

mpcharles

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Re: Australian Investing Thread
« Reply #3107 on: May 12, 2017, 04:31:52 AM »
Hey guys. My first ETF purchase, I currently have 30k$ to invest. I want an ETF prefer usa/world where I can get paid dividends and have them auto reinvested or drp. Any suggestions? I use a online broking.

Sent from my ASUS_Z00AD using Tapatalk


mjr

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Re: Australian Investing Thread
« Reply #3108 on: May 12, 2017, 04:54:42 AM »
VGS

JJ

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Re: Australian Investing Thread
« Reply #3109 on: May 14, 2017, 11:46:48 PM »
Do you think it's time to ask for a forum rather than a thread? 63 pages is a lot to wade through...
Mind ok, everything ok

Sydneystache

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Re: Australian Investing Thread
« Reply #3110 on: May 15, 2017, 12:40:43 AM »
Do you think it's time to ask for a forum rather than a thread? 63 pages is a lot to wade through...

Have you gone through "Overhead at work"? This thread's a baby compared to it.

Dropbear

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Re: Australian Investing Thread
« Reply #3111 on: May 15, 2017, 05:33:18 AM »
Do you think it's time to ask for a forum rather than a thread? 63 pages is a lot to wade through...

+1

Yes, please!  This thread is so full of useful info, except that everything is all mixed up together.  It'd be wonderful to have separate threads for various AU-specific things like asset allocation, super, tax, and smashed avo sangers.

turboslob

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Re: Australian Investing Thread
« Reply #3112 on: May 16, 2017, 02:26:05 AM »
Can someone slap me with a reality check?

Finally saved up for a parcel of ETFs (VTS, VEU or VAS), but when I look at recent performance they've all done really well of late. This makes me think I should hold it in cash (getting 3%) until a drop.

My mind conflicts between; 'buy low/when confidence is low' and 'long term the market always rises'.

Am I being clever, stupid or somewhere in the middle? Investing for an approx 10 year term at this stage.

Appreciate any advice as I only have a small moustache.

mjr

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Re: Australian Investing Thread
« Reply #3113 on: May 16, 2017, 04:16:21 AM »
If you've just managed to save up enough for "a parcel", I'm guessing you're talking about $10,000 worth or maybe less.

I know that if you're investing all/most of your available cash, then the amount is not really relevant - it's 100% of your investable funds and the thought of it losing value is scary.  But if it's of that order, it's not really *that* much money.

You know the rest of the drill - you can't time the market. 

You have a 10 year investment horizon.  Get the money in and start earning the returns and keep saving.  Even if it drops tomorrow, you care only about what the returns will be in 10 years.

Itchyfeet

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Re: Australian Investing Thread
« Reply #3114 on: May 16, 2017, 10:36:58 AM »
Agree with Mjr. Don't worry what the market is doing. Invest the money and focus on saving to invest your 2nd, 3rd and 4th parcels. Just keep piling up the stash. the market will drop from time to time, but don't let that deter you. Start investing and keep investing!

steveo

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Re: Australian Investing Thread
« Reply #3115 on: May 16, 2017, 04:40:11 PM »
I just keep investing. If it goes down it goes down. It's more likely to keep going up.

Dropbear

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Re: Australian Investing Thread
« Reply #3116 on: May 18, 2017, 07:32:43 AM »
Back to a super question - I'm now in the process of switching out of ING and into Sunsuper, and noticed that the international index options for hedged and unhedged investments have identical fees.

Doing more reading up about this hedged / unhedged question, most articles weigh these alternatives on the basis that hedged funds are usually higher cost, and yet still generally recommend a personal decision somewhere between 100% unhedged or a 50/50 mix.  Given that Sunsuper's funds are the same price, would I be right in thinking that this makes the 50/50 option relatively more attractive?

(For context: I have previously decided upon VGS over VGAD or a 50/50 mix for international allocations outside of super, and from what I've read on various forums, this appears to be a common choice?)

I also noticed that Sunsuper has no buy / sell spread, and that there is no automatic rebalancing of savings accounts.  So this means if I log in annually to rebalance manually, it'll be free.

kivex

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Re: Australian Investing Thread
« Reply #3117 on: May 18, 2017, 07:35:05 PM »
Back to a super question - I'm now in the process of switching out of ING and into Sunsuper, and noticed that the international index options for hedged and unhedged investments have identical fees.

Doing more reading up about this hedged / unhedged question, most articles weigh these alternatives on the basis that hedged funds are usually higher cost, and yet still generally recommend a personal decision somewhere between 100% unhedged or a 50/50 mix.  Given that Sunsuper's funds are the same price, would I be right in thinking that this makes the 50/50 option relatively more attractive?

I noticed the same with SunSuper and went 50/50 hedged/unhedged.

JamesSyd

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Re: Australian Investing Thread
« Reply #3118 on: May 18, 2017, 07:40:44 PM »
I am in the same boat needing to switch from ING super to another fund. I have about 120k in Australian shares and will continue to max out concessional contributions going forward.
I am finding it quite difficult to figure out the best value super fund because I find all the terminology confusingly nondescript and the total fees unclear... any advice?
Thanks

bigchrisb

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Re: Australian Investing Thread
« Reply #3119 on: May 18, 2017, 07:49:32 PM »
I am in the same boat needing to switch from ING super to another fund. I have about 120k in Australian shares and will continue to max out concessional contributions going forward.
I am finding it quite difficult to figure out the best value super fund because I find all the terminology confusingly nondescript and the total fees unclear... any advice?
Thanks

The opacity of super funds, combined with their ability to change the rules mid-game is one of the major reasons I moved to operating a SMSF.  It was borderline worth it at $200k, and now ($470k) I'm well ahead, with full transparency and control.

GT

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Re: Australian Investing Thread
« Reply #3120 on: May 18, 2017, 09:03:49 PM »
I am in the same boat needing to switch from ING super to another fund. I have about 120k in Australian shares and will continue to max out concessional contributions going forward.
I am finding it quite difficult to figure out the best value super fund because I find all the terminology confusingly nondescript and the total fees unclear... any advice?
Thanks

The opacity of super funds, combined with their ability to change the rules mid-game is one of the major reasons I moved to operating a SMSF.  It was borderline worth it at $200k, and now ($470k) I'm well ahead, with full transparency and control.

Would you recommend it for the $330k combined my wife and I have?

bigchrisb

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Re: Australian Investing Thread
« Reply #3121 on: May 18, 2017, 09:16:44 PM »
If you are comfortable with doing your own investments, then yes.

If you hold insurance with a conventional super fund, may be worth keeping a small balance in your existing fund for the insurance.  They seem to be able to get better pricing than I've managed with the SMSF.


Abundant life

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Re: Australian Investing Thread
« Reply #3122 on: May 19, 2017, 02:41:59 PM »
I am in the same boat needing to switch from ING super to another fund. I have about 120k in Australian shares and will continue to max out concessional contributions going forward.
I am finding it quite difficult to figure out the best value super fund because I find all the terminology confusingly nondescript and the total fees unclear... any advice?
Thanks.

The opacity of super funds, combined with their ability to change the rules mid-game is one of the major reasons I moved to operating a SMSF.  It was borderline worth it at $200k, and now ($470k) I'm well ahead, with full transparency and control.
I'm in the same boat with ING, just when I got it all established last July, now the fees are increasing five fold, argh!

My problem is the CGT if I sell the share parcels now will be 15%, if I can wait until after 12 months it will reduce to 10%.
 
I have about half of the super in share parcels, mostly ETFs and the other half in cash. I've been thinking of doing a partial roll-over of the cash component to Hostplus, then when I reach the 12 month point, selling each share holding and buying it in the new fund on the same day. When all shares are liquidated in ING, then rolling over the cash to the new fund.

However the point bigchrisb raises concerns me too, they can change the rules on a whim. It is a PITA dealing with the red tape.

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Re: Australian Investing Thread
« Reply #3123 on: May 19, 2017, 03:32:57 PM »
The way these big firms can change the rules is one reason why I have an SMSF. I only have about  $70k in mine but my costs are low as SMSF administration is my job. I don't charge myself a cent. My only costs are the levy, the audit fee and insurance.

Wadiman

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Re: Australian Investing Thread
« Reply #3124 on: May 19, 2017, 03:42:01 PM »
Hi Abundant Life -

I hear you re ING - have cashed out all my investments and am just waiting for the rollover to E-Superfund (SMSF) to be completed.  It was hard taking a big CGT hit ($3k) but I will recover this within a year compared to staying on with ING.

FFA

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Re: Australian Investing Thread
« Reply #3125 on: May 19, 2017, 08:27:30 PM »
i've made the point before about industry funds, if you are just doing a simple index portfolio. Understand there are some reservations about union linkages, pooled investments and transparency in industry funds, and no intention to revisit those specifically over again.

However just to point out there are also "SMSF-lite" options in the industry funds. I know AustralianSuper and Hostplus have options where you can invest in ASX200 and a subset of LIC/ETF's. Just to put it out there as another option which I think is lower cost, lower responsibility versus setting up a SMSF, and might be suitable if your investment strategy is simple. e.g. Hostplus choiceplus is $180 p.a. portfolio admin fee. It should also be isolated from others to address bigchris' concern about transparency/control. If you are doing complex stuff or if you just want to have an SMSF, then by all means go the SMSF route. I'm not arguing against it just to make people aware of other options that might suit their needs better and at lower cost.

Of course there's always a risk industry funds could change their fee structure down the track, but it seems less risky given they are not for profit organizations unlike ING. The same risk also applies to SMSF admin providers, I guess.

FFA

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Re: Australian Investing Thread
« Reply #3126 on: May 19, 2017, 08:33:06 PM »
Regarding hedged/unhedged, I aim to hold 10-20% of global shares hedged (using Sunsuper). I think the cost (MER) is not the key consideration. Also remember there are other hedging costs that are outside the MER but embedded in the unit prices. I'd be thinking more about your currency exposure in your expenses. i.e. do you travel overseas a lot, have any ongoing bills in foreign currency (memberships), etc. If you have a very domestic Oz lifestyle, it makes sense to be more AUD hedged. If you have a more global lifestyle and expenses, then it's probably better to be more unhedged. It's subjective so similar to the broader asset allocation I don't think there's any right or wrong answer - just decide a level that makes sense for your situation and stick to it long-term.

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Re: Australian Investing Thread
« Reply #3127 on: May 20, 2017, 12:13:32 AM »
Hi All,

I'm new to the forum. While I have no plans for early retirement (I really love my job), I am a keen investor (for financial security in retirement as well as fun!) and it has been great to be able to read so much Oz-centric information given the massive US-focus of this site.

I've just read all 63 pages of the thread...took me about 2 weeks.

Thanks to all those who have participated with their questions, knowledge and insight. Its much appreciated.

Popgun

Abundant life

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Re: Australian Investing Thread
« Reply #3128 on: May 20, 2017, 01:55:31 PM »
i've made the point before about industry funds, if you are just doing a simple index portfolio. Understand there are some reservations about union linkages, pooled investments and transparency in industry funds, and no intention to revisit those specifically over again.

However just to point out there are also "SMSF-lite" options in the industry funds. I know AustralianSuper and Hostplus have options where you can invest in ASX200 and a subset of LIC/ETF's. Just to put it out there as another option which I think is lower cost, lower responsibility versus setting up a SMSF, and might be suitable if your investment strategy is simple. e.g. Hostplus choiceplus is $180 p.a. portfolio admin fee. It should also be isolated from others to address bigchris' concern about transparency/control. If you are doing complex stuff or if you just want to have an SMSF, then by all means go the SMSF route. I'm not arguing against it just to make people aware of other options that might suit their needs better and at lower cost.

Of course there's always a risk industry funds could change their fee structure down the track, but it seems less risky given they are not for profit organizations unlike ING. The same risk also applies to SMSF admin providers, I guess.
Thanks FFA, yes what I have in ING is classed as a 'SMSF-lite', and Hostplus offers the same thing. (Scott Pape recommends Hostplus as a low-cost good value fund, although he uses the indexed balanced fund option, rather than the DIY choice plus).

What I like to be able to do is the real-time trading, so I can pick what price and when I'm prepared to buy and sell, (not that I want to sell, but just in case, I have that option).

There are no delays once you put an order in, I was able to pick up a bargain on the afternoon of the US election.

I know it sounds like market-timing, but when buying ETF's within super for me, it is in large chunks where a modest fluctuation can mean quite a difference in price. Also optimising the trading costs.






johnnydoe

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nnls

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Re: Australian Investing Thread
« Reply #3130 on: May 26, 2017, 03:18:07 AM »
hi

So a guy from work was talking about Dividend Harvesting Funds, I am looking into them though from what he said it sounds like it might be too good to be true. He claims to consistently get 11% returns, though even their website doesnt say that.

Though it does pay dividends monthly which could be an ok passive income stream


I will probably stick with vanguard but figured I would come on here and ask some people with a lot more knowledge for their opinions

JamesSyd

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Re: Australian Investing Thread
« Reply #3131 on: May 26, 2017, 03:25:37 AM »
hi

So a guy from work was talking about Dividend Harvesting Funds, I am looking into them though from what he said it sounds like it might be too good to be true. He claims to consistently get 11% returns, though even their website doesnt say that.

Though it does pay dividends monthly which could be an ok passive income stream


I will probably stick with vanguard but figured I would come on here and ask some people with a lot more knowledge for their opinions
61% financials...

And fees very high as well partly because they do a lot of trading. I.e rebalancing every two months to hold stocks before they go ex-div.

mjr

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Re: Australian Investing Thread
« Reply #3132 on: May 26, 2017, 05:28:55 AM »
Looks to me like they're mechanically converting capital gains into income.  So you'd expect low capital gains and an artificially inflated yield.  Indeed, their growth since inception (29/10/14) is only 3.18 p.a. %

They can't possibly deliver more total return than the underlying shares and as James said their fees are high due to their trading frequency.

I wouldn't touch them with a barge pole.

Rob_S

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Re: Australian Investing Thread
« Reply #3133 on: May 26, 2017, 10:19:49 PM »
Take a look at this thread for a decent commentary on the dividend harvesting ETF HVST: http://forums.whirlpool.net.au/archive/2393129

I occassionaly consider picking up some HVST once we have both stopped working and can make best use of the franking credits. In the end I figure VHY is easier. The lack of capital gains is the deal breaker for me.

bigchrisb

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Re: Australian Investing Thread
« Reply #3134 on: May 28, 2017, 06:21:10 PM »
Interesting bit of top-down data on fees from super from this article:
http://www.canberratimes.com.au/business/banking-and-finance/australians-paying-31-billion-in-super-fees-anually-20170528-gwexb2.html

Total admin fees paid to super industry:
$31b.
Industry funds: $13B to manage $942b = 1.3%
Retail funds: $15.5B to manage $638b = 2.4%
SMSF: $2.1B to manage $660b = 0.3%.

I know where I'd rather have my money.

JamesSyd

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Re: Australian Investing Thread
« Reply #3135 on: May 29, 2017, 07:21:18 PM »
Interesting bit of top-down data on fees from super from this article:
http://www.canberratimes.com.au/business/banking-and-finance/australians-paying-31-billion-in-super-fees-anually-20170528-gwexb2.html

Total admin fees paid to super industry:
$31b.
Industry funds: $13B to manage $942b = 1.3%
Retail funds: $15.5B to manage $638b = 2.4%
SMSF: $2.1B to manage $660b = 0.3%.

I know where I'd rather have my money.

I am leaning towards an SMSF, mind if I ask you some questions?

-Do you use esuperfund (if not how have you set it up)? if so how have you found it?

-My main concern is the extra admin; is that time consuming or pretty much automated by them?

-Their fees are $800 per year but they state:
"When setting up a SMSF it is important to understand that additional fees may apply that must be carefully considered prior to making a decision to setup a SMSF including an ATO Supervisory Levy , Company Trustee Setup Fee (where applicable) , and Investment Fees ."
Google tells me the ATO Supervisory Levy is a few hundred $, don't think a company trustee is neccessary, and investment fees are pretty straight forward (i.e. commsec trading fees and ETF management fees). Are those assumptions correct? Are there any other fees to consider?

Cheers

mjr

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Re: Australian Investing Thread
« Reply #3136 on: May 29, 2017, 07:31:51 PM »
Yes, the ATO levy is $259 , payable in advance, so you'll pay double that on startup.

Investment fees are straight forward, as you've listed.

I strongly suggest you set up a corporate trustee.  Then no matter how your trustee situation changes over the decades, assets bought by the SMSF can stay owned by the trustee.  It's less than a grand.

I can't comment on esuperfund, other than I'm looking closely at them for my parents and they have a special sign-on offer that ends tomorrow.

Rowellen

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Re: Australian Investing Thread
« Reply #3137 on: May 29, 2017, 08:08:44 PM »
I second what mjr said. I haven't had a lot to do with esuperfund except with one client who left them to come to the firm I worked for. I had a look into them at the time. My understanding is they work on a purely automated basis. The limit the types of investments that you can hold. Generally listed shares and certain managed funds only. I think they might even specify what bank accounts you can have. (This may have changed as it was about 4 years ago.) This is how they keep their costs down. They also told my client information that was incorrect / incomplete regarding an investment he made. They said he couldn't make this investment but what they meant was he couldnt make it and still use esuperfund as it wasn't on their approved list. Luckily he sought a second opinion has it could have cost him a lot of money. I'm not sure of the quality of output in general so I can't comment on that.

Corporate trustee has an annual fee of $47 a year. It goes up every July.

Audit fees. Not sure what esuperfund charges. They probably have a low cost provider.

Other costs would be documentation for starting a pension.

Actuarial fee if the fund is part pension / part accumulation.

Ozstache

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Re: Australian Investing Thread
« Reply #3138 on: May 30, 2017, 06:47:33 PM »
I looked into eSuperFund a while back and found that not only were their investment options very limited but buried deep in their PDS are some notable fees they cream off some of the options you can choose. eg. Term deposits has something like a 1% fee deducted from the headline interest rate. Also, their bonus offers seem to perpetually renew, so I wouldn't worry too much about any impending closing date of an offer. I ended up giving them a miss and went with SunSuper instead.

marty998

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Re: Australian Investing Thread
« Reply #3139 on: May 31, 2017, 01:23:14 AM »
Oh god yes please set up a corporate trustee!

You will regret it painfully so if you don't.

Interesting bit of top-down data on fees from super from this article:
http://www.canberratimes.com.au/business/banking-and-finance/australians-paying-31-billion-in-super-fees-anually-20170528-gwexb2.html

Total admin fees paid to super industry:
$31b.
Industry funds: $13B to manage $942b = 1.3%
Retail funds: $15.5B to manage $638b = 2.4%
SMSF: $2.1B to manage $660b = 0.3%.

I know where I'd rather have my money.

I am leaning towards an SMSF, mind if I ask you some questions?

-Do you use esuperfund (if not how have you set it up)? if so how have you found it?

-My main concern is the extra admin; is that time consuming or pretty much automated by them?

-Their fees are $800 per year but they state:
"When setting up a SMSF it is important to understand that additional fees may apply that must be carefully considered prior to making a decision to setup a SMSF including an ATO Supervisory Levy , Company Trustee Setup Fee (where applicable) , and Investment Fees ."
Google tells me the ATO Supervisory Levy is a few hundred $, don't think a company trustee is neccessary, and investment fees are pretty straight forward (i.e. commsec trading fees and ETF management fees). Are those assumptions correct? Are there any other fees to consider?

Cheers

coachky

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Re: Australian Investing Thread
« Reply #3140 on: May 31, 2017, 01:58:21 AM »
Iíve just spent the last 2 weeks reading through this great thread and I learnt heaps! That being said, Iím wondering if someone could please help me out as I canít seem to find anything on living overseas and investing.

My wife and I (both 33) currently live in the UAE and have about AUD$225k in savings that we would like to invest in a passive portfolio. We have no debt and no property. We save around AUD$100k a year. We will probably remain overseas for the next 10 years before returning to Australia to retire. As we get paid in USD, would it make more sense to purchase VTS + VEU or purchase VAS + VGS?
 Iím leaning more towards VAS + VGS as I donít want to take the currency hit on converting our existing AUD savings to USD and our current buying power is greater if we buy AUD.

Also, as I would be purchasing through a brokerage in Luxembourg, would I still receive the franking benefits if I purchased VAS?

Finally, my super has the option to self invest with VAS, VTS or VEU, does it make sense to hold any of the funds in my super as well given that I will not be contributing to it until I get back or should I just leave it set to aggressive/high growth (40% Aussie shares/40% Intl hedged shares/20% diversified bonds)?

Thank you so much!

Itchyfeet

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Re: Australian Investing Thread
« Reply #3141 on: May 31, 2017, 10:57:24 AM »
Hey Coachky

DW and I are also working in the UAE enjoying tax free USD and I presume from your intro you are also not a tax resident of Australia.

I do not know all the correct answers to your questions, but will tell you what I do....and because your questions are directly relevant to me I welcome advice and corrections from the clever peeps on this thread.

We invest in a mix of VAS, VWRD and VDEM. We have own some property in Oz that is leveraged to a point that, with depreciation deductions, we don't pay tax. We also have a decent amount in super back in Oz, but are not adding to the stash.

We are not adding to super as we want a stash outside of super to fund our FIRE. We will FIRE when I am 46-47 and DW 40-41, so a long time till we can access super.

We are investing in international and emerging markets (in USD) because I know we will spend plenty of time (years most likely) outide Australia over the remainder of our life so having exposure to different currencies and markets works for us.

I also am a bit bullish on emerging markets.... but that is just a personal bet, not a recommendation.

I don't know if you saw Bill Evan (WBC) comments this week forecasting the AUD to continue to drop v the USD over the coming year. He was predicting 65c. If this happens it'll be a huge bonanza for us getting paid in USD and shipping cash back to Oz.

For VAS, as non-Oz tax residents we have to pay tax on un-franked dividends. No tax on franked dividends. Tax on unfranked dividends can be offset against tax losses on negatively geared property (confirmation from others please :-) )

 My understanding is that generally we won't be liable for CGT on selling VAS, except for any portion that relates to a sale of shares of Taxable Australian Property.... this part is a bit unclear for me so again I would value the knowledge of others..., we are not selling now just accumulating so this hasn't been an issue thus far. I figure any CGT will be quite insignificant.

For my part, I would be interested to hear the thoughts of others on investing in super as a non-tax resident. It seems to me that getting money into super is a good idea, but an even better idea if I wait until I get back to Australia and can benefit from some tax breaks by loading up my super then. I am thinking while out of Australia build up my non-super stash. When in Australia build up my super stash.


steveo

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Re: Australian Investing Thread
« Reply #3142 on: May 31, 2017, 04:42:57 PM »
I looked into eSuperFund a while back and found that not only were their investment options very limited but buried deep in their PDS are some notable fees they cream off some of the options you can choose. eg. Term deposits has something like a 1% fee deducted from the headline interest rate. Also, their bonus offers seem to perpetually renew, so I wouldn't worry too much about any impending closing date of an offer. I ended up giving them a miss and went with SunSuper instead.

This is good information.

coachky

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Re: Australian Investing Thread
« Reply #3143 on: June 01, 2017, 01:17:53 AM »
Hey Coachky

DW and I are also working in the UAE enjoying tax free USD and I presume from your intro you are also not a tax resident of Australia.

I do not know all the correct answers to your questions, but will tell you what I do....and because your questions are directly relevant to me I welcome advice and corrections from the clever peeps on this thread.

We invest in a mix of VAS, VWRD and VDEM. We have own some property in Oz that is leveraged to a point that, with depreciation deductions, we don't pay tax. We also have a decent amount in super back in Oz, but are not adding to the stash.

We are not adding to super as we want a stash outside of super to fund our FIRE. We will FIRE when I am 46-47 and DW 40-41, so a long time till we can access super.

We are investing in international and emerging markets (in USD) because I know we will spend plenty of time (years most likely) outide Australia over the remainder of our life so having exposure to different currencies and markets works for us.

I also am a bit bullish on emerging markets.... but that is just a personal bet, not a recommendation.

I don't know if you saw Bill Evan (WBC) comments this week forecasting the AUD to continue to drop v the USD over the coming year. He was predicting 65c. If this happens it'll be a huge bonanza for us getting paid in USD and shipping cash back to Oz.

For VAS, as non-Oz tax residents we have to pay tax on un-franked dividends. No tax on franked dividends. Tax on unfranked dividends can be offset against tax losses on negatively geared property (confirmation from others please :-) )

 My understanding is that generally we won't be liable for CGT on selling VAS, except for any portion that relates to a sale of shares of Taxable Australian Property.... this part is a bit unclear for me so again I would value the knowledge of others..., we are not selling now just accumulating so this hasn't been an issue thus far. I figure any CGT will be quite insignificant.

For my part, I would be interested to hear the thoughts of others on investing in super as a non-tax resident. It seems to me that getting money into super is a good idea, but an even better idea if I wait until I get back to Australia and can benefit from some tax breaks by loading up my super then. I am thinking while out of Australia build up my non-super stash. When in Australia build up my super stash.

Thanks for the reply Itchyfeet. I was also thinking about having half in USD and buying VWRD and the other half in AUD and buying VAS. Why did you not consider VGS? Did you want a fund listed in USD with more exposure to emerging markets? It would be great if the AUD dropped to 65 cents, but who knows really! Thanks again!

switch42

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Re: Australian Investing Thread
« Reply #3144 on: June 01, 2017, 02:11:28 AM »
I looked into eSuperFund a while back and found that not only were their investment options very limited but buried deep in their PDS are some notable fees they cream off some of the options you can choose. eg. Term deposits has something like a 1% fee deducted from the headline interest rate. Also, their bonus offers seem to perpetually renew, so I wouldn't worry too much about any impending closing date of an offer. I ended up giving them a miss and went with SunSuper instead.

This is good information.

I've just set up my smsf with esuperfund.  Still waiting for 12 months CGT discount on etfs before I rollover from ING (next week), but I've read all the info fairly thoroughly.

The interest rates I receive from a term deposit through esuperfund are the same as I'd receive through the bank.  eg ING

https://app.esuperfund.com.au/smsf-term-deposits/interest-rates.html
https://www.ingdirect.com.au/superannuation/smsf-term-deposit.html

both 2.7% for 1 year.

Yes, esuperfund take a cut, but it's not out of my return, it's out of ING's return.

There don't appear to be any restrictions on investments other than ATO restrictions, but if you invest outside their preferred service providers it makes a little more work for you at tax return time as they don't automate it.  From what I've read that's as simple as sending them a csv file of the last 12 months transactions.

https://www.esuperfund.com.au/investments/allowed




Ozstache

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Re: Australian Investing Thread
« Reply #3145 on: June 01, 2017, 04:17:40 AM »
I just had another look at eSuperFund's website and, as switch42 says, it does seem you can now choose other investments outside their chosen set as long as you accept the extra paperwork involved. I'm quite sure, but not 100%, that this was not an option when I looked at them in 2014.

Re the eSuperFund's fee cut I had mentioned, I can no longer find it in their PDS. When I was reviewing them as an option, I had an email exchange with the one of the managers (possibly even the boss) of eSuperFund and let them know I thought it was underhanded to bury a fee in a PDS and not clearly state it on their summary of fees on their main webpage. They told me they were meeting financial regs by disclosing it in the PDS only at which point I said thanks but no thanks. Looks like they have revised this policy, which is great for current and new investors.

deborah

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Re: Australian Investing Thread
« Reply #3146 on: June 01, 2017, 06:28:45 AM »
I just had another look at eSuperFund's website and, as switch42 says, it does seem you can now choose other investments outside their chosen set as long as you accept the extra paperwork involved. I'm quite sure, but not 100%, that this was not an option when I looked at them in 2014.

Re the eSuperFund's fee cut I had mentioned, I can no longer find it in their PDS. When I was reviewing them as an option, I had an email exchange with the one of the managers (possibly even the boss) of eSuperFund and let them know I thought it was underhanded to bury a fee in a PDS and not clearly state it on their summary of fees on their main webpage. They told me they were meeting financial regs by disclosing it in the PDS only at which point I said thanks but no thanks. Looks like they have revised this policy, which is great for current and new investors.
I had very similar views on eSuperFund when I was looking at it a few years ago. When it came up here, I was surprised that the fees were low enough to look at it, because it certainly wasn't a low cost alternative at that stage. Since everyone had a different take on it, I guessed it must have moved on. However, with such big changes in policy in just a few years, I wonder whether they will revert.



Itchyfeet

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Re: Australian Investing Thread
« Reply #3147 on: June 01, 2017, 06:46:07 AM »
Thanks for the reply Itchyfeet. I was also thinking about having half in USD and buying VWRD and the other half in AUD and buying VAS. Why did you not consider VGS? Did you want a fund listed in USD with more exposure to emerging markets? It would be great if the AUD dropped to 65 cents, but who knows really! Thanks again!

We are investing in VWRD and not VGS because we are paid in USD and I didn't want the FX costs of changing to AUD now, when we may end up using the USD in the future (toying with the idea of buying property here in Dubai for instance).

Of our NW, only about 10% is currently in USD. The other 90% is AUD.

Our increased exposure to emerging markets is the VDEM (this is part of our USD investments).

By far our biggest exposure is to Australian residential property. As I have mentioned before here, I am a little uneasy with this, but for non-financial reasons I have my hands a little tied at this time (ie DW wont agree to sell some. LOL)

FFA

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Re: Australian Investing Thread
« Reply #3148 on: June 01, 2017, 06:57:50 AM »
I just had another look at eSuperFund's website and, as switch42 says, it does seem you can now choose other investments outside their chosen set as long as you accept the extra paperwork involved. I'm quite sure, but not 100%, that this was not an option when I looked at them in 2014.

Re the eSuperFund's fee cut I had mentioned, I can no longer find it in their PDS. When I was reviewing them as an option, I had an email exchange with the one of the managers (possibly even the boss) of eSuperFund and let them know I thought it was underhanded to bury a fee in a PDS and not clearly state it on their summary of fees on their main webpage. They told me they were meeting financial regs by disclosing it in the PDS only at which point I said thanks but no thanks. Looks like they have revised this policy, which is great for current and new investors.
I had very similar views on eSuperFund when I was looking at it a few years ago. When it came up here, I was surprised that the fees were low enough to look at it, because it certainly wasn't a low cost alternative at that stage. Since everyone had a different take on it, I guessed it must have moved on. However, with such big changes in policy in just a few years, I wonder whether they will revert.
Same here too, also studied options carefully back in 2014 and decided to go the industry fund route. I noted bigchrisb's top down stats above but personally I don't find them very relevant. i.e. How does it matter to me if the average industry fund investor is paying 1.2% in admin fees. All I care about is the fact I am paying 0.05% with Hostplus, and what I get for those fees. Also does it help me if the average SMSF investor only pays 0.3% if my costs might be higher than that? Given that nearly all High Net Worth investors have SMSF's those ultra high balances are obviously going to skew the statistics, especially compared to a raft of casual workers with lost/low balance super accounts most likely in industry funds...

As posted many times earlier if you want a lot of control and/or you are uncomfortable/untrusting of industry funds, then by all means stay away from them. But if you are just investing in index funds in Super (or ASX200 shares) and you have no such aversion to industry funds, personally I find it very hard to see how a SMSF can be more cost or time efficient, regardless of these top down numbers.

switch42

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Re: Australian Investing Thread
« Reply #3149 on: June 01, 2017, 12:45:31 PM »
I just had another look at eSuperFund's website and, as switch42 says, it does seem you can now choose other investments outside their chosen set as long as you accept the extra paperwork involved. I'm quite sure, but not 100%, that this was not an option when I looked at them in 2014.

Re the eSuperFund's fee cut I had mentioned, I can no longer find it in their PDS. When I was reviewing them as an option, I had an email exchange with the one of the managers (possibly even the boss) of eSuperFund and let them know I thought it was underhanded to bury a fee in a PDS and not clearly state it on their summary of fees on their main webpage. They told me they were meeting financial regs by disclosing it in the PDS only at which point I said thanks but no thanks. Looks like they have revised this policy, which is great for current and new investors.

All the details of esuperfunds commissions are listed in their financial services guide

https://www.esuperfund.com.au/Libraries/documents/smsf-financial-service-guide.pdf

They do get a decent cut of many of the transactions, but as mentioned above they get that from the service providers, not from the clients account.