Author Topic: Australian Investing Thread  (Read 2584536 times)

misterhorsey

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Re: Australian Investing Thread
« Reply #2750 on: February 14, 2017, 06:34:41 PM »
3 factors to consider when thinking about swap and sell, or not bothering.

1) CGT events if you sell (as Deborah mentioned)
2) Cost of ongoing fees if you stay
3) Market timing - either by selling out of one fund, or even just by staying.

If the funds aren't too bad, or inappropriate, and fees are okay, I'd be inclined to stay with the funds and build the overall portfolio around them.  You may not have your desired asset allocation but it's probably close enough.  Then wait for a low income year to sell. Or offset any gains from any accrued capital losses you have from previous dumb investments.

I envy those who had the knowledge and foresight and werewithal to go straight into index funds from the get go (although I dont think they were quite as accessible when I started earning and saving).


LonerMatt

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Re: Australian Investing Thread
« Reply #2751 on: February 14, 2017, 09:21:24 PM »
They are index funds - IOZ, and another global one I forget, which I think is a Vanguard one.

Thanks for the advice, will hold and chill.

marty998

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Re: Australian Investing Thread
« Reply #2752 on: February 15, 2017, 12:54:46 AM »
Solid result from CBA today plus comments from Janet Yellen lifted the major indices higher.

$4.9 billion for the six months with a $1.99 dividend. Happy days.

kivex

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Re: Australian Investing Thread
« Reply #2753 on: February 15, 2017, 05:07:42 PM »
I'll be moving my super from AMP to SunSuper and I'd like to get some thoughts about my new AA. I'm 41yo so I have time to ride out the bumps and get some growth.

I'm currently thinking:
  • 40% Australian shares (index)
  • 20% International shares - hedged (index)
  • 20% International shares - unhedged (index)
  • 20% Australian property (index)
I'm not so sure about the International shares - considering the time until my preservation age, should I bother with hedging at all and simply have 40% International unhedged? Or perhaps a different ratio?

Property seems to do ok, however that is based on future returns from past performance and all that. Perhaps I should drop property and have a 50/50, or perhaps a 40/60, or a 60/40 Aus/Intl mix.

It would be great to get some thoughts.

Thanks

misterhorsey

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Re: Australian Investing Thread
« Reply #2754 on: February 15, 2017, 06:32:33 PM »
I've been curious about the Sun Super option for a while, but the idea of manually balancing allocations put me off as I am prone to analysisparalysis.  My current super (Index Growth Option offered by Plum does automatic balancing, at a 0.37% fee per annum).

Have you got a strategy in mind for rebalancing?  Is it as simple as choosing an arbitrary date once a year and adjusting your allocation?

It's a pretty basic question I realise - but sometimes these practical issues are hard to get the head around, and ultimately inform the wider strategic objectives.

iloveanimals

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Re: Australian Investing Thread
« Reply #2755 on: February 15, 2017, 06:39:17 PM »
Super..yes have read that Sun Super is good but what about Hesta? I am currently with Asgard and need to make the move as it has been chewing up funds with silly fee's and charges.

misterhorsey

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Re: Australian Investing Thread
« Reply #2756 on: February 15, 2017, 06:59:07 PM »
Oh gawd, I'm answering my own questions now.

I just called Sunsuper and it's simply a matter of logging in and changing your % allocations.  Some issues spring to mind:
- ensuring the discipline to rebalance once a year, or more. Or on the flipside, stopping yourself from rebalancing everytime the market suffers some fall, rise, indigestion or Trump signs an Executive Disorder.
- cost of buy/sell spread (probably negligible, if you only do it once a year)

However, apparently the pre-set options effectively rebalance daily based on unit prices (though your gains or losses aren't crystalised as all your dealing with is the unit price.)


kivex

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Re: Australian Investing Thread
« Reply #2757 on: February 15, 2017, 07:03:08 PM »
From what I read on this forum, SunSuper gets a good rap. The fees are certainly cheaper than AMP. The Aus / Intl index funds are 100% Vanguard at about 0.09% IIRC, vs the 1.8+% that AMP is taking!

SunSuper have a Balanced Index fund at about 0.17% and they automatically rebalance. I guess that is always an option.

For my particular selection of index funds I could always rebalance every 12-18 months. Can easily be done on their website.

deborah

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Re: Australian Investing Thread
« Reply #2758 on: February 15, 2017, 07:17:06 PM »
Anything is better than AMP

steveo

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Re: Australian Investing Thread
« Reply #2759 on: February 15, 2017, 07:23:05 PM »
kivex - I think your allocation is fine but I would personally do a 50/50 split within your growth assets between Australian and International or even higher within your International exposure. I also wouldn't hedge it.

If you own your property I wouldn't allocate a cent to property. You could add some bonds if you want too. I suppose that is your choice.

kivex

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Re: Australian Investing Thread
« Reply #2760 on: February 15, 2017, 07:48:04 PM »
kivex - I think your allocation is fine but I would personally do a 50/50 split within your growth assets between Australian and International or even higher within your International exposure. I also wouldn't hedge it.

If you own your property I wouldn't allocate a cent to property. You could add some bonds if you want too. I suppose that is your choice.

Thanks steveo. What are your reasons for not hedging? I'm new to this so still learning. Also could you explain your reasons about property allocation (or lack of).

deborah

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Re: Australian Investing Thread
« Reply #2761 on: February 15, 2017, 08:07:37 PM »
My own personal take: Without hedging you get currency movement in your portfolio. Also, hedging adds to the management fees.

steveo

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Re: Australian Investing Thread
« Reply #2762 on: February 15, 2017, 08:10:51 PM »
kivex - I think your allocation is fine but I would personally do a 50/50 split within your growth assets between Australian and International or even higher within your International exposure. I also wouldn't hedge it.

If you own your property I wouldn't allocate a cent to property. You could add some bonds if you want too. I suppose that is your choice.

Thanks steveo. What are your reasons for not hedging? I'm new to this so still learning. Also could you explain your reasons about property allocation (or lack of).

My opinion for not hedging is that the currency fluctuations over time should even themselves out. You are though probably taking a hit in fees in relation to the hedging. If you own your own property in Australia you more than likely have a massive allocation to property. I don't believe in adding more property to your portfolio because you have enough exposure.

Eucalyptus

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Re: Australian Investing Thread
« Reply #2763 on: February 15, 2017, 08:18:14 PM »
kivex - I think your allocation is fine but I would personally do a 50/50 split within your growth assets between Australian and International or even higher within your International exposure. I also wouldn't hedge it.

If you own your property I wouldn't allocate a cent to property. You could add some bonds if you want too. I suppose that is your choice.

Thanks steveo. What are your reasons for not hedging? I'm new to this so still learning. Also could you explain your reasons about property allocation (or lack of).

My opinion for not hedging is that the currency fluctuations over time should even themselves out. You are though probably taking a hit in fees in relation to the hedging. If you own your own property in Australia you more than likely have a massive allocation to property. I don't believe in adding more property to your portfolio because you have enough exposure.

I am of this mind as well with the property to some extent. I think investing in individual properties is probably not ideal in Australia (outside of your PPOR), because of diversification (like owning individual shares). As well as your own property, many people end up inheriting property, or parts of property from parents, etc. Or move in a few years (that you can't predict now) and you might end up with another one. REITs are a bit different of course as they are by their nature diversified as an Index. But again, with relatively high investment into your PPOR, it doesn't make that much sense to have a lot invested in them. Few percent or so is probably good.

Everyone has their own take, of course

kivex

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Re: Australian Investing Thread
« Reply #2764 on: February 15, 2017, 08:29:18 PM »
My opinion for not hedging is that the currency fluctuations over time should even themselves out. You are though probably taking a hit in fees in relation to the hedging. If you own your own property in Australia you more than likely have a massive allocation to property. I don't believe in adding more property to your portfolio because you have enough exposure.

Thanks for the explanation. SunSuper use Vanguard for 100% of their International Index fund and the costs are the same for both hedged and unhedged at 0.09% so no difference either way. Would it then make sense to have both hedged/unhedged to cover both scenarios of the AUD rising or falling?

The property index has fees of 0.11% and contains Scentre, Westfield, Goodman, Stockland, Mirvac etc. Would that change your perspective of investing in property outside of your PPOR?

deborah

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Re: Australian Investing Thread
« Reply #2765 on: February 15, 2017, 08:50:16 PM »
The point is that it's YOU who has to be comfortable with your investments - not any of us. Like Steveo, I feel that my house is enough property investment. But BigChrisB, Marty998... all seem to be comfortable with a lot more property. People who don't want more property aren't likely to have looked into the detail, so aren't likely to give you reasonable guidance. That said, those things are certainly a different form of property investment, and so give you diversity in that sector - whether it is good or bad diversity I don't know.

iloveanimals

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Re: Australian Investing Thread
« Reply #2766 on: February 15, 2017, 09:14:12 PM »
ok with some basic research it has come down to Sun Super and Australian Super. Any advise from this forum about for or against? Cheers

kivex

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Re: Australian Investing Thread
« Reply #2767 on: February 15, 2017, 09:18:33 PM »
The point is that it's YOU who has to be comfortable with your investments - not any of us. Like Steveo, I feel that my house is enough property investment. But BigChrisB, Marty998... all seem to be comfortable with a lot more property. People who don't want more property aren't likely to have looked into the detail, so aren't likely to give you reasonable guidance. That said, those things are certainly a different form of property investment, and so give you diversity in that sector - whether it is good or bad diversity I don't know.

Thanks Deborah, yes a lightbulb moment for me as everyone has their own biases. I guess what I was trying to ask all along, though I might not have expressed it well, was that if my proposed AA looked reasonable or completely insane ;)

I have seen other super funds charge more for hedged vs unhedged funds due to additional overheads in the hedging, however since SunSuper charge the same for both hedged and unhedged, it would be great to have some feedback on whether it makes sense to have both hedged and unhedged funds.

FFA

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Re: Australian Investing Thread
« Reply #2768 on: February 15, 2017, 09:28:59 PM »
hi kivex, I use sunsuper also. Your AA looks reasonable to me. I use the following options
Australia (index), international (index) hedged and unhedged, emerging markets, Australia FI, cash

I generally lean against hedging, but still keep a small percentage. Some suggest hedging will increase your volatility as there is a natural hedge between the FX and relative performance of global shares. Not sure about this, but it definitely incurs some transactional costs.

I'm not keen on property, and I have investment properties outside of super. The ASX already has a reasonable exposure to it so I don't add extra, so that might be something for you to consider depending on your situation and view.....

kivex

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Re: Australian Investing Thread
« Reply #2769 on: February 15, 2017, 10:10:30 PM »
Thanks FFA for some great information.

steveo

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Re: Australian Investing Thread
« Reply #2770 on: February 15, 2017, 11:07:57 PM »
The point is that it's YOU who has to be comfortable with your investments - not any of us. Like Steveo, I feel that my house is enough property investment. But BigChrisB, Marty998... all seem to be comfortable with a lot more property. People who don't want more property aren't likely to have looked into the detail, so aren't likely to give you reasonable guidance. That said, those things are certainly a different form of property investment, and so give you diversity in that sector - whether it is good or bad diversity I don't know.

When I provide some advice I always feel like stressing it's my opinion and you need to come up with an AA that works for you. No one can predict the future.

cakie

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Re: Australian Investing Thread
« Reply #2771 on: February 16, 2017, 12:08:31 AM »
Kivex, we are the same! I'm also with amp - employer discounts made it cheap, but switching jobs right now. I'm moving to sunsuper, sticking to a basic allocation of 40% International, 40% Australian shares and 20% FI (Aussie i think?).

I also wasn't sure about hedging - I'm usually a fan of unhedged but the same fee makes hedging look appealing. In the end I stuck with unhedged.

Your AA looks perfectly sane to me!

marty998

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Re: Australian Investing Thread
« Reply #2772 on: February 16, 2017, 12:24:22 AM »

Telstra shares got hammered today following their profit announcement. All those SMSF's buying in for their expected 15.5c dividend have just seen 30c of capital wiped away in a day.


Anything is better than AMP


AMP has to be the biggest rubbish stock ever to list on the ASX. I wish the VAS fund would buy the ASX 300 index and specifically exclude AMP. I can't believe they are still standing.

The point is that it's YOU who has to be comfortable with your investments - not any of us. Like Steveo, I feel that my house is enough property investment. But BigChrisB, Marty998... all seem to be comfortable with a lot more property. People who don't want more property aren't likely to have looked into the detail, so aren't likely to give you reasonable guidance. That said, those things are certainly a different form of property investment, and so give you diversity in that sector - whether it is good or bad diversity I don't know.

Thanks Deborah, yes a lightbulb moment for me as everyone has their own biases. I guess what I was trying to ask all along, though I might not have expressed it well, was that if my proposed AA looked reasonable or completely insane ;)

I have seen other super funds charge more for hedged vs unhedged funds due to additional overheads in the hedging, however since SunSuper charge the same for both hedged and unhedged, it would be great to have some feedback on whether it makes sense to have both hedged and unhedged funds.


I have enough residential property, but not enough commercial property. I am a bit gun shy about commercial because a lot of them are debt funded by instruments known as "Commercial Mortgage Backed Securities" (CMBS). These went to shit so badly during 2009/2010 that even good solid REITs fell over.


Basically find it hard to trust any manager with significant exposure to that type of financing. When the markets seize up there's nowhere to hide.




FFA

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Re: Australian Investing Thread
« Reply #2773 on: February 17, 2017, 03:50:45 AM »
Kivex, we are the same! I'm also with amp - employer discounts made it cheap, but switching jobs right now. I'm moving to sunsuper, sticking to a basic allocation of 40% International, 40% Australian shares and 20% FI (Aussie i think?).

I also wasn't sure about hedging - I'm usually a fan of unhedged but the same fee makes hedging look appealing. In the end I stuck with unhedged.

Your AA looks perfectly sane to me!
hi cakie, with that kind of AA you might also consider Hostplus indexed balanced option. It is 37.5% international, 37.5% Australia shares, 15% FI, 10% cash and the MER is 0.02% by far the lowest I have seen. If you like this AA and want to set and forget, then it is a great option I suggest. The admin fees are also lower.  Maybe one for you also kivex if you reconsider the 20% property.

My wife is in the hostplus and I am in sunsuper. I use sunsuper to have a bit more flexibility. When I re-balance my AA it is on the overall portfolio (inside and outside super), so sunsuper has better options for that, i.e. the international (index) and emerging markets options.

cakie

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Re: Australian Investing Thread
« Reply #2774 on: February 17, 2017, 04:47:42 AM »
Kivex, we are the same! I'm also with amp - employer discounts made it cheap, but switching jobs right now. I'm moving to sunsuper, sticking to a basic allocation of 40% International, 40% Australian shares and 20% FI (Aussie i think?).

I also wasn't sure about hedging - I'm usually a fan of unhedged but the same fee makes hedging look appealing. In the end I stuck with unhedged.

Your AA looks perfectly sane to me!
hi cakie, with that kind of AA you might also consider Hostplus indexed balanced option. It is 37.5% international, 37.5% Australia shares, 15% FI, 10% cash and the MER is 0.02% by far the lowest I have seen. If you like this AA and want to set and forget, then it is a great option I suggest. The admin fees are also lower.  Maybe one for you also kivex if you reconsider the 20% property.

My wife is in the hostplus and I am in sunsuper. I use sunsuper to have a bit more flexibility. When I re-balance my AA it is on the overall portfolio (inside and outside super), so sunsuper has better options for that, i.e. the international (index) and emerging markets options.
Thanks for the suggestion FFA. I hadn't looked at any balanced options as I didn't realise any of them would be 70%+ stocks. That may be perfect for my SO's fund! I would prefer us to be with different funds anyway just in case... He's still with a (heavily discounted) for-profit.

FFA

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Re: Australian Investing Thread
« Reply #2775 on: February 17, 2017, 01:59:21 PM »
Yeah the growth allocation at 75% is certainly high for a "balanced" fund, it could also be considered in the growth category. They also have a low cost Australian index option, so if you wanted to tweak it up slightly you could do that (i.e. 90-95% indexed balanced (0.02%) / 5-10% IFM Australia shares (0.04% MER) ). The international options are poor at Hostplus though.

sirdeets

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Re: Australian Investing Thread
« Reply #2776 on: February 18, 2017, 02:13:21 AM »
Another happy SunSuper user here on the low fee Australia index and Intl unhedged index options (50 - 50)

limeandpepper

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Re: Australian Investing Thread
« Reply #2777 on: February 18, 2017, 07:24:34 AM »
ok with some basic research it has come down to Sun Super and Australian Super. Any advise from this forum about for or against? Cheers

I am with Australian Super and I am satisfied with it. I went with one of their pre-mixed investment options, Sustainable Balanced: https://www.australiansuper.com/SustainableBalanced

According to my needs/preferences, I also reduced or eliminated some of the insurance (life, disability, income protection) to lower the fees.

nofriends

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Re: Australian Investing Thread
« Reply #2778 on: February 18, 2017, 03:04:46 PM »
I am with Australian Super and I am satisfied with it. I went with one of their pre-mixed investment options, Sustainable Balanced: https://www.australiansuper.com/SustainableBalanced

According to my needs/preferences, I also reduced or eliminated some of the insurance (life, disability, income protection) to lower the fees.

Same here, with AustralianSuper, high growth option (~75% equities). Their fees are higher, but when i compared performance it was superior to hostplus and sunsuper, so decided to stay put and re-evaluate every 6-12 months.

mjr

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Re: Australian Investing Thread
« Reply #2779 on: February 18, 2017, 05:04:55 PM »
I set up an SMSF last year and continue to get real satisfaction that I have no financial leeches hanging off my portfolio. 0.1% + the vanguard ETF admin fees

GT

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Re: Australian Investing Thread
« Reply #2780 on: February 18, 2017, 11:29:49 PM »
I set up an SMSF last year and continue to get real satisfaction that I have no financial leeches hanging off my portfolio. 0.1% + the vanguard ETF admin fees

No additional costs for managing the fund on an annual basis for tax purposes?

mjr

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Re: Australian Investing Thread
« Reply #2781 on: February 18, 2017, 11:42:51 PM »
I set up an SMSF last year and continue to get real satisfaction that I have no financial leeches hanging off my portfolio. 0.1% + the vanguard ETF admin fees

No additional costs for managing the fund on an annual basis for tax purposes?

Tax return + audit is the 0.1 %

GT

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Re: Australian Investing Thread
« Reply #2782 on: February 19, 2017, 02:53:40 AM »
I set up an SMSF last year and continue to get real satisfaction that I have no financial leeches hanging off my portfolio. 0.1% + the vanguard ETF admin fees

No additional costs for managing the fund on an annual basis for tax purposes?

Tax return + audit is the 0.1 %

Ahh OK, so that 0.1% would drop over time.

iloveanimals

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Re: Australian Investing Thread
« Reply #2783 on: February 19, 2017, 01:08:52 PM »
I am with Australian Super and I am satisfied with it. I went with one of their pre-mixed investment options, Sustainable Balanced: https://www.australiansuper.com/SustainableBalanced

According to my needs/preferences, I also reduced or eliminated some of the insurance (life, disability, income protection) to lower the fees.

Same here, with AustralianSuper, high growth option (~75% equities). Their fees are higher, but when i compared performance it was superior to hostplus and sunsuper, so decided to stay put and re-evaluate every 6-12 months.
Thanks LimePepper and No Friends for providing your experiences with Australian Super. I just opened our accounts with them. Cheers

MrThatsDifferent

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Re: Australian Investing Thread
« Reply #2784 on: February 20, 2017, 12:40:43 AM »
I combined all my supers into Australian Super last month. I really like the app and easily watching the money grow.

MajorTom

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Re: Australian Investing Thread
« Reply #2785 on: February 20, 2017, 02:01:47 AM »
I see Vanguard are now offering 3 actively managed equity funds in Australia: all 0.45% expense ratios, all wholesale funds, all Australian domiciled.
(They currently only seem to be listed in the institutional investor part of their website, but I read an article which indicated that they would be available to individual/SMSF investors too)

Vanguard Global Minimum Volatility Fund
https://www.vanguardinvestments.com.au/institutional/inst/investments/product.html#/fundDetail/wholesale/portId=8154/?overview
(0.17% buy/sell spread)
(Hedged into Australian dollar)

Vanguard Global Quantitive Equity Fund
https://www.vanguardinvestments.com.au/institutional/inst/investments/product.html#/fundDetail/wholesale/portId=8156/?overview
(0.11% buy/sell spread)
(Ex-Australia)

Vanguard Global Value Equity Fund
https://www.vanguardinvestments.com.au/institutional/inst/investments/product.html#/fundDetail/wholesale/portId=8157/?overview
(0.15% buy/sell spread)
(All world, including Australia)

emdeex

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Re: Australian Investing Thread
« Reply #2786 on: February 21, 2017, 01:14:35 AM »
Hi All...I'm a long time MMM lurker, first time poster....

About a year ago, I started to look seriously at what was going on with my Super , and although I'm wiser, I certainly don't feel I fully understand all the ins and outs.

I opened an ING Living Super account, attracted by the low-fees, and more switched-on UI/data available.  I've been putting 100% of my new allocations into the High Growth option while I tried to work out what all the options meant, so far that's all worked out fine.

From my analysis, of downloading the historical unit prices back to the ING funds inception in 2012, and charting it against various exchange traded funds in Oz and the US, I came up with this chart (hopefully you can open).

https://docs.google.com/spreadsheets/d/1C2xxoEEXrMtE_rq34TDoE9kfdgJc30VDHO88Dg81tr0/pubchart?oid=1357093838&format=interactive


Which appears to show a very strong correlation between the US-traded Vanguard 500 (VOO) fund, and the ING Living Super High Growth option.

Am I right to think that investing in the ING High Growth option, is functionally equivalent to investing in the VOO?

If I'm getting the VOO performance... is the ING Super fee structure a good deal for this?  Management fee is 0.25%, and Admin fee is 0.5% (capped at $1k per annum).  No entry, switching or exit fees.

misterhorsey

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Re: Australian Investing Thread
« Reply #2787 on: February 21, 2017, 03:50:06 PM »
Maybe this could qualify for it's own thread, but I thought I'd post it up here. 

http://www.macrobusiness.com.au/2017/02/fundies-have-a-shocker/

It's kind of a weird article.  Frank and honest account of data - followed by ignoring the data!

Ozlady

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Re: Australian Investing Thread
« Reply #2788 on: February 22, 2017, 05:46:41 PM »
I combined all my supers into Australian Super last month. I really like the app and easily watching the money grow.

Me too! Happy with the returns on Balanced choice so far:)

marty998

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Re: Australian Investing Thread
« Reply #2789 on: February 23, 2017, 12:33:48 AM »
Didn't want to bury this in off topic... this thread is likely to get a few more views

NAB Chairman and former Treasury head Ken Henry has delivered a spray to the current political class.

He laments the inability for anything more than infantile insults to be hurled from one side to the other. Honestly it's about time someone yells over the top of Turnbull and Shorten and Abbott etc, for far too long this country has been led by imbeciles because no one has been willing to do anything about it.

Hopefully the business community will act constructively to back up the words now.

http://www.abc.net.au/news/2017-02-23/former-treasury-head-ken-henry-attacks-political-system/8296692?section=business

kivex

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Re: Australian Investing Thread
« Reply #2790 on: February 23, 2017, 01:50:17 AM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?
« Last Edit: February 23, 2017, 01:51:55 AM by kivex »

Rob_S

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Re: Australian Investing Thread
« Reply #2791 on: February 23, 2017, 02:03:16 AM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

Not worth it on the family trust unless one of you plans to give up working or dramatically scale back and end up in lower marginal tax bracket. Might be worth it if one of you works in a field where you are likely to be sued from an asset protection point of view.

I might be wrong but I am fairly sure you could only stream about $600 from the trust to your kids tax free. The ATO take a very dim view of investents for kids and tax the hell out of them. So again not really worth streaming income from a family trust to kids unless they are much older - 16 or more likely 18 when they are taxed as adults and get that tax free threshold.

marty998

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Re: Australian Investing Thread
« Reply #2792 on: February 23, 2017, 02:35:35 AM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

49...

45% marginal tax rate + 2% medicare + 2% debt levy (+ Medicare surcharge if applicable)

bigchrisb

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Re: Australian Investing Thread
« Reply #2793 on: February 23, 2017, 02:48:41 PM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

Do you need the income from investment now?  If not, I'd invest through a trust, stream what you can to the kids (not much at their ages but will increase as they get older / support them through uni), and stream the balance to a company beneficiary.  Better to be compounding at 27.5% than 49% / 34.5%, and have the flexibility to change how you distribute income later without CGT.

This is the approach I've taken, and its been beneficial for me.  I'd say the main criteria are:
- Having a reasonable nut to invest, so there are some tax savings to offset the running costs.  Maybe $250k was the break-even point for me.
- Being on a high personal tax rate
- Not needing the money now, and having a reasonable duration to gain from the tax spread
- A bonus if you expect to have differing income patterns.  For example, last few years I was the high income earner compared to my wife.  We are heading overseas for her work soon, and this will invert.  With a trust, we can choose the lower tax beneficiary.  With investing in individual names, changing it would be a CGT event.

Eucalyptus

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Re: Australian Investing Thread
« Reply #2794 on: February 23, 2017, 09:33:23 PM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

49...

45% marginal tax rate + 2% medicare + 2% debt levy (+ Medicare surcharge if applicable)

Hey Marty. I've never thought about the medicare additions, etc. (Have thought about my HECS-HELP debt repayments).

If one does something like Salary Sacrafice into super, thus reducing taxable income, does that also reduce the income on which the 2% medicare charge is calculated?

potm

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Re: Australian Investing Thread
« Reply #2795 on: February 23, 2017, 09:41:23 PM »
Yes, salary sacrificing to super will reduce the medicare levy as well.
It won't reduce your hec repayments though.

marty998

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Re: Australian Investing Thread
« Reply #2796 on: February 24, 2017, 03:47:03 AM »
Yes, salary sacrificing to super will reduce the medicare levy as well.
It won't reduce your hec repayments though.

Correct... there's a few things that are added back to your income for the purpose of calculating HECS and entitlements to other social security measures such as FTB. Net investment losses (negative gearing) being a prime example.


Notch

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Re: Australian Investing Thread
« Reply #2797 on: February 24, 2017, 01:52:38 PM »
The other option to keep things simple and minimise tax is to keep your high-yielding Australian shares in your super accounts, and keep the relatively low-yielding international stocks in your names.

kivex

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Re: Australian Investing Thread
« Reply #2798 on: February 24, 2017, 04:26:50 PM »
My wife and I recently opened an account (joint names) with the Vanguard wholesale funds. Our tax brackets are 32.5c for my wife and 45c (47?) for me.

Tax wise, would it make much of a difference to create a family trust and transfer our Vanguard fund to the trust? We have two children (7/10) so would that mean the trust could pay them up to a tax free threshold?

Do you need the income from investment now?  If not, I'd invest through a trust, stream what you can to the kids (not much at their ages but will increase as they get older / support them through uni), and stream the balance to a company beneficiary.  Better to be compounding at 27.5% than 49% / 34.5%, and have the flexibility to change how you distribute income later without CGT.

This is the approach I've taken, and its been beneficial for me.  I'd say the main criteria are:
- Having a reasonable nut to invest, so there are some tax savings to offset the running costs.  Maybe $250k was the break-even point for me.
- Being on a high personal tax rate
- Not needing the money now, and having a reasonable duration to gain from the tax spread
- A bonus if you expect to have differing income patterns.  For example, last few years I was the high income earner compared to my wife.  We are heading overseas for her work soon, and this will invert.  With a trust, we can choose the lower tax beneficiary.  With investing in individual names, changing it would be a CGT event.

Thanks Chris, lots of great info for consideration.

One question regarding the company beneficiary - how do you get the $$ out of the company later?

marty998

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Re: Australian Investing Thread
« Reply #2799 on: February 24, 2017, 06:15:44 PM »
Easy - pay a dividend, transfer cash form company to shareholders (you).

 

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