Author Topic: Australian Investing Thread  (Read 1254858 times)

Rowellen

  • Bristles
  • ***
  • Posts: 426
  • Location: Australia
Re: Australian Investing Thread
« Reply #3650 on: December 12, 2017, 07:33:09 PM »
That is very true deborah. I work in SMSFs so my perspective is a bit skewed towards the wealthy end of the scale. My parents are boomers. My mum worked from the age of 15 until she was physically unable a couple of years ago. Her super payout was under $100k. The majority of that was a disability insurance payment. My dad was better off because he worked for the government and had a decent defined benefit pension. However it's still a fraction of what most of my clients have. My clients were generally business owners or very high income earners. They are not quite old enough for the age pension and have spent over half their super already. Paid off their mortgage, bought a new caravan and 2nd hand 4x4 plus several extended overseas trips, cruises and home renos. I would not be surprised to find that the majority of couples have both partners in a similar situation to my mum.

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3651 on: December 15, 2017, 06:32:54 PM »
ATO finally sorted out my HECS-HELP Benefit today, including fixing up all their mistakes and missing payments since 2009. My HECS debt is now down to 19000, woohoo! It was almost 30k at its highest.

Did some calculations and at my current salary will be paid off four years from now. I can't wait. Did further calculations and the extra money (put into investments prior to FIRE) generally gives me a 15% reduction in SWR failure potential for my plans, or I could retire a couple of years earlier for similar risk. Sweeeeeeeet.

It really is quite amazing how much affect reductions in "spending" have on potential FIRE portfolio success.

PDM

  • Pencil Stache
  • ****
  • Posts: 526
  • Location: Australia
Re: Australian Investing Thread
« Reply #3652 on: December 15, 2017, 08:47:00 PM »
ATO finally sorted out my HECS-HELP Benefit today, including fixing up all their mistakes and missing payments since 2009. My HECS debt is now down to 19000, woohoo! It was almost 30k at its highest.

Did some calculations and at my current salary will be paid off four years from now. I can't wait. Did further calculations and the extra money (put into investments prior to FIRE) generally gives me a 15% reduction in SWR failure potential for my plans, or I could retire a couple of years earlier for similar risk. Sweeeeeeeet.

It really is quite amazing how much affect reductions in "spending" have on potential FIRE portfolio success.

Awesome news. There is nothing better than your first full pay cheque without HECS.

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3653 on: December 16, 2017, 02:43:32 AM »

[/quote]

Awesome news. There is nothing better than your first full pay cheque without HECS.
[/quote]

I'm definitely looking forward to the day!
I'll be watching it carefully over the next couple of years so that I can put the last grand or two in prior to the indexing date in June and then tell my employer to stop taking it out for the following financial year.

BattlaP

  • Stubble
  • **
  • Posts: 171
Re: Australian Investing Thread
« Reply #3654 on: December 16, 2017, 04:02:16 AM »
I paid my HECS off with a lump sum when I got access to my First Home Savers Account. Back in the days of extra payment discounts.

Feels good man, it's worth the opportunity cost to have the complete peace of mind of debt freedom.

asosharp

  • 5 O'Clock Shadow
  • *
  • Posts: 64
Re: Australian Investing Thread
« Reply #3655 on: December 18, 2017, 01:41:45 AM »
I need some help with my personal investments as I'm a bit confused. I came across Mr Money Moustache and was fascinated by it but of course a lot of it is not Aussie so I was surprised when I found this link (on another forum!).

Instead of putting all my money in a HISA, I decided that I would invest especially since the interest rate for HISAs keep going down. I came across the concept of ETFs and LICs which sound good for the long term as it's almost set and forget and with any other money I can put it into other investments like property or individual stocks.

My thought was that I would put maybe about $20 - 60k into an ETF or LIC. I have read this - https://www.bogleheads.org/wiki/Investing_in_Australia#VAS_vs_LICs - but as these people are John Bogle fans I don't know if they are biased towards Vanguard.

In regards to the paragraph there:

"The most common LICs for people looking for an alternative to Vanguard Australian Shares Index ETF (VAS) are Australian Foundation Investment Co.Ltd (AFI), Argo Investments (ARG) and Milton Corporation Limited (MLT). These don't generally trade at a deep discount to NTA, so if you can't get them at a fair discount to NTA then stick with VAS. "

1) Is it actually good advice - to put it into VAS if you can't get LIC's at a fair discount?

2) What do they mean by a 'fair discount'? How would you know if it is discounted? Does that mean the share price has dropped and that's why it's a fair discount?

3) It also says:

"Australian companies on average tend to return more to shareholders in the form of dividends than their US counterparts. For example the VAS (ASX300 index tracker) has tended to yield around 5%, whereas VTS (US S&P500 index-tracker) has tended to yield around 2%."

- I thought the ASX was the ASX 200 not the ASX 300? Is this a typo?
- I've read on Mr Money Moustache that holding foreign ETFs are good but why is that so if the yield is less than the Australian one?

4) One thing  that worries me about the long term future is the direction money is headed in the wake of cryptocurrencies, the blockchain, etc. The ASX comprises mostly of banks and mining. So once the digital change hits, does that mean Australian ETFs and LICs would be a really bad invesment in the long term? I am in my 30's and can only imagine the changes that would happen in the next 30 - 60 years when I could still be alive and would need to withdraw from the ETF or LIC for my retirement.

PDM

  • Pencil Stache
  • ****
  • Posts: 526
  • Location: Australia
Re: Australian Investing Thread
« Reply #3656 on: December 18, 2017, 01:49:15 AM »
VAS is based on the ASX300. The ASX200 is also a thing. The number is the top 200 companies by capitalisation or top 300.

Llewellyn2006

  • 5 O'Clock Shadow
  • *
  • Posts: 92
  • Location: Australia
Re: Australian Investing Thread
« Reply #3657 on: December 18, 2017, 04:59:43 AM »
I hold both Argo and AFIC. I hold them to provide me with a steady stream of fully franked dividends and that is their stated investment goal. I don't really hold either share with the expectation of making massive capital gains. My yield for each one is around 3.8% without allowing for the tax impact of the franking credits. Both have long track records and I think they are a good investment for people looking for exposure to a wider range of companies than might be possible with limited funds. I've never really bothered with the "discount to NTA" thing. But of course YMMV.

JuicyCrab

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 30
  • Location: Perth - Australia
Re: Australian Investing Thread
« Reply #3658 on: December 18, 2017, 05:01:28 AM »
I need some help with my personal investments as I'm a bit confused. I came across Mr Money Moustache and was fascinated by it but of course a lot of it is not Aussie so I was surprised when I found this link (on another forum!).

Instead of putting all my money in a HISA, I decided that I would invest especially since the interest rate for HISAs keep going down. I came across the concept of ETFs and LICs which sound good for the long term as it's almost set and forget and with any other money I can put it into other investments like property or individual stocks.

My thought was that I would put maybe about $20 - 60k into an ETF or LIC. I have read this - https://www.bogleheads.org/wiki/Investing_in_Australia#VAS_vs_LICs - but as these people are John Bogle fans I don't know if they are biased towards Vanguard.

In regards to the paragraph there:

"The most common LICs for people looking for an alternative to Vanguard Australian Shares Index ETF (VAS) are Australian Foundation Investment Co.Ltd (AFI), Argo Investments (ARG) and Milton Corporation Limited (MLT). These don't generally trade at a deep discount to NTA, so if you can't get them at a fair discount to NTA then stick with VAS. "

1) Is it actually good advice - to put it into VAS if you can't get LIC's at a fair discount?

2) What do they mean by a 'fair discount'? How would you know if it is discounted? Does that mean the share price has dropped and that's why it's a fair discount?

3) It also says:

"Australian companies on average tend to return more to shareholders in the form of dividends than their US counterparts. For example the VAS (ASX300 index tracker) has tended to yield around 5%, whereas VTS (US S&P500 index-tracker) has tended to yield around 2%."

- I thought the ASX was the ASX 200 not the ASX 300? Is this a typo?
- I've read on Mr Money Moustache that holding foreign ETFs are good but why is that so if the yield is less than the Australian one?

4) One thing  that worries me about the long term future is the direction money is headed in the wake of cryptocurrencies, the blockchain, etc. The ASX comprises mostly of banks and mining. So once the digital change hits, does that mean Australian ETFs and LICs would be a really bad invesment in the long term? I am in my 30's and can only imagine the changes that would happen in the next 30 - 60 years when I could still be alive and would need to withdraw from the ETF or LIC for my retirement.
Part 4 of your question had me concerned a little too, however I think if cryptos really did replace fiat it could really turn the market upset down globally, not just locally.

That is until banks develop their own digital currency products to compete in that space. They are savages and won't let a bit of block chain code hurt their profits...

Sent from my SM-G930F using Tapatalk


ozbeach

  • Bristles
  • ***
  • Posts: 266
  • Age: 54
  • Location: Australia
Re: Australian Investing Thread
« Reply #3659 on: December 18, 2017, 12:40:06 PM »
2) What do they mean by a 'fair discount'? How would you know if it is discounted? Does that mean the share price has dropped and that's why it's a fair discount?

The AFI and Argo web sites publish the current NTA and share prices on their home page. You get to decide when you think the discount is 'fair'.

middo

  • Bristles
  • ***
  • Posts: 408
  • Location: Country Western Australia
  • Learning.
Re: Australian Investing Thread
« Reply #3660 on: December 18, 2017, 06:20:46 PM »
My concerns about cryptocurrencies are:

1. As an investment they have no inheret earnings.  They are fundamentally like gold in this sense.

2. They are obviously currently in a bubble. They will crash sometime.  Investung now is purely gambling.

3. Block chain is one step away frim a major hack making them wirthless.  This is a fundamental concern I have with them. Currencies value is perceived worth, and these have no country to support them when they crash.

deborah

  • Walrus Stache
  • *******
  • Posts: 7830
  • Location: At Home
Re: Australian Investing Thread
« Reply #3661 on: December 18, 2017, 06:25:53 PM »
I love the bit by Noel Whittaker today...

Quote
In my opinion, Bitcoin fails every investment test. If you buy government bonds, you receive a guaranteed income plus principal repayment at the end of the term. If you buy shares you can make a decision based on the financial statements and profitability of the company. If you buy real estate there should be a nexus between the land value, the cost of improvements, and any potential rental income. In other words, you are making the decision on concrete information.

Bitcoin works on the greater fool theory: a fool buys today in the hope of on-selling to a greater fool tomorrow. It's more like the allegory of the box of strawberries sold from person to person at ever-increasing prices. Finally, the buyer who had paid $100 for a box of strawberries that had cost only $5 a few buyers ago, stopped the cycle by opening the box. To his dismay he found the strawberries were rotten! When he complained, the response was, "but these strawberries were meant to be sold they were never meant to be eaten". Each buyer had bought with one aim to resell for a higher price to a fool who still believed in the impossible dream. At least your Bitcoins can't rot. They never really existed.

asosharp

  • 5 O'Clock Shadow
  • *
  • Posts: 64
Re: Australian Investing Thread
« Reply #3662 on: December 18, 2017, 09:17:42 PM »
Thanks everyone for your feedback.

Last night I came across the Vanguard diversified range which is basically an ETF comprising of many of their wholesale funds. The MER is 0.27% but there's no track record yet as it hasn't even been a month since it was launched.

However I found some PDF which says how you can recreate the diversified model if you just bought individual fund. If you followed the alternative model the portfolio weighted MER would be something like 0.10%.

In the long term when it comes to fees, is it better to have a MER of 0.27% of just 1 fund, or a portfolio weighted average of 0.10% per fund?

Adram

  • 5 O'Clock Shadow
  • *
  • Posts: 63
Re: Australian Investing Thread
« Reply #3663 on: December 19, 2017, 01:38:54 AM »
It is better to have  an MER of 0.1% but I don't think it's easy to set up multiple funds to mimic that ETF given that some of the funds in these ETFs are not available in Australia.

Also, holding only one ETF has some value, given that you would not need to rebalance unless you held other investments, your tax return preparation would be simpler, and you would likely save on transaction costs.

Notch

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Age: 28
  • Location: Australia
Re: Australian Investing Thread
« Reply #3664 on: December 19, 2017, 04:12:50 AM »
In the long term when it comes to fees, is it better to have a MER of 0.27% of just 1 fund, or a portfolio weighted average of 0.10% per fund?

I'm kind of doing this; I'm copying the Vanguard Diversifed High Growth Index Fund asset allocation using Vanguard's wholesale funds.   

Advantages:
- Let the experts pick the asset allocation
"Vanguard's Investment Strategy Group, a global team of researchers and analysts, set the asset allocation of the Australian diversified funds as part of a robust framework used by Vanguard globally. These investment experts analyse issues such as concentration risk and currency exposure, and incorporate output from comprehensive modelling generated by Vanguard's proprietary forecasting engine, the Vanguard Capital Markets Model."

- Using separate funds lets me hold the highest-yielding component (Australian shares) within super, saving tax.
- The wholesale funds have basically the same MER as the ETFs and similar buy/sell spreads as Commsec brokerage.
- I don't have to deal with Commsec or Computershare.  Use BPay to purchase and get a summary tax statement once a year.
- Possibly less unwanted capital gains distributions because as an individual you're not forced to sell to rebalance your allocations; you can just top-up the fund performing worst.
- The funds pay out distributions a few days earlier than the ETFs ;)

Disadvantages:
- Can't buy/sell at intraday high/lows - have to take the end of day unit price.
- Need a minimum of $100,000 to invest to access wholesale funds (doesn't have to be all in one fund).
« Last Edit: December 19, 2017, 04:01:46 PM by Notch »

chasingthegoodlife

  • Stubble
  • **
  • Posts: 218
Re: Australian Investing Thread
« Reply #3665 on: December 19, 2017, 01:04:08 PM »
I am a crypto sceptic for all the reasons mentioned by middo and Deborah above.

A quote from an article I read a while back and can no longer remember the source ‘Bitcoin is a solution without a problem’.

Ignoring its use to transact illegal goods like child pornography online, as Deborah points out above Bitcoin’s primary use is being traded to a ‘greater fool’ for a (hopefully) increasing amount of traditional currency.

For everyday use it is dramatically less convenient and less secure than trad currency and we are still living in a time where a decent portion of the population can’t use internet banking.

I may have to eat my hat one day but I can’t see it happening.

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3666 on: December 19, 2017, 02:30:39 PM »
In the long term when it comes to fees, is it better to have a MER of 0.27% of just 1 fund, or a portfolio weighted average of 0.10% per fund?

I'm kind of doing this; I'm copying the Vanguard Diversifed High Growth Index Fund asset allocation using Vanguard's wholesale funds.   

Advantages:
- Let the experts pick the asset allocation
"Vanguard's Investment Strategy Group, a global team of researchers and analysts, set the asset allocation of the Australian diversified funds as part of a robust framework used by Vanguard globally. These investment experts analyse issues such as concentration risk and currency exposure, and incorporate output from comprehensive modelling generated by Vanguard's proprietary forecasting engine, the Vanguard Capital Markets Model."

- Using separate funds lets me hold the highest-yielding component (Australian shares) within super, saving tax.
- The wholesale funds have basically the same MER as the ETFs and similar buy/sell spreads as Commsec brokerage.
- I don't have to deal with Commsec or Computershare.  Use BPay to purchase and get a summary tax statement once a year.
- Possibly less unwanted capital gains distributions because as an individual you're not forced to sell to rebalance your allocations; you can just top-up the fund performing worst.
- The funds pay out distributions a few days earlier than the ETFs ;)

Disadvantages:
- Can't buy/sell at interday high/lows - have to take the end of day unit price.
- Need a minimum of $100,000 to invest to access wholesale funds (doesn't have to be all in one fund).

The another disadvantage of going with the diversified ETFs that I see (eg the high growth one), is that even the high growth one holds Bonds. If you are a long way off from retirement, and aiming to use glidepath ratios for bond allocations (eg, aquire bonds up to a small percentage in the final couple of years prior to retirement, then spend them down in the first few years or so until you are back to 0% bonds) you can't do it; your allocation is set. One could always just hold one or two additional equity ETFs to weight more towards growth (eg some S&P small cap or Emerging markets).

I like your approach of holding your Aus equities in Super for tax advantages.

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3667 on: December 19, 2017, 02:34:09 PM »
Magellan.

As a cricket fan I'm getting hammered by Magellan Investment ads.

Then I checked them out. Holy doodle, some high fees for not much.

I suppose its much better than sports betting ads

Notch

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Age: 28
  • Location: Australia
Re: Australian Investing Thread
« Reply #3668 on: December 19, 2017, 03:06:56 PM »
In the long term when it comes to fees, is it better to have a MER of 0.27% of just 1 fund, or a portfolio weighted average of 0.10% per fund?

I'm kind of doing this; I'm copying the Vanguard Diversifed High Growth Index Fund asset allocation using Vanguard's wholesale funds.   
...

The another disadvantage of going with the diversified ETFs that I see (eg the high growth one), is that even the high growth one holds Bonds. If you are a long way off from retirement, and aiming to use glidepath ratios for bond allocations (eg, aquire bonds up to a small percentage in the final couple of years prior to retirement, then spend them down in the first few years or so until you are back to 0% bonds) you can't do it; your allocation is set. One could always just hold one or two additional equity ETFs to weight more towards growth (eg some S&P small cap or Emerging markets).

I like your approach of holding your Aus equities in Super for tax advantages.

Ah yes, I forgot to mention that benefit. You're spot on.  I'm holding cash instead of the bond allocation at the moment as I'm looking to buy a house soon.  And I won't get into the bond allocation until my future mortgage is paid off.  No point buying bonds at 2% interest while having a home loan at 4%.

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3669 on: December 19, 2017, 03:52:20 PM »
In the long term when it comes to fees, is it better to have a MER of 0.27% of just 1 fund, or a portfolio weighted average of 0.10% per fund?

I'm kind of doing this; I'm copying the Vanguard Diversifed High Growth Index Fund asset allocation using Vanguard's wholesale funds.   
...

The another disadvantage of going with the diversified ETFs that I see (eg the high growth one), is that even the high growth one holds Bonds. If you are a long way off from retirement, and aiming to use glidepath ratios for bond allocations (eg, aquire bonds up to a small percentage in the final couple of years prior to retirement, then spend them down in the first few years or so until you are back to 0% bonds) you can't do it; your allocation is set. One could always just hold one or two additional equity ETFs to weight more towards growth (eg some S&P small cap or Emerging markets).

I like your approach of holding your Aus equities in Super for tax advantages.

Ah yes, I forgot to mention that benefit. You're spot on.  I'm holding cash instead of the bond allocation at the moment as I'm looking to buy a house soon.  And I won't get into the bond allocation until my future mortgage is paid off.  No point buying bonds at 2% interest while having a home loan at 4%.

Concur

stashgrower

  • Bristles
  • ***
  • Posts: 349
  • Location: Australia
Re: Australian Investing Thread
« Reply #3670 on: December 20, 2017, 06:16:13 AM »
Can capital gains losses from shares be offset against capital gains in the Vanguard mutual funds? What I mean is, does it count as one giant investment pot or two separate lines that balance separately?

Notch

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Age: 28
  • Location: Australia
Re: Australian Investing Thread
« Reply #3671 on: December 20, 2017, 04:31:17 PM »
Can capital gains losses from shares be offset against capital gains in the Vanguard mutual funds? What I mean is, does it count as one giant investment pot or two separate lines that balance separately?

If you're talking about assets you personally hold, ie. shares, funds, houses, bars of gold, then a capital loss in any asset can offset a capital gain in any other asset.

asosharp

  • 5 O'Clock Shadow
  • *
  • Posts: 64
Re: Australian Investing Thread
« Reply #3672 on: December 21, 2017, 07:12:32 AM »
In the long term when it comes to fees, is it better to have a MER of 0.27% of just 1 fund, or a portfolio weighted average of 0.10% per fund?

I'm kind of doing this; I'm copying the Vanguard Diversifed High Growth Index Fund asset allocation using Vanguard's wholesale funds.   
...

The another disadvantage of going with the diversified ETFs that I see (eg the high growth one), is that even the high growth one holds Bonds. If you are a long way off from retirement, and aiming to use glidepath ratios for bond allocations (eg, aquire bonds up to a small percentage in the final couple of years prior to retirement, then spend them down in the first few years or so until you are back to 0% bonds) you can't do it; your allocation is set. One could always just hold one or two additional equity ETFs to weight more towards growth (eg some S&P small cap or Emerging markets).

I like your approach of holding your Aus equities in Super for tax advantages.

Ah yes, I forgot to mention that benefit. You're spot on.  I'm holding cash instead of the bond allocation at the moment as I'm looking to buy a house soon.  And I won't get into the bond allocation until my future mortgage is paid off.  No point buying bonds at 2% interest while having a home loan at 4%.

Mmm... it kind of sounds like the all in one fund may not be the best option based on the portfolio weighted MER and I suppose the overall control of it all. I'll have to check the PDF if it was only for their wholesale funds or whether it included the retail ones.

Just out of curiosity, are there actually any benefits of holding ETF or LIC outside of super? That was my original intention.

Llewellyn2006

  • 5 O'Clock Shadow
  • *
  • Posts: 92
  • Location: Australia
Re: Australian Investing Thread
« Reply #3673 on: December 21, 2017, 04:42:06 PM »
In the long term when it comes to fees, is it better to have a MER of 0.27% of just 1 fund, or a portfolio weighted average of 0.10% per fund?

I'm kind of doing this; I'm copying the Vanguard Diversifed High Growth Index Fund asset allocation using Vanguard's wholesale funds.   
...

The another disadvantage of going with the diversified ETFs that I see (eg the high growth one), is that even the high growth one holds Bonds. If you are a long way off from retirement, and aiming to use glidepath ratios for bond allocations (eg, aquire bonds up to a small percentage in the final couple of years prior to retirement, then spend them down in the first few years or so until you are back to 0% bonds) you can't do it; your allocation is set. One could always just hold one or two additional equity ETFs to weight more towards growth (eg some S&P small cap or Emerging markets).

I like your approach of holding your Aus equities in Super for tax advantages.

Ah yes, I forgot to mention that benefit. You're spot on.  I'm holding cash instead of the bond allocation at the moment as I'm looking to buy a house soon.  And I won't get into the bond allocation until my future mortgage is paid off.  No point buying bonds at 2% interest while having a home loan at 4%.

Mmm... it kind of sounds like the all in one fund may not be the best option based on the portfolio weighted MER and I suppose the overall control of it all. I'll have to check the PDF if it was only for their wholesale funds or whether it included the retail ones.

Just out of curiosity, are there actually any benefits of holding ETF or LIC outside of super? That was my original intention.

I have both LIC's and ETF's outside of super because I'll need income between when I cut down my workload and being able to access my super. And I don't want to tie everything up in super because I don't trust governments of any colour not to tinker with it a bit more before I need to get my hands on it.

stashgrower

  • Bristles
  • ***
  • Posts: 349
  • Location: Australia
Re: Australian Investing Thread
« Reply #3674 on: December 23, 2017, 01:44:29 AM »
Thanks, Notch.

asosharp, I think the idea around here is to have investments ex-super if you retire early and need the income before reaching preservation age for super.

sirdeets

  • 5 O'Clock Shadow
  • *
  • Posts: 74
Re: Australian Investing Thread
« Reply #3675 on: December 24, 2017, 07:22:10 PM »
Anyone here get involved with dividend stripping? I'm having a very low income year due to travelling around and investing sweat equity into a business, so would be paying no tax (<$20k), and would basically get franking credits as cash.

Doing some backtesting it looks like on ex-div shares do drop more than the dividend sometimes, but when you factor in the franking credits, you come out ahead, if doing large chunks to minimise brokerage. 

Info here about the $5k franking credits rule where you don't have to hold for 45 days - quite generous. https://www.ato.gov.au/Forms/You-and-your-shares-2013-14/?page=11

(CC: Bigchris,potm)

bigchrisb

  • Handlebar Stache
  • *****
  • Posts: 1114
Re: Australian Investing Thread
« Reply #3676 on: December 25, 2017, 03:22:28 PM »
I've often wondered about div harvesting tactics, but have never pub a lot of time into them. Last time I looked even the tax rates in my super fund were prohibitive, and it seemed a lot of work for little gain.  Happy to hear otherwise from others!

11ducks

  • Pencil Stache
  • ****
  • Posts: 527
  • Location: Duckville, Australia
Re: Australian Investing Thread
« Reply #3677 on: December 26, 2017, 01:55:02 AM »

Hey guys, looking for advice please?

I've tried to search but no luck - how often do you invest, for a particular trading fee? FYI I'm buying Australian LIC's (AFI/ARGO), and considering branching into more diverse Aus-based LICs  (PAF, PAI, MFF) in the future. I don't have a lot but am hoping to regularly contribute.

So, if it costs $30 to make a trade, should I invest every time I have $1000, or wait for $5000 or $10000 lots? For reference, I'll be saving about $650/month going forward, so I'll have around $2000/quarter to invest, or $8000k annually. How periodically should I dump my cash in? Any ballpark figure would really help, thanks!!!

PDM

  • Pencil Stache
  • ****
  • Posts: 526
  • Location: Australia
Re: Australian Investing Thread
« Reply #3678 on: December 26, 2017, 02:04:15 AM »
No real answer, really upto how comfortable you are with the % of your buy is fees. For example, if it's $30 of a $1000 buy that is 3% it'll have to increase to just cover costs.

Also, $30 is expensive you can get a lot cheaper (even a big bank like CBA is $19.95) with others cheaper.

I've previously bought share parcels of $2000 for speculative stocks. With our Vanguard purchase we have bought $25k lots.

You might look into managed funds that you can BPAY into?

Llewellyn2006

  • 5 O'Clock Shadow
  • *
  • Posts: 92
  • Location: Australia
Re: Australian Investing Thread
« Reply #3679 on: December 26, 2017, 02:12:50 AM »

Hey guys, looking for advice please?

I've tried to search but no luck - how often do you invest, for a particular trading fee? FYI I'm buying Australian LIC's (AFI/ARGO), and considering branching into more diverse Aus-based LICs  (PAF, PAI, MFF) in the future. I don't have a lot but am hoping to regularly contribute.

So, if it costs $30 to make a trade, should I invest every time I have $1000, or wait for $5000 or $10000 lots? For reference, I'll be saving about $650/month going forward, so I'll have around $2000/quarter to invest, or $8000k annually. How periodically should I dump my cash in? Any ballpark figure would really help, thanks!!!

My rule of thumb is $2,000 per parcel. At $29.95 a trade that's 1.5% which I can live with.

Notch

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Age: 28
  • Location: Australia
Re: Australian Investing Thread
« Reply #3680 on: December 26, 2017, 06:22:28 PM »

Hey guys, looking for advice please?

I've tried to search but no luck - how often do you invest, for a particular trading fee? FYI I'm buying Australian LIC's (AFI/ARGO), and considering branching into more diverse Aus-based LICs  (PAF, PAI, MFF) in the future. I don't have a lot but am hoping to regularly contribute.

So, if it costs $30 to make a trade, should I invest every time I have $1000, or wait for $5000 or $10000 lots? For reference, I'll be saving about $650/month going forward, so I'll have around $2000/quarter to invest, or $8000k annually. How periodically should I dump my cash in? Any ballpark figure would really help, thanks!!!

My brokerage was $20 at Commsec and I assumed a return on the shares of 7% per year (0.58% per month).  Therefore, it was worth buying when I had at least $20 / 0.0058 = $3429 ready.  Otherwise, I would wait a month.

11ducks

  • Pencil Stache
  • ****
  • Posts: 527
  • Location: Duckville, Australia
Re: Australian Investing Thread
« Reply #3681 on: December 26, 2017, 06:33:16 PM »
Thanks PDM Llewellyn and Notch, that's really helpful.  Will try to get in touch with Commsec and get the fee down to $19.95 (I'm on the $29.95 one for some reason). Cheers.

JuicyCrab

  • 5 O'Clock Shadow
  • *
  • Posts: 37
  • Age: 30
  • Location: Perth - Australia
Re: Australian Investing Thread
« Reply #3682 on: December 26, 2017, 07:12:02 PM »

Hey guys, looking for advice please?

I've tried to search but no luck - how often do you invest, for a particular trading fee? FYI I'm buying Australian LIC's (AFI/ARGO), and considering branching into more diverse Aus-based LICs  (PAF, PAI, MFF) in the future. I don't have a lot but am hoping to regularly contribute.

So, if it costs $30 to make a trade, should I invest every time I have $1000, or wait for $5000 or $10000 lots? For reference, I'll be saving about $650/month going forward, so I'll have around $2000/quarter to invest, or $8000k annually. How periodically should I dump my cash in? Any ballpark figure would really help, thanks!!!

As others have said there is no hard and fast rule, just know the smaller each parcel is relative to your brokerage the more it eats into returns in the long run if you are dollar cost averaging your purchases.

When I was with commsec ($20/trade) I limited it to 0.5% of parcel size, so about $4000 per purchase was the sweet spot.

Now I'm using CMC markets ($11/trade) that number is now down to $2000 per purchase which personally I like as it allows me to invest more often and lock in my money to investments rather than have it sitting in its tempting cash form :).

Hope this helps.

sirdeets

  • 5 O'Clock Shadow
  • *
  • Posts: 74
Re: Australian Investing Thread
« Reply #3683 on: December 28, 2017, 04:39:37 AM »
So based on the advice from FFA a while back I've been using sharesight to track my portfolio.

It is amazing. Via sharesight you log into your broker (mine is NAB), it automatically brings in all your buy/sell transactions - and all the dividends... and you can go in and one click anything that's part of a DRP.
Anyway, they have a 50% off 1 year memberships at the moment for new members, try out the free acc and send an email to them if you want the code (not sure I should share publicly here).

I'm on the pro plan which can benchmark against an index.

itchyfeet

  • Pencil Stache
  • ****
  • Posts: 638
Re: Australian Investing Thread
« Reply #3684 on: December 28, 2017, 04:46:25 AM »
I have chosen (in hindsight unwisely given market growth) to hold onto a little pile of cash through 2017, so have just been trading in minimum transaction sizes of around $10,000. But, I am accumulating quickly so have still been able to buy several months of the past year.

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3685 on: December 28, 2017, 06:25:39 AM »
So based on the advice from FFA a while back I've been using sharesight to track my portfolio.

It is amazing. Via sharesight you log into your broker (mine is NAB), it automatically brings in all your buy/sell transactions - and all the dividends... and you can go in and one click anything that's part of a DRP.
Anyway, they have a 50% off 1 year memberships at the moment for new members, try out the free acc and send an email to them if you want the code (not sure I should share publicly here).

I'm on the pro plan which can benchmark against an index.

When it says on the pricing page, say, "20 holdings". Does that mean 20 different ETFs with parcels bought at unlimited times? Or is that 20 different trading events? If its the former then the Free or Starter plans is probably useful for most people with a bogleheads style diversified ETF portfolio.

What's benchmarking? Is that useful if you are holding individual stocks?

sirdeets

  • 5 O'Clock Shadow
  • *
  • Posts: 74
Re: Australian Investing Thread
« Reply #3686 on: December 28, 2017, 07:54:58 AM »
The former - 20 holdings - unlimited transactions on those holdings.

By benchmarking I can compare my portfolio to just investing in VAS. It will show the total return including dividends + franking credits.

For tax time it gives you a summary of capital gains, income, everything.

Wadiman

  • Stubble
  • **
  • Posts: 170
Re: Australian Investing Thread
« Reply #3687 on: December 28, 2017, 03:44:03 PM »
Top of the season to everyone!

INCOME STREAM & 'BUCKETING'

As i've had some free head space at the moment I've started taking a closer look at optimal arrangements for an income stream once I reach preservation age. 

Here's my rough plan and I'd be keen for feedback:

I'll be using a three 'bucket' approach for holding funds in my self managed super fund -
Bucket 3 will comprise a diversified portfolio of ETFs and direct equities; all dividends will be credited to bucket 1 (cash) - roughly 60% of portfolio value will be in this bucket and I expect about 3% in distributions (that takes me most of the way to my planned 4% SWR).  Rebalancing will be done annually and if the total growth in this bucket exceeds 5% the balance will go to Bucket 1.  Note that I do not have any high yield or a major focus on fully franked dividends as the Aus portion of holdings is about 40% and the main ETF I use for Aus shares is MVW which currently has a yield of about 3.3% at 60% franking (I chose MVW as it avoids a significant holding in banks which I believe are set for massive disruption over the coming years).

Bucket 2 will contain a portfolio of direct corporate bonds.  These will be held to maturity and the coupon payments will be paid to Bucket 1.  This bucket will hold about 30% of the total portfolio and should generate about 4% yield. 

Bucket 1 will comprise high interest savings accounts and perhaps term deposits (depending on rates at the time).  This bucket will hold about 10% of the total portfolio.  If the total value of this bucket exceeds 4 years of income then the balance will go towards replenishing Buckets 3 or 2. 

I have a FIRE plan to bridge the gap for a four year period between finishing up at work and reaching preservation age which will mainly involve cash holdings.

Thoughts?

marty998

  • Walrus Stache
  • *******
  • Posts: 5823
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #3688 on: December 29, 2017, 10:48:15 PM »
Snip!

So if bucket 3 grows 5% you'll send the excess to bucket 1 but if bucket 1 has more than 4 years expenses then it goes back to bucket 3?

Infinite recursive loop....

I'm not one of those who believes the banks will be disrupted... they are big and bad enough to look after themselves. If anything, future interest rate rises will actually be good for the banks, so I'm happy to hold VAS for a while yet.

Speaking of VAS, estimated distribution is 68c to be paid in mid Jan.
« Last Edit: December 29, 2017, 10:52:35 PM by marty998 »

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3689 on: December 29, 2017, 11:11:47 PM »
I'm nowhere near FIRE, but does seem like an awful lot of cash/term deposit holdings in Bucket 1.

Not sure the point of term deposits really. You lose a huge amount of liquidity vs ETFs, with barely more growth than a high interest savings account. TD's aren't what they used to be, certainly not at Moustachian levels of annual expenses.

(I'm nowhere near FIRE and my personal judgements will be different to yours!)

:-)

Llewellyn2006

  • 5 O'Clock Shadow
  • *
  • Posts: 92
  • Location: Australia
Re: Australian Investing Thread
« Reply #3690 on: December 29, 2017, 11:21:47 PM »
Not sure the point of term deposits really. You lose a huge amount of liquidity vs ETFs, with barely more growth than a high interest savings account. TD's aren't what they used to be, certainly not at Moustachian levels of annual expenses.


I agree with you about term deposits. I've got some money in a 3 month one that matures at the end of January. It's earning 2% but that was better than the measly 1% it was getting by sitting in a normal bank account. But I set it up before someone here tipped me off about the RAMS account that was paying 3% (1.35% base + 1.65% bonus if no withdrawals in the month, since cut to 1.45% but still works out to 2.8%). So now all my excess money will go into RAMS (at call if i need it and protected by the govt guarantee) so guess where a chunk of the proceeds of my term deposit will be going.

Wadiman

  • Stubble
  • **
  • Posts: 170
Re: Australian Investing Thread
« Reply #3691 on: December 30, 2017, 01:18:31 AM »
Thanks for the thoughts all.

Marty - yeah - I see what you mean re the loop - i guess that i'll make the call what goes where bucket-wise each year on rebalancing.  Understand your position on banks and VAS but am happy with my call re MVW.

Eucalyptus and Llewellyn - agree re TDs - that's the way things are now but the rates may change quite a bit in the future - I'll decide where best to park the funds but the high interest savers of course are far better for accessing funds.  Speaking of these products Ubank's Usaver Ultra looks good ATM - 2.87%.

krustyburger

  • 5 O'Clock Shadow
  • *
  • Posts: 51
Re: Australian Investing Thread
« Reply #3692 on: December 30, 2017, 02:15:07 AM »
Speaking of VAS, estimated distribution is 68c to be paid in mid Jan.

I've got a parcel to buy in Jan, does anyone worry about ex dividend dates? I usually forget about them completely. I've heard prices rise then dip but I've never taken much notice. 

steveo

  • Handlebar Stache
  • *****
  • Posts: 1692
Re: Australian Investing Thread
« Reply #3693 on: December 30, 2017, 02:34:16 AM »
Speaking of VAS, estimated distribution is 68c to be paid in mid Jan.

I've got a parcel to buy in Jan, does anyone worry about ex dividend dates? I usually forget about them completely. I've heard prices rise then dip but I've never taken much notice.

I always just buy when I have the money.

marty998

  • Walrus Stache
  • *******
  • Posts: 5823
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #3694 on: December 30, 2017, 03:25:36 AM »
Speaking of VAS, estimated distribution is 68c to be paid in mid Jan.

I've got a parcel to buy in Jan, does anyone worry about ex dividend dates? I usually forget about them completely. I've heard prices rise then dip but I've never taken much notice.

I always just buy when I have the money.

The rise and dip doesn't really apply to index funds. The divs it collects from every share on market is built into the unit price.

Telstra used to be quite predictable when all the SMSFs rotated into it in January and July, and sold out in March and September. Doesn't happen anymore because you are losing much more capital these days on TLS.

I too now just buy when I have the money. Not a bad calendar year return from VAS: ~$3 of dividends and ~$6 of capital for a return of above 12%*.

Would happily take that every year.

*I'm sure someone can find the actual figures

krustyburger

  • 5 O'Clock Shadow
  • *
  • Posts: 51
Re: Australian Investing Thread
« Reply #3695 on: December 30, 2017, 03:40:48 AM »
Speaking of VAS, estimated distribution is 68c to be paid in mid Jan.

I've got a parcel to buy in Jan, does anyone worry about ex dividend dates? I usually forget about them completely. I've heard prices rise then dip but I've never taken much notice.

I always just buy when I have the money.

The rise and dip doesn't really apply to index funds. The divs it collects from every share on market is built into the unit price.

Telstra used to be quite predictable when all the SMSFs rotated into it in January and July, and sold out in March and September. Doesn't happen anymore because you are losing much more capital these days on TLS.

I too now just buy when I have the money. Not a bad calendar year return from VAS: ~$3 of dividends and ~$6 of capital for a return of above 12%*.

Would happily take that every year.

*I'm sure someone can find the actual figures

cool, thanks for clearing that up

I bought my first lot of VAS in feb, sounds about right

mjr

  • Stubble
  • **
  • Posts: 226
  • Age: 53
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #3696 on: December 30, 2017, 06:02:38 PM »
Being on the top tax rate, I usually buy ex-div.  The most extreme opposite case would be to buy just before ex-div when the share price is loaded up with the pending dividend, which is then paid out and I lose half of it in tax.  I'd rather that money go into more shares than to the ATO.

krustyburger

  • 5 O'Clock Shadow
  • *
  • Posts: 51
Re: Australian Investing Thread
« Reply #3697 on: January 01, 2018, 05:56:45 AM »
Being on the top tax rate, I usually buy ex-div.  The most extreme opposite case would be to buy just before ex-div when the share price is loaded up with the pending dividend, which is then paid out and I lose half of it in tax.  I'd rather that money go into more shares than to the ATO.

Good point.
I'm not in the top tax bracket, also with the amounts I'll be buying it probably won't make much difference. I'm still thinking about what to get, the new diversified vanguard etfs look nice and easy, I might start buying one of them and forget about adding to my VAS and VGS

Eucalyptus

  • Bristles
  • ***
  • Posts: 330
  • Location: South Australia
Re: Australian Investing Thread
« Reply #3698 on: January 01, 2018, 03:43:41 PM »
Being on the top tax rate, I usually buy ex-div.  The most extreme opposite case would be to buy just before ex-div when the share price is loaded up with the pending dividend, which is then paid out and I lose half of it in tax.  I'd rather that money go into more shares than to the ATO.

Good point.
I'm not in the top tax bracket, also with the amounts I'll be buying it probably won't make much difference. I'm still thinking about what to get, the new diversified vanguard etfs look nice and easy, I might start buying one of them and forget about adding to my VAS and VGS

Aren't you a Postdoc? I'm sure you can handle a DIY complicated portfolio rather than paying a slightly higher MER for it ;-)

krustyburger

  • 5 O'Clock Shadow
  • *
  • Posts: 51
Re: Australian Investing Thread
« Reply #3699 on: January 01, 2018, 05:31:35 PM »
Being on the top tax rate, I usually buy ex-div.  The most extreme opposite case would be to buy just before ex-div when the share price is loaded up with the pending dividend, which is then paid out and I lose half of it in tax.  I'd rather that money go into more shares than to the ATO.

Good point.
I'm not in the top tax bracket, also with the amounts I'll be buying it probably won't make much difference. I'm still thinking about what to get, the new diversified vanguard etfs look nice and easy, I might start buying one of them and forget about adding to my VAS and VGS

Aren't you a Postdoc? I'm sure you can handle a DIY complicated portfolio rather than paying a slightly higher MER for it ;-)

Yep I'm on the postdoc/academia hamster wheel. True it isn't that complicated but I'm pretty lazy. I'll have to think about it but it's possible with the amounts I'm purchasing that the brokerage outweighs the MER if I were to buy a similar number of etfs. I also like the idea of being a bit more diversified than just VAS and VGS, I also hold two LICs that I might add more to.