US Investment Exposure - Australia

[TJEH]

I'm currently trying to put together an investment strategy, most likely using ETF's. I plan on having exposure to both the Australian and US markets (if not further international markets).

Initially, I opened up an account with OptionsXpress so that I could trade on the US market. I then discovered the ASX listed ETF's (e.g. through Vanguard) offering US exposure.

Does anyone have any thoughts re pro's and cons of holding similar ETF's giving exposure to the US markets via the ASX listings or buying the ETF's via OptionsXpress directly in the US market?

Current US holdings are VOO (S&P 500), VXF (Extended market) and Berkshire-B.

Thanks,
TJEH

[matchewed]

If they are similar ETF's then the pros and cons aren't going to be related to the composition of the ETF. It will be about what is cost effective for you to do. So which is cheaper? Go w/ that.

[TJEH]

Thanks matchewed, certainly a good consideration.

I was also thinking about the tax considerations, as well as how currency fluctuations might be a help or hindrance to the directly held US ETF's, e.g. when buying or selling (involving transfer of funds Aus<>US accounts). I suppose the latter still applies to the unhedged ASX ETF's, it just manifests itself differently.

[matchewed]

Yeah I'm not up on the international tax implications. You'll need to dig a bit deeper into AU tax laws and the like.

[mostlyeels]

I'm in a similar boat: living in Australia, but wanting exposure to more than our local market.  Vanguard have a couple of papers and pages on currency exposure and hedging (that I've found):

• https://www.vanguardcanada.ca/documents/to-hedge-or-not-hedge-tlrv.pdf -- there's a similar one on their US site, but I couldn't find one on the Australian site when I did a quick search
• https://static.vgcontent.info/crp/intl/auw/docs/etfs/resources/making-sense-of-ETF-currency-exposure.pdf -- from their page on the new hedged ETFs on the Australian site

Also there was a good thread on Bogleheads about it (from the US point of view, but I don't think that matters): https://www.bogleheads.org/forum/viewtopic.php?f=10&t=157837&p=2373931

[dungoofed]

http://forum.mrmoneymustache.com/investor-alley/australian-investing-thread/msg431838/#msg431838

There was a fair bit of related conversation here which you might be interested in. Start with that particular comment, then keep reading down through bigchrisb's analysis and onto the next page as the conversation turns to the two new vanguard products. Things you want to be interested in are domicile and effect on tax, hedged vs non-hedged, etc.

[TJEH]

mostlyeels - Thanks for the links. The one on the australian vanguard site is a nice simple example showing the influence FX has on the returns. The canadian  article  also has lots of good info and plenty more to take in. A (very) quick look at historical data of the US total market (VTS:ASX compared to VTI:NYSE) shows the ASX listed variant producing a healthy premium (1\3\5 year).

dungoofed - Thanks, i've been meaning to work my way through that thread from start to finish, I'm sure there is a lot of useful info. I think I'm glad there is not a hedged version of VTS to further complicate my decision :)

I might take up some VTS to get US total market exposure, with the implicit effect FX has in the return. The AUD certainly has taken a dive against the USD of late, who knows where to from here but I'm in it for the long haul.

I'll probably keep my NYSE listed stocks for the same exposure. I originally took out the S&P500 (VOO) and the Extended Market (VXF) so I would essentially have US total market exposure (instead of VTI, a single ETF for the total US market), but with the ability to tilt my holdings towards either one as desired.

I'll put some toes in the water on VTS and see how it goes. I can always make a change later if I see an advantage either way.

[This_Is_My_Username]

I bought some VGS on the asx today.

(unhedged)

https://www.vanguardinvestments.com.au/retail/ret/investments/etfdetailVISIFE.jsp

no idea aboout the tax implications.  surely it will be fine, though.