Author Topic: Australian Investing Thread  (Read 1742568 times)

lush

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Re: Australian Investing Thread
« Reply #4750 on: January 11, 2020, 09:16:11 PM »
Thanks Misterhorsey and Mrj and others for your responses regarding lower distributions.
Ok I think I am convinced  that I need to look at growth of the portfolio rather than distributions. It does challenge my feeling of security because of having to start to sell part of the portfolio which is scary right now. I hadnít planned to dip into selling for another 5 or more years.

 So now convinced that growth is the key, I keep coming back to that a large part of my funds are in the Balanced wholesale fund whoís performance, compared to higher risk portfolios, like say international funds, is lower. Which is a decision I made that I have been regretting for awhile and I am trying to determine whether It makes sense to sell about 50% of it over the coming months to maximise on its growth then put the funds into International. Anyway something for me to try to weigh up the pros and cons...or whether I just be old fashioned and just stick with what I have and see how it goes because after all it was meant to be a long term commitment. However I  donít want to be non proactive and hold even more regret. I have had the Balanced fund for about 3 years and over the last couple of years added the VAS fund which now sees me with an asset allocation I am happy with (30% defensive 70% growth) but overall it does have a heavy Aussie bias, so would like to change that. Thanks again.
« Last Edit: January 11, 2020, 09:18:47 PM by lush »

mjr

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Re: Australian Investing Thread
« Reply #4751 on: January 11, 2020, 10:04:40 PM »
I'd say that 70% growth assets qualifies as a "growth" portfolio, so you're probably OK there now.

You're just going to have weigh whether paying capital gains tax on 50% of your portfolio will be offset by a move to international funds. 

How much can you add to international funds over the next few years without selling ?

lush

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Re: Australian Investing Thread
« Reply #4752 on: January 11, 2020, 11:39:26 PM »
I'd say that 70% growth assets qualifies as a "growth" portfolio, so you're probably OK there now.

You're just going to have weigh whether paying capital gains tax on 50% of your portfolio will be offset by a move to international funds. 

How much can you add to international funds over the next few years without selling ?

Yes I need to find the time and head space to do the maths. Once I do that (hopefully I get it right!) it should provide me with the next steps to take. In regards to how much I can put in, not very much more, at the very least I will put the distributions from the VAS & Balanced funds which will equal about 20k annually after taxes. And maybe another $100k this year. But then I am done with trying so hard! I really want to unwind to part time work. I am very burnt out.

Andy R

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Re: Australian Investing Thread
« Reply #4753 on: January 12, 2020, 12:43:56 AM »
Ok I think I am convinced  that I need to look at growth of the portfolio rather than distributions.

You're still missing the point.
The point is not to look only at growth as opposed to only dividends.
The point is to ignore the specific return of either and look only at the total return.

deborah

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Re: Australian Investing Thread
« Reply #4754 on: January 12, 2020, 01:15:22 AM »
It appears to me that it might be advisable to have something similar to what we did with the investment order, but for how to invest.

Iíve shied away from this, because everyone is different, and has different knowledge - I think itís better to invest in what you know about. But so many people struggle with it.

Letís say that weíre setting up an investment guide... It might go something like this:

1. To begin: If you have no knowledge about any form of investment, buy the Vanguard index - VAS and VGS.

2. Review your knowledge. Your parents may have been landlords, and invested in some form of property. You may be working in some form of investment, you may be able to participate in employee share plans... Decide whether you know a reasonable amount about these investments. If you donít, read up (the ASX has a lot of courses), talk with your local expert (your parents...) and study this. Read the John Collins stock series...

3. Once you understand the investments you are interested in, work out how you will start to invest that way, and what proportion of your investments will be in them.

4. Review your other investments - youíre bound to have some superannuation, you may have inherited some investments... You need to understand these.

5. Develop an investment strategy.






Notes:
1 VAS gives you an ASX (Australian Stock Exchange) exposure, and VGS gives you the world. It wonít be the very best investment, but it will be better than a lot, and will start you investing and learning.

2 Develop your own understanding of the gambit of investing.



Thereís obviously more. Is this worth pursuing? In a special thread?

lush

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Re: Australian Investing Thread
« Reply #4755 on: January 12, 2020, 02:00:13 AM »
Ok I think I am convinced  that I need to look at growth of the portfolio rather than distributions.

You're still missing the point.
The point is not to look only at growth as opposed to only dividends.
The point is to ignore the specific return of either and look only at the total return.

Got it. Thanks

misterhorsey

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Re: Australian Investing Thread
« Reply #4756 on: January 12, 2020, 10:37:33 PM »
... I keep coming back to that a large part of my funds are in the Balanced wholesale fund whoís performance, compared to higher risk portfolios, like say international funds, is lower. Which is a decision I made that I have been regretting for awhile and I am trying to determine whether It makes sense to sell about 50% of it over the coming months to maximise on its growth then put the funds into International...

I wouldn't beat yourself up for choosing the balanced option 3 years ago.  It's actually not a bad option.
 
One of the really challenging things about investing is making financial decisions for your future self - who is someone you haven't yet met.  You go into it with all the best intentions, but 3 years pass and you're likely much savvier, have a better understanding of financial matter, and perhaps a higher tolerance of risk.  It's pretty hard to get it exactly right.

I dip in and out of this forum quite a bit. But I seem to recall that at the time you were about to invest you were selling a property and had a lot of cash. I don't think you'd invested in shares/index funds at all up to this point. So it was all quite new, and your tolerance of risk and volatility was probably lower than it is now.  At the time I think the balanced option was actually a decent choice.

Three years on the market has kicked on and you're regretting the fact that missed out on the better performance delivered by more growth oriented funds and that's understandable.

But I think it's worth remembering that three years back, no-one knew that the market would perform as it has. (Note that the this period also included the pretty sharp correction at the end of 2018. In fact, some of the stellar performance of 2019 was because it was making up for what was lost at the end of 2018.  VAS did 20% approx in calendar 2019.  But VAS from it's previous high in Oct 2018 to end of 2019increased by only 7% (not including dividends).  Still decent of course, but not the headline figure that you'd feel necessary to beat yourself up about.

But it's also worth remembering that if the market had experienced a sustained contraction over the past 3 years, or we entered into a full recession (something it seems we seem to be continually flirting with since the Great Recession/GFC), it's likely you would have been pretty happy to be in balanced fund as your 'losses' would be significantly less than an equivalent growth fund.

Choosing some degree of stability and lesser volatility with the balanced fund actually is a valuable thing.  The fact is, the market didn't crash - but you chose a strategy that would have put you in good stead if it had.  No-one knows how they'll behave if the market drops 40% again.  Everyone thinks they won't panic but you don't know what your future self might be tempted to do.

But now that you have significant amount in a balanced fund it doesn't need to stay that way forever - something you've already addressed by adding VAS.

You could cash out of your balanced fund and put it in a growth fund, but the CGT hit won't be ideal.  And anyway, there's really no urgency to shift the balance if you're investing for a 10-20-30 year etc time frame. Add the 100k cash you have to VGS/VAS, and opt to receive any future distributions from the fund as cash and put it into VAS/VGS.  If it's still not the allocation you like (growth v income, international v australia), then cash out a bit and buy into something else to rebalance. This is of course messier than if you had started with a high growth fund from that start, rebalancing will be a pain if you don't have a head for it, but that can't be helped.

It will be more volatile of course and if you're in for the long term it doesn't really matter.  As an example, I helped ease my parents into the Conservative vanguard fund.  When my High Growth fund dropped around 12% or so, theirs dropped by about 2%.   This was just a minor blip in the scheme of things but there were definitely people on forums getting jittery.

But perhaps above all, prepare a ideal allocation that you'd be happy with and slowly work towards that.   It took me about 5 years to unravel my legacy investment positions (investment property + no shares, to direct shares and no index funds, to an indexed strategy with a 50/50 international/Australian split). I wish I had bought VGHD ETF at the very beginning. But of course, it didn't exist at the time.

lush

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Re: Australian Investing Thread
« Reply #4757 on: January 14, 2020, 04:24:15 PM »
Misterhorsey thank you for your, accurate, articulate and very thoughtful response. It has provided me with excellent perspective and great food for thought. More than anything it has provided me with a calmer approach to the situation. I have no doubt what you have articulated resonates with many in this forum. Thanks again.

Alchemisst

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Re: Australian Investing Thread
« Reply #4758 on: January 15, 2020, 02:22:14 PM »
I'm currently weighing up whether I should put more money into super (over the 25k) for the tax benefits vs invest in the index outside super, any opinions?

deborah

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Re: Australian Investing Thread
« Reply #4759 on: January 15, 2020, 02:28:37 PM »
I'm currently weighing up whether I should put more money into super (over the 25k) for the tax benefits vs invest in the index outside super, any opinions?
Depends on your age, what age you plan to retire and how much you have inside and outside super.

Alchemisst

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Re: Australian Investing Thread
« Reply #4760 on: January 15, 2020, 04:17:34 PM »
I'm currently weighing up whether I should put more money into super (over the 25k) for the tax benefits vs invest in the index outside super, any opinions?
Depends on your age, what age you plan to retire and how much you have inside and outside super.

Currently early 30's

mjr

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Re: Australian Investing Thread
« Reply #4761 on: January 15, 2020, 06:03:39 PM »
Depends on your age, what age you plan to retire and how much you have inside and outside super.

Currently early 30's

Really can't offer an opinion without the information that Deborah listed.

Other important information would be do you have any major expenditures planned between now and age 60, including early retirement.  House paid off ?  Kids around or planned ? Etc.

I shored my short to mid term plans so that I had an early retirement plan and was protected against job loss, etc and then poured money into super in my late 40s/early 50s.

happy

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Re: Australian Investing Thread
« Reply #4762 on: January 15, 2020, 07:01:29 PM »
Its the question without one right answer I'm afraid. It really does depend on all those factors Deborah and MJR have mentioned, plus what you current income is ( changes the tax advantages) what your annual expenses will be in retirement, plus what you think the government is going to do with super in another 30 odd years time.

I like to think of it in 2 categories: old person money ie money you will need once you can access super, and younger person money - money you need in retirement until you can access super.

I've advised my children in their early 20s to try to build their super early, so that time - another 40 years or so, can do the heavy lifting. Especially as caps etc are more likely to get tighter than looser. As soon as possible, once it looks like a basic level of old person money will be covered, start investing outside.

At the end of the day super is really a tax minimization scheme, so what you do really does depend on your income and marginal tax rate . The main thing is to keep expenses low and save and invest.
« Last Edit: January 16, 2020, 03:47:06 AM by happy »

mjr

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Re: Australian Investing Thread
« Reply #4763 on: January 15, 2020, 07:09:20 PM »
Tax avoidance is illegal.  Super is a tax-minimisation vehicle, design to reward people for locking money away for up to 40 and beyond years in order to less of a burden on taxpayers

happy

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Re: Australian Investing Thread
« Reply #4764 on: January 16, 2020, 03:47:57 AM »
FIFY.

mjr

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Re: Australian Investing Thread
« Reply #4765 on: January 16, 2020, 02:08:06 PM »
Thanks :-)

marty998

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Re: Australian Investing Thread
« Reply #4766 on: January 21, 2020, 11:43:30 PM »
Holy sheeeeeet. How about all that froth in the market at the moment? Up, up and away, the Santa rally is in full force.

mjr

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Re: Australian Investing Thread
« Reply #4767 on: January 22, 2020, 01:51:42 AM »
It's bloody terrifying.  S&P500 futures is up 0.43% at the moment as well.

On the plus side, I'm now within $10k now of the big 3.   I crossed the big 2 in June 2018 !  Holy sheeet.

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #4768 on: January 30, 2020, 12:24:11 PM »
***Dumb question alert*** Will the Aussie dollar ever get better? During the gfc, it exceeded the USD. Are we ever going to see that again? And if it rises, do any of you do anything to take advantage of the better exchange rate before it drops again? Iím just thinking about how much more money I need if I want to live outside Australia while retired, and want the US and Europe as options not just SE Asia and Central America.

deborah

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Re: Australian Investing Thread
« Reply #4769 on: January 30, 2020, 12:34:09 PM »
***Dumb question alert*** Will the Aussie dollar ever get better? During the gfc, it exceeded the USD. Are we ever going to see that again? And if it rises, do any of you do anything to take advantage of the better exchange rate before it drops again? Iím just thinking about how much more money I need if I want to live outside Australia while retired, and want the US and Europe as options not just SE Asia and Central America.
It will get better. It will also get worse. As I travel overseas each year, I have some money in the money market that I use if it's better value than I can get when I'm traveling. So far, this strategy has paid dividends, but I realise it's market timing. If you plan to live in other places, you should adjust your investments so that your 'home bias' includes those places. That way you should be able to afford all the places you want to live, but will probably be slightly worse off than if you only had one country as your 'home bias'.

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #4770 on: January 30, 2020, 12:44:04 PM »
***Dumb question alert*** Will the Aussie dollar ever get better? During the gfc, it exceeded the USD. Are we ever going to see that again? And if it rises, do any of you do anything to take advantage of the better exchange rate before it drops again? Iím just thinking about how much more money I need if I want to live outside Australia while retired, and want the US and Europe as options not just SE Asia and Central America.
It will get better. It will also get worse. As I travel overseas each year, I have some money in the money market that I use if it's better value than I can get when I'm traveling. So far, this strategy has paid dividends, but I realise it's market timing. If you plan to live in other places, you should adjust your investments so that your 'home bias' includes those places. That way you should be able to afford all the places you want to live, but will probably be slightly worse off than if you only had one country as your 'home bias'.

Thank you for responding. Iím a bit confused by what you mean. Say I live in Australia but want to move to Portugal to live. So, youíre saying I need European investments in my index portfolio? I use the Vanguard high growth Lifestrategy fund, donít think I can change that. Is home bias Australia?

deborah

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Re: Australian Investing Thread
« Reply #4771 on: January 30, 2020, 02:00:24 PM »
Everyone has home bias, and it is good and bad. Australia has about 1.5% of the world's economy, so in theory, if you had no home bias, you would have 1.5% of your investments in the Australian economy, but many people have a hard time justifying even as low as 40% Australian shares. This can be seen as reasonable because
 
- our companies participate in other economies,
- we get more value from Australian shares because of our taxation rules,
- we need somewhere to live, so buy property here,
- we live in Australia, and are using Australian dollars, so need to have our investments giving us an Australian wage...

BUT it is still home bias.

If you plan to live in Portugal, Australia and the USA, you need to change your home bias to Portugal, Australia and the USA. How you do this is up to you. You can get a European index and an American index, you can buy property in your home countries...

mjr

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Re: Australian Investing Thread
« Reply #4772 on: February 06, 2020, 04:09:12 PM »
On the plus side, I'm now within $10k now of the big 3.   I crossed the big 2 in June 2018 !  Holy sheeet.

Took 16 days and plunged a couple of times, but as of right now the invested assets is north of $3m.  That's a $400k increase in the 18 months since I stopped work.
« Last Edit: February 07, 2020, 04:00:34 PM by mjr »

chevy1956

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Re: Australian Investing Thread
« Reply #4773 on: February 07, 2020, 02:18:44 AM »
On the plus side, I'm now within $10k now of the big 3.   I crossed the big 2 in June 2018 !  Holy sheeet.

Took 16 days and plunged a couple of times, but as of right now the invested assets is north of $3m.  That's a $400k increase in the 18 months since I stopped worked.

That was good timing to retire. I'm worried it's going to come down when I retire. I do have bonds to draw down on at the start though.

mrmoonymartian

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Re: Australian Investing Thread
« Reply #4774 on: February 07, 2020, 06:28:33 AM »

I don't know if this is a widespread concern, but one niggle for me at least with the latest update is that countries outside the US can't specify US for the international stocks any more, but are locked into WLD. In an ideal WLD, I would be able to select from more of the investment options you have data for, in a single portfolio (eg. domestic TSM + US SCV + EM + WLD REITS +...). But I would understand completely if the response is: "I'm afraid I can't do that, Dave".


Thanks for your hard work Tyler.

I agree that it would be great to see some US based assets added, converted back to $AUD. It looks like you've done this for SCV in Canadian portfolios. In Australia we have a reasonable variety of listed US markets ETFs available to choose from, and many people use them in their portfolios. We also have the option of buying NYSE ETFs directly through our local brokers.
@Daniel S check out his latest update...

https://portfoliocharts.com/2020/01/06/the-future-of-portfolio-analysis-has-more-history-than-ever/

Daniel S

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Re: Australian Investing Thread
« Reply #4775 on: February 07, 2020, 07:01:54 AM »

I don't know if this is a widespread concern, but one niggle for me at least with the latest update is that countries outside the US can't specify US for the international stocks any more, but are locked into WLD. In an ideal WLD, I would be able to select from more of the investment options you have data for, in a single portfolio (eg. domestic TSM + US SCV + EM + WLD REITS +...). But I would understand completely if the response is: "I'm afraid I can't do that, Dave".


Thanks for your hard work Tyler.

I agree that it would be great to see some US based assets added, converted back to $AUD. It looks like you've done this for SCV in Canadian portfolios. In Australia we have a reasonable variety of listed US markets ETFs available to choose from, and many people use them in their portfolios. We also have the option of buying NYSE ETFs directly through our local brokers.
@Daniel S check out his latest update...

https://portfoliocharts.com/2020/01/06/the-future-of-portfolio-analysis-has-more-history-than-ever/

Thanks for this mrmoonymartian. Our prayers have been answered!

mjr

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Re: Australian Investing Thread
« Reply #4776 on: February 07, 2020, 04:18:30 PM »
That was good timing to retire. I'm worried it's going to come down when I retire. I do have bonds to draw down on at the start though.

It was, that's for sure.  But even if the share market comes a gutsa in the next couple of years, it's likely that a higher withdrawal rate will be ok on the reduced valuations.

Of course, my skiting at 9:10 resulted in the market turning so my total closed $7k underneath that magic number :-)

I don't plan on my withdrawal rate ever exceeding 3% on my curretn valuation.  For now, I'm puttering along nicely at 1%, but that will change when I get less nervous (fingers crossed)

chevy1956

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Re: Australian Investing Thread
« Reply #4777 on: February 08, 2020, 03:57:56 PM »
I don't plan on my withdrawal rate ever exceeding 3% on my curretn valuation.  For now, I'm puttering along nicely at 1%, but that will change when I get less nervous (fingers crossed)

Once you are at 3% you are good. You will end up filthy rich at this rate at least in terms of wealth to spending needs which to me is what it means to be wealthy. If you want to spend you should spend.

marty998

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Re: Australian Investing Thread
« Reply #4778 on: Today at 01:56:32 AM »
Been watching the markets with a wry smile lately. On 30 January I sold substantially all of my equities portfolio in order to fund the purchase of an investment property.

5238 units of VAS @ $88.56, best part of half a million. The market did what it did and continued racing upwards to $91 and I sat there contemplating whether I should have let it run until closer to the property settlement before the red ink spilt this week. If I hadn't sold I'd be shitting bricks right now.

Bird in the hand allows me to sleep at night, have the cash sitting in the bank account staying deathly static while commsec has blood all over every page.

Stay the course and buy more if you can, but this little piggy is happy with his impeccable market timing :D

deborah

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Re: Australian Investing Thread
« Reply #4779 on: Today at 02:18:39 AM »
Well done Marty!