Australian Investing Thread

[GT]

Since inception: 2.60%  <--- this is due to GFC fees I imagine.

FTFY.

Australian Super is looked at favourably within this thread.  There's also industry supers like Host Plus which are lean on fees too.  I think anything that'll let you access Vanguard funds via your Super would be a good call.

[NotSure]

Since inception: 2.60%  <--- this is due to GFC fees I imagine.

FTFY.

Australian Super is looked at favourably within this thread.  There's also industry supers like Host Plus which are lean on fees too.  I think anything that'll let you access Vanguard funds via your Super would be a good call.

Thank you, my wife is with AustralianSuper, seems to be good.

BT fees are:

Administration & Management fees: $5 per month + 0.45% p.a
Investment fee: 0.50% p.a

So $60 a year plus 0.95% of balance. This fund started in 2007, right before GFC hit, so numbers don't look nice, also 0.95% of course.

[FFA]

Hey Team Aussie--I thought my whole strategy was planned out but now, after reading the info about after-tax contributions in the super, I'm rethinking my strategy.  I was going to buy VGS and VAS through the mutual fund so I can easily bpay my money until I get 100k in each and the. Shift to the lower cost mutual fund. I'm wondering though if I should be buying the shares through my super, setting up Australian Super as my super now, using the after-tax contributions. The downside I see is locking my money up in the super, although I will keep 100k in a HISA so we can draw on the first 2 years of RE. (I plan to FIRE in 5 years, barring major changes).  I really don't understand the buying shares outside of super versus inside super, except there seems to be a big tax advantage to buying within super. My goal in 5 years is to have 500k invested in shares. Should I do 250k inside super invested and 250k outside super? Which, should I start to build first?

Thanks for any suggestions, just when I thought I had it all figured out, I'm lost again.

General idea is Super is tax advantaged, so try to put more in there. But you need enough outside Super to live off between your FIRE date and Super preservation age. So work backwards based on that, how many years between FIRE and Super becomes available and allow some safety margin to avoid it running out. You can always top-up your Super with any surplus, but not the other way.

[FFA]

Super : I use Sunsuper $1.5/wk plus 0.1%p.a. on the balance up to $800k, and my wife uses Hostplus which is $1.5/wk.

I like Sunsuper better for investment options. Hostplus is better for the diversified index fund if you're happy with a 75/25% allocation it is great value.

[NotSure]

Super : I use Sunsuper $1.5/wk plus 0.1%p.a. on the balance up to $800k, and my wife uses Hostplus which is $1.5/wk.

I like Sunsuper better for investment options. Hostplus is better for the diversified index fund if you're happy with a 75/25% allocation it is great value.

Thank you. Which investment option do you use with Suncorp as it attracts more fees as well?

[FFA]

Super : I use Sunsuper $1.5/wk plus 0.1%p.a. on the balance up to $800k, and my wife uses Hostplus which is $1.5/wk.

I like Sunsuper better for investment options. Hostplus is better for the diversified index fund if you're happy with a 75/25% allocation it is great value.

Thank you. Which investment option do you use with Suncorp as it attracts more fees as well?

That was Sunsuper not Suncorp. I have the Australia (index), International (index), International hedged (index), Emerging markets,  Fixed interest, Cash. The investment fees tend to be good, same or slightly lower than ETF fees.

[marty998]

I really don't understand the buying shares outside of super versus inside super, except there seems to be a big tax advantage to buying within super.

That's exactly it. At the end of the day, 1 unit of VAS is the same inside of super as it is out. It's just that outside you get taxed at your marginal rate, and inside you get taxed at 15% (10% capital gains).

I am with Aus Super. Cheap fees, easy to use website, account balance keeps going up... you can login with an app on your phone and get a balance update and it will notify you when a new contribution has been paid in by your employer. The app doesn't yet allow you to choose insurance or change investment mix (have to go to the website for that) but I'd imagine soon enough that option will be there.

Got one a notification this morning that one went in :)

[MrThatsDifferent]

Thanks Marty & FFA! What I'm thinking now is that I'll use the first 2.5 years to buy $250k outside of super and then the next 2.5 years to get $250k in super. I wanted to do what MMM does and have some dividends that provide income. I'll use cash to fund our first two years so that we can maximize the franking credits when I no longer have a salary income.  With the investments outside of super and cash, I should be able to make it to the time I could access super and hopefully the super will grow from $500k when I FIRE to $1 mil by the time I hit preservation age. Ok, feel better now, the plan has improved, now I just need to hold on to the money! And yeah, I've just set up Australian Super and will roll all my other supers into that over the next 2 months.

[marty998]

Thanks Marty & FFA! What I'm thinking now is that I'll use the first 2.5 years to buy $250k outside of super and then the next 2.5 years to get $250k in super. I wanted to do what MMM does and have some dividends that provide income. I'll use cash to fund our first two years so that we can maximize the franking credits when I no longer have a salary income.  With the investments outside of super and cash, I should be able to make it to the time I could access super and hopefully the super will grow from $500k when I FIRE to $1 mil by the time I hit preservation age. Ok, feel better now, the plan has improved, now I just need to hold on to the money! And yeah, I've just set up Australian Super and will roll all my other supers into that over the next 2 months.

I like this guy. Sees something that makes sense, formulates a plan and makes a decision.

Too easy.

[MrThatsDifferent]

Thanks Marty, well, I'm looking at it like this: I didn't know a thing about any of this and have not managed my money well considering what I make and I need to be humble enough to listen, change and smart enough to act.  I have no excuses now that I know what to do and with so many of you providing advice, guidance and examples. I have a lot to catch up on and I have my end goal, FIRE and see the world before I get too old. Simple.

Another question: if I buy shares in super, should I consider VTS and VEU since super will handle all the taxes and everything or is VAS and VGS enough? I guess I'm also asking should you own the same shares in super as outside of super or diversify?

[GT]

Another question: if I buy shares in super, should I consider VTS and VEU since super will handle all the taxes and everything or is VAS and VGS enough? I guess I'm also asking should you own the same shares in super as outside of super or diversify?

Most try and diversify, so that their Aussie shares with franked dividends are in their Super (VAS) as it's tax advantageous and their holdings outside Super are International Markets (VGS, VEU, VTS).

[NotSure]

That was Sunsuper not Suncorp. I have the Australia (index), International (index), International hedged (index), Emerging markets,  Fixed interest, Cash. The investment fees tend to be good, same or slightly lower than ETF fees.

Thank you, no idea why I've typed Suncorp! :)

Question regarding putting after tax dollars into Super - if you never intend to sell shares, the only thing taxed will be dividends, doesn't matter if invested inside Super or outside. So pros for Super is 15% tax on dividends compared to say 37% when outside, but you can't touch the money until you've retired. So if you invest into high yield index or shares then 15% tax can save a lot, but if invested in growth with little or no dividends (maybe US index?) then not much difference?

Edit: GT answered my question before I've even posted it, so please ignore. :)

[FFA]

Yeah from the tax perspective it's better to skew your Australian shares in Super and global shares outside Super. Because the Aus market yield is much higher.

However from the FIRE perspective, most people might think the other way. As they need the passive income (outside Super) to stop working. And you get much more yield from Aus shares.

So it also depends how tight your FIRE time-line is, how much safety buffer you have, whether you want to live of dividends alone or are willing to sell shares too as needed.

I think the first key point is to view it as a whole : Manage your total asset allocation across both in a consistent fashion. After that, trying to optimize the tax efficiency is probably a secondary goal, which includes using Super where you can (i.e. don't need the money until 60+) and where to place your assets in or out of Super. I would also counsel to keep it simple. I allowed my affairs to get too complicated and now am spending some effort trying to fix that....

[iloveanimals]

Yeah from the tax perspective it's better to skew your Australian shares in Super and global shares outside Super. Because the Aus market yield is much higher.

However from the FIRE perspective, most people might think the other way. As they need the passive income (outside Super) to stop working. And you get much more yield from Aus shares.

So it also depends how tight your FIRE time-line is, how much safety buffer you have, whether you want to live of dividends alone or are willing to sell shares too as needed.

I think the first key point is to view it as a whole : Manage your total asset allocation across both in a consistent fashion. After that, trying to optimize the tax efficiency is probably a secondary goal, which includes using Super where you can (i.e. don't need the money until 60+) and where to place your assets in or out of Super. I would also counsel to keep it simple. I allowed my affairs to get too complicated and now am spending some effort trying to fix that....

Just picking up on your last point about keeping it simple. I so far have keep it very simple and placed our entire $900k into the Vanguard Balanced Fund, however recently asked this forum about the benefits of High Yielding return funds as I have come to the realisation that the Balanced Fund just isn't quite enough to cover the shortfall we were hoping to live off in about 3 years. This forum provided me lots of options which I then started to look into, and have created spreadsheets galore to spread money all over the place to make better returns. Anyway now I am of the thinking that we might be better off just keeping the Balanced Fund going for the next 2-3 years then move money over to the High Yield funds when we actually have decided to really work part-time - or not all. Just weighing up at the moment whether we could right now start benefiting from High Yield fund due to them being fully franked credits, or if it will actually be more detrimental and will have a higher tax bill. I earn about 80k p.a and my wife earns about the same. Any thoughts?

[FFA]

Just picking up on your last point about keeping it simple. I so far have keep it very simple and placed our entire $900k into the Vanguard Balanced Fund, however recently asked this forum about the benefits of High Yielding return funds as I have come to the realisation that the Balanced Fund just isn't quite enough to cover the shortfall we were hoping to live off in about 3 years. This forum provided me lots of options which I then started to look into, and have created spreadsheets galore to spread money all over the place to make better returns. Anyway now I am of the thinking that we might be better off just keeping the Balanced Fund going for the next 2-3 years then move money over to the High Yield funds when we actually have decided to really work part-time - or not all. Just weighing up at the moment whether we could right now start benefiting from High Yield fund due to them being fully franked credits, or if it will actually be more detrimental and will have a higher tax bill. I earn about 80k p.a and my wife earns about the same. Any thoughts?

I think the Vanguard diversified funds, like the one you're in, are a great option for hands-off, set & forget. You just need to select the right option to suit your risk tolerance. I would caution against tinkering and switching, unless you've really thought it through and want to adjust your asset allocation for the medium to long term. As already stated, personally I'm not really a fan of the high yield funds I would just tilt my portfolio with a higher Australian weighting vs global, if you want more franked dividends (or saying it another way, just use VAS which already has a good franked yield).

If I were you I wouldn't change anything yet. Study what asset allocation you would like/need in 3 years time. If it's different from the Vanguard Balanced fund (i.e. because you need more yield), and if it's a substantial change, then it might be a good idea to gradually switch, e.g. over a year or two. This is to reduce the risk of making a substantial change in asset allocation on a single day.

[misterhorsey]

Don't forget that the Balance Fund v High Yield aren't just investing in the same things with a different dividend payout.  There is a different risk profile to both in their underlying investments, so its not just comparing the amount of dividends they will pay.

The high yield fund is aiming to maintain high dividend payments and so focuses it's investments on a relatively concentrated selection of high yielding Australian equities. As others have pointed out the Australian stockmarket is already high concentrated in Resources and the Financial Sector.  What if there is a downturn in these areas?

Whereas the Balanced Fund is aiming to diversify your investment across a whole range of sectors.  The yield may not be as high as the high yield fund, but it has spread the investment across fixed interest, shares (Aus and International), and property - so that if one sector has a downturn, the theory is other sectors will pick up the slack.

So have a look at the summaries of each fund that vanguard prepare to determine whether the investment suits your risk profile and outlook.  I'm not saying the High Yield fund may not be suitable for you or others, in certain circumstances- but it's worth considering the underlying investments that make up the fund - and also appreciating that a investment structured as an ongoing cash cow has to make compromises somewhere else (in this case, diversification).

[mjr]

Do you really feel such a rush to get in before 30 June ? of course I'm sure there will be, and it might keep the ASX inflated through the first half too. Personally I'm in the position to throw cash in, but I don't feel the urgency. The door doesn't close after 30 June, you can still put in 30k (deductible) plus 100k (non-concessional) each year. Once your balance hits $1.6m there are no more non-concessional contributions, so it's a finite opportunity anyway. I can understand the rush if you're 55-60 and a fair way below the $1.6m. But those aged below 50 still have plenty of time to add to Super gradually via regular contributions.

Anyway, I would bear in mind your asset allocation at the same time as moving large lumps of money around. I think a lot of people rushed money into Super in 2007 also ahead of Costello's rule changes and had to wait a long while for their balances to recover, even with those low taxes.

Fair points.

You never know what other easter eggs will be dished out in the May budget though. This government has a habit of promising "no adverse changes" to everything and then coming up with exactly those adverse changes...

My view is the same as Marty's.  I've just dropped $540k into my new SMSF and I deliberately did it before budget night.  I've seen both sides of politics move the goal posts on budget night.

[marty998]

You have to wonder what they will come up with in May this year. I'm going to miss the fun this time around... will be off on holidays with just giraffes and rhinos for company. They don't know how to internet.

Someone will have to update me with everything. Bloody hell, Abbott could be PM again by then with Peter Dutton as Treasurer.

The budget will be treated as an "on-water matter" and no one will know anything....

Stranger things have happened.

[actionjackson]

Hi Guys, Aussie expat here, living in the states for past couple of years, about to head back to OZ this year. 32YO, married.

Currently;

Cash: 86k USD, 43k AUD
VAS ASX: 23k AUD
Super: 100k AUD

Net worth in AUD hovers around 350k depending on ex rate. Savings rate in 2016 was averaging 37%, then we downsized our apartment and in Q4 we saved 49%.

I bought into VAS at the start of the year around 4900 on the ASX. I'm planning to stay in the US for part of this year before returning to work in Aus again. Was a struggle, but I've opened a Vanguard investment account here in the US. I've been told I'll be able to keep it open even once I leave the country. This is going to make things complicated, but I think it will be worth it in the long term, to be able to have assets in USD and use the AUD/USD as a mechanism for hedging against big moves in the AUD. Also, we plan on coming back to US in 5-10Y time frame, so will be good to have some investments here. Need to learn more about this though, if anyone has any experience with running investments in US based account and AUS based account - would be keen to connect.

Thinking this year is to get 100k USD into long term investments - thinking Vanguard ETF here. Keep some USD cash and transfer it to AUD if AUD drops back down around 70c. AUD of 43k in Australia is in ING savings account - is emergency fund - will leave that. As we save more this year, will start pushing more into ASX under VAS and VGS international funds to get closer to yet to be determined allocation.

Just learning more about investing at the moment, need to develop better overall strategy this year, decide on ideal allocation and get cash from bank into that allocation by the end of the year.

[goldenmoustache]

Hi Guys, Aussie expat here, living in the states for past couple of years, about to head back to OZ this year. 32YO, married.

Currently;

Cash: 86k USD, 43k AUD
VAS ASX: 23k AUD
Super: 100k AUD

Net worth in AUD hovers around 350k depending on ex rate. Savings rate in 2016 was averaging 37%, then we downsized our apartment and in Q4 we saved 49%.

I bought into VAS at the start of the year around 4900 on the ASX. I'm planning to stay in the US for part of this year before returning to work in Aus again. Was a struggle, but I've opened a Vanguard investment account here in the US. I've been told I'll be able to keep it open even once I leave the country. This is going to make things complicated, but I think it will be worth it in the long term, to be able to have assets in USD and use the AUD/USD as a mechanism for hedging against big moves in the AUD. Also, we plan on coming back to US in 5-10Y time frame, so will be good to have some investments here. Need to learn more about this though, if anyone has any experience with running investments in US based account and AUS based account - would be keen to connect.

Thinking this year is to get 100k USD into long term investments - thinking Vanguard ETF here. Keep some USD cash and transfer it to AUD if AUD drops back down around 70c. AUD of 43k in Australia is in ING savings account - is emergency fund - will leave that. As we save more this year, will start pushing more into ASX under VAS and VGS international funds to get closer to yet to be determined allocation.

Just learning more about investing at the moment, need to develop better overall strategy this year, decide on ideal allocation and get cash from bank into that allocation by the end of the year.

A pain point of having a US based brokerage account is that you will have to file a tax return in the US (as resident or non resident depending on your situation) every year as the capital gains, dividends etc. will be reported to the IRS. You will not end up paying more due to tax treaty but it adds administrative burden, especially as tax years are not aligned.

Also, US has a requirement of disclosure of all worldwide accounts greater than a certain amount when you file taxes, again, no issues if all legit, just additional admin burden.

[actionjackson]

Thanks - yeah I figured that might be the case. Just getting my head around it all now. Really like the idea of being able to hedge against the exchange rate though. If Aussie market tanks off the back of real estate crash and major banks hit, my holdings in VAS go down etc. then likely the AUD will also tank at same time. I can offset losses by bringing cash back to Australia and benefitting off the lower exchange rate.

[misterhorsey]

Would VTS do the trick?

https://www.vanguardinvestments.com.au/adviser/adv/investments/product.html#/fundDetail/etf/portId=0970/?performance

"The ETF is exposed to the fluctuating values of the US currency, as there will not be any hedging to the Australian dollar."

US domiciled, but Australian tax treatment? Best of both worlds in your situation?  Although I don't know what issues or headaches might be triggered by this arrangement if returning back to the US.

[misterhorsey]

Just realised you'd have to convert your US dollars to buy the US fund in Australian dollars in Australia. Which would be a pain, and at exchange rate cost.  But possibly a one off pain compared to ongoing management of a US account from Australia.

[Dropbear]

May I ask a question about international ETF allocation?

My situation:

- I currently have $10k invested in UBU - based primarily on the ethical screening, the slight benefit of no W8-BEN form, but the detraction of a higher cost relative to VTS.

- I'm also underweight in my Australian / international spread, and am planning to invest $5k amounts in international ETFs until I'm 50 / 50.

- The general idea with all these investments is that I buy-and-hold for 10 years to reach FI.

However, I've been challenged by the debates on this ethics thread:http://forum.mrmoneymustache.com/investor-alley/ethical-implications-of-index-fund-investing/  The argument that I should not worry about broad ETF investment and instead focus on ethical consumption as well as things like volunteering is quite convincing.

I'm contemplating these alternatives:

A - Sell UBU (MER 0.20%), realise a small capital gain, and invest in VTS (MER 0.05%) instead, while also adding VEU for diversity?  Or...

B - Continue to hold UBU without adding any more to it, and invest in VTS and VEU progressively?

Could anyone please help me with these questions?

1 - Given my timeframe, is the difference in fees substantial enough to justify selling UBU?

2 - What sort of split should I consider between VTS and VEU?

3 - Should I consider adding VGE?  It looks a more risky proposition than VTS and VEU?

Many thanks!

[marty998]

Yay, Vanguard dividends get paid tomorrow!

I am waiting patiently for the day my quarterly distribution is $10,750 instead of $1,075 :D

[FFA]

Hi Dropbear,

2&3) I prefer VGS instead of VTS/VEU. VGS like UBU is Australia domiciled. It's not just the W8 form, it minimises any US estate tax risk or other US regulatory risk, gives a DRP option. VGS covers global developed in a single fund, so you don't need to worry about VTS/VEU. Although you can throw in some VGE if you want emerging, e.g. VGS/VGE 90/10. If you go with VTS/VEU then 50/50 is a reasonable split based on rough market cap. VGS and VGE usually go together, or alternatively pairing is VTS/VEU (VEU includes emerging markets too).
1) If you're going to focus on the Vanguard funds I would sell the UBU and switch it over, since the capital gain is not huge. Save yourself the admin of the extra holding.

[goldenmoustache]

Yay, Vanguard dividends get paid tomorrow!

I am waiting patiently for the day my quarterly distribution is $10,750 instead of $1,075 :D

aren't we all?! :)

[Anatidae V]

Yay, Vanguard dividends get paid tomorrow!

I am waiting patiently for the day my quarterly distribution is $10,750 instead of $1,075 :D

aren't we all?! :)

Yup!

I bought my first VGS yesterday. Woot international exposure! It's a big thrill to buy shares, and I'm completely unconcerned about blippy dips so far, but I'm not sure yet how we'd feel through a big dip. I'm glad I've picked the right investment for my risk tolerance so far. Shares are still a tiny allocation compared to cash for us, so I expect we may feel differently once our allocation starts to be clearly equal or more shares than cash (currently $120k cash, $20k shares).

[Dropbear]

Hi Dropbear,

2&3) I prefer VGS instead of VTS/VEU. VGS like UBU is Australia domiciled. It's not just the W8 form, it minimises any US estate tax risk or other US regulatory risk, gives a DRP option. VGS covers global developed in a single fund, so you don't need to worry about VTS/VEU. Although you can throw in some VGE if you want emerging, e.g. VGS/VGE 90/10. If you go with VTS/VEU then 50/50 is a reasonable split based on rough market cap. VGS and VGE usually go together, or alternatively pairing is VTS/VEU (VEU includes emerging markets too).
1) If you're going to focus on the Vanguard funds I would sell the UBU and switch it over, since the capital gain is not huge. Save yourself the admin of the extra holding.

I'm surprised I didn't see the "no DRP" on VTS and VEU - that, and the other reasons you've pointed out do tend to make VGS sound more attractive.

Although UBU and VGS are closely comparable in fees (0.20% and 0.18% respectively), does the overlap in US exposure with both these funds make it a flawed strategy if I were to consider keeping my existing UBU allocation in place while adding a higher proportion of new funds into VGS, relative to the alternative of offloading UBU for VGS?

Thanks for your comments, it's great to learn more about these things!

[potm]

Yay, Vanguard dividends get paid tomorrow!

I am waiting patiently for the day my quarterly distribution is $10,750 instead of $1,075 :D

aren't we all?! :)

Yup!

I bought my first VGS yesterday. Woot international exposure! It's a big thrill to buy shares, and I'm completely unconcerned about blippy dips so far, but I'm not sure yet how we'd feel through a big dip. I'm glad I've picked the right investment for my risk tolerance so far. Shares are still a tiny allocation compared to cash for us, so I expect we may feel differently once our allocation starts to be clearly equal or more shares than cash (currently $120k cash, $20k shares).

Wait until you start thinking that the market going up while you hold cash as you losing money 😋

[FFA]

Hi Dropbear,

2&3) I prefer VGS instead of VTS/VEU. VGS like UBU is Australia domiciled. It's not just the W8 form, it minimises any US estate tax risk or other US regulatory risk, gives a DRP option. VGS covers global developed in a single fund, so you don't need to worry about VTS/VEU. Although you can throw in some VGE if you want emerging, e.g. VGS/VGE 90/10. If you go with VTS/VEU then 50/50 is a reasonable split based on rough market cap. VGS and VGE usually go together, or alternatively pairing is VTS/VEU (VEU includes emerging markets too).
1) If you're going to focus on the Vanguard funds I would sell the UBU and switch it over, since the capital gain is not huge. Save yourself the admin of the extra holding.

I'm surprised I didn't see the "no DRP" on VTS and VEU - that, and the other reasons you've pointed out do tend to make VGS sound more attractive.

Although UBU and VGS are closely comparable in fees (0.20% and 0.18% respectively), does the overlap in US exposure with both these funds make it a flawed strategy if I were to consider keeping my existing UBU allocation in place while adding a higher proportion of new funds into VGS, relative to the alternative of offloading UBU for VGS?

Thanks for your comments, it's great to learn more about these things!

It's ok to have overlap if you have a specific reason. i.e. VGS has approx. 50% US exposure but you want a bit more, so top it up with a US only fund such as UBU. However if it's just a legacy issue then I would avoid the overlap and keep your affairs as simple as possible.

[superannuationfreak]

Hi Dropbear,

2&3) I prefer VGS instead of VTS/VEU. VGS like UBU is Australia domiciled. It's not just the W8 form, it minimises any US estate tax risk or other US regulatory risk, gives a DRP option. VGS covers global developed in a single fund, so you don't need to worry about VTS/VEU. Although you can throw in some VGE if you want emerging, e.g. VGS/VGE 90/10. If you go with VTS/VEU then 50/50 is a reasonable split based on rough market cap. VGS and VGE usually go together, or alternatively pairing is VTS/VEU (VEU includes emerging markets too).
1) If you're going to focus on the Vanguard funds I would sell the UBU and switch it over, since the capital gain is not huge. Save yourself the admin of the extra holding.

I'm surprised I didn't see the "no DRP" on VTS and VEU - that, and the other reasons you've pointed out do tend to make VGS sound more attractive.

Although UBU and VGS are closely comparable in fees (0.20% and 0.18% respectively), does the overlap in US exposure with both these funds make it a flawed strategy if I were to consider keeping my existing UBU allocation in place while adding a higher proportion of new funds into VGS, relative to the alternative of offloading UBU for VGS?

Thanks for your comments, it's great to learn more about these things!

If you don't overweight the US as part of your asset allocation, and the capital gains are small, it's probably preferable to sell the UBU.

From a rational perspective it probably won't matter much either way: $10,000, even if it doubles, won't be much of your 'stache in 10 years.  And the expense difference is also not material.  Either way, you'll be fine as long as you keep 'staching away the savings.

From a behavioural perspective it's probably easier to sell it.  It reduces the chance you'll second-guess yourself when one of UBU and VGS outperforms over any given time period.

[Dropbear]

Thanks for the helpful comments FFA and superannuationfreak!  Selling up sounds like a better option, so is there any particular tax implications I should know beforehand?  I'm already keeping tabs on deductable expenses, but I've not had experience with capital gains and losses, so I don't know if there are better or worse ways to manage a gain?

In regards to allocations, how diversified should an Aussie mustachian's international proportion of a portfolio be?  It seems that the size of the US economy ensures it's healthily weighted even in VGS!  Based on the mustachian concepts I've read, it seems unwise for the DIY investor to include any specific regions, countries, or sectors , so are all-world funds (and possibly emerging markets too?) all there is when it comes to broad international market investment?

[Anatidae V]

Yay, Vanguard dividends get paid tomorrow!

I am waiting patiently for the day my quarterly distribution is $10,750 instead of $1,075 :D

aren't we all?! :)

Yup!

I bought my first VGS yesterday. Woot international exposure! It's a big thrill to buy shares, and I'm completely unconcerned about blippy dips so far, but I'm not sure yet how we'd feel through a big dip. I'm glad I've picked the right investment for my risk tolerance so far. Shares are still a tiny allocation compared to cash for us, so I expect we may feel differently once our allocation starts to be clearly equal or more shares than cash (currently $120k cash, $20k shares).

Wait until you start thinking that the market going up while you hold cash as you losing money 😋

I already started feeling this late last year when I hadn't saved my next purchase yet! I have a house deposit that I am doing my best not to whittle away...

[cakie]

Got an unexpected job change in a couple weeks, my first 6-figure salary! But it is making me rethink our super strategy, especially as we start to plan long-term. Your thoughts would be appreciated...

Me: 26, SO: 34

He also has a low tax job (PBI with salary sacrifice), which we can live off, with mine to save.

Original plan was to put minimums into super, save up $400k outside super over next 5yrs, then downshift to part-time, itinerant work that covers basic expenses both here and overseas (we both have EU citizenship). We wouldn't touch the $400k and just let it passively accumulate for a decade until we settle down.

However, it has come to my attention that in 15yrs when we aim to hit full FI, SO will be 50yrs old. This means he will be 10-15yrs from preservation age (govt might up it to 65? worst case?). So we may as well try to have up to 40% in super. If I put extra in pre-tax contributions, we can do an annual spouse split up to 85% of contributions. Seeing as the max pre-tax is only $30k ($25k from next yr), this seems like a no brainer to max since I will now be firmly in the 37c bracket.

Seem correct? Not really familiar with super rules, so just want to bounce of everyone here and make sure I'm not completely off-base.

Current investments: $105k outside super, $11k my super, $58k SO super

[marty998]

Congrats cakie, nicely done.

Yes - spousal split of 85% (you pay the 15% tax in your super fund. Your age differences make this strategy work well - he'll hit the preservation age 8 years before you, so it makes sense to maximise contributions to his fund. Once he starts drawing a pension, you can use those excess pension payments beyond your expense needs to top up your super.

[cakie]

Congrats cakie, nicely done.

Yes - spousal split of 85% (you pay the 15% tax in your super fund. Your age differences make this strategy work well - he'll hit the preservation age 8 years before you, so it makes sense to maximise contributions to his fund. Once he starts drawing a pension, you can use those excess pension payments beyond your expense needs to top up your super.

Thanks! I hadn't made the connection between the 15% contribution tax and the 85% max, that part makes sense now :)

[iloveanimals]

Hi All - back to ask for some advise. I have set up a NAB trade high interest account as it gets 2.15%. I intend to save cash amounts - probably in 5-10k amounts to do trades. Cost per trade is $14.95. Commsec offer up to $600 worth of free trades before the cost of $29.95 per trade kicks in.
My question is - should I leave the money in NAB Trade High Interest Account and do my trades via NAB or should I, once I have enough funds, move the money over to Commsec to undertake my transactions as the majority will be free for a while? My concern is that once I have traded via Commsec I guess I am stuck with them for life. Not sure if that is something to be concerned about?

Your experience or advise in this matter would be greatly appreciated. Thanks!

[steveo]

iloveanimals - I think Commsec charge more. https://www.commsec.com.au/support/rates-and-fees.html

[FFA]

commsec are 19.95 if you open a CDIA account (free). Also I think unique feature of commsec is you don't need the funds in advance to trade. So you can leave the money in ubank or ING or somewhere paying more interest and then transfer it over after completing the trade (but needs to be there by settlement).

I use nabtrade myself.

You are not stuck forever, you can always change in future and shift your shares across using a broker to broker form.

[iloveanimals]

commsec are 19.95 if you open a CDIA account (free). Also I think unique feature of commsec is you don't need the funds in advance to trade. So you can leave the money in ubank or ING or somewhere paying more interest and then transfer it over after completing the trade (but needs to be there by settlement).

I use nabtrade myself.

You are not stuck forever, you can always change in future and shift your shares across using a broker to broker form.

Thanks FFA - can I ask why you choose NAB over Commsec? and what the cost is of a broker to broker form?

[iloveanimals]

iloveanimals - I think Commsec charge more. https://www.commsec.com.au/support/rates-and-fees.html

Thanks Steveo - I don't think I will trade anything higher than $10k lots...so here is a copy and paste of their costs - unless I am missing something?

$19.95 (Up to $10,000)
$29.95 (Between $10,000 and $25,000)

[englyn]

Won't the free trades with commsec expire after 60 days or something? so that after you've saved up it's not really worth the trouble? I had a quick look as that was a similar starter promotion to what I got from Nabtrade years ago, but couldn't see the info.

I store cash-waiting-for-share-purchase in ing high interest or mortgage offset, either are better than nabtrade's interest rate.

[FFA]

I chose nabtrade because at that time a few years ago they also had the 20 free trades promo, and their normal brokerage rates were slightly cheaper.  Broker to broker transfers are free of charge, as far as I'm aware. However it's important for everything to be completely consistent (full name, address, etc) otherwise the transfer will not go through.

[FFF]

@iloveanimals

Like FFA I originally used NABtrade because of their intro offer of 20 free trades. Once that was used up I then did a broker to broker transfer (free to do, and as easy as filling in 1 simple form) to CMC which I now use. CMC only charge $11 a trade (or 0.1%, whichever is higher) so if you are only buying once every few months or so then that is probably your cheapest option. Drawbacks are that CMC cash account pays virtually no interest, and they don't offer access to international markets.

It's easy to do the broker to broker transfer (provided the details match) but just be aware that there is a bit more of an administrative burden for that financial year as you then have documentation for 2 HINs. In my opinion, this wasn't a problem and was worth the savings in brokerage, but for some it may be easier to keep it simple.

[Jess of Arc]

Hi everyone,

I've put our case study up on 'Ask a Moustachian', and someone suggested that we invest into shares rather than pay off our PPOR.

I'm looking into the math of that, and it could put us ahead.

What are people's suggestion for the best fund, and what kinds of things do we need to take into account with that?

We already have a couple of IPs, and a PPOR, so diversifying outside of real estate would be a good thing...

[iloveanimals]

@FFF, @FFA and @ englyn – thanks very much for your advise! Think I will try to go down the "free" path and deal with the admin side. I think it's worth it.

[steveo]

Hi everyone,

I've put our case study up on 'Ask a Moustachian', and someone suggested that we invest into shares rather than pay off our PPOR.

I'm looking into the math of that, and it could put us ahead.

What are people's suggestion for the best fund, and what kinds of things do we need to take into account with that?

We already have a couple of IPs, and a PPOR, so diversifying outside of real estate would be a good thing...

I think you need to diversify but it's pretty hard to beat a return after tax of 5+% which is what you get if you pay off your mortgage on your PPOR. I can't understand how the math would put you ahead. Can you explain that to me.

[marty998]

Hi everyone,

I've put our case study up on 'Ask a Moustachian', and someone suggested that we invest into shares rather than pay off our PPOR.

I'm looking into the math of that, and it could put us ahead.

What are people's suggestion for the best fund, and what kinds of things do we need to take into account with that?

We already have a couple of IPs, and a PPOR, so diversifying outside of real estate would be a good thing...

I think you need to diversify but it's pretty hard to beat a return after tax of 5+% which is what you get if you pay off your mortgage on your PPOR. I can't understand how the math would put you ahead. Can you explain that to me.

They are assuming the average return on stocks is higher than the current mortgage rate (4.xx%)

It doesn't take into account:

- the volatility of stocks
- SANF (sleep at night factor)
- the fact that tax is payable on dividends and distributions
- interest rates will rise soon enough, which increases the value of paying down the PPOR now.

Can you tell which side I'm on? :D :D :D

Having said that, a sensible compromise can be reached between paying down the house and building a share portfolio.

VAS is enough for me. I get the arguments about international and blah blah, but I'm happy enough to keep it simple and all in the one fund for now. If at some point I want more international I'll go through Super for it.

[steveo]

Marty - in Australia I don't think it makes sense to put money into shares and not pay off the PPOR. It comes across to me as a pretty one-sided discussion.

As for shares I use VAS, VGS and VAF (bonds) outside of super and just go with the standard high volatility fund in my super fund. Still I think just using VAS would probably be okay as well. I think I'd want something in bonds or cash though if I was close to retirement.

I think going beyond the simplest indexes isn't worth it but some people might have a different idea.