Author Topic: Australian Investing Thread  (Read 1691155 times)

Reversifi

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: Australian Investing Thread
« Reply #4700 on: November 26, 2019, 12:14:29 AM »
Vanguard posted out their annual statements today.

                         1 Year         5 Year          Since inception
VAS                   11.24%       8.73%           9.86%
VAS Benchmark  11.42%       8.88%           10.04%

VGS                   12.10%       n/a                12.69%
VGS Benchmark  11.95%       13.25%         12.53%

VGE                    8.20%        7.83%           7.63%
VGE Benchmark   8.41%        8.46%           8.31%

Slow_Loris

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Australian Investing Thread
« Reply #4701 on: November 26, 2019, 09:24:23 PM »
Hi All - first time poster.  Thought I might be an unusual case studyÖ

Iím 55 and I am about to transition to retirement / part-time work.  I have a graphic design studio that employs 7 other people and donít want to go through the hassle of selling my company (not that it is that saleable as it relies on me for new clients, contacts, design work etc) and so I am downsizing.

After I pay out my staff their entitlements, thereís about $1.3m in cash in the company, and my plan is to use this as a wage for me for the next thirteen years or so. If I keep the company going I can pick up some more work when I feel like it and enjoy coast FIRE.  When I am about 68 I close it down for good and I switch to superannuation.


ADVICE PLEASE
So Iím looking for your views on the ideal wage drawdown rate, super contribution strategy, age to switch to Super, and where to park the money in the meantime to avoid erosion by inflation.

My accountant is very focused on reducing my tax and my super fund advisor is focused on me contributing more to super. This approach for the next 13 years seems right, but I end up with more money when I am 68 than now when Iíd like to travel, and spend more in my remaining energetic years.

I currently have the cash just sitting in an online business account earning 1%.  Iíve always been better at earning money through work rather than investment and Iím late to the whole game of investment and super and tax management.  But any thoughts on lump-summing or DCAing it into ETFs would be appreciated.  I need access to some of the cash over the years as I want to pay myself a wage. I also understand that Iím over the 250k government guarantee in the one bank, so would need to spread it around.


RISK PROFILE
Having earned the money I am extremely risk averse to losing it.  I wouldnít pull my funds out in a downturn, but I would be pissed off if I needed to wait ten years to restore my money to parity.  In any case I aim to withdraw some funds though the next 13 years.

I read that leaving the money in the company is risky too, but Iíve been running it for 20 years, and have the proper insurances, so donít feel too bad about another 10.


POSITION
I have a $900k house paid off, $440k in super, and then this $1.3m in the company.  I am the sole shareholder. No current partner, with one daughter who is fairly well set up by me and her mother.  No other debts.  Current living costs (measured via Pocketbook) are $50k per year, but keen to get these down to 40-45k as I stop self-medicating through food and drink.

Thanks in advance to anyone who has read this far and wants to advise a fool and his money.

Reversifi

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: Australian Investing Thread
« Reply #4702 on: November 26, 2019, 09:29:30 PM »
So to clarify you have $1.3m cash sitting in you business bank account earning 1%? If not, how much money are we talking about for you to invest and annual wage moving forward? We know how much you spend but not how much you earn.

Slow_Loris

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Australian Investing Thread
« Reply #4703 on: November 26, 2019, 10:30:04 PM »
Yep $1.3m in the business account, I can adjust my wage to whatever I'd like.  I'm thinking of paying myself $90k a year before tax and super.  But this gives me more than I need at the end of my life and not so much in my forthcoming energetic years where I could do with the cash.  I'm looking for that sweet spot, and also advice nowhere to put the company funds in the meantime.

deborah

  • Walrus Stache
  • *******
  • Posts: 9141
  • Location: Australia or another awesome area
Re: Australian Investing Thread
« Reply #4704 on: November 26, 2019, 11:06:38 PM »
@Slow_Loris , I really think this needs to be a case study in its own new thread, rather than being in this thread. Add it to the Australian Tax subforum https://forum.mrmoneymustache.com/australia-tax-discussion/ and include Australia in the title. Iím sure youíll get a number of responses!

Slow_Loris

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Australian Investing Thread
« Reply #4705 on: November 26, 2019, 11:50:16 PM »
Thanks @deborah - will do and sorry for cluttering up the thread

marty998

  • Walrus Stache
  • *******
  • Posts: 6580
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #4706 on: November 28, 2019, 04:36:11 PM »
Yep $1.3m in the business account, I can adjust my wage to whatever I'd like.  I'm thinking of paying myself $90k a year before tax and super.  But this gives me more than I need at the end of my life and not so much in my forthcoming energetic years where I could do with the cash.  I'm looking for that sweet spot, and also advice nowhere to put the company funds in the meantime.

The concessional company tax rate only applies to active trading businesses. If you were to use the cash inside the company for sharemarket investments, it's likely you'll be paying 30% tax on that.

Of course, drawing out the income over time means you get that back in franking credits, but it would still be good for you to get some proper accounting advice on that.

I'm thinking a mix of wages and dividends would be best here.... no point stripping out all the cash as wages and paying income tax on that while leaving the franking credits in the company (assuming you have excess credits in there).

Chris-93AUS

  • 5 O'Clock Shadow
  • *
  • Posts: 23
  • Age: 2015
  • Location: Tasmania, Australia
Re: Australian Investing Thread
« Reply #4707 on: December 03, 2019, 09:14:41 PM »
Hi All,

Have just done a re-allocation on my super fund portfolio,

Would like some thoughts on the following

VGAD: 29%
IHVV: 29%
MVW: 37%
Cash: 5%

Reasonings:

MVW - I subscribe to the view that capitalization weighted index funds pose a potential risk of being too heavily overweight in certain stocks, (looking at you big 4), and this also leads to concentration issues in the Australian share market. MVW equal weighted looks appealing to me, at a low cost, .35.
IHVV - I wanted US index exposure with hedging, given our weak currency rates I feel that there is a strong likelihood that overtime the dollar would appreciate from its current level, may not be a huge amount but can't see it sitting here for longer than a few years.
VGAD: As above but with a little bit more exposure to other international markets.
Also, I couldn't find any equal weight or smart beta funds with hedging in AUD that I could buy within my current super product (MyNorth) happy to take suggestions on that one.

Cheers!

Andy R

  • Bristles
  • ***
  • Posts: 294
Re: Australian Investing Thread
« Reply #4708 on: December 03, 2019, 10:07:21 PM »
MVW is interesting. That's a hell of a bet on it though at 37% though. What percent of your total assets is super?

Also, I believe in super you still do pay CGT, just less. If held over 12 months I think you get a 33% CGT discount of which you then pay 15% tax on, so 10%
Any gains held for less than 12 months will not receive the 33% CGT discount so 15% tax on those gains.

Have you considered cap weighted but just increasing the mid/small caps in there, like 50/50 VAS/Ex20? The churn should be much lower.

I do like the idea of equal weighted though (except for the churn).

I wouldn't want to make a bet on or against the US, very few people are qualified to make that anything more than a gamble.

The most glaring thing is that everything is in AUD and you want at least some unhedged global equities for the diversification. If you have this outside super, then fine, but if not I would want some in there. Don't forget that before 2000 the AUD dropped all the way down to 50c US, so there is a very long way it can continue to fall and a long time to turn around after that before going over where it is now.

Chris-93AUS

  • 5 O'Clock Shadow
  • *
  • Posts: 23
  • Age: 2015
  • Location: Tasmania, Australia
Re: Australian Investing Thread
« Reply #4709 on: December 03, 2019, 10:29:18 PM »
It's not a significant portion of my wealth, enough that 37% isn't going to hurt much if it went upside down.

I admin the hedging is a little of a play, but if you check out the 50 year history (albeit that past is no indication of future) we're closer to historic lows than we are to the highs, so whilst we definitely can go lower I don't think its an unwarranted risk to take.

I like your suggestion about increasing small and mid caps, might add a fund to direct the next contribution to and change the weight that way.

I like the US, I think there is still an incredible growth story there despite the various issues and noise. I would have considered China too who I believe are the clear up and coming but I have serious personal issue with the current state of Human Rights, reliability of corporate reporting etc etc. I know there are issues in this space with the US too but I feel these aren't as bad.

Churn isn't great I'll admit, prepared to see how it goes and whether there is any alpha generation that makes up for the hit,

Appreciate the feed back though!

marty998

  • Walrus Stache
  • *******
  • Posts: 6580
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #4710 on: December 04, 2019, 02:28:19 AM »
Just realised I'm down $25,000 net worth for the past two days :D

How are we all drowning our sorrows? Purchasing any more shares?

I have to wait until January until I have enough to buy a little more :(
« Last Edit: December 05, 2019, 03:38:16 AM by marty998 »

Reversifi

  • 5 O'Clock Shadow
  • *
  • Posts: 12
Re: Australian Investing Thread
« Reply #4711 on: December 04, 2019, 04:35:48 AM »
I just thought it was a cyber Monday sale.

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4712 on: December 04, 2019, 01:55:06 PM »
I'm down $70k.  I bought $30k of VTS on day 1 when it was down 2%, though.

I predict it'll be back up to record highs in 2 months.

Little Aussie Battler

  • Stubble
  • **
  • Posts: 205
Re: Australian Investing Thread
« Reply #4713 on: December 04, 2019, 11:14:03 PM »
Iíve been busy, and didnít even realise that the market was down. I re-calculate monthly, and have become pretty good about ignoring intra-month movements.

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4714 on: December 05, 2019, 02:15:17 AM »
I find that going through several $70k-80k drops in the last couple of years and having them all recover desensitises me to volatility.

chevy1956

  • 5 O'Clock Shadow
  • *
  • Posts: 39
Re: Australian Investing Thread
« Reply #4715 on: December 05, 2019, 02:37:53 AM »
I didn't realize I was down until reading this thread.

Alchemisst

  • Stubble
  • **
  • Posts: 111
Re: Australian Investing Thread
« Reply #4716 on: December 06, 2019, 05:45:20 PM »
Curious on what others here have for their allocations and why, I originally wanted to make mine as simple as possible so VGS and VAF, however VGS not containing EM and small cap put me off so I went for VEU, VTS, VAF, and VGAS for currency risk, however this is now a bit more complicated when trying to work out the allocations for each..

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4717 on: December 06, 2019, 07:20:28 PM »
In super, I have 50% in VTS, 30% in VAS and 20% in cash/term deposits.  VTS is more capital growth so it's the biggest chunk because they'll be capital gains tax free in pension mode.

Outside of super, I have 45% in VAS, 25% in VTS and 30% in cash.  VAS and its dividends are the focus here, I live off them.  I know I have too much cash, but while the market is hot I'm OK with it - it's also my "the stock can crash horribly tomorrow but I have 10 years of expenses safe".  I may also do things like knock my house down and develop the lots that is it on and this money will get used for that.

Super and non-super amounts are about equal.  I'll be moving $25k per year into super for the next 6 years at least - helps to bring down my taxable income.

Andy R

  • Bristles
  • ***
  • Posts: 294
Re: Australian Investing Thread
« Reply #4718 on: December 06, 2019, 08:29:00 PM »
Curious on what others here have for their allocations and why, I originally wanted to make mine as simple as possible so VGS and VAF, however VGS not containing EM and small cap put me off so I went for VEU, VTS, VAF, and VGAS for currency risk, however this is now a bit more complicated when trying to work out the allocations for each..

Just treat VTS/VEU as your global (unhedged) portion and VGAD as your global AUD-hedged portion. That VGAD doesn't contain small and emerging shouldn't be an issue as you don't need it to be exactly market cap.

If you had something like this (below). It isn't going to make a significant difference if you have 7% of your equity portion in emerging markets instead of 10% and similarly with small caps.

bonds: 30%
global equities AUD-hedged (VGAD) 20%
global equities (VTS/VEU) 50%

Alchemisst

  • Stubble
  • **
  • Posts: 111
Re: Australian Investing Thread
« Reply #4719 on: December 08, 2019, 04:24:09 PM »
What about bonds vs high interest savings? Seems to be a lot of people just keeping cash instead of bonds?

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4720 on: December 08, 2019, 07:49:05 PM »
Bonds have done "well" over the last few years due to interest rate cuts.  Those days are gone and their values will fall when rates rise.  Also, yields on bonds now are awful, high-interest savings accounts/term deposits are just as good.

Andy R

  • Bristles
  • ***
  • Posts: 294
Re: Australian Investing Thread
« Reply #4721 on: December 08, 2019, 08:05:25 PM »
It's not as simple as many make it out to be. I once thought that rates have nowhere to go but up, therefore bonds are not a good idea right now, but that wasn't accurate then and it isn't accurate now. There are countries where bond yields are negative, so Australian rates could easily continue to drop for years and years. They certainly aren't going to rise any time in the near future and the RBA has come out and even said exactly that.

Just saying "rates are low therefore bonds are no good" is a overly simplistic. I've tried to cover a number of concepts here. It doesn't give you an answer one way or the other, but explains the main differences conceptually so you can decide for yourself.

If you have an offset though, that would be the best choice.

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4722 on: December 08, 2019, 11:03:42 PM »
It's not as simple as many make it out to be. I once thought that rates have nowhere to go but up, therefore bonds are not a good idea right now, but that wasn't accurate then and it isn't accurate now. There are countries where bond yields are negative, so Australian rates could easily continue to drop for years and years.

Even if rates were to go negative in Australia and I doubt that they will, they don't have far to fall to get there.  They've pretty much bottomed out.

You may consider it "overly simplistic" and that's fine for you.  As of today, a term deposit and a HISA pay more than an Australian Government 15 year bond.   It doesn't need to be more complicated that if non-equities and non-property is a small fraction of one's portfolio.

We don't have a well-developed bond market in Australia. 

lush

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Australian Investing Thread
« Reply #4723 on: January 05, 2020, 09:49:18 PM »
Happy New Year Everyone!

I wanted to ask this forum if my thinking is correct around Attribution Managed Investment Trust Regime (AMIT) changes that came into affect for Vanguard Wholesale Funds / ETF's on July 2017 - investor notice here :

https://api.vanguard.com/rs/gre/gls/1.3.0/documents/10747/au

and that is ever since the AMIT was applied, quarterly distribution payouts have been kind of steady, with almost little change, compared to years previous were some quarterly distributions were significant.

Am I on the right track here? I am trying to make sense of the low distributions I have received over the last couple of years, and that made me think of the AMIT.

Thanks

Alchemisst

  • Stubble
  • **
  • Posts: 111
Re: Australian Investing Thread
« Reply #4724 on: January 06, 2020, 07:18:41 PM »
I am trying to work out whether I should stay in my defined benefit super or transfer to a regular super Suh as hostplus, is anyone able to comment on my figures?

Have only done a few rough calculations but i got say 100k super = just over 8k pension amount, 100k in super fund in 30 years time would be ~500k (based on historical averages) 4% of that amount would be about 20k/ year, or 3% would be ~15k/ year. So it seems you would be 7k+ per year better off using the conservative 3% and even more using 4%?

itchyfeet

  • Pencil Stache
  • ****
  • Posts: 809
Re: Australian Investing Thread
« Reply #4725 on: January 06, 2020, 08:30:59 PM »
Is the $8k the pension in todayís dollars. If the pension is indexed and you donít retire for 30 years the pension will almost be worth $20k a year by the time you retire.

Without knowing your full details I would intuitively expect that you would be better off taking the defined benefits pension and not have any sequence of return risk or sleepless nights from market fluctuations.

I will get a small defined benefit pension from 55 that is worth $14,000 a year in todayís money, but is indexed, and it is a foundation piece of my overall retirement plan. Having this ďguaranteedĒ income stream till death gives me greater confidence on the share market risk the rest of my plan hinges on.

Minion

  • Stubble
  • **
  • Posts: 133
  • Location: Brisbane -> London -> Berlin
Re: Australian Investing Thread
« Reply #4726 on: January 06, 2020, 10:32:08 PM »
Agree, I have a small defined benefit pension too and I'll never abandon it either for the reasons above.

Alchemisst

  • Stubble
  • **
  • Posts: 111
Re: Australian Investing Thread
« Reply #4727 on: January 06, 2020, 10:58:13 PM »
The pension is indexed so that's today's dollars but the 4% example is also today's dollars, so both numbers should grow with inflation.

dominikm

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Age: 32
  • Location: From Australia, Resident of Bulgaria, Currently in Thailand
  • Live YOUR Life on YOUR Terms!
Re: Australian Investing Thread
« Reply #4728 on: January 07, 2020, 08:38:55 AM »
Might as well chime in here. A bit of a back story and my plan instead of just investing related stuff. And my numbers at the bottom, starting from almost zero. But all good! We all start somewhere right!

I honestly don't know where I fit in as I am Australian but I also left Australia mid 2013 traveling and as of 2017 I became a resident in Bulgaria. So I suppose the Australian thread is where I should post as when I start investing I'll likely invest in the Australian market along side the US.

Bulgaria partially due to the fact that the income tax is very low if you pay yourself a decent salary and corporate tax is 10% and dividend tax is only 5%. I make all my money online so it was a perfect fit and Bulgaria is in the EU which is really good. Plus combo that with the fact where I live is a tourist town with a ski hill and during the summer it's got downhill mountain biking. A few hours drive later and you're in Greece and then it's not far to get to somewhere you can kite surf. So basically heaven on earth for me.

I quit my office job in 2013. Traveled, made money online. Worked the 4 hour work week for a while. Got bored as not working is boring for me. Did something new. Got bored did something else. Traveled more. Never stopped and I've seen 50+ countries now. Sold on Amazon.com importing from China. That did very well selling over $1.5MM USD in product. That dried up and I lived off savings and then started doing something else that didn't make much money at all but wasn't crazy fast paced like Amazon.

Right now I bring in a few grand a month that basically covers living costs, save a bit and have money to put into new projects I'm getting going. I'm 33 at the end of Feb so it kind of hit home a few days ago when we got into 2020 that I've actually had a pretty magnificent last few years traveling perpetually but I've got sweet FA to show for it asset wise. But more memories than I can even recall so I don't regret it at all.

So I binge read a lot of the MMM blog a few days ago and understand generally how everything works. My plan is different though. I've actually run though what my ideal life would be and it sits at $3MM. At the 4% annual safe withdrawal rate that gives me $120K/year or $10K/m. I worked everything out to the finest detail factoring in everything I could possibly think of with the life I want to live and $10K/m is where I need to be. Nothing was missed. I even put in my monthly hair cut, my health insurance I need to buy (not being an Aussie tax resident means no medicare), my flights (all business class and about $18K/year) I want to take yearly, my sports gear I want to buy new and replace yearly, the hotels and hire cars I want each year, even $10/m for Netflix and $55/m towards a new laptop as that's about $2k for a new one every 24 months. $500/m for miscellaneous things that come up and helping a charity each month for example. Even that extra $50/m for random household items. It's literally all there.

I love all the concepts of the blog but I want a certain lifestyle with my kite surfing, skydiving, snowboarding and traveling. That all costs money. But, that said. I'm an expert at getting costs down when traveling. I've taken some flights that I'm even shocked I've pulled off price wise. So part of my is an MMMer.

But living in nice places costs money and I don't really want to own a home. If I had a decent $800K home in Perth with 20% down that's $2,837 a month over 360 months based on a calculator I found in Google for a mortgage. I would rather spend $2k each month over 360 month and see the world living very nice one month per city and see the worlds 200+ countries without having to deal with property maintenance.

Realistically I'll probably get a small apartment in that ski town in Bulgaria. As I'll always got back and it will be a place to store my spots gear as I travel to different parts of the world. But since the property market is so messed up there with the over building I can get a nice 2 bed apartment in a 4 star building for 50K and that's is way over average price. I mean WAY over average. I have a buddy who bought a good ground floor one bed apartment for 5,000 Euros. 50K would put me in a very nice place. So no real concern as 50K is a blip on the radar with a 3MM total. Even if I get a nicer place, more like a baller place for that price, and do it up for $100K total it's not all that much overall.

And maybe in 20 years after retirement things change and I get a house and settle back in Australia. Life changes. Costs go down monthly as the blog explains (it makes sense why it does) and even buying a nice house for cash doesn't mess me up and I'm still way ahead.

My goal is to do it by 40. I'm 33 now. I'm going to spend the next one year working very hard focusing on getting things going again. I have a few grand a month income. I'm in the process of saving $5K as backup money I will not touch and I have access to $5K more if I need it for an emergency. That's saved at the end of this month.

I've been working some new methods to make money online that have made me $2k/m over the last three months. So if all goes to plan I should get that to $5k/m by March/April and then $10K/m by mid year. This method is probably capped at $10K/m with what's possible. My living costs right now are covered from my existing income so I don't have to dig into anything from the new revenue. I will use this $10K/m to reinvest into other ideas to scale them online. Some are already in play. The just need attention.

The way I see it is if I 100% focus on what I'm doing the first year will bring in something like $150k. As I scale the second year should easily do $300K or more. And then I'll be at $500K in year 3. Probably sooner. $1,369/day profit is $500K/yr and at the peak of Amazon we were doing more so I think it's very doable in year 3 onward when focused. If I keep that up I'll hit 3MM in 7 years roughly. When I'm 40.

Once I retire I'll likely continue with my projects that bring in cash but I will drop the ones that are tedious or I don't really like or just sell off those projects as individual businesses for a lump sum.

My other plan is that once I'm 35, so just over 2 years, I want to actually start living this life of $10K/m no matter what as I know I'll keep up with my projects. So I might take longer to save or I will simply dedicate one project to pay for the lifestyle and work harder to build up another project to replace it so I can still hit my 7 year goal. Why? Because at 35 living my best life doing my sports daily is going to be kind of brutal on the body. So I'd rather do it younger than start at 40. Start at 35 and finish at 65 going hard like that and then tone it down. Who knows how long you can go hard for but I'd rather do it sooner than later.

So a little different post from what I've read in here but it is what it is. And it's where I'm starting at with my wake-up call (if you can call it that) when 2020 hit realising I'm not 25 anymore.

I do everything in USD online. So all figures are in $USD except the $AUD mentioned below.

So the actual numbers like others post assuming it's the end of Jan:

Cash - $5K
Super - $28.2K

So if I convert that total to USD I'm at about $24.3K or 0.81% towards my goal.

I've just logged into my super account with ANZ and I see over the last few years I've made a nice chunk. I set it to 'Cash' for the risk level/very low risk a long time ago. Then I logged in a few years ago and set it to 'High' as I figured why does it matter as it's only about $20K and I'm not even 30 (back then). This is for the 'ANZ Smart Choice Super 1980s' plan.

Originally I was 'sold' by some clown who ran a private super firm with how I would make 10% or more a year. And two years later I was at the same portfolio value. I realised it was all total BS with the profits being taken by fees. So I rolled it all into ANZ and I had $19.8K and now it's at $28.2K. So not bad as that was in May 2016. So it's up a total of 42%. If I get 8% annually with no more contributions it will be at ~$330K when I'm 65. I doubt I will need it but not bad considering I never made an extra payment and that was just the money that I was legally forced to pay during my short working career of about 7 years in the office plus the other small amounts I would have got working part time jobs over the years as a teenager. Even if it's only 150k as the markets go nuts in a negative manner. An extra 150K when I'm 65 is handy.

After realising how big of a job is ahead of me it's a nice bonus to see the super performing well at least!

So there you have it! That's me! Wish me luck! It's going to be a long road with lots of work to hit my goals by 40. But I know it will be well worth it!
« Last Edit: January 07, 2020, 08:10:28 PM by dominikm »

Minion

  • Stubble
  • **
  • Posts: 133
  • Location: Brisbane -> London -> Berlin
Re: Australian Investing Thread
« Reply #4729 on: January 08, 2020, 01:12:06 AM »
That was a interesting read. Do you now have EU residency, I heard there's a loophole in Bulgaria where you can get if after living there 6 months and with a property purchase?

itchyfeet

  • Pencil Stache
  • ****
  • Posts: 809
Re: Australian Investing Thread
« Reply #4730 on: January 08, 2020, 02:27:36 AM »
Hey Dominikm.

As a fellow Aussie making a life abroad I read your post with interest.

I wish you all the best.

We have had a fun time traveling the world (based out of Dubai) but are now starting to think about heading back home to Australia.... maybe for that slower paced life you referred to. Not sure. 😆


dominikm

  • 5 O'Clock Shadow
  • *
  • Posts: 22
  • Age: 32
  • Location: From Australia, Resident of Bulgaria, Currently in Thailand
  • Live YOUR Life on YOUR Terms!
Re: Australian Investing Thread
« Reply #4731 on: January 08, 2020, 03:05:53 AM »
That was a interesting read. Do you now have EU residency, I heard there's a loophole in Bulgaria where you can get if after living there 6 months and with a property purchase?

I've been an EU/Bulgarian resident since mid February 2017.

I'm actually not 100% sure about what method you'd use with property. I'm not aware you can use property. Maybe it's just something I don't know about.

I do have duel citizenship (Australian/Germany) and if I had of lived in Europe I would have just needed an old health care card and I could have had residency from just that. With my situation since I never lived in Europe before the lawyer I used opened me a company and that allows you to have residency as an EU citizen. And of course the benefit of the 10% tax and 5% dividends.

As far as I'm aware there is a foreigner visa (as in you come from an non-EU country) for Bulgaria that allows you to open an office in Bulgaria of an existing company. The process takes a few months at least. Costs a few grand (dirt cheap vs other countries though) and then you get it and just renew every year or two.


Hey Dominikm.

As a fellow Aussie making a life abroad I read your post with interest.

I wish you all the best.

We have had a fun time traveling the world (based out of Dubai) but are now starting to think about heading back home to Australia.... maybe for that slower paced life you referred to. Not sure. 😆



Thanks! I'm sure when I've done my time for 20 years or so I'll consider going back. But for now there is to much of the world to see :)


If you guys are interested I just started my journal after finding that section of MMM. It's much more detailed than what I wrote here. Here is it: https://forum.mrmoneymustache.com/journals/dominik's-journey-to-$3mm-d/
« Last Edit: January 08, 2020, 03:36:58 AM by dominikm »

Alchemisst

  • Stubble
  • **
  • Posts: 111
Re: Australian Investing Thread
« Reply #4732 on: January 08, 2020, 03:42:49 AM »
Any advice on super, I'm currently with hostplus because it has the lowest fees, but considering moving to sunsuper to recreate a vanguard index, is it worth moving and what are the options available? I would ideally like to be atleast 90% stocks and high international allocation.

Rob_S

  • Stubble
  • **
  • Posts: 137
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #4733 on: January 08, 2020, 03:55:56 AM »
I recently moved to Sunsuper for the reason you mentioned. Setting up a new account online was quick. There were the usual index options. I'm 100% unhedged international stocks. Making an investment selection was simple. These days rolling your $ over from one fund to another is painless and can be handled online. I've been in the fund for about 4 months now with no complaints. The fees in Sunsuper aren't that bad, all up its cheap though Hostplus is cheaper (depending on the investment you select). One thing to consider is the insurance attached to each fund (if you need cover).

Rob_S

  • Stubble
  • **
  • Posts: 137
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #4734 on: January 08, 2020, 04:16:03 AM »
I wanted to ask this forum if my thinking is correct around Attribution Managed Investment Trust Regime (AMIT) changes that came into affect for Vanguard Wholesale Funds / ETF's on July 2017 - investor notice here :

https://api.vanguard.com/rs/gre/gls/1.3.0/documents/10747/au

and that is ever since the AMIT was applied, quarterly distribution payouts have been kind of steady, with almost little change, compared to years previous were some quarterly distributions were significant.

Am I on the right track here? I am trying to make sense of the low distributions I have received over the last couple of years, and that made me think of the AMIT.

Thanks

You might be on to something. I have been disappointed by the last years worth of distributions and you got me thinking about the AMIT impact. My take is AMIT allows the fund manager to distribute capital gains in a 'fit and reasonable' way. Seems pretty broad terms to me. I guess the gist is that if someone sells $5M worth of VAS Vanguard can attribute the relevant capital gain to the seller and not spread it across all members of the fund.

I'm a holder of VHY. I checked the distribution tax estimates reported on the ASX site for the fund. The last distribution that included capital gains was June 2018. The last 6 distributions have been significantly lower and have had no capital gains proportion. Historically the distributions had spikes which seemed to correlate with capital gains but this hasn't happened for the last 18 months. My take is that these capital gains distributed formed part of the dividend increasing the amount paid. Now that the capital gains are not being distributed the dividend total is significantly down. In a notice to unit holders Vanguard mentioned deciding to distribute capital gains in the March 2018 dividend. My take is that AMIT allows them to decide to distribute capital gains and when to distribute them. That they haven't distributed any for VHY in the last 18 months seems a bit rubbish.

I took a glance at the VAS distributions and noticed a drop off in capital gains distributed. 1 out of 4 dividend payments included a capital gains component in 2019.

I'm far from the expert but that's my take. I'm saddened by the whole thing if my assumptions are correct. In theory the payoff for AMIT is presumably an advantageous change in your cost base, an advantage only when it comes time to sell the shares, something I don't intend on doing so BOO again :(

I hope I've got it all wrong and AMIT is working in my favour but from my limited reading/research it looks awful.
« Last Edit: January 08, 2020, 04:43:33 AM by Rob_S »

Alchemisst

  • Stubble
  • **
  • Posts: 111
Re: Australian Investing Thread
« Reply #4735 on: January 08, 2020, 08:54:38 PM »
I recently moved to Sunsuper for the reason you mentioned. Setting up a new account online was quick. There were the usual index options. I'm 100% unhedged international stocks. Making an investment selection was simple. These days rolling your $ over from one fund to another is painless and can be handled online. I've been in the fund for about 4 months now with no complaints. The fees in Sunsuper aren't that bad, all up its cheap though Hostplus is cheaper (depending on the investment you select). One thing to consider is the insurance attached to each fund (if you need cover).

Thanks for the reply, but what about currency risk if you're 100% unhedged? Is there an option to add some hedging?

mrmoonymartian

  • Stubble
  • **
  • Posts: 189
  • Age: 38
  • Location: Brisbane
Re: Australian Investing Thread
« Reply #4736 on: January 09, 2020, 01:41:15 AM »
I recently moved to Sunsuper for the reason you mentioned. Setting up a new account online was quick. There were the usual index options. I'm 100% unhedged international stocks. Making an investment selection was simple. These days rolling your $ over from one fund to another is painless and can be handled online. I've been in the fund for about 4 months now with no complaints. The fees in Sunsuper aren't that bad, all up its cheap though Hostplus is cheaper (depending on the investment you select). One thing to consider is the insurance attached to each fund (if you need cover).

Thanks for the reply, but what about currency risk if you're 100% unhedged? Is there an option to add some hedging?
Yes, for the VGS-equivalent (at the same cost as unhedged). No, for the VGE-equivalent (side-note: this is the US-domiciled EM fund, so extremely cheap compared to most other options). It's easy to get them to tailor insurance to suit your needs (I did).

For the comparison I've done (Sunsuper vs ChoicePlus/Hostplus), Hostplus has a higher base admin fee ($258 vs $78), but lower % admin fee (0% vs 0.1%). So Sunsuper is cheaper for smaller staches, but not bigger staches. For me the breakeven is around $200-300k, depending how often I want to pay the brokerage in ChoicePlus ($10). But the investing options are the biggest difference - being able to choose from a heap of ETFs in ChoicePlus. Still not every option I'd like, but much more freedom than Sunsuper. I'm considering running both to get all the assets I want at the best price - eg. autotrickle into Sunsuper and manual lump into Hostplus occasionally.

lush

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Australian Investing Thread
« Reply #4737 on: January 09, 2020, 02:55:12 PM »
hope I've got it all wrong and AMIT is working in my favour but from my limited reading/research it looks awful.

Hi Rob, I am so glad you responded and are seeing the same as I am.
I set up our Vanguard accounts for Early retirement - meaning distributions, this is now a problem for me. The market has been performing so well and I almost cry at the returns I get each quarter for the amount of money invested. I don't mind going with the highs and lows, but this low level returns almost seem ongoing - as you said about 18 months.
I need to seriously consider if this investment in Vanguard is worth my hard earned cash.
Thanks.

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4738 on: January 09, 2020, 05:45:43 PM »
What returns have you been getting and what were you expecting and why ?

Over the last 2 years. my VAS stocks have returned 6% (grossed up) in dividends and 8% capital gains.  I'm popping champagne corks.

Andy R

  • Bristles
  • ***
  • Posts: 294
Re: Australian Investing Thread
« Reply #4739 on: January 09, 2020, 06:50:10 PM »
Yeah it must be terrible getting 30% returns last year with only 3% as dividends.
Shame you can't get access to any of the other 27% by selling some.

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4740 on: January 09, 2020, 10:35:50 PM »
I'm down $70k.  I bought $30k of VTS on day 1 when it was down 2%, though.

I predict it'll be back up to record highs in 2 months.

The all ords sailed past 7000 today.  Didn't take 2 months, not even 6 weeks to get back up there.

lush

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Australian Investing Thread
« Reply #4741 on: January 10, 2020, 03:11:19 PM »
Hi - for those wanting to know the outcome if the AMIT affects the distributions for Vanguard funds, I spoke to Vanguard yesterday and they confirmed that yes the AMIT has and will continue to affect the amount of distributions. The focus is on retaining the cost base of the units. I was advised that if I was seeking funds that had decent distribution returns to consider Property, Global Infrastructure, VHY and VAS. However they said to keep in mind that there is a global trend to move away from such funds (therefore over time might lose their value and lower distributions).


mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4742 on: January 10, 2020, 03:26:23 PM »
As discounted capital gains are way more tax effective than distributions, why are you so focussed on distributions ?

I love distributions and have sized my portfolio so that I never need to sell a share.  But I know that if the returns skew towards capital gains at the expense of distributions, then that's better for me.

hm520

  • 5 O'Clock Shadow
  • *
  • Posts: 8
Re: Australian Investing Thread
« Reply #4743 on: January 10, 2020, 06:47:24 PM »
I recently moved to Sunsuper for the reason you mentioned. Setting up a new account online was quick. There were the usual index options. I'm 100% unhedged international stocks. Making an investment selection was simple. These days rolling your $ over from one fund to another is painless and can be handled online. I've been in the fund for about 4 months now with no complaints. The fees in Sunsuper aren't that bad, all up its cheap though Hostplus is cheaper (depending on the investment you select). One thing to consider is the insurance attached to each fund (if you need cover).

I've been with Sunsuper for 3ish years now. Currently ~70% international index, 15ish Aus index and a small emerging market and small property index.

Returns have been good - but I'm waiting to see what is offered from Vanguard, as may consider moving to them if 1) They manage to launch their super product this year and 2) it's as decent as it's hyped to be

itchyfeet

  • Pencil Stache
  • ****
  • Posts: 809
Re: Australian Investing Thread
« Reply #4744 on: January 10, 2020, 09:46:28 PM »
Yeah it must be terrible getting 30% returns last year with only 3% as dividends.
Shame you can't get access to any of the other 27% by selling some.

😂

lush

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Australian Investing Thread
« Reply #4745 on: January 11, 2020, 04:34:10 PM »
As discounted capital gains are way more tax effective than distributions, why are you so focussed on distributions ?

I love distributions and have sized my portfolio so that I never need to sell a share.  But I know that if the returns skew towards capital gains at the expense of distributions, then that's better for me.

The reason for the focus on the distributions, is exactly what you said, which is limiting the need to draw down on the portfolio funds, thereby enabling ER for someone of my age (45). If I start selling off the portfolio now then it won't last the distance I need it to. So this approach (AMIT lowering distributions) does disrupt the ER plan I had in mind.

I just need to re-think ER and how it can now be executed.

misterhorsey

  • Bristles
  • ***
  • Posts: 363
Re: Australian Investing Thread
« Reply #4746 on: January 11, 2020, 05:21:08 PM »
Hey Lush, sorry to hear your disappointed in the lower distributions you're currently receiving.

Regular quarterly distributions certainly have an appeal, as they can be a set and forget way of covering your annual living expenses.  There is a strong bias in Australia towards investing in dividends, partly due to the franking regime - and there's a virtuous/vicious cycle of investors demanding fully franked dividends and companies trying to meet that demand. However, they certainly aren't the most optimal way of extracting value from your portfolio.

Ideally you should look at value of your investment by it's overall growth - which includes capital growth as well as distributions.  VAS went up by about 20% in the 2019 calendar year. Meanwhile it's dividend yield was around 4%. It's combined growth is then 24% (note: these aren't exact figures).

When you receive your dividends they are taxed at your personal marginal rate. And there's no way of altering the timing of these.  You receive them, you're taxed on the income. On the other hand,  selling shares is subject to capital gains tax (which is discounted by 50% if you've held for a year) and the CGT rate is also at your personal income tax rate.  So it's a lower tax liability overall - also you determine when you sell them, which can be helpful in reducing your annual income and tax liability.

Of course it's a bit more fiddly selling shares down instead of receiving an automatic quarterly distribution, so there's a bit of recording keeping and paper work. But it's more control, and it's a small price to pay for year on year steady growth for doing effectively nothing. And the flexibility to vary the size that you drawn down is very powerful for minimising the amount of tax you may pay in a given year.

I have distributions that almost cover my living expenses. They provide a foundation to my annual spend. But in a perfect world, my investments wouldn't distribute any dividends, the value would be retained by the companies/index (and the share prices would grow) and I'd sell down shares only as I needed.

If investments were a cake, then quarterly distributions  give me a slice every 3 months whether I want cake or not.  And I am forced to eat it.  Selling down shares is being able to cut off slices that are more in line with my appetite.  Only, investments aren't cakes. As cakes don't magically grow bigger each year (or sometimes shrink, before growing again).

There are some great articles floating around busting the myths around dividend focused investing. I did a quick search and couldn't find one. Hence the long response and weird cake analogy above.



mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4747 on: January 11, 2020, 08:41:19 PM »
If I start selling off the portfolio now then it won't last the distance I need it to.

This is a common misperception and/or psychological block for many people - including myself.

Total return is what matters.  With sufficient capital growth, you need to sell off fewer and fewer shares as time goes on until eventually even a lower dividend payout ratio throws off sufficient cash so that you don't need to sell any more shares.

The other thing which does matter is tax and as previously mentioned the 12 month capital gains discount makes selling shares more tax effective and hence puts more money in your pocket.


Andy R

  • Bristles
  • ***
  • Posts: 294
Re: Australian Investing Thread
« Reply #4748 on: January 11, 2020, 08:44:29 PM »
Just to add in case lush somehow still doesn't get it -

A dividend is literally a withdrawal. It's not similar to a withdrawal, it's an actual withdrawal.

At the company level, after a company pays out employees' wages, debts, and other obligations from their income, they pay out some of the remaining profit as dividends.

If a company worth $99M is gifted $1M, their new value is $100M.
In the same way, when a company pays out $1M in dividends, their new value is worth $1M less.
When you don't reinvest your dividends, you have a made a withdrawal.

mjr

  • Bristles
  • ***
  • Posts: 368
  • Age: 54
  • Location: Brisbane, Qld
  • Retired at 52
Re: Australian Investing Thread
« Reply #4749 on: January 11, 2020, 09:03:43 PM »
I was advised that if I was seeking funds that had decent distribution returns to consider Property, Global Infrastructure, VHY and VAS. However they said to keep in mind that there is a global trend to move away from such funds (therefore over time might lose their value and lower distributions).

Wait, what ?  Someone from Vanguard told you that VHY and VAS might lose their value and lower distributions ?

Wildly inappropriate for a Vanguard CSR to offer an opinion on the future performance of asset classes of property and global infrastructure.

VAS is just the top 300 listed Australian companies.  It's not "dividend-focussed" per se and its value will always reflect the value of the constituent companies.