Join our investing community

Vanguard high yield australian shares fund vs benchmark

Discussion in 'Exchange Traded Funds (ETF)' started by venger0, 21st Mar, 2008.

  1. venger0

    venger0 Active Member

    Joined:
    30th Jan, 2008
    Posts:
    40
    Location:
    WA
    Hello all :)

    I've been doing some reading up on the Vanguard high yield australian shares fund on their website. The one interesting trend i see on the fact file is that the fund tends to have an average result of -2% over the last 5-7 years against the benchmark (ie ASX 200 ex-REIT).
    And this result assume reinvestment of yields. :eek:

    So my little brain is telling me that essentially investors are paying an extra 0.2% MER (over a classic index fund) and historically give up 2% in yield/growth for:
    (1) getting yield paid out (almost) monthly
    (2) having (hopefully) extra 1% in gross yield

    The above makes me scratch my head a bit - not sure if its worth doing it simply for those reasons; 2% in yield/growth is a lot to give up (for me).

    hmmm.. maybe another reason to use the fund is the expectation that it will outperform the benchmark during the next 12 months ? (ie during a bust phase)


    What do you think?
    Is this fund a growth fund or an income fund?
    Or is it trying to be a hybrid growth/income?
    With the 2% deviation from benchmark, is it suceeding?

    Would to hear your thoughts and reasons...

    Happy Easter everyone!! :D
     
  2. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Venger0,

    The difference in price between the standard index (0.34% MER) and High Yield fund (0.40% MER) is 0.06% difference.

    Index Funds High Yield Australian Shares - Vanguard Investments Australia Ltd

    Interesting that it's a ASX100 compared to the Vanguard Australian Share Index fund which uses the ASX300 as it's indexation.

    It's not very clear cut to whether it's a growth or income fund, certainly paying out monthly would point to income (this unfortunately forces down selling of assets to provide income when it may be detrimental to sell the assets). On the flipside, it's investing in shares which are likely to fluctuate over time (hopefully upwards) which suggests a growth style fund.

    Maybe call Vanguard and see what they say.

    Cheers,

    Dan

    PS Before making an investment decision speak to your FPA registered Financial Planner.
     
  3. venger0

    venger0 Active Member

    Joined:
    30th Jan, 2008
    Posts:
    40
    Location:
    WA
    Hi AsxBroker :)

    while i was looking at the performance of the underlying wholesale funds, i will be using the retail version instead so the MER is 0.9% for high yield fund vs 0.7% for index fund.

    thanks for sharing your thoughts tho !

    cheers,
     
    Last edited by a moderator: 22nd Mar, 2008