Author Topic: Basic Australian Investing Thread  (Read 20518 times)

deborah

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Basic Australian Investing Thread
« on: January 16, 2016, 09:25:02 PM »
This is the thread where you ask all the questions you thought were too dumb to ask about Australian Investing.

Flyingkea

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Re: Basic Australian Investing Thread
« Reply #1 on: January 16, 2016, 10:04:51 PM »
Is there a list of abbreviations, and what they mean?
I can barely remember ETFs and what they are/do, let alone some of the more esoteric this I've seen.

deborah

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Re: Basic Australian Investing Thread
« Reply #2 on: January 16, 2016, 10:32:23 PM »
The ASX (Australian Securities Exchange - changed from the stock exchange in 2006) has a glossary of terms - see http://www.asx.com.au/education/glossary.htm
« Last Edit: January 16, 2016, 11:34:46 PM by deborah »

Astatine

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Re: Basic Australian Investing Thread
« Reply #3 on: January 16, 2016, 11:07:18 PM »
Is there a list of abbreviations, and what they mean?
I can barely remember ETFs and what they are/do, let alone some of the more esoteric this I've seen.

Oh good, it's not just me! I understand normal stocks (kind of) but outside that I was struggling.

Astatine

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Re: Basic Australian Investing Thread
« Reply #4 on: January 17, 2016, 01:19:40 AM »
What's an ETF? Is it the same concept as buying shares in a company? (I do feel a bit embarrassed how little I know afte all this time)

deborah

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Re: Basic Australian Investing Thread
« Reply #5 on: January 17, 2016, 02:07:35 AM »
From the ASX glossary

Exchange Traded Fund (ETF)

Investment fund designed to track the performance of an asset such as a share price index and which allows for applications and redemptions in the primary market on a daily basis either in-specie or in cash


Let's look at this one bit at a time.

  • designed to track the performance of an asset such as a share price index - EFTs track other investments. We are all familiar with Vanguard funds which track the ASX 200, or some other grouping of shares. ETFs are also available that track things other than shares. The ones available in Australia can track cash, bonds, currency, commodities... For instance, I recently went to America. When I knew I was going, I bought an ETF that tracked US currency. I sold some of it when I went. This meant that I knew what I would be spending in Australian dollars, and it didn't matter if the US dollar went up (or down) between when I bought it and when I went, that was what I would have.
  • allows for applications and redemptions in the primary market = it can be sold on the ASX (the primary market)
  • on a daily basis = any day
  • in-specie = transferring ownership without selling - eg. when you give the shares to your SO
So, an ETF can be something you buy on the stock exchange that follows the share index (for instance the ASX200) or some other index. The Vanguard funds sold on the stock exchange are ETFs. There are some that track things other than the stock exchange - for instance there are Vanguard ETFs that follow the bond "index" in exactly the same way.

Recently, in the Australian Investing thread:

A new site went live a few days ago called ETF watch. It's full of useful information about ETF's and LICs.

The guy who built the site says:

It is a database of all of the ETFs and most of the LICs available on the ASX.

It has been designed for investors to be able to filter a fund database and find funds that suit their needs. Some of the cool aspects i think are industry/region categorisations, historic performance, dividend yield, and LIC premium or discount to NAV/NTA (as well as 5 years worth of premium/discount history). There's also a blog and news feed and some general info on ETFs & LICs.

I've been poking around on it today and like what I see. I figured it's worth a share.

http://www.etfwatch.com.au/

coin

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Re: Basic Australian Investing Thread
« Reply #6 on: January 17, 2016, 02:12:50 AM »
Edit: deborah, you beat me to it!

If I could suggest a book to check out from the library - Money Makeover by Nina Dubecki and Vanessa Rowsthorn has some great information on investing.  Yes, it's aimed primarily at women but I think it's a great primer for anyone.  There are a few sections which are a bit old hat to the average MMM reader, but it's Australian focussed, provides details for further resources and is very good at encouraging you towards the idea of investing then showing you your options.  Oh, and it has cheesey limericks at the start of each chapter, which I find hilarious.

povertystrickenbastard

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Re: Basic Australian Investing Thread
« Reply #7 on: January 17, 2016, 02:13:06 AM »
What's a battle?

faramund

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Re: Basic Australian Investing Thread
« Reply #8 on: January 17, 2016, 02:14:28 AM »
An ETF is an exchange traded fund. Take Vanguard High Yield Fund, it comes in three flavours.

Wholesale managed fund (>$500000) and you directly buy/sell with vanguard
Retail managed fund (>$5000), and you directly buy/sell with vanguard (but with higher fees)
ETF, bought and sold on share market, with only share market minimums (commsec $500), and I think the lowest fees.

When buying the fund, you effectively get shares in around 40 high dividend companies. So when they pay dividends, vanguard passes them onto you.

If you look at https://www.vanguardinvestments.com.au/retail/ret/investments/etfs.jsp#etfstab ,
you can see a list of vanguard's ETFs. Each of them is a blend of a number of sub-companies or bonds.

There's a few other ETFs (http://www.morningstar.com.au/ETFs/PerformanceTable) but I stick with Vanguard, they seem to have the lowest fees.


deborah

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Re: Basic Australian Investing Thread
« Reply #9 on: January 17, 2016, 04:01:46 AM »
What's a battle?
I don't know. Do you have some context?

nnls

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Re: Basic Australian Investing Thread
« Reply #10 on: January 17, 2016, 04:23:52 AM »
Thanks for starting this thread Deborah :)

My first question is in regards to what we were talking about in the other thread. What are the advantages /disadvantaged of investing in vanguard via the ASX or direct with them on their website?


coin

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Re: Basic Australian Investing Thread
« Reply #11 on: January 17, 2016, 05:10:21 AM »
    Thanks for starting this thread Deborah :)

    My first question is in regards to what we were talking about in the other thread. What are the advantages /disadvantaged of investing in vanguard via the ASX or direct with them on their website?

    Two things immediately spring to mind - flexibility and expense ratios, but here are my thoughts:

    ETF advantages:
    • Low(er) bar to entry - you can invest as little as $500
    • No buy/sell spreads - the only buying and selling fees you will pay are to your broker for doing the transaction
    • Expense ratios are generally lower than the equivalent managed funds (e.g. the VAS ETF has an expense ratio of 0.15% while the equivalent managed fund is 0.75% for your first 50,000
    • Flexibility - you can invest as little or as much as you want over time and have complete control over what % of your portfolio is bond ETFs, share ETFs, etc

    ETF disadvantages:
    • Flexibility - being able to invest as little or as much as you like can be a problem because a lot of people don't have the discipline to continue buying during a downturn or selling to rebalance during the boom times.
    • You have to decide your own asset allocations, which can take time/confidence
    • ETFs are probably a bit more effort than managed funds
    • Have to engage the services of a broker or online brokerage form (e.g. Nabtrade) to buy and sell ETFs.  There is no way around this as far as I know, and the brokers will charge fees to buy and sell.
    • You have to buy/sell your funds yourself, the market taking a dive a day or week after you buy in can be a little discouraging even if you know it doesn't matter in the long run

    Managed fund advantages:
    • Easy to set up and implement
    • Easy dollar cost averaging - when you transfer your money in, it's automatically invested and all managed for you
    • The funds often allow you the option of setting up automatic deposits - automation like this can be good if you like the hands-off approach

    Managed fund disadvantages:
    • High(er) bar to entry - most managed funds have a minimum investment of $5000.  You can get lower, but a lot of these come with clauses such as you having to put in $300 a month or similar via direct debit.
    • Further to the above point - I've heard in some situations if the market takes a dive and your fund goes under the minimum investment amount, they can ask you to top it up or set up a recurring transaction.  Probably not something to worry about, but definitely keep it in mind.
    • Buy/Sell spreads - they will charge you a fee every time you buy and sell.  E.g. Vanguard's lowest buy sell spread for any of its managed funds is 0.10%, which means you have 0.10% less to retire on.
    • Fees.  They're the ones doing all the management for your account, so they will skim more off the top than if you were buying an ETF.

    Note that my post-tax/non-superannuation investments are all in ETFs, so I am perhaps a bit biased that way.  Don't get me wrong, I think managed funds have their own place and can be very good, but the expense ratios have always been a big turn-off to me.[/list]
    « Last Edit: January 17, 2016, 05:13:34 AM by coin »

    nnls

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    Re: Basic Australian Investing Thread
    « Reply #12 on: January 17, 2016, 05:16:09 AM »
      Thanks for starting this thread Deborah :)

      My first question is in regards to what we were talking about in the other thread. What are the advantages /disadvantaged of investing in vanguard via the ASX or direct with them on their website?

      Two things immediately spring to mind - flexibility and expense ratios, but here are my thoughts:

      ETF advantages:
      • Low(er) bar to entry - you can invest as little as $500
      • No buy/sell spreads - the only buying and selling fees you will pay are to your broker for doing the transaction
      • Expense ratios are generally lower than the equivalent managed funds (e.g. the VAS ETF has an expense ratio of 0.15% while the equivalent managed fund is 0.75% for your first 50,000
      • Flexibility - you can invest as little or as much as you want over time and have complete control over what % of your portfolio is bond ETFs, share ETFs, etc

      ETF disadvantages:
      • Flexibility - being able to invest as little or as much as you like can be a problem because a lot of people don't have the discipline to continue buying during a downturn or selling to rebalance during the boom times.
      • You have to decide your own asset allocations, which can take time/confidence
      • ETFs are probably a bit more effort than managed funds
      • Have to engage the services of a broker or online brokerage form (e.g. Nabtrade) to buy and sell ETFs.  There is no way around this as far as I know, and the brokers will charge fees to buy and sell.
      • You have to buy/sell your funds yourself, the market taking a dive a day or week after you buy in can be a little discouraging even if you know it doesn't matter in the long run

      Managed fund advantages:
      • Easy to set up and implement
      • Easy dollar cost averaging - when you transfer your money in, it's automatically invested and all managed for you
      • The funds often allow you the option of setting up automatic deposits - automation like this can be good if you like the hands-off approach

      Managed fund disadvantages:
      • High(er) bar to entry - most managed funds have a minimum investment of $5000.  You can get lower, but a lot of these come with clauses such as you having to put in $300 a month or similar via direct debit.
      • Further to the above point - I've heard in some situations if the market takes a dive and your fund goes under the minimum investment amount, they can ask you to top it up or set up a recurring transaction.  Probably not something to worry about, but definitely keep it in mind.
      • Buy/Sell spreads - they will charge you a fee every time you buy and sell.  E.g. Vanguard's lowest buy sell spread for any of its managed funds is 0.10%, which means you have 0.10% less to retire on.
      • Fees.  They're the ones doing all the management for your account, so they will skim more off the top than if you were buying an ETF.

      Note that my post-tax/non-superannuation investments are all in ETFs, so I am perhaps a bit biased that way.  Don't get me wrong, I think managed funds have their own place and can be very good, but the expense ratios have always been a big turn-off to me.[/list]

      Thank you for this :)

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #13 on: January 17, 2016, 11:41:16 AM »
      Note that my post-tax/non-superannuation investments are all in ETFs, so I am perhaps a bit biased that way.  Don't get me wrong, I think managed funds have their own place and can be very good, but the expense ratios have always been a big turn-off to me.
      If you have an SMSF (Self Managed Superannuation Fund) like me, you could have your superannuation in EFTs as well. If you don't have an SMSF, Managed Funds are the way you would get indexes in Superannuation. Some WRAPs also have ETFs available.

      Both of these options for Superannuation are probably only for those with a reasonable amount in super. I am only mentioning them because I was someone who didn't know much about finance, and hated it, even though I actually had a reasonable stash. (I still think I don't know much, but over the last few years I have been learning.) There may be other people using this thread in a similar situation.

      To me, it doesn't really matter if you are mustachian and don't get your savings in the "right place" to begin with. Let us say that it takes you a year to sort out what you want to do. Rarely do investments earn more than 10% in a year, so you will only be 10% worse off if you take time to think it through. And you only have a small amount to invest compared to later on - if you are going to spend 10 years saving, in the first year you will only have 10% of what you will have saved over the 10 years. So, you will have lost maybe 1% of what you could end up with BEFORE you count how much your investments earn over the 10 years.

      syednaeemul

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      Re: Basic Australian Investing Thread
      « Reply #14 on: January 17, 2016, 03:16:03 PM »
      Maybe it's suitable here: which is the recommended brokerage to use? And how do you set about financing it? Regular bank transfers?

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #15 on: January 17, 2016, 05:20:15 PM »
      Maybe it's suitable here: which is the recommended brokerage to use? And how do you set about financing it? Regular bank transfers?
      My brokerage setup is not available to you, so I won't recommend it. As I am retired, I don't finance my brokerage. It gets money from dividends... So I don't know. I think this is a question for the Australian Investing thread - brokerage recommendations were discussed there on 28 December (see reply 1591 and subsequent discussion).
      « Last Edit: January 17, 2016, 05:22:11 PM by deborah »

      stripey

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      Re: Basic Australian Investing Thread
      « Reply #16 on: January 17, 2016, 07:40:27 PM »
      Thanks for starting this thread, Deborah! :)

      pancakes

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      Re: Basic Australian Investing Thread
      « Reply #17 on: January 18, 2016, 02:29:21 AM »
      Thank you for posting, I most certainly need this thread.

      When I joined up I did so looking to start investing our savings and in that time all I have done is accumulated a bunch of cash.

      We are sitting on close to $180k in cash now and I think part of my paralysis is due to it being such a large sum and part because we've had a meh experience with a managed fund in the past. I don't want to invest all of it and certainly not all at once but I need to work out some kind of plan.

      happy

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      Re: Basic Australian Investing Thread
      « Reply #18 on: January 18, 2016, 03:51:15 AM »
      Following

      nnls

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      Re: Basic Australian Investing Thread
      « Reply #19 on: January 18, 2016, 06:38:11 AM »
      Note that my post-tax/non-superannuation investments are all in ETFs, so I am perhaps a bit biased that way.  Don't get me wrong, I think managed funds have their own place and can be very good, but the expense ratios have always been a big turn-off to me.
      If you have an SMSF (Self Managed Superannuation Fund) like me, you could have your superannuation in EFTs as well. If you don't have an SMSF, Managed Funds are the way you would get indexes in Superannuation. Some WRAPs also have ETFs available.

      Both of these options for Superannuation are probably only for those with a reasonable amount in super. I am only mentioning them because I was someone who didn't know much about finance, and hated it, even though I actually had a reasonable stash. (I still think I don't know much, but over the last few years I have been learning.) There may be other people using this thread in a similar situation.

      To me, it doesn't really matter if you are mustachian and don't get your savings in the "right place" to begin with. Let us say that it takes you a year to sort out what you want to do. Rarely do investments earn more than 10% in a year, so you will only be 10% worse off if you take time to think it through. And you only have a small amount to invest compared to later on - if you are going to spend 10 years saving, in the first year you will only have 10% of what you will have saved over the 10 years. So, you will have lost maybe 1% of what you could end up with BEFORE you count how much your investments earn over the 10 years.

      I was told by someone it wasn't worth having an SMF unless you had a largish amount in super, like above $200k?

      coin

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      Re: Basic Australian Investing Thread
      « Reply #20 on: January 18, 2016, 09:04:39 AM »
      Note that my post-tax/non-superannuation investments are all in ETFs, so I am perhaps a bit biased that way.  Don't get me wrong, I think managed funds have their own place and can be very good, but the expense ratios have always been a big turn-off to me.
      If you have an SMSF (Self Managed Superannuation Fund) like me, you could have your superannuation in EFTs as well. If you don't have an SMSF, Managed Funds are the way you would get indexes in Superannuation. Some WRAPs also have ETFs available.

      Both of these options for Superannuation are probably only for those with a reasonable amount in super. I am only mentioning them because I was someone who didn't know much about finance, and hated it, even though I actually had a reasonable stash. (I still think I don't know much, but over the last few years I have been learning.) There may be other people using this thread in a similar situation.

      To me, it doesn't really matter if you are mustachian and don't get your savings in the "right place" to begin with. Let us say that it takes you a year to sort out what you want to do. Rarely do investments earn more than 10% in a year, so you will only be 10% worse off if you take time to think it through. And you only have a small amount to invest compared to later on - if you are going to spend 10 years saving, in the first year you will only have 10% of what you will have saved over the 10 years. So, you will have lost maybe 1% of what you could end up with BEFORE you count how much your investments earn over the 10 years.

      I was told by someone it wasn't worth having an SMF unless you had a largish amount in super, like above $200k?

      That's because the fees often don't make it worthwhile until you reach a large(r) balance for your super.

      If you had $50,000 in your super and it was managed by REST (an industry superfund) in their MySuper option, the fees amount to $437.20 a year.  If you had $50,000 in a self-managed superannuation fund, you would need to pay fees to set it up and keep it in compliance with the ATO and the average SMSF fees range from $1,500 to $5,000 per annum. 

      Even if your super did quite well and the fees are on the competitive end, it's possible any gains you make will get eaten up by fees.  Obviously that choice is up to the individual, what they're investing in and if they think that they will be able to make considerably more than they would in a non-self-managed fund.

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #21 on: January 18, 2016, 11:35:26 AM »
      I was told by someone it wasn't worth having an SMSF unless you had a largish amount in super, like above $200k?
      True - but how soon is someone here going to take to reach that figure?

      The average full time wage earner in Australia gets a total of $80,054.00 - and gets to keep $62,272.02. Their employer also pays $7605.13 superannuation to them. So, if you live on $30,000 a year (more than me), you can save $32272.02 a year. Including superannuation, that means you are saving $39877 a year - so, if half is going to super, and half outside super, you end up with more than $20,000 a year going to super (before tax contributions mean that you pay less tax). It doesn't take long at that rate to be worth thinking about an SMSF.

      Aussiegirl

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      Re: Basic Australian Investing Thread
      « Reply #22 on: January 18, 2016, 12:40:55 PM »

      I was told by someone it wasn't worth having an SMF unless you had a largish amount in super, like above $200k?

      Disclosure - we have a SMSF, because we have real estate in our super.

      Even $200k now may not make it worth having a SMSF.  Some of the industry funds have introduced great self directed options to combate the flight of capital to SMSF.  Have a look at Australian Super as an example.   Their fees are quite reasonable.  Portfolio fee of $395/yr plus brokerage.  Heaps cheaper than a SMSF and will likely have enough investment options for the set and forget EFT strategy most here favour.

      I'm not sure what the average fees are for industry super funds (non self directed) so you'd have to do the maths to see when it was economically worthwhile moving from the standard fund to self directed.  I'd guess without doing the maths it would be $75-100k.

      If you have an SMSF (Self Managed Superannuation Fund) like me, you could have your superannuation in EFTs as well. If you don't have an SMSF, Managed Funds are the way you would get indexes in Superannuation. Some WRAPs also have ETFs available.

      The self directed industry funds have ETFs.    See the link below, Austarlian Suoer has a good range: https://www.australiansuper.com/~/media/Files/Investment/Member%20Direct/Member%20Direct%20Investment%20Menu.ashx

      Note: I'm not recommending Australian Suoer, it's just an example - there are a few others that offer self directed as well.

      Minion

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      Re: Basic Australian Investing Thread
      « Reply #23 on: January 18, 2016, 04:13:47 PM »
      Following :)

      Any assistance with a spreadsheet to track ETF purchases / tax accounting would be great
      http://forum.mrmoneymustache.com/investor-alley/australia-dumb-vanguard-managed-fund-query/

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #24 on: January 18, 2016, 05:08:07 PM »
      This is what I use to track shares.

      It has 8 columns
      The first has the date of purchase
      The second is what the stock is, and what account it is (i.e. Vas-D is my account, VAS is my wife - its not case sensitive).
      The third is the number of shares bought
      The fourth is the total amount it cost (including brokerage costs)
      The fifth is unnecessary, but shows the per share cost
      The sixth (column G) is the running number of shares for that stock/account
      The seventh (H) is the running amount (this is sometimes referred to as base cost)
      The eighth (I) is also unnecessary, but shows the running per share cost.

      Note that I bold the last entry for each stock/account, just so I can easily recognise it.

      So each time I buy a new block of shares, say VAS-D, I'd add a new row, say under column 5, and then
      enter the purchase details into columns 1-4, and then paste the formulas from columns 5-8 down into the new row.

      If later on I sold all my VAS-D The amount I would have to declare for capital gains would be what I got from the shares, minus whatever is the last figure for that stock in the seventh column (H) (at the moment for VAS that would be 6653.43).

      You will probably notice the funny rows on the 30/6/15. With quite a few stocks, a component of their dividends is actually a capital gain - and the way they are to be recorded is as in the sheet, a reduction in the cost base (this means when/if you sell the stock - your capital gain will be bigger - but until then you don't pay any tax on it). In my experience, any stock that does this, will send you a tax statement at the end of each financial year - showing what your amounts are, and telling you what to do.

      Well, that went on a lot longer than I thought it would ...

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #25 on: January 18, 2016, 05:19:09 PM »
      Thank you for posting, I most certainly need this thread.

      When I joined up I did so looking to start investing our savings and in that time all I have done is accumulated a bunch of cash.

      We are sitting on close to $180k in cash now and I think part of my paralysis is due to it being such a large sum and part because we've had a meh experience with a managed fund in the past. I don't want to invest all of it and certainly not all at once but I need to work out some kind of plan.

      You don't have to invest it all at once - or even all of it ever. Given how large your cash amount is, its probably reasonable to invest in lots of maybe $10000 (so with a $20 trading fee at commsec or $15 at nabtrade, thats a 0.2 or 0.15% fee).

      So you could make a choice, and probably VAS is a good start - especially if you believe the strong market efficiency theory - but obviously other shares/ETFs are possible (I've had almost the same conversation with my father-in-law but he's started with a package of VHY shares as he wants a larger dividend stream).

      But its probably good to make a start, even with just making one trade. It will force you to find a broker, and set up your accounts and record keeping. Then, if all goes well, in some later week/month you could do the same thing again.

      Minion

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      Re: Basic Australian Investing Thread
      « Reply #26 on: January 18, 2016, 06:17:22 PM »
      This is what I use to track shares.

      It has 8 columns
      The first has the date of purchase
      The second is what the stock is, and what account it is (i.e. Vas-D is my account, VAS is my wife - its not case sensitive).
      The third is the number of shares bought
      The fourth is the total amount it cost (including brokerage costs)
      The fifth is unnecessary, but shows the per share cost
      The sixth (column G) is the running number of shares for that stock/account
      The seventh (H) is the running amount (this is sometimes referred to as base cost)
      The eighth (I) is also unnecessary, but shows the running per share cost.

      Note that I bold the last entry for each stock/account, just so I can easily recognise it.

      So each time I buy a new block of shares, say VAS-D, I'd add a new row, say under column 5, and then
      enter the purchase details into columns 1-4, and then paste the formulas from columns 5-8 down into the new row.

      If later on I sold all my VAS-D The amount I would have to declare for capital gains would be what I got from the shares, minus whatever is the last figure for that stock in the seventh column (H) (at the moment for VAS that would be 6653.43).

      You will probably notice the funny rows on the 30/6/15. With quite a few stocks, a component of their dividends is actually a capital gain - and the way they are to be recorded is as in the sheet, a reduction in the cost base (this means when/if you sell the stock - your capital gain will be bigger - but until then you don't pay any tax on it). In my experience, any stock that does this, will send you a tax statement at the end of each financial year - showing what your amounts are, and telling you what to do.

      Well, that went on a lot longer than I thought it would ...

      Much appreciated, that makes sense. If you reinvested your dividends automatically, how do you track this? Do you add a line item to update the cost base on the day it takes effect?

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #27 on: January 18, 2016, 06:21:41 PM »
      This is what I use to track shares.

      It has 8 columns
      The first has the date of purchase
      The second is what the stock is, and what account it is (i.e. Vas-D is my account, VAS is my wife - its not case sensitive).
      The third is the number of shares bought
      The fourth is the total amount it cost (including brokerage costs)
      The fifth is unnecessary, but shows the per share cost
      The sixth (column G) is the running number of shares for that stock/account
      The seventh (H) is the running amount (this is sometimes referred to as base cost)
      The eighth (I) is also unnecessary, but shows the running per share cost.

      Note that I bold the last entry for each stock/account, just so I can easily recognise it.

      So each time I buy a new block of shares, say VAS-D, I'd add a new row, say under column 5, and then
      enter the purchase details into columns 1-4, and then paste the formulas from columns 5-8 down into the new row.

      If later on I sold all my VAS-D The amount I would have to declare for capital gains would be what I got from the shares, minus whatever is the last figure for that stock in the seventh column (H) (at the moment for VAS that would be 6653.43).

      You will probably notice the funny rows on the 30/6/15. With quite a few stocks, a component of their dividends is actually a capital gain - and the way they are to be recorded is as in the sheet, a reduction in the cost base (this means when/if you sell the stock - your capital gain will be bigger - but until then you don't pay any tax on it). In my experience, any stock that does this, will send you a tax statement at the end of each financial year - showing what your amounts are, and telling you what to do.

      Well, that went on a lot longer than I thought it would ...

      Much appreciated, that makes sense. If you reinvested your dividends automatically, how do you track this? Do you add a line item to update the cost base on the day it takes effect?
      When you reinvest dividends you are buying an entirely new parcel of shares - you get information about how many you bought, what day you bought them on, and what you paid for them. So it is a completely new line.

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #28 on: January 18, 2016, 08:34:06 PM »
      This is what I use to track shares.

      It has 8 columns
      The first has the date of purchase
      The second is what the stock is, and what account it is (i.e. Vas-D is my account, VAS is my wife - its not case sensitive).
      The third is the number of shares bought
      The fourth is the total amount it cost (including brokerage costs)
      The fifth is unnecessary, but shows the per share cost
      The sixth (column G) is the running number of shares for that stock/account
      The seventh (H) is the running amount (this is sometimes referred to as base cost)
      The eighth (I) is also unnecessary, but shows the running per share cost.

      Note that I bold the last entry for each stock/account, just so I can easily recognise it.

      So each time I buy a new block of shares, say VAS-D, I'd add a new row, say under column 5, and then
      enter the purchase details into columns 1-4, and then paste the formulas from columns 5-8 down into the new row.

      If later on I sold all my VAS-D The amount I would have to declare for capital gains would be what I got from the shares, minus whatever is the last figure for that stock in the seventh column (H) (at the moment for VAS that would be 6653.43).

      You will probably notice the funny rows on the 30/6/15. With quite a few stocks, a component of their dividends is actually a capital gain - and the way they are to be recorded is as in the sheet, a reduction in the cost base (this means when/if you sell the stock - your capital gain will be bigger - but until then you don't pay any tax on it). In my experience, any stock that does this, will send you a tax statement at the end of each financial year - showing what your amounts are, and telling you what to do.

      Well, that went on a lot longer than I thought it would ...

      Much appreciated, that makes sense. If you reinvested your dividends automatically, how do you track this? Do you add a line item to update the cost base on the day it takes effect?
      When you reinvest dividends you are buying an entirely new parcel of shares - you get information about how many you bought, what day you bought them on, and what you paid for them. So it is a completely new line.
      Yes I do exactly this, but just to clarify. Say I get $43 in dividends, and I'm reinvesting all of it, and the shares are priced at $20, I record this as 2 shares worth $43  (not $40).. Most companies carry over any odd bits of money.. like that $3, so in the future I might next get $59 of dividends (and say the shares are still priced at $20), I would then record that as 3 shares worth $59.

      Sometimes I might get say $13 in dividends and a share might cost $20, so I'll record that as 0 shares for $20.

      These are all just simple examples, in each reinvestment case I just add a line, say how many shares I received and how much in dividends (I would have got in cash if I hadn't done reinvestment). I ignore the effect of any rolled over dividend funds.
       
      I've updated my file to show what's happened to my WBC funds that I did a lot of reivestment with (initially fully, but now just a little bit), and also my MTU shares (to show one of these 0 reinvestment cases)

      HappierAtHome

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      Re: Basic Australian Investing Thread
      « Reply #29 on: January 18, 2016, 08:47:54 PM »
      This is a judgement free zone, right?

      Possibly a dumb question: if I buy into one of the managed funds (e.g. high growth) will Vanguard track all of this crap for me instead of my having to maintain a spreadsheet? Or is tracking it all in a spreadsheet pretty much non-negotiable for any equity investing?

      This is what I use to track shares.

      It has 8 columns
      The first has the date of purchase
      The second is what the stock is, and what account it is (i.e. Vas-D is my account, VAS is my wife - its not case sensitive).
      The third is the number of shares bought
      The fourth is the total amount it cost (including brokerage costs)
      The fifth is unnecessary, but shows the per share cost
      The sixth (column G) is the running number of shares for that stock/account
      The seventh (H) is the running amount (this is sometimes referred to as base cost)
      The eighth (I) is also unnecessary, but shows the running per share cost.

      Note that I bold the last entry for each stock/account, just so I can easily recognise it.

      So each time I buy a new block of shares, say VAS-D, I'd add a new row, say under column 5, and then
      enter the purchase details into columns 1-4, and then paste the formulas from columns 5-8 down into the new row.

      If later on I sold all my VAS-D The amount I would have to declare for capital gains would be what I got from the shares, minus whatever is the last figure for that stock in the seventh column (H) (at the moment for VAS that would be 6653.43).

      You will probably notice the funny rows on the 30/6/15. With quite a few stocks, a component of their dividends is actually a capital gain - and the way they are to be recorded is as in the sheet, a reduction in the cost base (this means when/if you sell the stock - your capital gain will be bigger - but until then you don't pay any tax on it). In my experience, any stock that does this, will send you a tax statement at the end of each financial year - showing what your amounts are, and telling you what to do.

      Well, that went on a lot longer than I thought it would ...

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #30 on: January 18, 2016, 09:13:48 PM »
      This is a judgement free zone, right?

      Possibly a dumb question: if I buy into one of the managed funds (e.g. high growth) will Vanguard track all of this crap for me instead of my having to maintain a spreadsheet? Or is tracking it all in a spreadsheet pretty much non-negotiable for any equity investing?


      Murdoch in  Reply 13 of http://forum.mrmoneymustache.com/investor-alley/australia-dumb-vanguard-managed-fund-query/ suggested that vanguard did it all for him, so I guess that's your answer.

      Astatine

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      Re: Basic Australian Investing Thread
      « Reply #31 on: January 18, 2016, 09:39:52 PM »
      This is a judgement free zone, right?

      I hope so. I have many many (probably dumb) questions that I will be asking once I'm less distracted with stuff.

      Possibly a dumb question: if I buy into one of the managed funds (e.g. high growth) will Vanguard track all of this crap for me instead of my having to maintain a spreadsheet? Or is tracking it all in a spreadsheet pretty much non-negotiable for any equity investing?



      That was one of my questions too. I'm hoping the answer is yes (and maybe the answer is buried in Vanguard's documentation somewhere). I suspect we will probably pay more for the tracking because that's something that I always have good intentions about and never actually do.

      HappierAtHome

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      Re: Basic Australian Investing Thread
      « Reply #32 on: January 18, 2016, 09:52:45 PM »
      This is a judgement free zone, right?

      Possibly a dumb question: if I buy into one of the managed funds (e.g. high growth) will Vanguard track all of this crap for me instead of my having to maintain a spreadsheet? Or is tracking it all in a spreadsheet pretty much non-negotiable for any equity investing?


      Murdoch in  Reply 13 of http://forum.mrmoneymustache.com/investor-alley/australia-dumb-vanguard-managed-fund-query/ suggested that vanguard did it all for him, so I guess that's your answer.

      I thought he was saying that Vanguard sent him the details of selling the retail fund and buying into the wholesale fund for his tax prep, not the entirety of his buy/sell activity... I should probably call Vanguard and ask.

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #33 on: January 18, 2016, 10:12:13 PM »
      It really depends. He had bought things and changed within a year or so. And he was changing from Vanguard to Vanguard. However, in the past I have had problems working out this information for managed funds that I have held for a long time. I suspect that this is partly because until 2000 or so, the way all the funds stored records was hopeless and they couldn't give you the information, and partly because they were held for a long time.

      I think it is worth while getting into the habit of keeping the records yourself.

      I am also sure that you need to record the actual price paid, rather than the dividend you would have received if you are participating in a dividend reinvestment plan.

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #34 on: January 18, 2016, 10:22:24 PM »
      If I buy into one of the managed funds (e.g. high growth) will Vanguard track all of this crap for me instead of my having to maintain a spreadsheet? Or is tracking it all in a spreadsheet pretty much non-negotiable for any equity investing?

      With regard to tracking your investments, if you include your brokerage account in your YNAB stuff (I think you have YNAB), can't it automatically say what you have spent each time, what day... all you need to do then is to add a column with the number of shares, and you have all the information you need.

      HappierAtHome

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      Re: Basic Australian Investing Thread
      « Reply #35 on: January 18, 2016, 10:33:45 PM »
      If I buy into one of the managed funds (e.g. high growth) will Vanguard track all of this crap for me instead of my having to maintain a spreadsheet? Or is tracking it all in a spreadsheet pretty much non-negotiable for any equity investing?

      With regard to tracking your investments, if you include your brokerage account in your YNAB stuff (I think you have YNAB), can't it automatically say what you have spent each time, what day... all you need to do then is to add a column with the number of shares, and you have all the information you need.

      I don't have YNAB. But it's good to know that it can be used that way.

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #36 on: January 18, 2016, 10:35:42 PM »
      Dividend Reinvestment Plans

      With just about anything on the share market you can opt in or out of a DRP (dividend reinvestment plan). Instead of getting money when they issue a dividend, they can give you shares.

      Advantages:

      • Set and forget - you automatically increase your holdings without thinking about it - so compounding kicks in.
      • You don't pay brokerage - just what the investments are worth the day they decide to do the reinvestment (not necessarily the day that the dividends are given out)
      • The investments are probably low priced (because they have just given out a dividend)
      Disadvantages

      • Your overall investments may get out of kilter. It may be better to get the dividends and work out where the money should go to rebalance your investments.
      • You end up with an enormous number of small parcels of your investment, so working out CGT can be a problem when you sell them.
      • They inevitably keep some of the money, because the dividend price isn't an exact number of shares (or whatever your investment is), so you are effectively losing interest on that money for six months (dividends are usually every six months)

      There are probably more.

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #37 on: January 18, 2016, 10:36:34 PM »
      If I buy into one of the managed funds (e.g. high growth) will Vanguard track all of this crap for me instead of my having to maintain a spreadsheet? Or is tracking it all in a spreadsheet pretty much non-negotiable for any equity investing?

      With regard to tracking your investments, if you include your brokerage account in your YNAB stuff (I think you have YNAB), can't it automatically say what you have spent each time, what day... all you need to do then is to add a column with the number of shares, and you have all the information you need.

      I don't have YNAB. But it's good to know that it can be used that way.
      I don't have it either, it was a question rather than a statement.

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #38 on: January 18, 2016, 10:39:58 PM »
      I am also sure that you need to record the actual price paid, rather than the dividend you would have received if you are participating in a dividend reinvestment plan.

      On the ATO web site (https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Shares,-units-and-similar-investments/Dividend-reinvestment-plans/) it says

      Each share (or parcel of shares) acquired in this way – on or after 20 September 1985 – is subject to CGT. The cost base of the new shares includes the price you paid to acquire them – that is, the amount of the dividend.

      I used to have TOL shares (before Japan Post took them over), and they used to have a policy that when reinvesting, they would round up any shares you were owed, so if you got $0.20 as a dividend, and shares were worth $15, you would get 1 share.   

      So I'd record that as 1 share, and the amount of the dividend which is $0.20.

      If you used the price per share, you would record it as 1 share, and $15, which seems to clash with the ATO definition.

      deborah, I've often wondered about this myself, and I have an old memory of getting something from a company, that said you could do it either this one, or the way you suggested, but from poking around the internet I couldn't find anything like that. Do you know of anything?


      JLR

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      Re: Basic Australian Investing Thread
      « Reply #39 on: January 19, 2016, 01:52:27 AM »
      I sooo need this thread to help me pull the trigger.

      My main concern ATM is getting a good deal on fees. I was nearly ready to get some Vanguard through ANZ brokerage, but then wondered if over time I would be better off going directly through Vanguard. I couldn't decide, so just did nothing....

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #40 on: January 19, 2016, 02:14:25 AM »
      I've looked into this for a while, and it seems like getting Vanguard through the ASX (say with ANZ) is the lowest fee way of doing it (although if you have $500000, wholesale is only slightly worse). But you need to keep records of when you did with each share transaction, how much you paid, and how may shares you bought.

      If you're feeling hesitant, just buy some shares, and at least get started.

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #41 on: January 19, 2016, 02:56:31 AM »
      The other thing is:

      the difference between the different Vanguard funds isn't that big:
      maybe getting EFTs through the share market has the lowest fees,
      the wholesale ones are probably only about .1% worse then that,
      and the retail are only about 0.5% worse than the ETF.

      In comparison to just keeping money in a deposit, any of these, on average, will be better then some sort of term deposit.

      There's an old saying, that its time in market that counts, not timing the market. The most important thing, is to get in, and stay in the market, even if its only with a portion on one's available funds.

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #42 on: January 20, 2016, 08:16:03 PM »
      I am also sure that you need to record the actual price paid, rather than the dividend you would have received if you are participating in a dividend reinvestment plan.

      On the ATO web site (https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Shares,-units-and-similar-investments/Dividend-reinvestment-plans/) it says

      Each share (or parcel of shares) acquired in this way – on or after 20 September 1985 – is subject to CGT. The cost base of the new shares includes the price you paid to acquire them – that is, the amount of the dividend.

      I used to have TOL shares (before Japan Post took them over), and they used to have a policy that when reinvesting, they would round up any shares you were owed, so if you got $0.20 as a dividend, and shares were worth $15, you would get 1 share.   

      So I'd record that as 1 share, and the amount of the dividend which is $0.20.

      If you used the price per share, you would record it as 1 share, and $15, which seems to clash with the ATO definition.

      deborah, I've often wondered about this myself, and I have an old memory of getting something from a company, that said you could do it either this one, or the way you suggested, but from poking around the internet I couldn't find anything like that. Do you know of anything?


      I have talked to a couple of experts about this, and I think you are misunderstanding the intent of this paragraph:

      Each share (or parcel of shares) acquired in this way – on or after 20 September 1985 – is subject to CGT. The cost base of the new shares includes the price you paid to acquire them – that is, the amount of the dividend.

      Because this is just illustrative to a case where the dividend equals the price paid in a DRP (often a discounted price).  The ATO’s position is more clearly stated in the preceding paragraph which says:

      For capital gains tax (CGT) purposes, if you participate in a dividend reinvestment plan you are treated as if you had received a cash dividend and then used the cash to buy additional shares.

      So it is the price paid for the shares that is the cost base, not the dividend received.  And the dividend received is the income that is to be declared.

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #43 on: January 20, 2016, 10:08:32 PM »
      I am also sure that you need to record the actual price paid, rather than the dividend you would have received if you are participating in a dividend reinvestment plan.

      On the ATO web site (https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Shares,-units-and-similar-investments/Dividend-reinvestment-plans/) it says

      Each share (or parcel of shares) acquired in this way – on or after 20 September 1985 – is subject to CGT. The cost base of the new shares includes the price you paid to acquire them – that is, the amount of the dividend.

      I used to have TOL shares (before Japan Post took them over), and they used to have a policy that when reinvesting, they would round up any shares you were owed, so if you got $0.20 as a dividend, and shares were worth $15, you would get 1 share.   

      So I'd record that as 1 share, and the amount of the dividend which is $0.20.

      If you used the price per share, you would record it as 1 share, and $15, which seems to clash with the ATO definition.

      deborah, I've often wondered about this myself, and I have an old memory of getting something from a company, that said you could do it either this one, or the way you suggested, but from poking around the internet I couldn't find anything like that. Do you know of anything?


      I have talked to a couple of experts about this, and I think you are misunderstanding the intent of this paragraph:

      Each share (or parcel of shares) acquired in this way – on or after 20 September 1985 – is subject to CGT. The cost base of the new shares includes the price you paid to acquire them – that is, the amount of the dividend.

      Because this is just illustrative to a case where the dividend equals the price paid in a DRP (often a discounted price).  The ATO’s position is more clearly stated in the preceding paragraph which says:

      For capital gains tax (CGT) purposes, if you participate in a dividend reinvestment plan you are treated as if you had received a cash dividend and then used the cash to buy additional shares.

      So it is the price paid for the shares that is the cost base, not the dividend received.  And the dividend received is the income that is to be declared.

      Well, I just talked to the ATO, and they agree with you, and thus, I was wrong. That does make dealing with reinvested dividends slightly messier - but not too much I guess. Unless of course, you have a spreadsheet that you've been using for 15 years that needs to be updated .. mumble grumble.

      Although, mathematically the 2 approaches give almost the same result if the company doesn't round the number of shares you get, and if they round up, you end up giving the ATO slightly more money. So I might just leave it as it is.. I'll have to think about it.

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #44 on: January 20, 2016, 11:00:41 PM »
      If you don't keep records, the company usually has a lot of the information online for instance, Woolworths (ASX code WOW) has this page

       http://www.woolworthslimited.com.au/page/Invest_In_Us/Shareholder_Centre/Payments/Dividend_Payments/

      which says what the dividends were each time and the price of the DRP shares. I was missing records for a few years and was able to reconstruct what happened by using this information.

      faramund

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      Re: Basic Australian Investing Thread
      « Reply #45 on: January 20, 2016, 11:22:12 PM »
      I do keep records, but each year's tax things are in a separate plastic bag, all jumbled together, so it would be a hassle to go through them.

      I think I only have to back change the rounding up shares, I think with the shares that carry over, all I have to do, is next time I get a reinvested dividend, subtract off whatever amount was carried over (which should cancel out whatever I had incorrectly added)

      So that's only one tricky case, AGL, I'll try looking up their website as you suggested - thanks for the idea.




      nnls

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      Re: Basic Australian Investing Thread
      « Reply #46 on: February 02, 2016, 04:24:08 PM »
      Dividend Reinvestment Plans

      With just about anything on the share market you can opt in or out of a DRP (dividend reinvestment plan). Instead of getting money when they issue a dividend, they can give you shares.

      Advantages:

      • Set and forget - you automatically increase your holdings without thinking about it - so compounding kicks in.
      • You don't pay brokerage - just what the investments are worth the day they decide to do the reinvestment (not necessarily the day that the dividends are given out)
      • The investments are probably low priced (because they have just given out a dividend)
      Disadvantages

      • Your overall investments may get out of kilter. It may be better to get the dividends and work out where the money should go to rebalance your investments.
      • You end up with an enormous number of small parcels of your investment, so working out CGT can be a problem when you sell them.
      • They inevitably keep some of the money, because the dividend price isn't an exact number of shares (or whatever your investment is), so you are effectively losing interest on that money for six months (dividends are usually every six months)

      There are probably more.

      hi

      can you do dividend reinvestment if you go straight through ASZ shares to buy into vanguard or is that only if you go through them?

      deborah

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      Re: Basic Australian Investing Thread
      « Reply #47 on: February 02, 2016, 07:13:00 PM »
      Each investment available on the ASX may or may not have a DRP (dividend reinvestment plan), so to find out about Vanguard, I looked up Vanduard ETFs and ended up on this page -

      https://www.vanguardinvestments.com.au/retail/jsp/investments/all-products#/etf

      I then decided I was looking at VAS (as an example), and clicked on that PDF  and got

      https://static.vgcontent.info/crp/intl/auw/docs/etfs/profiles/VAS_profile.pdf?20160202|101500

      In the top corner it has a grey box with overall information (see attachment below) which says that it pays dividends quarterly, and has a DRP.


      Reading a similar retail fund fact sheet

      https://www.vanguardinvestments.com.au/retail/jsp/investments/retail?portId=8129##overview-tab

      It says right down the bottom that "Total returns are calculated after allowing for management and transaction costs. Returns assume reinvestment of all income distributions" - and thus I assume that you can do exactly the same thing with this managed fund.
      « Last Edit: February 02, 2016, 07:21:44 PM by deborah »

      nnls

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      Re: Basic Australian Investing Thread
      « Reply #48 on: February 02, 2016, 07:54:31 PM »
      Each investment available on the ASX may or may not have a DRP (dividend reinvestment plan), so to find out about Vanguard, I looked up Vanduard ETFs and ended up on this page -

      https://www.vanguardinvestments.com.au/retail/jsp/investments/all-products#/etf

      I then decided I was looking at VAS (as an example), and clicked on that PDF  and got

      https://static.vgcontent.info/crp/intl/auw/docs/etfs/profiles/VAS_profile.pdf?20160202|101500

      In the top corner it has a grey box with overall information (see attachment below) which says that it pays dividends quarterly, and has a DRP.


      Reading a similar retail fund fact sheet

      https://www.vanguardinvestments.com.au/retail/jsp/investments/retail?portId=8129##overview-tab

      It says right down the bottom that "Total returns are calculated after allowing for management and transaction costs. Returns assume reinvestment of all income distributions" - and thus I assume that you can do exactly the same thing with this managed fund.

      thanks Deborah

      Adventures With Poopsie

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      Re: Basic Australian Investing Thread
      « Reply #49 on: February 02, 2016, 09:03:32 PM »
      Great thread deborah, thanks for starting!

      HappierAtHome, I wanted to try and answer your question. I own Vanguard through their website (managed fund type option) and reinvest all dividends. They provide me with the records at the end of the fy (usually it takes about a month for them to upload it) and I then provide this to my accountant. This is all my Vanguard info- and I buy in each fortnight, so I have a lot of transactions. When I used to do my own tax I didn't own Vanguard, so I am not sure about doing it on your own.

      I haven't actually sold any Vanguard yet, but I am pretty sure CGT will be calculated based on all the records Vanguard provides me with. Can anyone else shed any light on this?

      I have always been a bit confused about how they calculate CGT if you're a regular buyer- presumably you're buying shares on a variety of different days at a variety of different prices- so who is to say if the 10 shares you just sold were actually purchased in 2013 or in 2014?  This is possibly a really dumb question, but I'm unsure about it.