Australian Investing Thread

[TJEH]

I've considered the small cap space too, but haven't investigated anything as yet. I'll also have to tell myself when to stop finessing :)

[superannuationfreak]

I find MVW far too expensive for not enough differentiation.  Outside of super I don't think it will be tax efficient (and there is a risk of lock-in from capital gains, where it isn't worth selling due to potential taxes).

I still struggle with the same issues (although I probably have proportionally more allocated to international shares than most Australians).  I'm gradually moving towards getting more of my Australian diversification to unlisted property, infrastructure, etc. in industry funds (full disclosure for any latecomers: I now work for one).  It's a much more tax effective place for things which are "different" from a cap weighted index fund.

But focusing on listed assets I did the calculations on an earlier page.  For the price of MVW or QOZ we could buy a mix of pure ASX300 (VAS) and something more different like FGX, QVE or even Market Vectors newer offering MVS (Small cap dividend payers - still too new, too expensive and prone to the same lock-in as MVW for my liking but at least it's a very different exposure) or Realindex Small Cap (class A if you can stump up $25,000).

[Juan Ponce de León]

Today is a good illustration, as commodity prices fell causing bhp/rio down 3-4%. on top anz/wbc announce bad debts in commodity sector wiping 4-5% plus 2-3% off cba/nab too. VAS was down 1.1%, MVW was flat. I'm not trying to focus on daily price moves here, but just highlighting how MVW gives you a different exposure than VAS.

Yep and when the banks and the miners go on a bull run MVW might do nothing.  There's a reason the index is market weighted so heavily to certain companies, they're the companies that are making all the money and paying out the FF divs.  If I want to diversify I think I'd prefer to buy international market cap weighted indexes than change up ours.

[FFA]

yes Trevor Reznik, the context of my comment is not which is better, the question was are they really different ? I've been a big advocate of international diversification in this thread. I still suggest a VAS/VGS 50/50 portfolio as a good base case for simple investing. For people who wanted to tweak it, or who have bigger portfolios and start to wonder if they want all that money in these two funds, then you might supplement some of the VAS with MVW (or other alternative ETF/LIC's).

Hi Superannuationfreak, yeah MVW at 0.35% is a bit high compared to VAS but it's a smaller fund and the equal weight index does involve more work to rebalance. Also if you step back from the VAS benchmark, 0.35% would still be considered in the "low" bracket. Anyway, lowest cost does not always equal best, and in this case I believe having some MVW adds value to my portfolio. But everyone should do their own research and assessment.

[superannuationfreak]

yes Trevor Reznik, the context of my comment is not which is better, the question was are they really different ? I've been a big advocate of international diversification in this thread. I still suggest a VAS/VGS 50/50 portfolio as a good base case for simple investing. For people who wanted to tweak it, or who have bigger portfolios and start to wonder if they want all that money in these two funds, then you might supplement some of the VAS with MVW (or other alternative ETF/LIC's).

Hi Superannuationfreak, yeah MVW at 0.35% is a bit high compared to VAS but it's a smaller fund and the equal weight index does involve more work to rebalance. Also if you step back from the VAS benchmark, 0.35% would still be considered in the "low" bracket. Anyway, lowest cost does not always equal best, and in this case I believe having some MVW adds value to my portfolio. But everyone should do their own research and assessment.

Indeed VAS/VGS 50/50 is a great starting point.

To be clear re: MVW, I'm not directly comparing it with VAS.  I'm saying, for example, instead of $20,000 of MVW I could invest in an additional $10,000 in VAS and $10,000 in MVS at lower overall cost and, at a first glance, greater diversification.  Not suggesting this is the right combination (as I said, MVS is too small and too new for me), just an example of the principle.

For my Mum's pension we use HostPlus (I don't work for them and have no other ties to them).  A small amount of her Australian 'risk' allocation has been allocated to Industry Super Property Trust, and next time we rebalance some might go into IFM – Australian Infrastructure.  Fees were 0.4% and 0.5% p.a. respectively last financial year, for assets I expect to be more diversifying than MVW or MVS.

Of course she doesn't need life and tpd insurance, and much more of her allocation is in cash and fixed interest (rather than international shares, which HostPlus don't do especially cheaply outside of their Indexed Balanced all-in-one) so they may not suit everyone (including me at this stage).

[Wadiman]

'Bucket' approach to retirement income

Many of you may be well across this model - i've heard it mentioned quite a few times here and elsewhere but haven't seen a detailed account of how to make it work.

After a bit of googling I found this: http://www.forbes.com/sites/investor/2014/02/12/how-to-create-a-model-bucket-portfolio-for-your-retirement/#3b57213829c8

While a little US in focus the basic principles would be the same for us. 

I like the approach espoused here.  For those who want a simple (seven step) summary refer to the gallery on page 1.

[stashgrower]

Errr, sorry for this simple Q, but I started doubting whether I understood the fee comparison for mutual funds vs ETFs correctly. Set me straight please?

Let's say the MER for a Vanguard mutual fund is 0.90%. I understand that the 0.90% fee is applied for every year I hold the mutual fund account. I can imagine this as a sum of money taken out of my account each year.

Now how does the ETF work? Let's say I buy VAS which has an MER of 0.15%. When/how is the 0.15% applied? Is the 0.15% skimmed off in the year of entry and exit, or is there some way Vanguard applies it annually? Thanks.

In other words: do I pay the fee annually regardless of whether I'm in a mutual fund or ETF, or do I pay annually for the mutual fund and only twice (at entry/exit points) for the EFT?

Thanks.

[superannuationfreak]

Applied annually regardless.  If it helps visualise, think of them collecting the dividend payments from all the shares and taking their fees out before they do periodic distributions/reinvest.

[stashgrower]

Cheers, superannuationfreak. That visualization helps.

[pistolpete]

hey guys, just wondering of the ppl who prefer vanguard managed funds over the etfs, what was your thought process in opting for lifestrategy funds over say 50/50 australian and international shares. i called vanguard and they will accept 100k buy in to the wholesale funds and am debating on going into lifestrategy growth fund or go 50 50 into australian shares and international shares with expense ratio at .18% a piece!

thanks!

[steveo]

hey guys, just wondering of the ppl who prefer vanguard managed funds over the etfs, what was your thought process in opting for lifestrategy funds over say 50/50 australian and international shares. i called vanguard and they will accept 100k buy in to the wholesale funds and am debating on going into lifestrategy growth fund or go 50 50 into australian shares and international shares with expense ratio at .18% a piece!

thanks!

I think this is the type of question that is a win/win. I'm investing now and I've gone the ETF option and I'm going 50% VAS/25%VAF/25%VGS. I'm comfortable with that because of the low fees and I'm confident that will work out for me. At the same time I think both your options will work out for you.

I like the wholesale fund options and I might have gone that way if I was prepared to save to 100k prior to investing.

Honestly though I just can't see you making a mistake no matter which option you choose.

[pistolpete]

cheers for that, yes i have read previous posts from yourself as well as murdoch, falcon among others and i have been waiting patiently for some opinions!

[steveo]

cheers for that, yes i have read previous posts from yourself as well as murdoch, falcon among others and i have been waiting patiently for some opinions!

I think it comes down to how simple and easy you want it. Those all in one funds are great. You just save money and forget about it completely. No need to even worry about rebalancing. I would probably have gone for that if I had 100k saved up. At the same time maybe it's cool to try and eek out a few basis points with the lower fee option.

It comes down to what you think will work for you. I think out of those options though whatever you choose will work out great.

[stashgrower]

Would the other advantage be the exposure to a few more things than just a straight VAS / VGS (or VTS+VEU)? E.g. Life Strategy also has emerging markets, property etc. You could, of course, get those as ETFs but LS simplifies things.

I went for ETFs for the lower fees as I'd only be eligible for the retail fund. If I'd had 100k and could spring for wholesale upfront, I would have considered the mutual fund in more detail. It may have helped with the psychology of it too haha.

[The Falcon]

What about trusts as a tax strategy? My understanding is that this is a way to essentially wrap a company around some investments, so that you get taxed at the company rate instead of your personal rate, plus you get all the other benefits available to companies (the ability to pay yourself a distribution, employ your kids, etc). I'm way out of my league here but there is a fair bit of information in the various threads and I think Chris' journal too.

If you put your investments through a company you lose the 50% CGT discount.

Trust allow some measure of income splitting, but you can't really distribute much unearned income to kids before being taxed at punitive rates. You need a lot of kids, grandkids, nieces and nephews for it to be worthwhile.

Use of a trust is a no brainer. The value flexibility it provides over the decades as your life changes cannot be overestimated. A lot of beneficiaries for it to be worthwhile? Rubbish. Married couple over 20-30 years will have different times one is working and the other isn't, and often they will be at different tax rates...kids come of age, and then there is the ability to distribute to a pty ltd. kick the overs out to a pty ltd to compound fixed interest at company rates, or just buy income stocks in it that you will never sell. Collect franking credits and pass them on with divis to a trust when you need the money.

A trust buys flexibility that years from now folks will wish they had.

[steveo]

Would the other advantage be the exposure to a few more things than just a straight VAS / VGS (or VTS+VEU)? E.g. Life Strategy also has emerging markets, property etc. You could, of course, get those as ETFs but LS simplifies things.

I went for ETFs for the lower fees as I'd only be eligible for the retail fund. If I'd had 100k and could spring for wholesale upfront, I would have considered the mutual fund in more detail. It may have helped with the psychology of it too haha.

I completely agree with you. I like the wholesale fund option. It's a little more diversified and there is no need for rebalancing. I probably would have gone with that if I started off with 100k. When I get some inheritance or a chunk of money I may use this option at that time.

[insolent librarian]

The wiki page looks like it has a good structure. My suggestion is to add something on HECS. It's a very common discussion point, and it's not like usual debt (as the rate it increases at is less than the rate of bank account interest).
The two sides are usually:
Yes, pay it off, you get 5% discount! (Used to be 10%..., and may end up being 0%.)
No, don't pay it off, you get more money from leaving the money sitting in the bank than you lose from inflation.

Also, new rules about having to tell the government everything about what you earn overseas, even if you aren't resident for tax purposes in Australia (and therefore don't have to put in a tax return).

Cheers.

[dungoofed]

Two excellent suggestions - thanks!

The HECS one you're right, we have discussed it before here and elsewhere.

[coin]

The wiki page looks like it has a good structure. My suggestion is to add something on HECS. It's a very common discussion point, and it's not like usual debt (as the rate it increases at is less than the rate of bank account interest).
The two sides are usually:
Yes, pay it off, you get 5% discount! (Used to be 10%..., and may end up being 0%.)
No, don't pay it off, you get more money from leaving the money sitting in the bank than you lose from inflation.

Also, new rules about having to tell the government everything about what you earn overseas, even if you aren't resident for tax purposes in Australia (and therefore don't have to put in a tax return).

Cheers.

Yeah I'm strongly in the 'pay it back' camp, the new rules seem to complicate things unnecessarily - once it's done you don't have to think about it again.  When I paid mine off a few years ago there was even an option in eTax to pay it back using your tax return, though I'm not sure that's still an option given they've killed eTax from this financial year onward.

Does anyone use any "rules of thumb" to determine if their superannuation is on track? There's not much Australia-specific info, but there was an American article I read saying you should ideally have a years salary in retirement by 30, twice that at 40, four years salary at 50 etc.   I'm not sure how that's supposed to scale as your income increases (e.g. if I started at age 22 earning 35k, then at 28 got a job paying 70k, should I still be angling to have 70k in retirement by 30?), or if that really applies to the average early retiree, but I've been using it as a guideline.  I figure I'm not exactly going to miss the extra couple of grand that I'm funnelling into super a year, but was wondering if it factored into the plans of the younger FI'ers, why/why not and if super is even all that necessary for the average early retiree.

[stashgrower]

The Falcon - Thanks, I wondered if you had thoughts on when to start using a trust? I can see how it'd be beneficial, but while I'm on a low income with a small portfolio I'm not sure it's worth setting up yet. I get that it'd be nice to have it all set up properly from the start, less messing around etc, but I suspect any set-up and maintenance costs would outweigh benefits for a few years.

[FFA]

hi Coin, I don't have any rules of thumb. Generally i'd look at total net worth progress towards a target stash ("your number"). The split of this net worth, in/out of Super, will depend a lot on how early you plan to retire. For those retiring 5-10 years early (e.g. in your 50's), probably a large percentage will be in Super. For those retiring in 30's, it will likely be a much smaller percentage. But beyond those somewhat obvious comments it will depend a lot on personal circumstances and attitude towards Super (risks vs rewards).

As for trusts, need to make a long-term call on it. I agree with Falcon, the flexibility can be worth a lot even if you don't see it right now. This year is a case in point for me, where I might've saved a lot of tax if I had one. But best to decide at the start and get your assets in the right structure from the get go, otherwise change-over costs can be high, especially properties. I also have a slight distaste for trusts, but that's just me. Personally I hope the Govt will one day change the rules to allow tax thresholds to be applied on a family household basis instead of individually. IMHO couples with one breadwinner should be able to pool their income without needing to use a trust. I don't see why a couple earning $70k each should be substantially tax advantaged versus a couple earning $140k/nil. Especially since many welfare benefits, medicare levy, etc are income tested on family basis too.

[nolongerhere]

I researched MVW as well, my takeaways:

- Increased Fee / Less Franking / Less Track Record is a disadvantage.
- Having 5% weighting instead of 30% to the Big 4 Banks in a financial crisis is the main advantage.

So effectively paying a little in insurance each year to hedge against a potential bank collapse.

Also on ARG and other LICs mentioned as outperforming, their portfolios have outperformed over some times historically.  It is mathematically impossible for all funds to underperform, so obviously some will outperform. 

Research has shown that the pool of funds that underperform are much more numerous than those that outperform, so you are essentially placing a bet that requires you to philosophically for example, pick 1 out of 3 at a rate of better than 1 out of 2.

[FFA]

I researched MVW as well, my takeaways:

- Increased Fee / Less Franking / Less Track Record is a disadvantage.
- Having 5% weighting instead of 30% to the Big 4 Banks in a financial crisis is the main advantage.

So effectively paying a little in insurance each year to hedge against a potential bank collapse.

agree it's worth considering the crisis scenario, but I wouldn't base my entire judgement on it.

For me the key point is the ASX concentration (in both crisis, and more "normal/expected" scenarios). A lot of Bogle's thinking on market cap weighting is in the US context where the index is much better diversified. The ASX200/300 are substantially different from the S&P500.

Bear in mind there is nothing written in stone saying market cap weighting is the right way to index. However it has become the accepted norm, mainly based on it's formation/development in the US context.

Anyway, enough from me on MVW !

[Juan Ponce de León]

I was thinking VAS tanking awfully hard this morning, just realised it's ex-div day :D

[AussieCat]

Replying to remind me to come back to have a read :)

[marty998]

I was thinking VAS tanking awfully hard this morning, just realised it's ex-div day :D

Interesting how comparatively small the VHY dividend is to VAS. Too much allocation to BHP and RIO....

Makes a mockery of the high-yield strategy when they pick low yielding stocks to comprise that index...

[potm]

Too much reliance of past dividends without consideration of what the likely future dividends will be?
I guess as with any non-index based fund you are relying on the manager's judement.

[Juan Ponce de León]

I was just talking about this on another forum.  BHP are 'high yield', their share price starts going down, yield getting higher day by day!  They ride it all the way to the bottom and then BOOM the dividend cut.  Oh no, now it's time to cut it loose from our high yield index, just in time for the likely commodity price recovery and just in time to miss all the upside as the share price and dividend recovers.  This ain't indexing, it's stock picking mixed with market timing.

[FFA]

trying hard not to say I told you so (oops!).... I've been suggesting VAS a better bet than VHY (inclusion of WPL, BHP, RIO as per it's method ; increased concentration ; slightly higher fee ...) for over a year in various threads. Rob_S are you going to stay the course with VHY or open to adjust plans ?

[qwerty8675309]

It's the same reason why I'd stay away from MVW. Smart beta, as Jack Bogle says, is dumb beta! It's just another way for active management to sneak back into our portfolios. This happens whenever you deviate from a market cap weighted index. It all just reverts to the mean over time anyway.

[steveo]

trying hard not to say I told you so (oops!).... I've been suggesting VAS a better bet than VHY (inclusion of WPL, BHP, RIO as per it's method ; increased concentration ; slightly higher fee ...) for over a year in various threads. Rob_S are you going to stay the course with VHY or open to adjust plans ?

It's the same reason why I'd stay away from MVW. Smart beta, as Jack Bogle says, is dumb beta! It's just another way for active management to sneak back into our portfolios. This happens whenever you deviate from a market cap weighted index. It all just reverts to the mean over time anyway.

I just stick with VAS as well. I think focussing on fees and simplicity is the best approach.

At the same time I have a lot of ASX shares (mostly VAS - my other shares were given to me via employee benefits) in my asset allocation. I would prefer to just buy the total world index but I think that is risky because I live and intend to retire in Australia.

[Rob_S]

trying hard not to say I told you so (oops!).... I've been suggesting VAS a better bet than VHY (inclusion of WPL, BHP, RIO as per it's method ; increased concentration ; slightly higher fee ...) for over a year in various threads. Rob_S are you going to stay the course with VHY or open to adjust plans ?

March dividends were a blow. It had me question the 100% VHY plan. The wife was concerned for the first time since we started this journey, normally she trusts me, but now she wanted me to crunch numbers so I stayed up and did a comparison with other dividend index funds. The problem is VHY hasn't been around all that long with a 2011 inception date so while the 2012 to 2015 data looks great and had convinced me that it was the way to go. It really doesnt have a long enough history to back the decision up.

I agree with everyone that commodities and resource stocks, being cyclical, don't deserve a spot in VHY. Given its rules based and as long as RIO and BHP keep meeting the criteria then they'd stay. With their recent slashing of dividends I expect they will drop out of the index and no longer be a dividend drag. Maybe in 6 months time the dividend payout will be back to normal. If BHP, RIO and Woodside are still in the index in 6 months I'll start to seriously consider the alternatives. - Edit: VHY rebalance their portfolio in June and December.

But before we get too doom and gloom lets put the March dividend into context. Here's the historic VHY March payout:
March 2012 - 58.6
March 2013 - 48.8
March 2014 - 42.5
March 2015 - 73.4
March 2016 - 43.5

I'm considering LIC's for consistency but the premiums they go far are making the decision a tough one. RDV has a more attractive list of holdings and could be a viable alternative to VHY.

[pistolpete]

does anybody have any time for wilson asset management and his lic's? they seem to perform well but do have higher fees with performance fees!

or do you guys prefer the traditional lic's basically hugging an index? (argo, afic, milton)

[steveo]

does anybody have any time for wilson asset management and his lic's? they seem to perform well but do have higher fees with performance fees!

or do you guys prefer the traditional lic's basically hugging an index? (argo, afic, milton)

When I read higher fees I just think why bother. Why not just stick with VAS (ASX index), VGS (world) and VAF (Aussie bonds) ? It's so simple with low fees and no need to worry about swapping funds around because something underperforms. I think it's easier for you to manage your emotions with a plan like this one.

I'd be interested in why anyone would go for anything else. I suppose to argue against what I'm stating I can see why adding some gold or commodities or emerging markets may be a good option to diversify further if you have a reasonable sized fund but if you are like me and intend to retire with approximately a 4-5% SWR I see getting the extra diversification as probably being more risky.

[dungoofed]

does anybody have any time for wilson asset management and his lic's? they seem to perform well but do have higher fees with performance fees!

or do you guys prefer the traditional lic's basically hugging an index? (argo, afic, milton)

When I read higher fees I just think why bother. Why not just stick with VAS (ASX index), VGS (world) and VAF (Aussie bonds) ? It's so simple with low fees and no need to worry about swapping funds around because something underperforms. I think it's easier for you to manage your emotions with a plan like this one.

I'd be interested in why anyone would go for anything else. I suppose to argue against what I'm stating I can see why adding some gold or commodities or emerging markets may be a good option to diversify further if you have a reasonable sized fund but if you are like me and intend to retire with approximately a 4-5% SWR I see getting the extra diversification as probably being more risky.

Tend to agree, it's extremely hard to justify the fees. I'd personally prefer to do the fundamental research and pick a few stocks myself.

[dungoofed]

Guys I need some help. I don't want to lose the following (from page 2 of this thread) but the problem is I don't quite understand it. Doesn't have to be bigchrisb/The Falcon, would just appreciate if someone could give me some more background so I can wiki it.

A question I've long debated on LICs and not managed to get an answer from (either from the ATO, the ASX or the LICs themselves).  Do you know if the post tax NTA accounts for the value of the LIC capital gains credits or not?  i.e. is the CGT calculated at 30% or 15% in that stat?

Ok, here is an answer. LIC Post tax NTA is CG paid at company tax rate 30% but no LIC investor CG credit is applied.
The value of the investor CG credit will depend on investors individual tax situation, ie it is not company tax @ 30% / 2 , as LIC structure does not get 50% CGT discount but the individual shareholders get the flow through discount on the underlying holdings. Hope this makes sense.

I think that's good news - in other words, in the hands of an individual shareholder, the difference between the pre and post tax NTA would be halved?

Thanks for coming back to me on this one.

Roughly yes for low tax bracket, but still a better outcome than you might assume for top tax bracket, given the limited portfolio turnover, there is a lot of discounted CG to be had so you would have to expect an actual of 25% effective on top bracket for CG component, so yes I would suggest that Post tax NTA figure is probably a pretty pessimistic number (as it should be) and that would be top bracket, and a pretty high turnover year for one of the traditional LICs to get there.

No worries at all mate :)

[marty998]

Guys I need some help. I don't want to lose the following (from page 2 of this thread) but the problem is I don't quite understand it. Doesn't have to be bigchrisb/The Falcon, would just appreciate if someone could give me some more background so I can wiki it.

A question I've long debated on LICs and not managed to get an answer from (either from the ATO, the ASX or the LICs themselves).  Do you know if the post tax NTA accounts for the value of the LIC capital gains credits or not?  i.e. is the CGT calculated at 30% or 15% in that stat?

Ok, here is an answer. LIC Post tax NTA is CG paid at company tax rate 30% but no LIC investor CG credit is applied.
The value of the investor CG credit will depend on investors individual tax situation, ie it is not company tax @ 30% / 2 , as LIC structure does not get 50% CGT discount but the individual shareholders get the flow through discount on the underlying holdings. Hope this makes sense.

I think that's good news - in other words, in the hands of an individual shareholder, the difference between the pre and post tax NTA would be halved?

Thanks for coming back to me on this one.

Roughly yes for low tax bracket, but still a better outcome than you might assume for top tax bracket, given the limited portfolio turnover, there is a lot of discounted CG to be had so you would have to expect an actual of 25% effective on top bracket for CG component, so yes I would suggest that Post tax NTA figure is probably a pretty pessimistic number (as it should be) and that would be top bracket, and a pretty high turnover year for one of the traditional LICs to get there.

No worries at all mate :)

Some background for others who are interested.

Companies are not permitted access to the 50% CGT discount.

However in order for LICs to compete with Australian share funds that are run via trusts (e.g. MLC, Colonial, Advance, Anteras,  Perpetual etc), LICs have effectively lobbied the tax office to allow them to pass through discounted capital gains in the same way that these trusts can.

Many LICs publish several NTAs: pre tax, post tax, post franking benefits... some then publish diluted NAVs (such as QVE, where all those $1 options will be a drag on performance for years to come).

You can always ring them up and ask them to clarify their policies.

[AustralianMustachio]

The QVE options have expired now though haven't they? No matter, as I've only been looking at the the "diluted" NTA. Which i always do whenever a LIC publishes this data.

It actually always annoys me when they don't, in the case of FGG and FGX they just say "not diluted for outstanding options."

Must be Geoff Wilson's influence, because there is something that annoys me with his LICs too (in answer to an above question about this):

With WAM and the other Wilson LICs that despite their obviously high performance well above the ASX index over a long period of time, they don't publish their after fee returns. CDM is the same.

I find it annoying rather than overly worrying, since those LICs quote publications by the ASX which shows their after fee returns being the highest amongst available LICs over five, seven, ten years. So you are getting outperformance with those LICs, but just how much extra is taken out is hidden, since it must be quite large.

[FFA]

It's the same reason why I'd stay away from MVW. Smart beta, as Jack Bogle says, is dumb beta! It's just another way for active management to sneak back into our portfolios. This happens whenever you deviate from a market cap weighted index. It all just reverts to the mean over time anyway.

Yeah I used to be in the same camp, and still am basically. I guess in the case of MVW I personally wouldn't classify it as smart beta, but rather a different index methodology. It is not trying to make some strategy around dividends, value, quality, etc. It is purely saying use equal weights instead of market cap. I wonder what Bogle would say about market cap weightings in the Australian context.

Regarding Wilson, they have an excellent reputation. I've been tempted to give it a try, but for me the bigger issue is the NTA premium. The fees are probably warranted based on track record at least. I think even Wilson himself suggested people shouldn't buy his funds at these 10% premiums (smart marketing I reckon, good way to attract people by telling them to stay away as we're just too successful lately!). Alas, I still have nil LIC's....

[AustralianMustachio]

My thoughts as well FFA - I've never wanted to buy them as they're always trading at a premium it seems!

However, I think with some of the outperforming, higher yielding LICs (ALF, WAM, CDM, etc), they seem to surge pre dividend. Then drop afterwards by more than the dividend amount, even taking into account the franking credits (for example, look at ALF - was 1.54 cum dividend, now around 1.41. The fully franked div = around 7 cents).

So if you're interested, buying them ex dividend might be a better bet. The Australian investing herd and their yield chasing behaviour, might throw up some opportunities for us!

[Eamesy]

G'day

I am after some tips on tracking my portfolio. Does anyone use online based platforms such as sharesight? I have also read previous posts mentioning excel spreadsheets to keep track of dividend reinvestments, new parcel purchases etc. Also is the main purpose of keeping track of these details for when the time comes to sell and to work out CGT?

I have had some VAS & VGS for just over a year now and would like to keep track of these before any more time slips away.

Cheers

[qwerty8675309]

I am after some tips on tracking my portfolio. Does anyone use online based platforms such as sharesight? I have also read previous posts mentioning excel spreadsheets to keep track of dividend reinvestments, new parcel purchases etc. Also is the main purpose of keeping track of these details for when the time comes to sell and to work out CGT?
Cheers

Yup this is all to work out CGT events. In most cases, this will be from a sale of units, but it can also happen in other situations. For ETFs, you want to also record any tax deferred distributions because it is a unit trust (I'll be in the yearly tax statement you get from Vanguard). This reduces your cost base for the units that you've purchased.

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Trusts/Non-assessable-capital-payments-from-a-trust/?page=3

To track my parcels, I've just got a spreadsheet that has the headings for each of my holdings (eg, VAS, VTS, VEU, etc)
- Date of event (eg, purchase date, sale date, DRP allocation date, tax deferred distribution date)
- Bought / Sold units
- Unit price at which you bought/sold (you can find this on your contract note from your broker)
- Brokerage paid (this is considered as a direct investment expense, so you can adjust your cost base with these amounts)
- Cost base for purchases (ie, (units x unit price) + brokerage)
- Cost base adjustments (for deferred distributions - see link above)
- Cost of sales (ie, (unit x unit price) - brokerage)
- Capital gains (ie, cost of sales less cost base of purchases for units sold less cost base for adjustments.. this will be negative for a capital loss)

Remember that if you've signed up for the DRP, you also need to keep track of the extra units you've been allocated. The cost base of these units is the price that they state in their announcement to the ASX.

During a sale, the ATO allows you a few different methods to work out which parcels you've sold. Depending on the method you choose, this can affect your capital gains. eg, FIFO, average cost, or specific parcel. Using specific parcel can reduce your capital gains if you keep detailed records of each parcel because you can choose which parcels are disposed of.

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Shares,-units-and-similar-investments/Identifying-when-shares-or-units-were-acquired/

Also remember that if you hold a parcel for a year or more, you are entitled to a 50% CGT discount when you sell these shares. eg, if your purchase shares for 1000, and you sell your shares for 2000 a year later, your capital gains is (2000 - 1000) x 50% = 500.

I've also got another spreadsheet that tracks a running balance of capital losses that I've carried forward for each tax year. These capital losses can be used to offset capital gains in the future.

https://www.ato.gov.au/General/Capital-gains-tax/In-detail/Shares,-units-and-similar-investments/Claiming-losses-from-the-disposal-of-investments/?page=2

I think that's all. Feel free to correct me if I've stuffed anything up :)

[Aus_Stashington]

Hey guys,

Got a question regarding VTS/VEU vs VGS.

From everything I've read on the subject so far, VTS/VEU wins out easily with better diversification, lower expense ratio, exposure to emerging markets, better liquidity (and subsequent lower buy/sell spread), ability to control split between US/rest of world stocks.

The drawback being no DRP and no foreign tax rebates except from the US.

One thing I haven't been able to find any info on from a MMM perspective is the impact of the 15% tax payable on US derived income. You pay this personally with VTS/VEU but does VGS pay this on your behalf inside the fund itself (with it reflected in the share price)? If one had an income of 18,000 or less from VTS only, they would be paying 15% tax vs 0 with the Australian tax free threshold of 18,000. Is this also true of VGS?

Does anyone know the answer?

[FFA]

Good post qwerty !

Re: VTS/VEU vs VGS, if you hunt around (including earlier in this thread and also on reddit) you can find pros/cons lists. Another con is the US estate tax issue, which is safer in the case of VGS as an oz domiciled fund. It might be a non issue but I never fully confirmed. You might want to consider this in your decision.

AFAIK the 15% foreign resident withholding tax is the same. In VTS/VEU you pay it yourself. In VGS it is inside the fund and extracted from the share price/NAV. Vanguard have told me this over the phone, so it should be correct.

However there might be differences in other withholding taxes / foreign tax rebates, as you mentioned. I think superannuationfreak.blogspot did an analysis of it and the difference in MER was quite small after these effects, if I recall correctly.

[Juan Ponce de León]

I am yet to diversify into international shares, but for me that argument will be VTS vs VGS.  VTS is such a huge portion of VGS and the big US multinationals have so much international exposure themselves, I see VEU as unnecessary.  I haven't even looked into this but how many of the big European firms are also listed on the NYSE and are part of VTS anyway?  Maybe I have my wires crossed there.

[Aus_Stashington]

Good post qwerty !

Re: VTS/VEU vs VGS, if you hunt around (including earlier in this thread and also on reddit) you can find pros/cons lists. Another con is the US estate tax issue, which is safer in the case of VGS as an oz domiciled fund. It might be a non issue but I never fully confirmed. You might want to consider this in your decision.

AFAIK the 15% foreign resident withholding tax is the same. In VTS/VEU you pay it yourself. In VGS it is inside the fund and extracted from the share price/NAV. Vanguard have told me this over the phone, so it should be correct.

However there might be differences in other withholding taxes / foreign tax rebates, as you mentioned. I think superannuationfreak.blogspot did an analysis of it and the difference in MER was quite small after these effects, if I recall correctly.

Thanks mate, your call to vanguard directly answers my query. In respect of US estate tax I read on another forum that aus has a tax treaty with the US extending the $60,000 limit before estate tax kicks in to $5,000,000.

Found a great comparison of VTS/VEU vs VGs on whirlpool forum

[limeandpepper]

I have also been wondering about VGS vs. VTS+VEU. I would love to know what other people decide. I see that VGS is simpler but VTS+VEU looks more diversified and the management costs are lower. But I didn't even know about the foreign resident withholding tax thing.

[steveo]

I use VGS primarily because it looked simpler.

[FFA]

I started with VTS/VEU, but switched to using VGS (and a small bit of VGE) from this year onwards for fresh funds. For simplicity and I'm still not 100% sure on the estate tax matter even though I've read the same about the tax treaty. I think the extra diversification is probably a very small factor, and the lower cost is also a clear benefit but also relatively small in the big scheme. One other practical aspect, the liquidity is still better on VTS/VEU. VGS is better than it used to be, but hopefully will improve a bit more.

[Aus_Stashington]

I have also been wondering about VGS vs. VTS+VEU. I would love to know what other people decide. I see that VGS is simpler but VTS+VEU looks more diversified and the management costs are lower. But I didn't even know about the foreign resident withholding tax thing.

here's the best source I've found: http://forums.whirlpool.net.au/archive/2449117