Author Topic: Australian Investing Thread  (Read 539473 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?


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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.

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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.