Join our investing community

Hi from brisbane newbie

Discussion in 'Introductions' started by Hanso, 25th Oct, 2016.

  1. Hanso

    Hanso Member

    Joined:
    25th Oct, 2016
    Posts:
    5
    Location:
    Brisbane
    Hey all,

    I've lurked for awhile now over on propertychat and have just discovered investchat, so looking forward to absorbing plenty of info.

    Bit about myself. 31 i work in the oil and gas industry so currently reasonably well paid but aware of how quickly it can all end. With that in mind I like the thought of building a passive portfolio that doesn't require taking on additional debt.

    I have a couple of IP's that are CF neutral and seeing reasonable CG gains i also have a solid buffer in an offset on the PPOR, but now looking at building an ETF portfolio.

    I've spent a bit of time reading bogleheads guide to investing and have a basic understanding, but I have been trying to figure out the best way to go about it. The things I'm tossing up at the moment is if I should build it through super(ing/Australian super etc) for tax savings (witgout the liquidity) or start a portfolio using after tax cash and having more flexibility. Then there is the assett allocation and figuring out how to do a deep dive on the details of the different ETF's to create a portfolio that I'm hoping to learn more about here.

    Happy to take any nudges in the right direction to find the answers to my queries above.

    Cheers
    Hanso
     
  2. trinity168

    trinity168 Active Member

    Joined:
    16th Sep, 2016
    Posts:
    41
    Location:
    NSW
    Welcome to InvestChat. Am more an ETF/LIC type of person. I'm still on my L-plates with ETFs and LICs but enjoying the learning.
     
    Bran and twisted strategies like this.
  3. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD

    LOL

    you may as well leave the L-plates on for the ETFs even when from the same stable every ETF is subtly ( but importantly different )

    at least to the investor ( rather than the trader )

    studying them CAREFULLY first ( before buying ) seems to work best for me .

    LICs are more novice friendly ( still tricky , but someting you can gain confidence in )
     
  4. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    welcome to investchat ,

    most important is to have a plan first ,

    sort of like buying a property ( after you have the property what are you going to do with it .. go for straight income maybe income + capital gain or just capital gain )

    some use ETFs just to track ( parts of ) the share market expecting it to go up ( more than inflation )

    BUT some ETFs have a DRP ( dividend reinvestment plan ) and then the magic of componding becomes avaiable for you , that could suit you .

    i avoided a formal super ( or SMSF ) but you should seek professional advice on what are your best options .

    the law of averages ( actually market cycles ) hints a stock market crash is likely in say 18 months but, will the ASX ( Australian market ) suffer more or less than the US or Europe

    for example if a crash happens and the US is hurt much worse the Australia maybe buying US focused ETFs in the depth of the crash MIGHT be a good long term play ( but buying Australian focused ones a better short-term play )

    with ETFs you do need to put in the extra study ( start early on the study and ask your advisor on stuff you don't understand when setting up your fund )
     
  5. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    270
    Location:
    hodor
    Hello and welcome

    What you do with super will depend on your goals and time frame. If you want access before 60 (or later) to your investments then you might have to look at building (at least some) your portfolio outside of super.

    If you are looking at the Boglehead approach then Vanguard is a good (and perhaps obvious) source of ETFs

    Investment Products

    The Boglehead philosophy is about absolute lowest cost and broad indexing so staying away from the slightly higher cost ETFs that pick stocks is the name of the game.

    For a super simple implementation start by looking at;

    VAS - Australian shares
    VGS - International shares (Ex-Aus)
    VAF or VGB - Bonds

    From there you just need to decide on your asset allocation.
    Assuming you are Australian having an Australian tilt makes a lot of sense (to me) to take advantage of franking credits. If all you do is buy and re-balance those equally you are likely to do well long term.

    IMO when following a Boglehead approach getting some skin in the game ASAP helps with the whole learning experience and developing the right temperament. It is a conservative long term strategy that isn't going to loose all your money like trading is likely to.

    Final thought;

    Given you have Non-deductible debt you are going to be better off going a debt recycling strategy over dividend reinvestment (assuming you have the discipline which it sounds you do) or using cash money.

    The above is definitely not advice.

    Saw something interesting on this. Australia is in its second longest period without a correction and its longest period without a new market peak been achieved. One would indicate we are due for a correction the other that a new market peak should occur before the correction.

    Still the US is at all time highs and if their market crashes it will probably look like synchronized diving.
     
  6. Hanso

    Hanso Member

    Joined:
    25th Oct, 2016
    Posts:
    5
    Location:
    Brisbane
    Thanks for the welcome @Hodor @twisted strategies & @trinity168

    Hodor & twisted stratergies thanks for your input. I'm a fan of the DRP focus due to it's compounding nature but interested to hear why debt recycling would be a better option than DRP. I assume by debt recycling you mean using equity to invest and dividends to pay off interest payments?

    Bit more about my current situation. I currently have an equity loan against the PPOR that has been partially used to fund the deposits on the 2 IP's (still a little more left to use, which I will use once I meet my savings goal in the PPOR loan offset). I will need to wait a while now until I could pull anymore out, however the other side to that is I will likely not meet serviceability criteria if and when the oil and gas role finishes and I wind my salary back, this coinciding with the my wife also going on maternity leave. The above uncertainty around earnings in the near-medium future is the reason I am looking to use cash rather than increasing debt to fund any further investments. Being very green though I'm keen to hear benefits for/against this approach.

    In relation to ETF selection, what is is you the main things you specifically look for when assessing a fund? I know the vanguard products are very popular but what other funds would you recommend assessing? I'm quite happy to take a fairly basic 3-4 fund approach with the long term goal in mind.
     
    twisted strategies likes this.
  7. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    the US yes , the EU , probably ... but Australia .. over-valued ,indeed , but bubble territory ??

    maybe not

    not only haven't we reached ( all time ) record peaks more than 6700 for the XJO ( pre-GFC ) but we haven't even convincingly breached 6000 ( post GFC ).

    also a factor is many nations have weak fundementals and growth , but yet extremely low official interest rates ( can be much higer unofficially ) AND large debt burdens .

    as at least one commentator has admitted this is new economic territory and anything close to this scenario has been defused ( ignored ) by a ( near ) global war ( and personally i hope that doesn't happen in my lifetime , being over 60 ... that is slightly possible )

    so one ( unlikely) scenario is a US/EU meltdown causing and Australian and Chinese correction ( via contagion factors )

    another ( unlikely ) scenario is the US/EU get pused aside by China ( and the BRICS bloc ) as the world economic powers leaving the US/EU to freefall as they will but limiting the contagion factor .

    in ETFs

    i hold VAS ( a top 20 holding .... i hold over 150 shares )
    VHY , SYI , IHD , QFN and HVST

    i have bought and later exited SLF and IEM

    now IF we have a correction ( or major crash )

    i am likely to buy into ILC or VLC ( less likely both )

    possibly IKO ( i think in time the two Koreas will unite , and become a nation similar in mindset to Vietnam

    possibly ITW also thinking a better relationship with China could eventuate .

    i am currently prefering the 'stock-picking ' type of ETFs because i feel the portfolios will benefit from a more active management ( and am willing to pay the extra fees )

    HOWEVER in a BIG DROP i will be heading for the ETFs focused on 'blue chips ' where i am currently underweight as i chased quick( er ) growth in 2011/2012 , and stock-picked some blue-chips since


    with my top 5 holdings ( by $value ) being

    1. WOW

    2. BHP

    3. MQG

    4. APE

    5. CUP ( might change at open )

    while i am in immense profit on WOW ,MQG and APE this isn't the core most would choose for 'survival mode

    of the current ASX Top 20 i hold
    AMP
    BHP
    MQG
    QBE
    RIO
    SUN
    TLS
    WBC
    WES
    WOW
    WPL

    ( which is why QFN made sense for me )

    both RIO and WPL are rather small holdings .

    (IMO) a very treacherous time for those sensitive to current share prices
     
  8. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    270
    Location:
    hodor
    Debt recycling theory (not advice) -

    While you have non deductible debt you shouldn't use cash to buy investments. The cash you were going to use to buy shares you repay the loan and then take out a separate loan to purchase the shares. You don't end up with any more total debt, however your deductible debt will be higher and non deductible lower.

    If you have $10k cash to invest you repay your loan by $10k and then reborrow the $10k (via split loan or LOC) to buy shares. Set the dividends to be paid into the offset account and then year two (or when you next plan to invest) you pay off more of your non deductible debt with savings and dividends accumulated in the offset and reborrow the same amount again which is then invested.

    As long as you use the dividends to payoff the loan and re-borrow then invest the same amount you are compounding your wealth in exactly the same manner as DRP - just requires a little effort for a greatly enhanced tax position.

    Stock selection -

    Priorities are low fees and costs. Previously I have looked at and invested in ETFs that have specific goals such as high yield. They all have flaws and unnecessarily complicate things.
    Simple index tracking ETFs are very likely to outperform in the long run, classic example is the US Vanguard S&P500 ETF outperforming over 90% of managed funds in the long run - on average by a significant margin.

    I used vanguard ETFs for my example because Vanguard is the provider I use. You could use STW, IOZ or VAS for Australian exposure, they are all much the same (see the attached jpg).

    Of the ETFs I hold I currently plan to only add to VAS and VGS, simple is often better, which is shown time and time again. Brokers, Brokerages and the media all make money by people trading and exciting stories/ideas. Telling people to just buy two index tracking index funds and stay the course won't pay for any of their yachts.

    Disclaimer - I don't follow the Boglehead philosophy, though I am somewhat close in some ways. As a sucker I seek some "alpha" (out performance) by using LICs which are low fee in place of ETFs for much of my portfolio. The LICs I use have similar fees to the ETFs however historically they have outperformed slightly by avoiding some of the junk. AFI, ARG and MLT (the three largest) are good proxies for the ASX tracking ETFs (VAS, STW, IOZ etc) with long histories and low fees.
    I don't hold any bonds.
     

    Attached Files:

  9. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD

    now ( IMO) popularity has nothing to do with selecting my ETFs

    IMPORTANT is div. payment frequency some pay yearly , some 6 monhtly , a few FOUR monthly ( 3 a year ) , more common is 3 monthly , and at least one pays monthly ( 12 divs a year )

    and several ( mainly precious metals ones ) DON'T PAY A DIV at all , expecting you to make a profit by selling at a good time

    the next important factor is the on-going costs ( taken out of divs or in the case of physical metal eaten away out of your bullion allotment )

    now some costs are fair considering the extra work/risk the fund does ( some currency hedge , others leverage aka use a margin loan , and other tactics ) and some are a bizarre joke ( probably used in advertising )

    next factor is PHSYICAL v. SYNTHETIC ( a real basket of assets v. an index figure backed by derivatives ) each has their strengths and flaws .. i strongly prefer , unhedged ,unleveraged and physical shares ( in the portfolio )

    franking credits are important but not as important as above factors

    and VERY IMPORTANT is an available DRP plan ( to help compound any gains and average weak and stellar cycles )

    some will tell you this is 'easy and a no-brainer ' i strongly disagree that extra hour digging through the boring details or phone call to an expert can trigger a 'light-bulb ' moment

    some strategies used by LIC investors work well also , but you do need to select the right strategy for te correct investment

    ( ETFs are a game of tiny fractions accumulated )

    in ETFs research pays

    cheers !!
     
  10. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    270
    Location:
    hodor
    A great simple quote the summaries investing clearly.

    "My advice to be a successful investor is this: Save regularly, develop a personal asset-allocation plan, use a few broad market index funds, keep costs low (including taxes), avoid mistakes, strive for simplicity, and stay the course."

    from What the Bogleheads know for sure - Morningstar.com.au
     
    twisted strategies likes this.
  11. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    423
    Location:
    Gone
    As suggested having a plan is crucial.

    First up is fiddling with your investments or focusing on your career going to create the most wealth?

    And rather than Super vs Non Super why not both?

    Aust Super is dirt cheap with good performance and lets you get on with your life. Perhaps select one on their preset options and do the mandatory (for most) 9.5% contribution. Then let compounding do it's thing.

    As for outside Super if one can scrape together $100K Vanguard offer something similar to the Boglehead path (better I believe given Australia's small share and bond market) but the rebalancing is done for you. After the initial $100K investment a periodic BPay for small additional investment can be setup. Wholesale Option keeps the fee lower but entry higher.

    These options might be of interest:
    https://api.vanguard.com/rs/gre/gls/stable/documents/8469/au

    https://api.vanguard.com/rs/gre/gls/stable/documents/8391/au

    Not even a three ETF Boglehead solution, this "single" fund covers the lot.

    In a world of new, bright and shiny ETFs one can forget that the old fashioned unlisted index fund path is often still the best. No broking account needed so one is less likely to fiddle and waste time watching the market. And you won't forget to rebalance or try to time stuff. Most importantly this option can protect us from one of the greatest enemies in investing being OURSELVES!

    For outside Super then there's the decision of which is the best structure for investment eg own name, Family Trust, Coy or combination.

    But if you are keen to try to manage it all yourself for better or worse then Property Chat and here are likely to be helpful.

    I suppose what the theme of my post is whether your time is best spent focusing on your career and finding a low fee, good performing, set and forget investing approach with everything happening automatically.

    Was discussing the above with a friend recently. I found an old article by Jack Bogle called "THE ENEMY OF A GOOD PLAN IS THE DREAM OF A PERFECT PLAN". Select an investing approach that you can stick with through good and bad times whether young, old, busy, in good or bad health and importantly one your love ones can easily understand when you're no longer around.

    Not advice.

    PS: This is not what I do personally but there's been plenty of times I wish I had!
     
    Last edited: 26th Oct, 2016
    en710, Hanso and twisted strategies like this.
  12. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    this as been a useful website i have recently found

    ETFs Performance Tables

    also once you have spotted some appealing targets Yahoo!7 finance has some features you might exploit for your benefit
     
    Hanso likes this.
  13. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    423
    Location:
    Gone
    @Hanso,

    In relation to the Vanguard diversified funds there is also the retail option. You'll incur a higher fee on the first $100K but the fee is the same as the Wholesale funds after that from memory. Actually surprisingly the retail funds fee is a fraction less than wholesale after $100K. So no big deal if you're goal is to accumulate a sizable amount over you're your lifetime.

    The beauty with the Retail option is you only need $5K initial investment to start and the additional top up via BPay is a lot less.

    Have a look if you're interested:
    https://api.vanguard.com/rs/gre/gls/stable/documents/8298/au

    https://api.vanguard.com/rs/gre/gls/stable/documents/8298/au
     
    twisted strategies likes this.
  14. Hanso

    Hanso Member

    Joined:
    25th Oct, 2016
    Posts:
    5
    Location:
    Brisbane
    @austing thanks for weighing in. With the funds you linked above it appears the min buy in is $500k for the wholesale fund? or am I missing something? I'm very much keen on a set, top up and forget style investment to come back to in 25-30 years.

    Now a very newbie question
    What is the best way to purchase ETF'S and index funds like mentioned above? broker, fin planner or online account? I'd imagine an online broking account would be the most cost effective
     
    twisted strategies likes this.
  15. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD

    for you ,

    ( and definitely me ) probably on-market ( through your preferred trading platform )

    if through an on-line broker $500 ( i believe) is still a minimum parcel value ( and the brokerage is extra )

    you might find between $1,000 and $10,000 the sweet spot for small buys but check your platform's brokerage charges ( mine have varied in the $10K + range since i started in 2010 ( in the market )

    buying on-line gives you timing and cash expenditure flexibilty

    ( in fact i am chasing a small parcel of HVST to add to an existing holding , today )
     
  16. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    423
    Location:
    Gone
    Vanguard say $500K but it's common knowledge that if you ring them they will let you into their Wholesale funds with a minimum $100K. I just confirmed that with them.

    In fact I just rang them out of curiosity on the retail vs wholesale option. The disadvantage with retail is that if you decide to invest in an additional retail fund you will be hit with the high fees on the first $100K for it as well. They don't aggregate your total invested amount in retail.

    In wholesale your investment amount is aggregated. Also note that one can start with an initial investment of $100K across as many Wholesale funds as you like. For example, you could put $100K in a single fund or $10K in 10 funds. And if you want to invest in an additional fund later on only a minimum $5K investment is required (not another $100K).

    So overall the flexibility of the wholesale funds makes it the winner overall and worth getting the $100K to get started with this option.

    With the vanguard managed fund option you don't need online trading accounts, expensive financial planners etc. It just requires the completion of an application form. The following is for those investing in their own name:

    https://api.vanguard.com/rs/gre/gls/stable/documents/8146/au

    More info here:
    Investment Products (the growth or high growth funds at the bottom are likely to be of most interest to you).

    PDS & application forms

    They will Debit the initial investment from your nominated account or advise how you can do it via BPay.

    Then once you're started you can setup up a periodic BPay (minimum $5k?) then forget about it all.

    If this interest you it's all very easy. Just give them a call and they will assist.

    Probably one of the lowest fee, automated investing, set and forget options out there in the Non-super environment.

    Not liscenced to give advice.

    PS: Note that it's not just novices who take this approach. Knowledgeable and wealthy investors do this also. They know their main wealth will come from their employment and just don't have the time between family and work to be stuffing around trying to become the next Buffett. The above low fee, set and forget option will outperform most other funds out there and let you get on with your life without having to waste time fussing with your investments. Investing is a means to an end, not an end in itself.

    But if the interest in investing is deep enough then you might decide to spend / waste time like the rest of us trying to outperform index funds. There are no guarantees however.
     
    Last edited: 26th Oct, 2016
  17. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    austing ,

    if out-performing the index means i will achieve a livable income in retirement , i will give that a crack . too

    but knowledge gained via a now deceased relative , clearly shows even good companies get taken over and big name companies go broke ( much the same as small companies .

    add in the fact a fistful of cash and pitiful interest rates won't combat inflation. for your future benefit

    my next MAJOR annoyance is the fictional performance comparsions used ( find an index we look good next to .)

    i have a hobby in computers , trust me compared to fund managers you have no concept of BLATANT BS ( and that is the garbage they load onto the corporate world.)

    my current method adds extra costs and complexity , that is true , but it also adds extra adaptability and flexibilty , so i can reduce the damage of mistakes and offset some of them by quick reactions

    what i will be watching keenly it the spread of 'robo-advice ' ( official and as a pre-screening tool in major institutions )

    just remember if investing was easy Peter Costello wouldn't be troubling the current government with tough questions about what they expect out of te Future Fund

    ( yes i finally feel a little sorry for Peter .. i can find that tiny investment that yields 10% , but try investing a miserable $100K in the same spot ).

    PS might i suggest novices learn a good amount about investing so they can tell if their hired professional is doing their investing is doing the right thing for them .

    PS Buffet is a major part of Berkshire Hathaway , managing investment risk is a BIG part of the insurance game
     
  18. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    423
    Location:
    Gone
    Hi @twisted strategies,

    I fully understand we're you're coming from and certainly some very basic education in investing is useful in avoiding the bad types of the investment world. When will people finding learn if it's too good to be true then it usually is.

    I personally follow a slightly more active dividend focused approach. But activity is minimal.

    But not everyone has the time and interest in spending countless hours learning, researching, following the market, monitoring their investments... . And then with knowledge for some comes the inclination to fiddle, optimise, time, trade, chop and change, waste time, neglect family and friends etc. As mentioned in my previous post "THE DREAM OF A PERFECT PLAN IS THE ENEMY OF A GOOD PLAN". For many people simple strategies like the index path I have discussed here is a GOOD PLAN.
     
    twisted strategies likes this.
  19. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    270
    Location:
    hodor
    Interesting, I did not have that common knowledge. The whole $500k and $5k minimums put me off looking deeper, at $100k minimum and no $5k minimum on BPay contributions it makes more sense and is a lot more approachable.

    As austing noted approach the fund directly for managed funds.

    ETFs are most cheaply purchased through an online broker, all the major banks have them.
     
    twisted strategies likes this.
  20. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    977
    Location:
    QLD
    i need to rush in the mid-term ( next 2 years ) .

    and 'bad apples ' is whole different story ( unless the advisor is a sole operator )

    but the short story is ... the more ( financially ) educated the investor the better the chance of a mutually happy outcome . i often try to urge friends, children and spouses gain a basic ( or better ) knowledge of such things , you never know when the investor will be unable to act "hands on " ( but need something done quickly and efficiently ).

    investing can be easy , but you need to learn certain things early

    unlike many here i misspent my youth ( and dodged a lot of school ) but ended up doing fairly well in the market by avoiding the traps rather than by having superior maths skills .

    PS a big hint for the novices get yourself a reliable calculator and keep it handy ( just to check if the deal is good or not so good .. and don't be afraid to check the figures again if you have a doubt )

    i do remember a quote that could easily be applied to investing

    the friend is a Jazz Musician quotes ...... ' there is no such thing as a BAD note , there are perhaps better times to have played that note '

    investment strategies might benefit from the same logic ( most people play 'that note ' late .. and don't know the best recovery tactic )