Author Topic: Vanguard (or others) in Australia  (Read 11661 times)

Riccati

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Vanguard (or others) in Australia
« on: July 20, 2012, 12:14:38 AM »
Hi all,

I'm a long-time MMM blog reader but new forum member, living in Australia.

I currently have a bit over $100k sitting in an ING savings accelerator account, to which I'm adding about $3k each month. The ING account gets pretty good interest (4.5%) but I'm looking into spreading it around a bit with some in higher growth.

Americans on here seem to like Vanguard. I noticed there is an Australian branch:
https://www.vanguardinvestments.com.au/retail/ret/home.jsp
I'm looking at some of their ETF products.

Does anyone have any experience with them? Does that sound like a good idea for this amount of money?

-R

englyn

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Re: Vanguard (or others) in Australia
« Reply #1 on: July 20, 2012, 01:35:27 AM »
Hi Riccati, another Aussie, yay!
I realise this doesn't answer your question exactly, but I found the recent articles on this site interesting when I found them yesterday:
marcustoday.com.au They've drawn everything out of shares into cash at the moment expecting the market to get worse before it gets better. You may disagree, or you may find that by the time you've finished doing your research and are ready to buy, the threat is over and it's the perfect time to get in :)
Ubank has savings deposit rates advertised at 5.71% at the moment, I haven't read the fine print.
The barefoot investor has some useful opinions on ETFs or something very similar.
http://www.barefootinvestor.com/four-efts-add-your-portfolio/
Ah! here's what I was thinking of. LICs. http://www.barefootinvestor.com/how-to-invest-guide/listed-investment-companies/

happy

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Re: Vanguard (or others) in Australia
« Reply #2 on: July 20, 2012, 07:37:21 AM »
G'day Riccati and Englyn,

I found the Australian Vanguard website too a few weeks ago. Sorry I can't help but I'm interested in the answer to your question.

This is off-topic, sorry but I'm wondering whether there are any Australian sites/blogs you use? (Maybe I should put it in another thread. ) It would be good to find/create a group of Aussie moustaches to compare notes, since the US is quite different in many respects. Of course the principles are the same.


Riccati

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Re: Vanguard (or others) in Australia
« Reply #3 on: July 20, 2012, 05:28:28 PM »
Hi Happy and Englyn, thanks for the replies.

I'm not really market savvy at all - my one attempt to "play the market" was to buy a couple of grand worth of BHP shares when they were almost $100, which are now at $64. Although I didn't lose much in the scheme of things, this early experience taught me I'm not likely to beat the markets, and something index linked is probably a good idea.

I guess a safe way would be for me to just start by putting a portion of my monthly savings into an index fund, rather than moving a large chunk of my cash savings over. That way a sudden fall won't really hurt (and would help in a sense since I'd be buying cheap).

That article recommends Barclay's ETFs. Given all the news about them cheating LIBOR recently, I'm not sure I really support them as a company, or trust them with my money. From the little I've read Vanguard seems to be run in a responsible and respectful way. I'd be interested in others' thoughts about this (from oz or elsewhere).

I don't know of any Australian sites, but I'd also be interested. There's a lot of talk on here about 401k etc which is irrelevant to us, but I haven't seen any discussion about super funds. I'm also interested in the aussie housing market. All the discussion I can find on the web seems to be petty fighting between renters hoping it'll crash (like me :-) and mortgage-payers hoping it won't.

HowMuchCanAKoalaBear

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Re: Vanguard (or others) in Australia
« Reply #4 on: July 22, 2012, 12:39:43 AM »
I use Vanguard and Statestreet etf's both very low fees and reputable companies. I use symbol VAS(0.15%) asx 300 top stocks and STW(0.28%) asx 200 stocks, VAS has lower fees but isn't as liquid (as much volume going through each day). Note asx 300 = 80% of the all ords by value...best way to go direct stock picking is hard work :)

Commsec (commonwealth bank) is a great online broker $19.95 up to $10,000 per trade.

Change your cash account to Ubank NAB 5.71% u need to deposit $200 per month to get the bonus interest no biggie and its all at call very flexible paid per month. Easy to set up online.

Housing is very expensive, crash? maybe sit tight its flat or going down so no rush keep saving a deposit.

Super make sure you choose an industry fund First state is a good one retails funds will slug you 2%+ a balanced fund at first state is approx 0.3%

Although salary sacrifice is a good way to save tax I wouldnt be adding any extra till you have a house and are a good way to paying it off, no tax relief on mortgages and 6.5% rates means its better to pay the mortgage first and salary sacrifice later. No super matches in oz unless you are self employed. Also u cant access it till 60yrs , tax free.

My recommendation(for what its worth) would be to keep at least 50k incash at Ubank and  50k into an ETF and then every 2 months 3k into the ETF (dollar cost average). and saving 3k more for the house.

Bonus : mobile phone  tip justmobile $15 for 6 months prepaid :)
« Last Edit: July 22, 2012, 12:48:20 AM by HowMuchCanAKoalaBear »

happy

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Re: Vanguard (or others) in Australia
« Reply #5 on: July 22, 2012, 02:30:00 AM »
Hello HMCAKB,

Thanks for your answer HMCAKB, I'm reassured I read a few things the same as you.

Real estate, yes mostly flat, or going down slowly, a few exceptions in some locations but difficult to pick. Already have a mortgage but if I didn't I'd be saving for a bigger deposit at that good cash rate and waiting to see what happens. You can get mortgages for less than 6.5%. I get 6.03% with NAB, and some of the Building societies etc are in the high 5's.

I have also lots of good recommendations about Commsec, but don't use it myself.

I use First super. Not going great guns  at the moment but from what I know nothing much is at present. Its returning 5% over the last 10 years.

Thanks for the info about Vanguard and Statestreet, at present I am paying off debt, but I am researching for the magic day its gone and I have some additional $$for the stache.

englyn

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Re: Vanguard (or others) in Australia
« Reply #6 on: July 22, 2012, 07:47:01 PM »
wait, you have a mortgage? Get that 'stash into a 100% offset account. Totally flexible and you can't beat the equivalent of 6.03% interest tax free! Unless you are on a fixed rate, don't tell me NAB can't do it and for a slightly better loan rate than that even - personal knowledge ;)
That is where my money's currently going and I haven't seen anything nearly as good at the moment.

englyn

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Re: Vanguard (or others) in Australia
« Reply #7 on: July 22, 2012, 07:50:46 PM »
PS super match can be found in aus, although it's not common. My husband's new job has it I think.

Thanks for the info on commsec and vanguard. Going to keep that in mind for when my mortgage is paid off.

JJ

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Re: Vanguard (or others) in Australia
« Reply #8 on: July 22, 2012, 09:01:53 PM »
I had a good looks through the Vanguard PDS for each of their main ETFs and normal managed funds.  It looks reasonably solid.  The Motley Fool Aussie edition newsletter came out a couple of days back and reiterates the Vanguard index investing philosophy using a story from one of Buffet's newsletters - nicely put.  Have a read of http://www.berkshirehathaway.com/letters/2005ltr.pdf under "How to minimise investment returns".

The ETFs seem to have slightly higher trading costs than the managed funds (I should have written it all down - it was a few weeks back and then I got distracted), but the ETFs are way more flexible.  Plus you need to jump through hoops to apply for the managed fund which you don't need to do if you already have a trading account with someone like Commsec.  I'd be surprised if there wasn't a follow-up interrogation with ASIO based on all the other stuff on the form. Maybe it's just that I haven't set up with a new financial institution for such a long time that I forgot the pain.  Anyway, I digress...

The liquidity isn't a problem as they create & destroy units to match demand so it isn't like trading an illiquid small-cap (e.g. ONT with its outrageous dividend).

I'm all for an Aussie Mustachian group - maybe we can lean on Mr & Mrs MM to set up a category on this forum.  We could go fully Antipodean and include our Kiwi friends - there's plenty of solid contributions from across the pond.

happy

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Re: Vanguard (or others) in Australia
« Reply #9 on: July 23, 2012, 03:33:02 AM »
wait, you have a mortgage? Get that 'stash into a 100% offset account. Totally flexible and you can't beat the equivalent of 6.03% interest tax free! Unless you are on a fixed rate, don't tell me NAB can't do it and for a slightly better loan rate than that even - personal knowledge ;)
That is where my money's currently going and I haven't seen anything nearly as good at the moment.

I do have a 100% offset account. Hmm I might give my banker a call and see if she can do any better with the rate. I thought I might have to refinance with someone else to do better.

Super match is not available to me - there is the government co-contribution http://www.ato.gov.au/individuals/content.aspx?menuid=0&doc=/content/42616.htm&page=3&H3[url=http://]]], but this is means tested with an upper threshold just under $62000. 

englyn

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Re: Vanguard (or others) in Australia
« Reply #10 on: July 23, 2012, 07:21:13 PM »
(deleted comment that made no sense because I lost track of who posted what) *sheepish*
« Last Edit: July 23, 2012, 11:45:26 PM by englyn »

Riccati

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Re: Vanguard (or others) in Australia
« Reply #11 on: July 23, 2012, 10:28:45 PM »
I think some people are getting mixed up. I was the original question-asker with the ING account, but "happy" has a mortgage and an offset account.

Anyway, it's good to see some discussion here.

Just for the dummies (me), have I got this right? I would open an account with commsec and deposit some cash there, then I buy vanguard's ETFs through them? And it costs $20 each transaction?

happy

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Re: Vanguard (or others) in Australia
« Reply #12 on: July 24, 2012, 12:00:53 AM »
Sorry OP we kind of got off track.

RE: the process to buy Vanguard: I can't really  help  with any authority since I am also a newb to share/stocks etc. What you describe sounds correct  to me, but hopefully someone with more experience will come by and confirm.

JJ

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Re: Vanguard (or others) in Australia
« Reply #13 on: July 24, 2012, 02:38:39 AM »
Just for the dummies (me), have I got this right? I would open an account with commsec and deposit some cash there, then I buy vanguard's ETFs through them? And it costs $20 each transaction?

Correct. That's the idea of ETFs.  There are, however, other ongoing costs - around 0.15% pa.  I'm not sure how these get deducted - probably a reduction in the quarterly distribution.

You can also apply to join a managed index fund direct with Vanguard.  ETFs are more or less managed funds packaged up in such a way that they can be traded using the share market platforms rather than managed fund platforms - i.e. you buy and sell them like shares.  ETF = Exchange Traded Fund.

https://www.vanguardinvestments.com.au/retail/ret/education/inv-library/what-are-etfs.jsp has an overview of how they work.

HowMuchCanAKoalaBear

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Re: Vanguard (or others) in Australia
« Reply #14 on: July 24, 2012, 03:03:35 AM »
@ Ricatti , I would recommend the VAS ETF @ 0.15% p.a. compared to the index fund which is buy sell spread 0.2%+0.75% p.a. It pays quarterly for divys and its about 80% franked.

Buy in every 2 to 3 months to keep your brokerage costs down. Commsec has a cash account and an investment account(4.0%) that is used to settles your share purchases online this is called internet prefered,  this enables u to get the $19.95 per trade otherwise linking to an existing bank account is $29.95 up to 10k per trade. Money can be transfered easily online once u are all setup . Till the end of August they have an intro offer $600 worth of free brokerage. might as well open a cash account with them no fees and save on brokerage..

regards HMCAKB
« Last Edit: July 24, 2012, 03:13:06 AM by HowMuchCanAKoalaBear »

Riccati

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Re: Vanguard (or others) in Australia
« Reply #15 on: July 24, 2012, 12:07:01 PM »
Thanks for the info. What does "80% franked" mean?

Also, what are the pros and cons of the commsec/ETF route vs applying direct to vanguard for a managed index fund?

I guess commsec would give me more freedom to invest in other things if I chose, but supposing all I wanted to do was buy some vanguard ETFs, what would be the difference?

JJ

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Re: Vanguard (or others) in Australia
« Reply #16 on: July 24, 2012, 03:52:14 PM »
80% franked means that 80% of the dividend income has already had tax paid on it at the corporate tax rate (30%), so you only pay tax on the difference between the corporate tax rate and your own marginal tax rate. If you are in a low tax bracket you may even get some of this tax reimbursed.

For a full explanation of ETF v MF pros and cons follow the link from my previous post. Basically, ETFs are more flexible but higher transaction fee ($20 per buy or sell or whatever brokerage is charged) so are good for either larger amounts or infrequent purchases. MFs are better for small, regular contributions.

Riccati

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Re: Vanguard (or others) in Australia
« Reply #17 on: July 25, 2012, 05:28:42 PM »
Thanks for all the info, everyone.

Another query: do people use any software to track and analyse their spending/investments/etc? I used to live in the US where I used mint.com, but I haven't seen an equivalent here in oz. What about MYOB or Quicken or something?


JJ

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Re: Vanguard (or others) in Australia
« Reply #18 on: July 25, 2012, 05:56:39 PM »
I use Excel - dump the transactions from the online bank statement, fill in a category column and use a pivot table.  "Clunky but funky". For my purposes it's fine - I don't agonise over every cent but just need to know the big expense numbers so I know where to focus.  For me it is car, power, insurance where there is room for improvement at the moment.  Investment cash-flow is handled ok with this approach, but not good enough for tax purposes as it doesn't handle depreciation schedules, capital gains calcs etc - I use an accountant for this.

MYOB, in my opinion, is too much for personal finance.  It's great for small business and I have used it there before.  I haven't used Quicken.

arebelspy

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Re: Vanguard (or others) in Australia
« Reply #19 on: July 25, 2012, 05:59:09 PM »
What about MYOB or Quicken or something?

MYOB = ??  (I always read it as "Mind your own business.")

Did you mean YNAB (You Need a Budget)?
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gooki

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Re: Vanguard (or others) in Australia
« Reply #20 on: July 25, 2012, 06:03:07 PM »
MYOB is an accounting application, and yes it is named after the common term "Mind Your Own Business".

http://myob.co.nz/

arebelspy

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Re: Vanguard (or others) in Australia
« Reply #21 on: July 25, 2012, 06:07:18 PM »
Ah, learned something new.  Thanks gooki.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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JJ

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Re: Vanguard (or others) in Australia
« Reply #22 on: July 25, 2012, 06:28:45 PM »
I prefer this one: http://myob.com.au/ ;)