Australian Investing Thread

[asosharp]

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]

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]

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).

[chasingthegoodlife]

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.

[oysters]

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.

[oysters]

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]

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%.

[oysters]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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.

[oysters]

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]

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]

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]

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.

[oysters]

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]

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]

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]

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]

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]

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]

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]

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]

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

[oysters]

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]

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.

[PDM]

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.

Also keep in mind that VAS may be very similar​ to your superannuation fund's investments - depending on which option or plan you're on. You're likely to be doubling up on a fair few stocks in the ASX. Just something to be wary of with diversifying.
I like VGE and VEQ for non ASX exposure in addition to VGS.

[Chris AU]

Any thoughts on this new book?: http://www.johnderavin.com/

[PDM]

Any thoughts on this new book?: http://www.johnderavin.com/

Seems like a waste of $39.95 + $9.95 for a book that has compiled what is mostly information freely available on the internet.
From the description large portions seem to be what government websites provide? How to make a will, get government support etc.
The rest doesn't seem ground breaking. "Strategies"...

[lush]

Vanguard VAS & Balanced Wholesale funds perfromed very low - just looked at the CPU and it hurt a bit :(

[misterhorsey]

What figures are you looking at?  Just the Cents Per Unit?

Also, do you mean the market performed poorly? Or VAS performed poorly in replicating the market?

I do think it's pointless to follow quarterly returns too closely.  There's too much variability across the financial year. But I thought I'd do a quick calculation for VAS for the past October to December Quarter 2017 as your disappointment at the last quarter piqued my curiosity.

Price
VAS closing price on 2nd Oct - $72.91
VAS closing price on 29 Dec - $77.81

On price, a gain of $4.90, or 6.7%. Pretty solid result.

Distribution
A distribution of 68.0989 cents per unit. Assuming we go off the 29 Dec closing price of $77.81, then that's a yield of 0.8%.

(Or a yield of 0.93% if you want to be cheeky and go off the 2 Oct closing price)

Total Return
6.7% capital growth + .08% income is a total return of 7.6% for one quarter.

Remembering that distributions and growth are quite variable across quarters. But I think that's pretty decent.

If every quarter was like this we'd be looking at a 30.4% return for the year. Which has happened in the past.

Benchmark
Comparing the performance of VAS to the benchmark  ASX300

2 Oct - 5,655.476
29 Dec - 6,023.304

A gain of 367.828 points, or 6.5%.  This does not include dividends.  But assuming the ASX 300 has an average yield of about 3-4% per annum, then this suggests you can tack on about 1 per cent to allow for dividends, which makes a total return of 7.5%.

Which is what VAS returned for the same period.

Summary?
So I think both the market performed quite well, and VAS did really well in tracking the market.  I've never tracked this data before and it's comforting to know that VAS is so well aligned. It's one thing to go off official Vanguard reports, it's nice to know that double checking their reports gives the same results.

Also, the Cents Per Unit for VAS at 0.8% for the quarter theoretically equates to about 3.2% per annum, which is what you'd expect for the ASX 300. Whether or not that's a good thing depends on your circumstances.  Some people want big dividends, others would prefer to avoid the tax consequences.

So I think it's important to recognise that it's actually a pretty good result. 

There will be quarters where performance will be strongly negative.  Where unemployment increases, people start taking public transport more frequently, abandoning pets, stop going to restaurants and the economy contracts and you'll see a real decline in the market and dividends will come under pressure. But I think it's just as important to remain sanguine in these circumstances as it is now.

Hope this helps with the hurt!

[mjr]

" misterhorsey, but I'll add that he hasn't included the 25.78 c/share of franking credits.  That's 94 c/share gross return for the quarter.

If anyone wants to get down in the mouth on low dividends without doing any analysis or big-picture thinking, there's the VAP quarterly dividend of 15c or 0.2%.

[misterhorsey]

Yep thanks, I was going to acknowledge my ignoring of the franking. But was going big picture, and my post was already too long! But it's a significant point.

[mjr]

and to be pedantic, VAP didn't pay a dividend this quarter.  That low 15c distribution is pretty much entirely capital gains.

[lush]

Mister Horsey & Mr J - thanks for your analysis of the returns etc for VAS....Mister Horsey what an amazing overview you provided!!!! Just brilliant.
FYI - I was more disappointed with the Wholesale Balanced Fund distribution where I have the majority of my money invested - but I completely understand the ups and downs of it all. For me it's about the CPU as I am looking at it based on the potential to live off so I can retire early. I am about 2 years off, but wonder with these sorts of results if that is realistic, hence why I was a little dis-heartened, mainly because I had just worked so hard over the last year to put a large chunk of funds into VAS in Dec. Also double whammy of a low CPU coupled with higher re-investment prices  (I have my funds automatically reinvesting). Thanks again guys! I just better get back to the hard work part and not worry too much. Cheers.

[mjr]

The ASX300/VAS fairly reliably pays ~4% dividends p.a.  It doesn't reliably pay 1% dividends/quarter.  You'll need a buffer of at least a year to smooth out the cash flow.  Of course, depending on your asset allocation, you'd probably have more than that in cash anyway.

4% dividends is quite conveniently the same as a 4% withdrawal rate.  If VAS is your sole investment, then you can more or less plan to take the 4% dividends as your income stream and let the capital appreciation handle growth and inflation.

[marty998]

Adding my thanks to you both as well for doing the reconciliations on VAS.

Now. Gimme my reinvested shares!

[lush]

The ASX300/VAS fairly reliably pays ~4% dividends p.a.  It doesn't reliably pay 1% dividends/quarter.  You'll need a buffer of at least a year to smooth out the cash flow.  Of course, depending on your asset allocation, you'd probably have more than that in cash anyway.

4% dividends is quite conveniently the same as a 4% withdrawal rate.  If VAS is your sole investment, then you can more or less plan to take the 4% dividends as your income stream and let the capital appreciation handle growth and inflation.

Mjr - thanks again for the information. Currently my main investment is Vanguard Wholesale Balanced Fund – and the distribution for that was 0.6003…VAS makes up 20% of the Balanced Fund portfolio. However I want to increase that to about 40% - so I opened a VAS wholesale fund and hope to get to that 40% in the next couple of years. Overall I have come to the conclusion that yes I need some good cash reserves to get through each year if I want to retire early.