Author Topic: Buying Vanguard - direct or through Commsec (Australia)  (Read 13407 times)

kingma15

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Buying Vanguard - direct or through Commsec (Australia)
« on: April 15, 2014, 11:32:19 PM »
So I am really new to investing and the MMM way of life.

I have set up a commsec trading account to buy shares. (I have some NRMA shares that were given to me).

I was looking at buying into Vanguard Index Funds.

Am I better off purchasing the Vanguard shares through Vanguard Australia directly or just use my Commsec account?

The reason I am asking is because Vanguard has a minimum $5,000 for initial investment, which I don't have yet. However, I could use the $600 free brokerage from my Commsec account to purchase less than $5000 worth of shares in the Vanguard fund....

I hope this question makes sense: basically, am I better off buying Vanguard funds through Vanguard directly or through Commsec?

Thanks

asabourin

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Re: Buying Vanguard - direct or through Commsec (Australia)
« Reply #1 on: April 15, 2014, 11:59:44 PM »
Hi Kingma, I've been facing the same question and done some research about it during the last couple of months. The thing is you're actually looking at slightly different products:

What you buy through your broker Commsec is shares in Vanguard ETF, which have a very low expense ratio (I think 0.15% for VAS which tracks ASX300, 0.05% for VTS which tracks the US index) but incur transaction fees.

When you open an account with Vanguard you buy in their managed fund, which don't have transaction fee, but a much higher expense ratio: 0.75% for the first 50k for the Australian share fund.

So you get more flexibility with the ETF, and potentially lower cost if your transaction are big enough to make the fee small in comparison. If you buy the fund there are minimum amount and Vanguard takes care of all the tax reporting, allows you to transfer automatically with BPay, but it's more expensive when you have a significant amount.

You'll have to do the math depending on how much you can invest each time to see which one ends up being cheaper. The good thing about the fund is that you can put money in their Lifestyle funds, which set and keep an allocation for you. For instance the High Growth has 40% Australian shares, 40% International Shares, 10% property and 10% bonds. That makes it easier as you don't have to keep track of your allocation and rebalance, but obviously this come at the price of the bigger expense ratio.

We unfortunately don't have the extensive services and lower prices available in the U.S., but hopefully it'll get better over time.

Cheers

kingma15

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Re: Buying Vanguard - direct or through Commsec (Australia)
« Reply #2 on: April 16, 2014, 01:06:41 AM »
Thanks for the reply asabourin!

After reading your post, I read the investors website and noticed that it says you have to purchase the etf's through a broker.

This was a massive aha moment for me!

What have you been thinking about investing in?

I was thinking half of my investment money going into etf through commsec, and the other half being dumped into one of the lifestyle funds through vanguard might be a good way to diversify my income.

agent_clone

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Re: Buying Vanguard - direct or through Commsec (Australia)
« Reply #3 on: April 16, 2014, 03:31:42 AM »
AFIC (http://www.afi.com.au/) and ARGO (http://www.argoinvestments.com.au/) are a couple of Listed Investment Companies (LICs) that have a good reputation in Australia.  You can also purchase them from your Commsec account as well.

Some reading on ETF's, LIC's, etc can be found at http://www.asx.com.au/products/etf/types.htm .  There is also a list on what products for the ETF/LIC/Managed Funds etc that can be bought and sold on the stock market (Right hand side under related information.

kingma15

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Re: Buying Vanguard - direct or through Commsec (Australia)
« Reply #4 on: April 16, 2014, 04:09:29 AM »
Thanks Notch and Agent Clone.

Great replies and a big help!

It can all get a bit overwhelming when starting out.

dsiee

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Re: Buying Vanguard - direct or through Commsec (Australia)
« Reply #5 on: April 16, 2014, 06:10:28 PM »
I have just bought my first bundle of VAS through commsec and would also like to highlight that the retail/managed funds are completely different to the EFT index funds.

Also an interesting point, the dividends for VAS is around 4% p.a. This is on par or above what any bank will give you at the moment. So don't worry when they go down in value because you are still betting that lovely 4%, any capital gain is just bonus!