Australian Investing Thread

[marty998]

Ouch (again). Down 187 points today.

BHP slaughtered today... not really sure why (except falling in sympathy with all other global miners), my theory is that it's one of the few companies that could cash in and buy up Glencore's assets on the cheap should a fire sale happen.

I don't believe this is going to be a short sharp bear market... thinking it could persist well into next year. There's just no growth in the economy this year.

I'm starting to increase my investments in the stock market and I honestly hope this happens. I'd like to see 5 years of dud returns. I reckon this is realistic as well.

had a day in the garden y'day and missed all the action. eyes popped out when I saw the asx chart!

the mood is definitely gloomy. the one key support remains the very attractive yield on offer. buyers still cautious when prices falling fast though....

We'll soon enough find out how good that yield is when WBC, ANZ and NAB report their full year results in a month's time. CBA's full year results indicated a softer second half with earnings down 2% half on half. Can expect largely the same from the other 3 majors.

[FFA]

We'll soon enough find out how good that yield is when WBC, ANZ and NAB report their full year results in a month's time. CBA's full year results indicated a softer second half with earnings down 2% half on half. Can expect largely the same from the other 3 majors.

yeah you're right Marty, the concern now is not only prices falling, but potential for future dividends to fall too.

still, purely on yield comparisons, the asx at 5% (or 7+ with franking) is just so far ahead versus online savers (3.5%), us shares (<2%). dividends would have to fall a long way for income investors to be worse off. And the outlook for interest rates seems to remain low for some time yet.

[wombat]

APRAs squeeze on investment loans may also hit bank profitability and dividends. If (when?) the RBA lowers interest rates the banks may not be keen to pass that on - after all if their deposit ratios have to adjust to meet APRAs targets then they might look to interest rates to encourage more deposits so they can write more loans.

[marty998]

And back up we go...190 odd points in 2 days. If I were a psychiatrist I'd be diagnosing Mr Market with bi-polar disorder then and there.

Buried in the middle of yesterday's Fin Review was a short story about 2 major banks trying to offload Arrium loans for 80c in the dollar.

Could potentially be quite a hit to the bottom line assuming they haven't already been provided for. And this is all before the banks start taking haircuts on all the loans made to LNG and coal sector companies.

APRAs squeeze on investment loans may also hit bank profitability and dividends. If (when?) the RBA lowers interest rates the banks may not be keen to pass that on - after all if their deposit ratios have to adjust to meet APRAs targets then they might look to interest rates to encourage more deposits so they can write more loans.

Yeah I tend to agree... the next cut in interest rates will see OO loans fall but Investor loans won't by as much. It'll almost go back to the situation 20 years ago with the differential pricing in place, just this time it will be same SVR, different discounting.

You might find they will also look at costs. I doubt many more jobs will be offshored.. rather jobs will be disappearing entirely soon enough.

Considering you can already deposit cheques into ATMs, the only transactions people need a bank teller for these days is if they're taking out a home loan or closing all their accounts.

[dungoofed]

AUD back up, ASX back up. Watch next as analysts/banks revise their forecasts up for each lol

[bigchrisb]

AUD back up, ASX back up. Watch next as analysts/banks revise their forecasts up for each lol

Yep, certainly bipolar!  I'm always amazed how much recency bias I end up with in my own emotions about the stock market.  Case in point - on the way down, I was saying "VAS at $67?  I should buy more, what a bargain!!!".  Now on its way back up, I'm thinking "VAS at $67? That's getting expensive, better hoard cash". 

All good arguments for trying to take emotion out of investment and just keep to regular buying I suspect.

[dungoofed]

HAHA looks like you had a couple of good purchases though.

I've got one high-conviction speccy that I've been looking to purchase more of for nine months now. I believe it's an 8-bagger at the price I bought it, and I was hoping the market would push it down a little more into 10-bagger territory but now it's back up again.

[FFA]

AUD back up, ASX back up. Watch next as analysts/banks revise their forecasts up for each lol

Yep, certainly bipolar!  I'm always amazed how much recency bias I end up with in my own emotions about the stock market.  Case in point - on the way down, I was saying "VAS at $67?  I should buy more, what a bargain!!!".  Now on its way back up, I'm thinking "VAS at $67? That's getting expensive, better hoard cash". 

All good arguments for trying to take emotion out of investment and just keep to regular buying I suspect.

yes I find the same, and largely gave up on market timing for the regular investing approach.

this kind of psychology is similar to the support/resistance concept, i.e. once the 67 support gets broken it becomes a resistance... if you believe in technicals !

looks like the ole sell everything in april and buy it all back again is September would've worked a treat this time !!

[Astatine]

A n00b question about how often you guys invest? I recently came across the concept of investing too often means complicated CGT calculations in the future (in someone's journal) which I'd kind of thought about but not in any detail.

[FFA]

A n00b question about how often you guys invest? I recently came across the concept of investing too often means complicated CGT calculations in the future (in someone's journal) which I'd kind of thought about but not in any detail.

in the past year I've transacted (bought) 65 etf/share parcels. that's more than usual as I've been in transition. But even in a typical year it would be easily 30-40 parcels mainly due to DRP's (dividend reinvestment).

I think I mentioned in the other thread, for me it's not a big deal, just a bit of spreadsheet work. not as time consuming as it might seem and anyway is a labour of love :) .... but marty has a valid point, it's not for everyone.

you can control it. 1) keep a simple portfolio (e.g. two fund VAS/VGS). 2) don't use DRP's do it manually yourself to avoid lots of small parcels. 3) invest less frequently e.g. bimonthly or quarterly. 4) buy and hold forever.

if you are over 100k in size and can get access to wholesale funds, that might be the best option. I expect the fund manager will track it for you and provide a CGT tax statement when you eventually sell. the difference between wholesale and etf MER's is very small (e.g. 0.03% in the case of Vanguard)

[Astatine]

A n00b question about how often you guys invest? I recently came across the concept of investing too often means complicated CGT calculations in the future (in someone's journal) which I'd kind of thought about but not in any detail.

in the past year I've transacted (bought) 65 etf/share parcels. that's more than usual as I've been in transition. But even in a typical year it would be easily 30-40 parcels mainly due to DRP's (dividend reinvestment).

I think I mentioned in the other thread, for me it's not a big deal, just a bit of spreadsheet work. not as time consuming as it might seem and anyway is a labour of love :) .... but marty has a valid point, it's not for everyone.

you can control it. 1) keep a simple portfolio (e.g. two fund VAS/VGS). 2) don't use DRP's do it manually yourself to avoid lots of small parcels. 3) invest less frequently e.g. bimonthly or quarterly. 4) buy and hold forever.

if you are over 100k in size and can get access to wholesale funds, that might be the best option. I expect the fund manager will track it for you and provide a CGT tax statement when you eventually sell. the difference between wholesale and etf MER's is very small (e.g. 0.03% in the case of Vanguard)

Thank you very much, that's very helpful. I'm at least a year away before I start investing, but I'm someone who takes a long time to digest and internalise knowledge if it's well outside what I know inside and out. Every little nugget I learn is being added to a mental model of how I will invest (need to keep it simple in case DH needs to take over at any point) so that when I start it will all seem relatively straightforward and I'll have some idea of what I don't know.

[qwerty8675309]

A n00b question about how often you guys invest? I recently came across the concept of investing too often means complicated CGT calculations in the future (in someone's journal) which I'd kind of thought about but not in any detail.

About once every 2-3 months when I have 10k saved up. Don't let the CGT calculations prevent you from investing regularly. Just keep track of the cost for parcels. Re-investment of dividends will mean you'll have a ton of parcels to track anyway. Remember you'll also need to track of non-assessable amounts too as they will affect your cost base.

[FFA]

A n00b question about how often you guys invest? I recently came across the concept of investing too often means complicated CGT calculations in the future (in someone's journal) which I'd kind of thought about but not in any detail.

About once every 2-3 months when I have 10k saved up. Don't let the CGT calculations prevent you from investing regularly. Just keep track of the cost for parcels. Re-investment of dividends will mean you'll have a ton of parcels to track anyway. Remember you'll also need to track of non-assessable amounts too as they will affect your cost base.

Re : the non-assessable / tax deferred income, I think that was Marty's main point in the first place.

All I do is take the tax deferred income from the end of the year ETF tax statement, and apportion to all the parcels on a pro rata basis.

It's really easy if you use a spreadsheet.

Each parcel is a new row. Include columns for number of shares/units, purchase price, purchase cost, brokerage, other costs, tax deferred income 2014/15/16/17/....  Then sum all of these to give the cost base for each parcel.

I agree with qwerty, I would not let CGT calc's drive your investment strategy. Especially if you know some basic spreadsheet skills or have a trusted friend who can help, or a friendly accountant.

As an aside : Personally I think shares are a piece of cake compared to Investment Properties, especially if you ever head overseas and become a tax non resident. I am now having to spend $2k on property valuations for CGT. Thanks a lot, Wayne Swan.

[marty998]

Oh never a pain point for me :) I was even a good boy with the stapled Macquarie Infrastructure, Office, Airports, whatever trusts...

2 trusts and one company stapled together and you had to had to apportion tax deferred income and capital returns between the 3 entities.

But I'm guessing for the non-mathematically inclined/spreadsheet nerds among us it might be more of a hassle...

[marty998]

Market was on a tear this week up 6%. One good day in HK up 10% in a session + continued good economic news out of the US.

Big Chris... you would have done well with your BHP purchases earlier. Picking bottoms messy as it is (lols) can be lucrative.

[Minion]

I think I mentioned in the other thread, for me it's not a big deal, just a bit of spreadsheet work. not as time consuming as it might seem and anyway is a labour of love :) .... but marty has a valid point, it's not for everyone.

Would love to grab a spreadsheet template if you are willing to share

[Astatine]

Oh never a pain point for me :) I was even a good boy with the stapled Macquarie Infrastructure, Office, Airports, whatever trusts...

2 trusts and one company stapled together and you had to had to apportion tax deferred income and capital returns between the 3 entities.

But I'm guessing for the non-mathematically inclined/spreadsheet nerds among us it might be more of a hassle...

I do like a good spreadsheet (I built my own mortgage calculator when I was buying my home coz I wanted to model more scenarios than the online ones allowed for). But tax law confuses the crap out of me so I wouldn't even know what to build. Hence the need for simplicity (DH has no interest in this stuff and it needs to be DH proof). Maths? Easy. Tax? Fucking confusing.

[FFA]

I think I mentioned in the other thread, for me it's not a big deal, just a bit of spreadsheet work. not as time consuming as it might seem and anyway is a labour of love :) .... but marty has a valid point, it's not for everyone.

Would love to grab a spreadsheet template if you are willing to share

I would be happy to share except for all the transaction details, not that there's anything top secret but is personal nonetheless. Will try find time to make a clean/template version, but can't promise. At very least I will commit to do a blog post sometime soon describing how I track my financials....

[gwdonnelly]

just posting to subscribe to the thread...

Just starting out, very late in the game!

[terrier56]

https://au.finance.yahoo.com/news/reasons-never-millionaire-172926213.html

great article has so many great reason why you shouldn't try in australia ;)

[steveo]

Hi everyone. I have a quick question for you. When it comes to super at what salary does it make sense to put extra into super up to the additional 30k per year ?

[povertystrickenbastard]

Hi everyone. I have a quick question for you. When it comes to super at what salary does it make sense to put extra into super up to the additional 30k per year ?

Anything you earn over 37K will attract income tax of 32.5% plus 2% medicare levy, so it does make sense to salary sacrifice into super and only pay 15% contribution tax.  However, you need to take into account your personal circumstances.  Personally I think it's not a bad thing to prioritise non-super investments if you're younger.

- First thing you need is a cash emergency fund, or at least access to cheap credit to achieve the same thing
- Do you need to save for a house deposit?
- Super won't help your financial situation until you're at least 60, have you considered investing in stocks/index funds?  A reliable dividend stream will start helping your cashflow NOW and will possibly help you retire before 60, or assist you to live in the case of sickness or unemployment.
- You might not even live until 60
- The government might change the rules and not let you get your super until you're 70, 80 or even 100.

My plan is to leave super, while keeping an eye on it in growth funds until I'm in my 50s and have a reasonable expectation that my super will be available soon, hopefully by that point I have built up quite a lot of wealth and will be able to maximise all avenues of topping it up before it becomes available.

[marty998]

Hi everyone. I have a quick question for you. When it comes to super at what salary does it make sense to put extra into super up to the additional 30k per year ?

Anything you earn over 37K will attract income tax of 32.5% plus 2% medicare levy, so it does make sense to salary sacrifice into super and only pay 15% contribution tax.  However, you need to take into account your personal circumstances.  Personally I think it's not a bad thing to prioritise non-super investments if you're younger.

- First thing you need is a cash emergency fund, or at least access to cheap credit to achieve the same thing
- Do you need to save for a house deposit?
- Super won't help your financial situation until you're at least 60, have you considered investing in stocks/index funds?  A reliable dividend stream will start helping your cashflow NOW and will possibly help you retire before 60, or assist you to live in the case of sickness or unemployment.
- You might not even live until 60
- The government might change the rules and not let you get your super until you're 70, 80 or even 100.

My plan is to leave super, while keeping an eye on it in growth funds until I'm in my 50s and have a reasonable expectation that my super will be available soon, hopefully by that point I have built up quite a lot of wealth and will be able to maximise all avenues of topping it up before it becomes available.

I can tolerate paying 34.5%. When I started earning over 80k then I started getting pissed at paying 39%, so began SS to super and now doing $480/fortnight.

I give up $7,633 in after tax cash income per year, but my super goes up by $10,637, for a net tax saving of $3,004.

I don't max out the $30k limit - as mentioned by the previous poster you need a strategy to have enough income outside of super if you want to retire before 60.

[steveo]

Thanks for the replies. I'm 42 with the house due to be paid off on 6th January next year. I earn over 100k so I think its a no brainer to put more into super but I'm not doing it until the house is paid off. My wife earns about 50k so I figure its worth it for her as well.

I intend to have about 50% of my wealth in super and 50% outside of super. My super fund appears low cost and appears to just take an index approach so I figure its pretty safe. I can't see the government raising the super age too much.

[FFA]

i recall a Michael Pascoe article a few weeks ago suggesting now might be a good time to pile into super, due to recent consensus to change the rules and reduce the level of tax concession, and assuming existing balances will be unaffected by the changes. Lots of ifs and maybes... Personally I wouldn't pile in for such reasons, just wait for confirmation of any changes and respond accordingly once know. But I am doing after tax contributions (where deductible), since I already have enough passive income outside super, it seems a good option for me.

[DrowsyBee]

The sheer amount of peopl saying "you should do this and that" or all the politicians saying "we should do this or that" is the main thing that makes me throw nothing extra in superannuation at this stage of my life. Way too much uncertainty for me to trust that the funds will still be available at 60.

If I ever earn enough to put me on track to be financially independent earlier than expected, then yeah I'll salary sacrifice the hell out of it

[bigchrisb]

I take full advantage of concessional contributions (salary sacrifice), as I'm in a higher tax bracket, and I'm also saving and investing significantly more outside super.   To me, its a tax effective vehicle for a portion of my investments. 

I'd probably have a different answer if I were faced with the choice between super or outside super, and couldn't fund both.

[marty998]

Takeover bid for Santos today - all cash @ $6.88 - from a group called "Scepter Partners" - supposedly a collection of UHNW families and sovereign wealth funds.

Me thinks the oil sheiks have been deliberately driving down the price of oil, smashing the share prices of producers around the globe and hoovering them up in opportunistic takeovers in order to eliminate the competition.

Makes me sound like a tin foil hat nutter but there is so much manipulation and market rigging of shares and commodities that I find it hard to swallow sometimes.

[AustralianMustachio]

Makes me sound like a tin foil hat nutter but there is so much manipulation and market rigging of shares and commodities that I find it hard to swallow sometimes.

Lol. The image of someone sitting behind his computer in wearing such a hat gave me a good chuckle.

[radson]

For all those looking for spreasdheets to track DRp, CGT etc. try sharesight.com.au. Free for first 10 investments and trackes shares, ETFS and managed funds

[FFA]

Takeover bid for Santos today - all cash @ $6.88 - from a group called "Scepter Partners" - supposedly a collection of UHNW families and sovereign wealth funds.

the bid price alone - 6.88 - makes me guess there are some Chinese among the UHNW. that's a "lucky" number right there !!

well, share markets seem to be rolling again, and with S&P up further overnight I guess it's a positive lead into next week... So, are we out of the woods now and set for a bullish run into end of year // or there's still more fun and games ahead ????

[FFA]

Has come up earlier in the thread and in other forums... I was checking again recently on the issue of VTS/VEU and US estate tax if you were to die holding these assets. It seems a bit unclear, some people suggest estate tax will apply on balances above $60k. Others suggest the US-Oz tax treaty gives Australians the same exemption as US citizens which is roughly $5m. Does anyway know the answer with greater confidence (e.g. based on tax advisor) ? Thanks

[DrowsyBee]

For anyone interested, I just logged on to CommSec and had a notice that International Brokerage has gone down from $69.95 AUD to $19.95 USD.

Probably still expensive compared to some online brokers but hey thats a nice little thing that makes me want to invest in some US shares.

[stripey]

Posting mainly to follow (at some point I'll read through the rest of the thread...)

[This_Is_My_Username]

For anyone interested, I just logged on to CommSec and had a notice that International Brokerage has gone down from $69.95 AUD to $19.95 USD.

Probably still expensive compared to some online brokers but hey thats a nice little thing that makes me want to invest in some US shares.

$69.95 AUD and $19.95 USD will be the same price soon !

:p

[Abundant life]

Hello fellow Australians, I've been lurking on the forum for a while and have a question re franking credits. (I'm sorry if this has been covered in the preceding 29 pages of this thread!) I'm familiar with them as far as individual share parcels like TLS, CBA etc are concerned.

What I need to know is how they work for index funds and ETFs? Are you able to take full advantage of them according to your tax bracket, or are they somehow generically included in the total returns? 

[Ozstache]

Hello fellow Australians, I've been lurking on the forum for a while and have a question re franking credits. (I'm sorry if this has been covered in the preceding 29 pages of this thread!) I'm familiar with them as far as individual share parcels like TLS, CBA etc are concerned.

What I need to know is how they work for index funds and ETFs? Are you able to take full advantage of them according to your tax bracket, or are they somehow generically included in the total returns?

Welcome!

Re franking credits and index funds, the credits you get are directly proportional to whatever shares mix, and the associated franking credit each share provides, that the index fund holds. If you want high franking levels for their tax advantages, pick an index fund that invests in shares that mostly provide such franking credits. Some funds managers, such as Vanguard, declare what franking level was achieved in the past in their fact sheets eg. https://static.vgcontent.info/crp/intl/auw/docs/etfs/profiles/VAS_profile.pdf?20151014|094500 (See page 2)

[dungoofed]

My Melbourne Cup results have got me thinking that maybe my fundamental analysis skills aren't what I thought they were.

[DrowsyBee]

Mate you've gotta buy some index bets, where you buy a share of the winners of every race over a seven to ten year time frame. I think vanguard offers some.

[Astatine]

Mate you've gotta buy some index bets, where you buy a share of the winners of every race over a seven to ten year time frame. I think vanguard offers some.

Hahaha nice.

[WhiteNoise]

Hi All

Just popping on here to say hi - I've made the plunge and signed up to the forums today. I've been lurking the MMM forums for quite some time now, but have only just come across this Australian investing thread. My husband and I have a lot of our portfolio tied up in real-estate (we own a few rental properties) in our hometown. But we are now looking to diversify into other asset classes - I'm interested in learning about managed funds and ETFs and how I can best use them for our situation.

Looking forward to learning from you all!

[Abundant life]

Welcome!

Re franking credits and index funds, the credits you get are directly proportional to whatever shares mix, and the associated franking credit each share provides, that the index fund holds. If you want high franking levels for their tax advantages, pick an index fund that invests in shares that mostly provide such franking credits. Some funds managers, such as Vanguard, declare what franking level was achieved in the past in their fact sheets eg. https://static.vgcontent.info/crp/intl/auw/docs/etfs/profiles/VAS_profile.pdf?20151014|094500 (See page 2)

Thanks for that Ozstache, that makes things clearer. The franking credits are a bonus, especially for those in lower tax brackets.

After reading all MMM and JL Collins posts I can see the logic of index fund/ETF investing. Now I have to understand the differences and decide on which ones! Am I right in assuming that the index funds are useful for building a stache gradually, whereas exchange traded funds are better for a lump sum investment? The structure of Vanguard, being owned by the investors, and its lower fees in the US are appealing, although I gather the fees are not as low here.

I also get Scott Pape's emails and he recommends AFIC and Argo a lot.

Anything else I should consider?

There'll be more aussies here soon than Americans! Welcome WhiteNoise :)

ozbeach it is great to have a place where aussie's can ask questions pertinent to our situation.

[englyn]

Am I right in assuming that the index funds are useful for building a stache gradually, whereas exchange traded funds are better for a lump sum investment? The structure of Vanguard, being owned by the investors, and its lower fees in the US are appealing, although I gather the fees are not as low here.

I also get Scott Pape's emails and he recommends AFIC and Argo a lot.

Scott Pape has some pretty good info. I have some Argo. It's overpriced at the moment though (price > NTA).

I think that ETF or direct investment into Vanguard are much the same. Direct investment you can do by Bpay without brokerage, so it's cheaper if you will be putting in small amounts frequently (<5000 or so). I picked the ETF instead for reasons I couldn't quite remember, maybe the fees were a bit lower? Or I wanted to view all my investments in one place? (Nabtrade)

[dsiee]

I think that ETF or direct investment into Vanguard are much the same.

How is it the same when the expense ratios are so different? The Retail funds are all managed and high fee (minimum of .7% for the first $50k). Is there something i am missing completely?

[cakie]

That's why i picked etfs instead of the funds. If you have enough to buy into the wholesale funds it would be ok, but i'm just starting out, so the fee diff is pretty large. I buy funds in $5k lots- the aim is to buy every month or so.

[marty998]

I think that ETF or direct investment into Vanguard are much the same.

How is it the same when the expense ratios are so different? The Retail funds are all managed and high fee (minimum of .7% for the first $50k). Is there something i am missing completely?

The managed funds do all the admin work for you in terms of working out your CGT calcs when you eventually redeem out. You have to do that yourself for the ETF.

Said before it can be tricky if you're not an accounting/spreadsheet geek.

[Minion]

What's the minimum buy in for Vanguard wholesale funds - $100k?

[Abundant life]

Scott Pape has some pretty good info. I have some Argo. It's overpriced at the moment though (price > NTA).

I think that ETF or direct investment into Vanguard are much the same. Direct investment you can do by Bpay without brokerage, so it's cheaper if you will be putting in small amounts frequently (<5000 or so). I picked the ETF instead for reasons I couldn't quite remember, maybe the fees were a bit lower? Or I wanted to view all my investments in one place? (Nabtrade)

Englin, thanks for your input. Is there a way of looking up the NTA without sourcing a balance sheet and doing the calculations yourself? Although I would like to buy at bargain prices, does that mean I'm timing the market which delays me jumping in, which is not recommended from my reading?

[stripey]

I think they're required to disclose the NTA. For example, Argo has it on their website.

[bigchrisb]

The ASX publishes monthly stats on LIC NTA here: http://www.asx.com.au/products/managed-funds/market-update.htm

There is also some useful info on expense ratios, and some information on REITS too.