Australian Investing Thread

[AustralianMustachio]

Yeah "why?" is pretty much my reaction too

[Andy_in_Aus]

Because I'm new to this game, and it popped up on a google search.  I find documents like these have lots of information that I don't know (procedures and language etc), which I then spear off and research.

It's how I learn things, it's not my primary means of gaining knowledge, but puts an Australian contrext to the (often) U.S. investment books.

I'll get back in my box now...

[The Falcon]

Because I'm new to this game, and it popped up on a google search.  I find documents like these have lots of information that I don't know (procedures and language etc), which I then spear off and research.

It's how I learn things, it's not my primary means of gaining knowledge, but puts an Australian contrext to the (often) U.S. investment books.

I'll get back in my box now...

No need to get back in your box Andy, we have all been in your position :)

In short, that Perpetual LIC's fees are expensive and its unproven. Have a look at the material on AFIC and ARGO's sites for cheaper alternatives proven over decades of solid after tax performance. For International exposure (Active Management) I'd be inclined to look at the likes of Platinum or Magellan, both LICs are available on the ASX, or you could buy the "mother ships" (the traded operating companies). For Indexes, you have the likes of VTS and VEU on the ASX. At the other end, you can buy NYSE and NASDAQ listed stocks through most Australian brokerages should you wish to do that.

I think as a starting point though, as a buy an hold investment you would be well served by AFI/ARG/MLT (or VAS/VHY) and International ETFs as core and then you can add to that later on should you have convictions about particular stocks.

(Disclosure ; I hold ARG/MLT/VAS/VHY/VEU/VTS among many others)

[abyss]

Does anyone have experience buying and holding NZX shares from Australia?

I'm particularly interested in discount broker options and the potential tax implications.

Generally I'm an indexing kind of guy, but there's 1-2 NZ companies that I think would be a small holding in my high growth allocation.

[deborah]

Because I'm new to this game, and it popped up on a google search.  I find documents like these have lots of information that I don't know (procedures and language etc), which I then spear off and research.

It's how I learn things, it's not my primary means of gaining knowledge, but puts an Australian contrext to the (often) U.S. investment books.

I'll get back in my box now...

Sorry, I didn't want to put you in a box - we are all learning together. I wanted to know why because that is the first question I ask myself if I am thinking of buying something. For instance I am trying to work out the why of Investment Bonds (aka Insurance Bonds) - they seem to  be recommended for buying for children because they are tax free after 10 years (including everything you put in after the first year). So they sound like something that someone going for early retirement might want. Of course, the next question is always "why not".

[The Falcon]

The why not on Insurance bonds ;

- 30% Tax rate after 10 years (no good if your personal rate is lower than this)
- Manager risk, will they still be around ? (APRA regulated product so should be ok)
- Fully taxed pre 10 years
- High MERs , usually 2% or so in typical "churney" MF products

That said, they aren't a bad product for the right use, and there are quite a few. I actually have one for my 2 year old daughter.

 

[slothman]

Some brokers maintain spreadsheets that will give them a pretty good idea of current day NTA to assist clients. Personally not seeing a lot of value with the LICs now, AFI and ARG are holding up well compared to the market.

Hi Falcon, do you know if I can get a hold of the spreadsheet or how I might create one for myself? What I've been doing up till now is getting last month's NTA and then using the performance of the XJO to adjust NTA. Pretty coarse way of doing it, but enough for me to make a decision.

I was looking to purchase some more shares given the recent dip in the market, but all the old school LICs are currently trading at a premium to NTA. I've since put in a buy order for Vanguards ETF: VAS.

[AustralianMustachio]

MMMers, whats your opinion on the current ASX fall? Do people think the market will continue to fall, or are we simply in a dip that will soon rebound?

I'm not trying to time the market or anything, more than buying in a little extra a week ago. Just musing out of interest more than anything, and keen for the musings of others

[This_Is_My_Username]

Some brokers maintain spreadsheets that will give them a pretty good idea of current day NTA to assist clients. Personally not seeing a lot of value with the LICs now, AFI and ARG are holding up well compared to the market.

Hi Falcon, do you know if I can get a hold of the spreadsheet or how I might create one for myself? What I've been doing up till now is getting last month's NTA and then using the performance of the XJO to adjust NTA. Pretty coarse way of doing it, but enough for me to make a decision.

I was looking to purchase some more shares given the recent dip in the market, but all the old school LICs are currently trading at a premium to NTA. I've since put in a buy order for Vanguards ETF: VAS.

i'm looking for the same thing: How can I know which LICs are trading at a premium or a discount to their net tangible assets (NTA) ?

I guess, with yesterday's prices?   Or even intra-day ?

[The Falcon]

Some brokers maintain spreadsheets that will give them a pretty good idea of current day NTA to assist clients. Personally not seeing a lot of value with the LICs now, AFI and ARG are holding up well compared to the market.

Hi Falcon, do you know if I can get a hold of the spreadsheet or how I might create one for myself? What I've been doing up till now is getting last month's NTA and then using the performance of the XJO to adjust NTA. Pretty coarse way of doing it, but enough for me to make a decision.

You are on the right track, but instead of XJO, look at the LICs top 20 holdings.....yeah a bit of a PITA really !

[bigchrisb]

MMMers, whats your opinion on the current ASX fall? Do people think the market will continue to fall, or are we simply in a dip that will soon rebound?

I'm not trying to time the market or anything, more than buying in a little extra a week ago. Just musing out of interest more than anything, and keen for the musings of others

Who knows!

What I do know is that I'd been accumulating cash for most of this year and avoiding buying much of the index (just a few speculative individual shares).  In the last month I've started buying back in to the broader market using VAS.  Each purchase has only been about 1% of net worth (approx $15k a trade), so not exactly a big market timing attempt.  My viewpoint at the moment is that it may fall further.  However, as at yesterdays close, the grossed up yield of VAS is just over 6%, and I'm OK if over the next 10 years I get that 6% with nil capital growth.

Given that dividends have typically at least grown with inflation, and that my tax rate investing through the trust is 30%, that gets a 4% real return right.  Any capital gain will just be gravy.

Its pretty crude, but I'm intending on dollar cost averaging all savings into the market at the moment, and converting a bit more cash to shares each time the market drops a bit more (crude re-balance).  In some ways I'm a bit frustrated that I just used up $200k of cash in a deposit and transaction costs on a house, so have a lot less free cash allocation that I did three months ago.

[AustralianMustachio]

Thanks for the reply bigchrisb.

I'm sure you've considered this, but if yield is your primary concern, why not go for VHY over VAS? The net yield has been a percent or so higher than VAS, and the franking level on the last distribution was much higher (96% ish for VHY vs 56% ish for VAS)

Is it because it's a much less diversified index? I've seen that it's top 10 holdings constitute 70-80% of the fund

[bigchrisb]

I don't like stock selection etf's like VHY because they typically have higher portfolio churn than the market cap indices. From what I understand, ETFs have to distribute any capital gains from churn - hence you get the double whammy of the transaction costs, and of being taxed on the distributed proceeds.  Then there is the additional 10 basis points of fees for VAS vs VHY.   Between the two of these guaranteed performance drags, a dividend approach would have to significantly outperform the broad index.  (I confess that it has done so handsomely over the last couple of years!)

Re the franking levels, if you look at the fact sheets on the vanguard Australia site, its about the same for both funds (77-78% for VAS between 2011-2014 and 69%-80% for VHY over the same periods) 


To each their own though!

 

[AustralianMustachio]

Ah I see. Cheers for explaining your reasoning on that. I own a small amount of both at the moment. Re the franking levels, I was just going off the last two distributions they've declared - i guess the franking levels must have been an anomaly.

[AustralianMustachio]

And thanks Falcon for your tip off in regards to QOZ and betashares. I have researched them a bit now, and there are some really interesting funds in there! Very new and different to what has been available in Australia before, it seems. I’ll post what i’ve gleaned here for people to read, critique my understanding, comment.

QOZ - the one Falcon already mentioned, an ASX200 index ETF based on fundamental weightings vs market cap weightings. Check out the beta shares website for a more detailed explanations of this. Lots of good info on the specific funds available on the website at http://www.betashares.com.au

YMAX - this one’s interesting - an actively managed yield maximiser fund. It seeks to generate a higher yield than the underlying securities, whilst protecting from downside risks by selling calls options against the securities it holds. On the website it says the fund should outperform the ASX during a falling, stagnant or slowly rising market, but under perform in a rising market. The yield has been 9-10% per annum so far, which seems very high. However it’s capital growth has been much less and hence it has under performed vs the ASX200 accumulation index. Since this has been a rising market, this is to be expected. Interesting product if you were more bearish and required consistent income, however.

(Note - What I find confusing with this fund is that it stipulates its not an ETF. Even though it’s listed and traded on the ASX. I thought any fund that was traded on the exchange would be... an exchange traded fund. Am I missing something here?)

Foreign currency funds such as USD. Pretty much tracks the performance of the USD relative to the AUD, in the form of a fund traded on the ASX

Bear fund - this is the most interesting one of them all! A fund that seeks to closely track the complete opposite of the ASX200 index! It provides investors with a way of making money during a falling market. But more importantly I guess it can be used as a hedge.

I suppose if you were worried about a short term crash and you thought you were overexposed to stocks at that point, instead of selling you could buy some bear fund ETF and sell them after the crash materialised. Seems too dicy for me, but very interesting concept!

[dungoofed]

Guys how do I buy one of these things:

http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=GOVERNMENT_BOND

Specifically something with 10+ years remaining. There was one trade today across all products, with the market maker giving outrageous prices. Is there no other option but to suck it up and accept the spread?

[dungoofed]

AustralianMustachio - just be careful of BEAR. BEAR and its ilk (as well as leveraged version of these) often don't do a very good job of tracking the inverse - see https://www.tradeking.com/education/etfs/leveraged-and-inverse-etfs for a quick overview.

[AustralianMustachio]

Thanks for the link dungoofed i'll check it out later once I have some more time. I had a quick look at the yearly price range of BEAR with the ASX200 as a comparison, and it seems to have tracked it pretty much exactly. It says on the website, price will match the inverse by 90-110%.

I'm not planning on buying it myself. Just found it an interesting development in the ETF range!

[johnnydoe]

Guys how do I buy one of these things:

http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do?type=GOVERNMENT_BOND

Specifically something with 10+ years remaining. There was one trade today across all products, with the market maker giving outrageous prices. Is there no other option but to suck it up and accept the spread?

@dungoofed I'm not sure of any other way except through a broker... there is more information on the bonds here: http://australiangovernmentbonds.gov.au/

Another option is to go for the Vanguard Index VGB (https://www.vanguardinvestments.com.au/retail/ret/investments/etfdetailVAGBIE.jsp)

[urbanista]

What I do know is that I'd been accumulating cash for most of this year and avoiding buying much of the index (just a few speculative individual shares).  In the last month I've started buying back in to the broader market using VAS.  Each purchase has only been about 1% of net worth (approx $15k a trade), so not exactly a big market timing attempt.  My viewpoint at the moment is that it may fall further.  However, as at yesterdays close, the grossed up yield of VAS is just over 6%, and I'm OK if over the next 10 years I get that 6% with nil capital growth.

Given that dividends have typically at least grown with inflation, and that my tax rate investing through the trust is 30%, that gets a 4% real return right.  Any capital gain will just be gravy.

Its pretty crude, but I'm intending on dollar cost averaging all savings into the market at the moment, and converting a bit more cash to shares each time the market drops a bit more (crude re-balance).  In some ways I'm a bit frustrated that I just used up $200k of cash in a deposit and transaction costs on a house, so have a lot less free cash allocation that I did three months ago.

My strategy is very similar to yours. However, there is one thing that I am unsure about: do you have any data on dividends growing with the inflation? I was under impression that in times of market dips, companies cut their dividends. Simply because the general economic situation is not favourable at times of market dips. For example, NAB has recently announced a large profit downgrade. I bet they will cut their future dividends.

[bigchrisb]

Not raw data alas.  What I have done as a crude proxy based upon data back to 1981:

- Monthly close of ASX200 (XJO).  This data is pretty much everywhere and easy to get.
- Monthly data for the ASX200 accumulation index (XJOAI).  This is harder to come by, but is available from the reserve bank stats page and a couple of other places
- For each month, work out the difference in percentage change between the two indices (this is the reinvested dividends, expressed as a monthly yield)
- Determine the payout by applying the yield to the XJO.

Using this approach, over this time period Australian dividends have grown significantly faster than inflation.  However it is really volatile, and there are periods where dividends do fall in both real and nominal terms.

The other quick test is to look at the total data over the last 34.75 years (data from the RBA, table F7 http://www.rba.gov.au/statistics/tables/pdf/f07.pdf):

Total return
31 Dec 1979 XJOAI: = 1000
30 Sept 2014 XJOAI = 45717
Compound growth rate = 11.6%

Capital growth:
31 Dec 1979 XJO = 500
30 Sept 2014 XJO = 5293
Compound growth rate = 7%

i.e. over this period dividends averaged 4.6% = about the same yield as today!  Dividend yield in 1980 was a touch under 5% (all these ignore franking credits, and the numbers are even better if we include them).  If the yield is about the same, then dividends have been growing at about the same rate as the underlying securities, or about 7%.

Using CPI for inflation over the same period (we can argue about the relevance of CPI elsewhere) gets inflation of 425% over the same period, or if compounding over 34.75 years, about 4.25%.  So, over this time period, dividends have grown in real terms (but not very smoothly).

This is why I'm reasonably comfortable with dividends increasing with inflation being a reasonably conservative assumption over the 60 years I'm investing for.

Keen to see alternate rationales for a different conclusion though.
 

[urbanista]

Thanks a lot, that's rough what I have been thinking too. Here is the monthly data on ASX200 Accumulation index (XJOAI) up to 2007.

http://www.economagic.com/em-cgi/data.exe/rba/FSMSPASX2AI

[potm]

It would be interesting to see some data on payout ratios of the index. I think in recent years it has been the fashion for ASX listed companies to increase their payout ratios. This will affect any increase in dividend measurement and obviously increasing payout ratios is not sustainable long term.
I agree that assuming dividend increases at inflation is pretty conservative.

[The Falcon]

Added my last direct US stock to the Portfolio today, NYSE : Y. Currently holding BRKB, MKL, GLRE, Y. Will hold these for the long term. Now I'll just keep DCA and buying dips with ASX : VTS / IJR / IXI

[bigchrisb]

It would be interesting to see some data on payout ratios of the index. I think in recent years it has been the fashion for ASX listed companies to increase their payout ratios. This will affect any increase in dividend measurement and obviously increasing payout ratios is not sustainable long term.
I agree that assuming dividend increases at inflation is pretty conservative.

http://www.shawstock.com.au/files/LATEST_RESEARCH.pdf has a chart of this through to 2011.  With it currently around 70%, its sitting appox 1  standard deviation above the mean, so on the high side, but not all that different from much of the period 1990-2005?

[banksie_82]

We often hear on global forums, such as this one, about the ‘4% Rule’. I just wanted to get people’s opinion on how applicable that is to Australians, and to throw out an idea that has been bouncing around in my head.

Referring to your research, bigchrisb, regarding historical dividend growth, which had conclusions close to my own, albeit more narrowly focused, analysis (I just looked at what the LIC’s paid out over the last 10-15yrs).

I also found that during the depths of the GFC, the LIC’s dividend absolute payment went down by no more than about 20%. I assume that the ETF’s were about the same but I’m happy to be corrected.

Based on this, what do people think of the following strategy?

Have enough dividend income to be able to live off 80% (coincidently, this is about 4% withdrawal rate assuming a yield of 5%), 75% to be conservative.

Have a bit of a cash buffer, the size is subject to discussion as well as what you actually do with it (bonds, high interest, term deposits – after tax none of these are going to yield much above inflation). But otherwise reinvest the other 20%.

If dividends go up (as they should on average at 7%), increase what you live off so you still spend 80% of the dividends.

If dividends flat line, or go down, only increase your spending by inflation if you must, or preferably not at all. This may involve dipping into the cash buffer mentioned above. Importantly, don’t sell shares to fund spending… this is likely the worst time to sell as it will be the bottom of the market.

Keep spending subdued until such time that it is only 80% of dividend income again.

In theory, over the long term, your spending money should increase by 7% + the yield from what you reinvest. That is far more than not only inflation, but also wage growth. So this differs from the 4% Rule in that your spending money increases much faster once it’s all in place.

What do people think of this? I'm sure there are pitfalls that I haven't thought of that I'd be happy for someone to point out. Or, on the other hand, is it too conservative?

[deborah]

Wade Pfau has done some SWR studies for other countries. It's 3.6% for Australia, and worse in other places. The US is abnormally high - I seem to remember it is 0.6% for Japan, and Germany is pretty poor too (from memory because of the hyper-inflation period they had).

Because of this, I think the forum concentrates too much on 4% - there will always be times when dividends don't yield much, or when inflation or deflation strikes. And it doesn't matter which country you belong to, its economy changes over time - certainly the 40+ years we are talking about with ER.

I think is is better to work out what the risks might be, and develop strategies to deal with them when they arise. I would be very interested if we could develop some of this together.

[potm]

I think the problem with the 4% rule is it's entirely focused on the market value of the portfolio at the time and not on the earnings or dividends.
The market could be vastly overvalued or undervalued at that point in time. Aiming for an arbitary 4% of assets does not make sense to me. Applying the 4% rule at the end of 2007 and at the start of 2009 will have vastly different results.

A better way to compare is with the earnings or dividend yield. If dividends cover your expenses and you assume they go up by inflation then you are covered. Add in a margin of safety like banksie has mentioned of expenses only being 80 or 75% of dividends and combined with the fact that assuming only inflation level growth in dividends will protect you against any falls in the dividend levels, which banksie has also pointed out is a lot less volatile than prices.

I also like to look at earnings yields as well or PEs as companies will have different payout ratios. If your dividends meet your expenses with a portfolio of companies with conservative payout ratios, you are in a better position than if they have high payout ratios.

Then you also have to consider the quality of the earnings reported and prospects for growth as well but that's a whole other issue which is not as relevant at the index level.

[The Falcon]

POTM, just on the ETF dividend cut, this was more significant than the traditional LICs who hold cash reserves to smooth out dividend fluctuations to investors. ETFs divis were cut by approx 40% from memory.

[urbanista]

http://www.perennial.net.au/investor_insights/long_term_investing

another source: in 2009 during the GFC, dividends were cut
across the market by approximately 29% from their 2008
levels.

[dungoofed]

Just to make sure we're all on the same page, could someone please define the 4% Rule? My understanding was that 4% was the amount of your portfolio you could sell year after year and capital growth (assuming reinvested dividends) would outpace inflation and any market downturn. So even if you retired in 2008 and sold your first 4% at the bottom, you'd still be ok long-term.

[BattlaP]

Anyone here hold VAP? Why was the distribution so pathetic this month? Went from like 139 cents last time to 9. wth?

[Sleeping Lions]

I have recently bought a house (outright) which has stretched me to my limits. It will be worth it in the end, but my bank account balance is looking pretty dismal at the moment! I can't see myself having enough spare funds to start investing in shares until the beginning of next year, however I'm wanting to spend the next few months getting my head around the stock market. It's all pretty new to me still, but I thought I would jump in this thread and have a bit of a read.

[AustralianMustachio]

Simple question regarding dividend dates - do you simply get paid on the number of securities you were holding up until the ex dividend date, or do you have to be holding those securities up until the pay date as well? I.e can you sell after the ex dividend and still get paid the dividend despite not holding the shares at that precise moment?

Years ago my parents bought me a tiny parcel of TLS and I was thinking of selling it at some stage and rolling it into my index funds.

[potm]

You get paid based on what you own just prior to the ex-dividend date. It's technically based on who is on the register at the record date but shares trade on a T+3 basis.

[deborah]

Simple question regarding dividend dates - do you simply get paid on the number of securities you were holding up until the ex dividend date, or do you have to be holding those securities up until the pay date as well? I.e can you sell after the ex dividend and still get paid the dividend despite not holding the shares at that precise moment?

Years ago my parents bought me a tiny parcel of TLS and I was thinking of selling it at some stage and rolling it into my index funds.

It's a bit convoluted as you can buy some shares pre-dividend after you have sold shares ex-dividend - on the same day, for the same amount of money (+/- the dividend). This allows you to get twice the franking credits on exactly the same value of shares (obviously there are capital gains/losses involved too). It is one of the lurks that the last budget closed particularly for SMSFs (as SMSFs pay no capital gains tax - so the net result was that they could get twice the franking credits for no extra money) called dividend churning.

[AustralianMustachio]

Thanks for the replies. Deborah I don't think I really understand your post, but that's fine since I'm not trying any specific dividend strategy like that.

But just to clarify - can I sell my shares a few days after the ex-dividend date, and still get paid the dividends a month or so later, even though I'm not holding the shares anymore on the pay date?

[potm]

But just to clarify - can I sell my shares a few days after the ex-dividend date, and still get paid the dividends a month or so later, even though I'm not holding the shares anymore on the pay date?

Yes, you can sell on ex dividend date or after and get the dividend.

[deborah]

But just to clarify - can I sell my shares a few days after the ex-dividend date, and still get paid the dividends a month or so later, even though I'm not holding the shares anymore on the pay date?

Yes, you can sell on ex dividend date or after and get the dividend.

You just need to make sure you are getting the shares you want - companies will have two different prices on the stock exchange during the period when both are available - one with the dividend and one without. These are usually actually the same price if you subtract the dividend itself.

[potm]

You're talking about dividend washing, which isn't relevant for AustralianMustachio and has been disallowed by the ATO.

[deborah]

You're talking about dividend washing, which isn't relevant for AustralianMustachio and has been disallowed by the ATO.

Yes - that's it's name - but I was saying it only works because shares are available both dividend and exdividend at the same time, and he was asking about the availability of dividends.

[potm]

He was just asking whether he could sell his shares on the ex dividend date and still get the dividend. No need to confuse him with a strategy that no longer works.

[slothman]

http://superannuationfreak.blogspot.com.au/2014/10/everything-you-need-to-know-about.html

hi superannuationfreak, amazing blog post. I've been reading some of your other posts aswell on asset allocation and keen to get my house in order. At the moment I've only got Australian stocks and looking to invest in overseas shares aswell.

Stockspot recommend IOO for global shares exposure, how do you think it compares to WXOZ? What do you think of the respective indexes? (S&P Global 100 vs S&P Developed ex Australia LargeMidCap) (100 holdings vs 352 holdings)

See link here for Stockspot's recommend ETFs:
https://www.stockspot.com.au/how-it-works/our-chosen-etfs/

Keen to have a simple all-in-one global shares ETF rather than having to keep both VTS and VEU. Even if it means paying a little extra in fees.

[superannuationfreak]

Stockspot recommend IOO for global shares exposure, how do you think it compares to WXOZ? What do you think of the respective indexes? (S&P Global 100 vs S&P Developed ex Australia LargeMidCap) (100 holdings vs 352 holdings)

Keen to have a simple all-in-one global shares ETF rather than having to keep both VTS and VEU. Even if it means paying a little extra in fees.

Both have their fans, they are both probably fine but I'm not sure either are perfect.  I prefer WXOZ for an Australian resident for two main reasons.  Firstly, 100 stocks isn't as diversified as I'd like (nor is 350 but they've tracked their larger index pretty well with that).  Secondly WXOZ will likely be more tax-efficient.  I'm not an expert but here is my understanding:

IOO is actually a US fund cross-listed as a "CHESS Depositary Interests".  So the US fund holds the shares and we hold an interest in the US fund.  The problem there is that some countries (in addition to the US) withhold tax on dividends.  And we aren't able to claim that withholding as foreign tax credits, only the withholding that the US then applies to the distributions of the fund.  WXOZ is Australian domiciled so each country will withhold dividends and then, depending on our individual situation, we may be able to use the withheld amount as a foreign tax credit on our Australian tax return.

In most cases I expect that tax advantage plus random tracking error will have a bigger difference than the 0.02% difference in expense ratio.  IOO is very slightly more 'tradeable' in terms of historical bid-ask spreads, volume and liquidity but they're still pretty similar on that basis too.

[potm]

Interesting points there superannuationfreak, does the same apply to VTS and VEU in terms of withheld tax as there are CDI as well?

[dungoofed]

Was considering the exact same question not long ago (IOO vs WXOZ). Interesting about the tax thing - thanks Superannuationfreak. I ended up going with IOO for the liquidity (both suffer from pathetic liquidity on the ASX).

Regarding geographic diversity, the companies in IOO are diverse enough to give you the global exposure you want in my opinion. As the wealth of consumers around the globe fluctuates, so does their purchasing of the products sold by the companies in IOO. And even if Apple disappeared today off the face of the planet you'd still only lose 6.24% of your investment in IOO.

[superannuationfreak]

Interesting points there superannuationfreak, does the same apply to VTS and VEU in terms of withheld tax as there are CDI as well?

VTS is all US stocks so shouldn't be an issue, I just claimed the foreign tax credit on US withholding. VEU does have this issue though, we're only able to claim the US withholding not any earlier-stage withholding by other nations. We also can't get franking credits on the Australian companies in veu (4%-ish).

[marty998]

So I sucked it up, swallowed my pride and after 9 years of losing a bucket of cash on individual stocks I bought 100 VHY a couple of minutes ago.

As soon my 1000 WBC shares go ex dividend in November I'm going to transfer them to VHY too. An inordinate amount of capital losses carried forward will ensure I won't be paying CGT on the disposal either :)

[Primm]

I have a question, and I'm wondering if anyone can poke holes in my plan.

I have an old credit card that I don't use much, it has a $10k limit and I keep it because at some point in the past when I was struggling with debt I rang up to cancel it because I was going to pay it down, but they changed the interest rate to 3.99% on purchases instead, on the condition I didn't close the card! Now it's close to zero, but I've been only making minimum payments while I have been focusing on investments, because 3.99%. Anyway, my hazy recollection of the conversation was that it was for 12 months and then "we'd see", but 5 years later the interest rate hasn't gone up.

So my question is, if I buy ETFs and settle them with this card via Bpay, can I still claim the interest? If I pay it off completely first and then use this card for only share transactions, it will be easy to separate out for the ATO, right? And if I settle with Bpay before my T+3 date then the money won't come out of my settlement account.

I guess it's a form of margin lending, which I am a bit hesitant about, but because it's not connected I will just pay off the credit card separately and won't have to worry about things like margin calls and share market fluctuations.

Thoughts? Good/bad idea?

[marty998]

Yes you most certainly could claim the interest - if you do pay it off initially and can show all interest is from share purchases.

Sounds like you're on to a winner!