Author Topic: Do you have any Australian Index funds?  (Read 999 times)

Alchemisst

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Do you have any Australian Index funds?
« on: August 19, 2020, 09:45:16 PM »
Initially I was going with just world market cap, but am rethinking now that bond returns are so low that dividends and franking credits would be quite handy and am now unsure on my stance. Do you have Australian index funds such as VAS, why or why not?

marty998

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Re: Do you have any Australian Index funds?
« Reply #1 on: August 20, 2020, 12:32:14 AM »
Dividends aren’t exactly what they once were with CBA halving theirs, Westpac cancelling, NAB and ANZ lowering theirs and a whole stack of industrials cutting their Divs too.

I hold VAS. Put it in the bottom draw and just close your eyes.

I have an aversion to foreign shares due to currency risk. Not a fan of hedging either.... cost and odd tax consequences when the hedging generates taxable income.

Arapiles

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Re: Do you have any Australian Index funds?
« Reply #2 on: August 20, 2020, 01:30:55 AM »
I guess I'm at the opposite end of the spectrum.  I've always been really reluctant to hold too much of the Australian sharemarket.  It is just far too concentrated for my tastes.  I understand the attraction of dividends and franking credits but it has never been enough to sway me.  In my Investment Policy Statement, I have a specified an upper limit of 30% of my equity holdings in the Australian market.  That number is basically driven by the choice of the Vanguard wholesale fund that I use as one my key investment vehicles.  I often wonder if that number is still too high.  The point about currency risk and hedging is fair enough, I guess.  It hasn't really bothered me over the years.  I guess that too comes down to each person's appetite for complexity and/or risk. 

lazycow

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Re: Do you have any Australian Index funds?
« Reply #3 on: August 20, 2020, 01:40:41 AM »
Ptf.
I need to look up what VAS stands for!

marty998

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Re: Do you have any Australian Index funds?
« Reply #4 on: August 20, 2020, 02:56:47 AM »
VAS is the ASX code for the Vanguard Australian Shares Index Fund. It tracks the S&P ASX 300 Index, which is the measure of the ~top 300 companies on the ASX by market capitalisation (value basically).

The index excludes non-liquid shares and listed investment companies. Otherwise you would have LICs like Australian Foundation Investment in there, which is obviously a problem given the nature of the AFI “business”.

Non liquid shares are an interesting one. For a long time in the distant past News Corp was the highest valued Australian company but was excluded from indices because of the Murdoch Family interests and the nature of the voting and non-voting shares.

lazycow

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Re: Do you have any Australian Index funds?
« Reply #5 on: August 20, 2020, 07:36:29 AM »
VAS is the ASX code for the Vanguard Australian Shares Index Fund. It tracks the S&P ASX 300 Index, which is the measure of the ~top 300 companies on the ASX by market capitalisation (value basically).

The index excludes non-liquid shares and listed investment companies. Otherwise you would have LICs like Australian Foundation Investment in there, which is obviously a problem given the nature of the AFI “business”.

Non liquid shares are an interesting one. For a long time in the distant past News Corp was the highest valued Australian company but was excluded from indices because of the Murdoch Family interests and the nature of the voting and non-voting shares.
Thanks heaps for the great explanation. I understood almost all of it!

JimmyMac

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Re: Do you have any Australian Index funds?
« Reply #6 on: October 04, 2020, 12:43:38 AM »
I started with a 50% allocation to VAS and reduced it over time to around 20%. Currently considering a 50/50 VGS/VGAD split.
I've found it hard to justify Australian market exposure and based my initial allocation off other's templates. How do you justify Aus over market cap?

deborah

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Re: Do you have any Australian Index funds?
« Reply #7 on: October 04, 2020, 02:12:08 AM »
I started with a 50% allocation to VAS and reduced it over time to around 20%. Currently considering a 50/50 VGS/VGAD split.
I've found it hard to justify Australian market exposure and based my initial allocation off other's templates. How do you justify Aus over market cap?
Same way you justify having Australian dollars rather than some other currency. You do need a home bias when you’re living in a country, because if the rest of the world gets devalued, you still want to live here. As Australia is less than 5% of the world markets, anything over 5% is a home bias, so I’m not talking anything like 100%. Besides which, you may have home bias by owning a PPOR.

JimmyMac

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Re: Do you have any Australian Index funds?
« Reply #8 on: October 04, 2020, 03:55:42 AM »
That's fair, and it's one of the reasons behind the 20% holding; it should also reduce expected volatility. The recent underperformance highlights the risks behind our sector concentration, which is my main issue with the index. Expected long term returns are still almost equal for domestic/international, so it could just be short term volatility. 
Some home bias seems reasonable but it can be difficult to find good information as discussion is usually focused on dividends and currency, which should be immaterial.