Author Topic: New to investing - case study - Australia+America  (Read 1642 times)

Sandia

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New to investing - case study - Australia+America
« on: September 17, 2015, 08:05:09 PM »
Hello everyone,

Long time lurker, first time poster. I've learned heaps on this site and feel confident about many of the changes I've made over the past few years, but investing is still something that leaves me feeling nervous. Any advice you have would be appreciated!


Status: I'm American, lived in Perth for 3+ years, married to an Aussie. We're both relatively young, at the start of our "careers" with a lot of job uncertainty for the moment.

Current allocations:
31% = cash in savings earning 3%p.a. (12-month emergency fund plus savings buckets about to be spent to visit America)
15% = term deposits for 5 years earning 4.5%p.a. (done before we got opened the Vanguard account)
14% = Aussie partner's Super (Australia-based high growth)
4% = my super (sustainable high growth)
36% = Vanguard Australia account in Aussie partner's name, the Australia high growth fund


Questions:
1). Is it enough to diversify within our couple-dom, or do we need to diversify within in each account? In other words, does Aussie partner need to buy another fund within their Vanguard account, or is it sufficient if I open a Vanguard account with a different fund?

2). I've got the minimum deposit to open an account at Vanguard in my name (outside of the above stash allocations), but which fund to choose? I'm tempted towards the International index fund in order to diversify since everything else is Australia-based. But with AUD weak at the moment, is that a bad idea? Should I choose another Australia-based fund and wait to re-distribute after AUD regains some footing?

bigchrisb

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Re: New to investing - case study - Australia+America
« Reply #1 on: September 18, 2015, 12:58:53 AM »
I'll bite - I'm Australian, so lots of knowledge from an AU perspective.  I can't help much from a US perspective though.

1. Lets assume your couple-dom is secure - and as you are married here, even if it led to a split, the asset allocation would end up split to some degree in a divorce settlement.  So, from a pure asset allocation perspective, asset allocation across the couple works out the same.  Bare in mind that in Australia, taxes are filed individually and not joint - so there may be tax issues to consider - does your US citizenship improve/hurt the tax treatment of any asset classes for you?  Does it make more sense for particular assets to be in a particular name?

2. Figure out the asset allocation first, then just get on with it.   Trying to guess currency movements is pretty tough!

And food for thought - if you are considering international anyway, would it be of any benefit doing so through a US vanguard account and bank account?  I don't know the answer to this, but if it was me, I'd look into it - it potentially gives you an extra degree of freedom to use in your optimisation.

Sandia

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Re: New to investing - case study - Australia+America
« Reply #2 on: September 18, 2015, 03:39:56 AM »
Quote
does your US citizenship improve/hurt the tax treatment of any asset classes for you?  Does it make more sense for particular assets to be in a particular name?

bigchrisb, THANK YOU for asking that question. Whilst I knew that my American taxes are, indeed, a huge PITA, I'd forgotten to check how the IRS would respond to my ownership of a Vanguard Australia account. It looks like it would be a bad idea: http://thunfinancial.com/why-americans-should-never-ever-own-shares-in-a-non-us-incorporated-mutual-fund/

Alrighty, time for a new plan. I imagine we'll use that fund-starting money to open a new fund with Vanguard under the Aussie's name, so we'd better figure out our AA to decide which fund to choose. The Vanguard investors quiz I took suggests an asset allocation of 20% bonds and 80% stocks, whilst another quiz I took suggests a more conservative 50% bonds 50% stocks balance. What kinds of questions do we need to ask ourselves to figure out which AA works for us? Is there a list somewhere, or is this one of those situations where each person has to muddle through based on their own risk tolerance?

Either way, perhaps now is the time to open the bond part of our asset allocation. Are there any funds I should investigate besides Vanguard's index diversified bond fund? https://www.vanguardinvestments.com.au/retail/ret/investments/funddetailDBF.jsp

dungoofed

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Re: New to investing - case study - Australia+America
« Reply #3 on: September 20, 2015, 01:35:57 AM »
Regarding the AA, maybe check out https://www.bogleheads.org/wiki/Lazy_portfolios for some ideas. Also, considering the tax intricacies of your situation it might be worth employing a fee-based professional but your mileage may vary.