Search found 344 matches

by Tonen
Wed May 25, 2022 12:44 am
Forum: Personal Investments
Topic: A "free lunch" in Aussie Inflation bonds?
Replies: 1
Views: 557

A "free lunch" in Aussie Inflation bonds?

I'm wondering if I'm getting something wrong here. The yield "curve" for Aussie inflation bonds is all over the place with widely varying Yield to Maturities. It seems that somehow this thinly traded market seems more interested in Coupon % than YTM - eg 2030 Coupon 2.5% YTM 0.24% vs 2032 Coupon 0.75% YTM 1.23%. I have already loaded up on the 2032's at around $95 with Nominal Value already around $102 (soon to become $104). Aussie inflation Bonds Year YTM Coupon % 25 0.32% 3.00% 27 0.81% 0.75% 30 0.24% 2.50% 32 1.23% 0.25% 35 0.36% 2.00% 40 0.81% 1.25% 50 1.18% 1.00% The YTM's have to be manually calculated - I used Excel's Yield function as discussed in a different thread. I am confident I have the math correct. Numbers for the ...
by Tonen
Fri May 13, 2022 1:48 am
Forum: Investing - Theory, News & General
Topic: Calculating Yield to Maturity for Inflation Bonds?
Replies: 7
Views: 888

Re: Calculating Yield to Maturity for Inflation Bonds?

Thanks so much guys! The Aussie inflation bond market is tiny, with only 7 series up to 2050, and information is scanty.
I can now calculate YTM - I see some serious mispricing in the YTM curve :) Actually, "curve" might be a misnomer - "sawtooth" is a better discriptor. No negative yields here BTW
by Tonen
Tue May 10, 2022 2:58 am
Forum: Investing - Theory, News & General
Topic: Calculating Yield to Maturity for Inflation Bonds?
Replies: 7
Views: 888

Calculating Yield to Maturity for Inflation Bonds?

I'd love some help figuring this out - I can't find an answer with Google.
Yield is simple enough - Face Value/Price * Coupon %.
Yield to maturity (YTM) however should also allow for the difference between Face Value and Price realised over time? I gather Inflation can be ignored for inflation bonds, so is it....
(Face Value + Coupon % * Years - Price) / Years ?
e.g. ($110 Face Value + 1% * 10 years - $100 Price) / 10 years = $20/10 years = YTM 2%;
v.s. Yield at $110/$100 * 1% = 1.1%?
by Tonen
Wed Mar 09, 2016 6:21 am
Forum: Investing - Theory, News & General
Topic: Factor regressions for non-US etfs
Replies: 5
Views: 866

Re: Factor regressions for non-US etfs

Only comment I can think of frazz is that presumably DFA Australia does factor investing of the FF variety, but its generally hard and potentially expensive to get access (ie advisor only). Their small and value factor tilts have generally sucked for the last decade or so, but that's just the way things fall.
QSuper uses DFA for some of their passive stuff, but you can only join if you happen to have a QLD Govt job. It's possible some other super funds might, but you'd need to do a lot of digging to find out.
by Tonen
Thu Mar 03, 2016 2:33 pm
Forum: Investing - Theory, News & General
Topic: What to do if bonds have negative returns?
Replies: 70
Views: 12560

Re: What to do if bonds have negative returns?

Freshly issued inflation bonds. If the concern is that long-term nominals will have a negative yield, the implied scenario is long-term deflation.
Inflation bonds in Australia and I think in USA have an inherit "put" option in that they can be worth no less than the initial face-value at maturity. So a fresh issue with $100 face-value must be paid out at no less than $100 at maturity. Having said that, any Interest payments from the bond might be clipped along the way to try to claw back any difference between face and deflated value.
Using this approach doesn't involve ramping up risk.
by Tonen
Fri Dec 11, 2015 8:42 pm
Forum: Investing - Theory, News & General
Topic: Wade Pfau on Reverse Mortgages
Replies: 41
Views: 6619

Re: Wade Pfau on Reverse Mortgages

Is it Government guarenteed? Otherwise, what are the odds of a Line of Credit provider figuring out some clever way of walking away from the deal (eg spinoff to a subsiduary that then becomes insolvent) if lines of credit end up being worth more than the houses?
by Tonen
Mon Sep 14, 2015 5:52 pm
Forum: Non-US Investing
Topic: Australian vanguard what should I invest in? , need advice
Replies: 8
Views: 2006

Re: Australian vanguard what should I invest in? , need advice

Hi skyhigh872 I suggest keeping it very simple with this Vanguard high growth fund https://www.vanguardinvestments.com.au/retail/ret/investments/funddetailHIG.jsp In a couple of decades start to dial down your risk by then adding more and more to a second (fixed interest) fund https://www.vanguardinvestments.com.au/retail/ret/investments/funddetailDBF.jsp Its really not worth fiddling around with anything more complicated. With a lot of effort you could maybe save a couple hundred bucks in fees. Simpler to just get the one thing, throw savings at it via a regular automatic plan, and maybe check the balance every 5-10 years. Leave any serious thinking about maybe getting the second fund until you start to push 40. Now thats the principle - o...
by Tonen
Thu Sep 10, 2015 4:58 pm
Forum: Non-US Investing
Topic: Aussie investor here - how is my allocation?
Replies: 12
Views: 1414

Re: Aussie investor here - how is my allocation?

Hi boomdeyada
Have you considered taxation differences in deciding your domestic allocation?
Having all company tax refunded to you (franking credits) on Aussie stocks vs none on International is a valid reason to overweight domestic.
I personally use 50/50 domestic/ international - its easier to resist fiddling with things later when using "naive diversification" as your guiding principle.

Ditch the gold
by Tonen
Tue Aug 18, 2015 3:01 am
Forum: Non-US Investing
Topic: Advice please [Irish citizen, working in Australia]
Replies: 31
Views: 3740

Re: Advice please [Irish citizen, working in Australia]

MA15, the Financial Claims Scheme is still at a nice $250k per ADI
http://www.apra.gov.au/CrossIndustry/Do ... AQ-ADI.pdf
Settlement, the cheapest way to get bonds is in an ETF (VGB, VAF), but I agree with MA15 - most choose to do better with Govt guaranteed, risk-free cash.

The Vanguard figures for Bond performances are Bloomberg AusBond Composite.
by Tonen
Fri Aug 14, 2015 8:09 pm
Forum: Non-US Investing
Topic: Advice please [Irish citizen, working in Australia]
Replies: 31
Views: 3740

Re: Advice please [Irish citizen, working in Australia]

As an aside, consider using one of the P2P currency exchange companies to minimise spreads when you transfer any AUD to Euro. Retail exchange rate spreads are about 3% - you can get close to zero with P2P. I personally use CurrencyFair (which happens to be domiciled in Ireland). There are others - just make sure any you consider are a fully regulated Authorised Payment Institution, so you have the same protections as if dealing with a "real" bank.
by Tonen
Wed May 13, 2015 11:58 am
Forum: Personal Investments
Topic: delete
Replies: 13
Views: 2123

Re: Vanguard Australia - All Weather

Using a single LifeStrategy fund will get you to cheaper fees faster - 0.35% >100k. I suggest picking the one that fits your current needs. Later on as you get closer to retirement and want to dial risk down, it may be most tax efficient to then start to put new contributions into a Vanguard Bond Fund. Adding a second fund does then cost a bit more in fees while enabling you to achieve your changing allocation needs, but will reduce/avoid capital gains you might trigger if you were to partly sell/switch from one LifeStrategy fund to another. Superannuation has to be formally considered as a stand-alone investment from the regulatory point of view, including its written investment strategy. Nevertheless, it clearly makes sense from a persona...
by Tonen
Tue May 12, 2015 8:06 am
Forum: Personal Investments
Topic: Three Fund Portfolio for Australians
Replies: 7
Views: 1821

Re: Three Fund Portfolio for Australians

Looks good. 1. No idea 2. VGB. If it all hits the fan, I don't want to get hit by Aussie company defaults vs Joe H. printing me more $. More correctly, take your risks in equities rather than bonds. Corporate bond risk is uncompensated, and tends to correlate with equity risk. Corporate defaults are way, way higher than governmant domestic defaults. I have vague recollection from a forgotten source that only 6 countries have ever defaulted on domestic bonds in 500 years, and they are serial offenders (eg Argentina, Russia)? Rather than outright domestic default, historically the preferred govt pseudo-default option in debt crisis is to be much more polite, and hammer domestic bond-holders by manufacturing inflation. Maybe hold your nose and...
by Tonen
Tue May 05, 2015 7:41 am
Forum: Personal Finance (Not Investing)
Topic: Advice for young aussie
Replies: 3
Views: 673

Re: Advice for young aussie

Hi Bikeman Your set up so far looks great, and your plan is fine. Make sure you have income protection insurance covered, and maybe some trauma insurance. Its a bugger for the family financially if you hit a tree and they have to look after you forever. The hedging of some international is a bit dodgy in the ING account from a portfolio theory perspective, but not a deal-breaker. If nothing else, hedging tends to generate more tax, as any hedging gains are are distributed. Fees aren't bad once you get through the load to 200k (0.5% capped at 1k). Might be worth considering something a bit cheaper like SunSuper. Maybe drift the emergency account to 10 k for extra piece of mind if the sums work out for you. There is great comfort in having 3 ...
by Tonen
Tue Mar 03, 2015 11:24 pm
Forum: Investing - Theory, News & General
Topic: Poll: Increasing international equities
Replies: 70
Views: 10353

Re: Poll: Increasing international equities

No changes equities 50% domestic, 50% international
by Tonen
Thu Feb 26, 2015 2:10 am
Forum: Personal Finance (Not Investing)
Topic: physicians [Frustrated, considering early retirement]
Replies: 132
Views: 18684

Re: physicians [Frustrated, considering early retirement]

Though we Docs also winge a lot here in Australia, it seems you guys are collectively much more depressed and fed-up.
Seems to me that the way your insurance companies have so much say is the cause for so much of the unhappiness, and arguably you are rightly feeling more harassed than other professions. Makes me grateful that I don't have to work in a managed care environment.
by Tonen
Sat Jan 24, 2015 6:31 am
Forum: Personal Investments
Topic: Should I Declare Victory and Pack It In?
Replies: 173
Views: 23920

Re: Should I Declare Victory and Pack It In?

Three Urologist colleagues of mine retired 50's/ early 60's - all were bored pretty quickly and went back to some level of practice.
Didn't hurt them to figure it out that way. On the other hand it might have been easier if they had eased out. Probably doesn't matter one way or the other - just keep some options open.
by Tonen
Tue Jan 20, 2015 5:48 am
Forum: Personal Consumer Issues
Topic: "Wining and dining" in medical community
Replies: 35
Views: 5035

Re: "Wining and dining" in medical community

The three criteria for a successful specialist practice in decending order of importance.....
Availability
Affability
Ability

Nobody has time for wining and dining for work purposes, though on average probably "play hard" when it comes to wining and dining in family and friends time.
by Tonen
Sun Oct 26, 2014 10:01 pm
Forum: Non-US Investing
Topic: Help with global ETfs from New Zealand
Replies: 23
Views: 3858

Re: Help with global ETfs from New Zealand

Voltage wrote: Vanguard ETFs are available on the Australian Stock exchange. Unfortunately, they are all domiciled in the US which gives a taxation headache for estate taxes over $60000. If looking long term this is a real issue and I feel should be solved before I go further with this.
Hi Voltage.
I'm not sure if the 60k applies. Australia has a tax treaty that avoids this, and maybe ZN has one as well.
Check out this thread..
http://www.bogleheads.org/forum/viewtop ... 0&t=145392
by Tonen
Sat Sep 06, 2014 6:35 am
Forum: Non-US Investing
Topic: Diversification in practice: Investing from Australia
Replies: 28
Views: 6090

Re: Diversification in practice: Investing from Australia

Just be careful not to drop dead. US tax law apparently has some usurious death-duties on any aliens (=non-US citizen human beings) holding any US domiciled assets over $60k or so.
by Tonen
Sun Aug 31, 2014 4:05 am
Forum: Personal Consumer Issues
Topic: Probability question
Replies: 26
Views: 4093

Re: Probability question

Your question is retrospective. The probability he would get it twice is simply 100%. Had you asked the question before the two years, it would be 1/144. Had you thought to ask it after the first year, it would be 1/12. But you didn't. You are asking the question in retrospect - data-mining if you will.
You wouldn't be posing it here if it hadn't already happened, so the correct answer is the probability of him already having won twice is 100%.

Now, having thought of the question, the chances of him winning three in a row is 1/12, four in a row is 1/144 and so on. Having posed your hypothesis, he needs to win the next two (four in a row) to be at p<0.05, i.e. statistically significant.
by Tonen
Sat Aug 30, 2014 3:11 am
Forum: Non-US Investing
Topic: Diversification in practice: Investing from Australia
Replies: 28
Views: 6090

Re: Diversification in practice: Investing from Australia

I am fortunate to have just an "execute only" transaction service for DFA access.
by Tonen
Thu Aug 28, 2014 5:14 pm
Forum: Personal Investments
Topic: Angel Investing
Replies: 6
Views: 1471

Re: Angel Investing

I consider my small amount of Angel financing more like a capitalist version of charity than an investment. It is recorded at "$0" in my portfolio. If it ever happens to pay off that'd be a nice surprise, but it's more about giving what seems to be a really good and useful thing a bit of a leg-up, just in case it really proves to be a good and useful thing that otherwise would have withered on the vine.
Don't go there to get rich. I think you get better odds at a Casino.
And as to how to get started, for me it was through personal connections. Doubt I could get interested enough in something requiring third party introduction.
by Tonen
Sat Aug 23, 2014 7:05 pm
Forum: Non-US Investing
Topic: Diversification in practice: Investing from Australia
Replies: 28
Views: 6090

Re: Diversification in practice: Investing from Australia

A great writeup daffyd. It's going in my bookmarks. Australian Real Estate Investment Trusts Another popular alternative is to include an allocation to Australian REITs. Note that these are already included in an ASX200 fund but at a much lower weight. Also, the tax implications require more keeping-track than standard dividends (see links at the end of this note) so may be best suited for an allocation inside super. My main question about REITs is: how much diversification do we really get from them given our already large allocation to banks and financial institutions? Another concern is that the funds themselves are not very diversified (the Vanguard ETF holds 27 securities, with 87% of the fund's assets in the top 10 holdings). Market V...
by Tonen
Mon Aug 18, 2014 7:40 am
Forum: Investing - Theory, News & General
Topic: When is a 3.75% load worth it?
Replies: 79
Views: 8776

Re: When is a 3.75% load worth it?

If pimco will guarantee those results in perpetuity we all would gladly pay that load and expense ratio. But alas they cannot. And you are cherry picking a fund that has outperformed. The trick is to pick the funds before they outperform. But it is not possible. Not to nit pick but I suspect you'd have given the same answer in 2010, 2011, 2012, and 2013. And yes it is possible...for all the people that bought the fund 2009-2013. Call it luck, yes, but not impossible. We have no guarantees in any of our investments, yet we still make them. Because in part of its past performance. Couple of observations You didn't ask the question in 2010, 2011, 2012, 2013. Ask yourself why you didn't perform the trick of picking this fund beforehand? Ah - &...
by Tonen
Wed Aug 13, 2014 3:51 pm
Forum: Non-US Investing
Topic: Investing in US from New Zealand
Replies: 21
Views: 3664

Re: Investing in US from New Zealand

This NZ article from 2010 may be helpful. Start about 1/3 way in - where passive/ index is discussed.
http://www.maryholm.com/heraldholm.php?article=459
by Tonen
Sun Aug 10, 2014 7:13 am
Forum: Non-US Investing
Topic: Vanguard australia fees
Replies: 14
Views: 2393

Re: Vanguard australia fees

On another note I'm confused about hedging. Do i need to hedge against currency with etfs? If so how? And what effect does it have? Short and sweet - don't hedge. Hedging.. 1) reduces diversification of overseas equities. Basically hedging kills the whole point of having overseas equities - they are there to keep you solvent if domestic goes down the gurgler vs international. 2) is tax inefficient - any hedging gain/loss is taxable in that financial year. You can pay tax on distributed hedging gains even if your fund loses money in any given financial year. 3) inflicts some (small) cost within the fund. None of the Vanguard ETF's are hedged anyway. Cash/ Bonds and so on should only be domestic, so nothing to consider there. http://www.bogl...
by Tonen
Sun Aug 10, 2014 12:49 am
Forum: Non-US Investing
Topic: Vanguard australia fees
Replies: 14
Views: 2393

Re: Vanguard australia fees

Another example of the "Australia Tax" - price gouging where identical items are way more expensive than OS irrespective of exchange rates and any reasonable costs of local distribution. We are considered dumb chumps who just put up with it. By way of illustration for U.S. readers, identical digital content downloaded from U.S. is typically +50% on my Aussie Tunes account vs a US iTunes account.

State Street indices through industry super (e.g. SunSuper) is about the only workaround for managed funds, otherwise its ETF's, with the accompanying hassle of opening a brokerage account/ buy-sell spreads/ brokerage.
by Tonen
Sat Aug 09, 2014 8:10 am
Forum: Personal Consumer Issues
Topic: It won't matter if your password gets stolen
Replies: 20
Views: 3284

Re: It won't matter if your password gets stolen

Biometrics are non-revokable, and are therefore not a serious security option. Once someone figures out some way to replicate your biometric, your compromised - forever.
It might involve less violence though - it'd be more profitable for a scammer to leave your eyeball in your head.
by Tonen
Wed Jul 16, 2014 11:47 pm
Forum: Non-US Investing
Topic: Australian newbie needs your help with starting investing
Replies: 11
Views: 2434

Re: Australian newbie needs your help with starting investin

Hi Cortez, and welcome. As well as starting an emergency fund, do you have adequate income protection insurance and life insurance in place? 1) Should I throw all my savings into first building an emergency fund before investing OR should I split my savings 50/50 and start investing in ETFs while building my emergency fund? I consider my job fairly stable and increases by 3% p.a. Either/or - when in doubt about financial stuff I personally go 50/50. 2) Where should I hold my emergency fund as it builds up? High interest savings account? Vanguard Investor Cash Plus Fund https://www.vanguardinvestments.com.au/retail/ret/investments/funddetailCSH.jsp where I could make regular contributions as it grows over $5000? In an account that offsets my...
by Tonen
Tue Jul 01, 2014 9:03 pm
Forum: Non-US Investing
Topic: Advice for a young Australian Investor
Replies: 17
Views: 2209

Re: Advice for a young Australian Investor

Hi Aussie Lad The older I get the simpler I with I had left things :happy . If I was just starting out again, I reckon I'd just go with LifeStrategy High Growth fund, and exercise benign neglect while regularly adding to it. Only thing to consider is that in 20-30 years time you will you want to wind back your equity allocation. Capital Gains Tax will probably make it prohibitive to switch a single fund to a more conservative option. An easy work around is to at some stage open up a second fund - a more conservative option e.g. Vanguard® LifeStrategy® Conservative Fund. Stop contributing to the High Growth fund, contribute to the conservative fund until you reach relative amounts in each to match whatever overall equity/ bond allocation you...
by Tonen
Sat Jun 28, 2014 5:40 pm
Forum: Non-US Investing
Topic: Investing from new zealand
Replies: 28
Views: 3894

Re: Investing from new zealand

As shown in the Vanguard paper listed above, calculating an appropriate home-bias is a pretty complex question. Its a more difficult decision for a small-market domiciled investors than one in the US whose market makes up a fair chunk of world weighting anyway. I think it would be a rare small-market domiciled investor who could cope well with negative tracking error of a world-weighted equities portfolio vs domestic. Naive diversification is a pretty good principle when things are complex. In asset allocation models it seems to work no worse than anything else. So for me as an Aussie, 50/50 domestic international equity seems no less logical than anything else, and is a figure that I have been able to stick to in thick and thin. Over the l...
by Tonen
Fri Jun 13, 2014 11:19 pm
Forum: Investing - Theory, News & General
Topic: 2nd part of int'l diversification series on ETF.com
Replies: 18
Views: 1855

Re: 2nd part of int'l diversification series on ETF.com

Suppose I want to just use total funds TSM, and TISM. Suppose I work in USA and earn US$, and spend US$. I understand the idea of starting with world market weighting, and then shifting towards TSM since I use US$. But how do I quantify that shift? How do I figure a TSM:TISM weighting? Does it depend on stock:bond allocation? Does it depend on human capital (remaining work years)? If you plan to spend a reasonable chunk of money overseas in retirement - e.g. travelling, or spending a lot of time with family OS, more international seems logical. Tax treatment of domestic vs international. In Australia all company tax paid on dividends is refunded to the shareholder, so its a no-brainer to instantly dismiss market-weight domestic as an optio...
by Tonen
Mon Jun 09, 2014 6:05 am
Forum: Personal Finance (Not Investing)
Topic: Rational Expectations Kindle
Replies: 10
Views: 2771

Re: Rational Expectations Kindle

Really enjoyed it!
I hadn't realised USA DFA'a are zero% REITS - Aussie Core DFA runs around 5-6% for example. Must be to do with local preferences - REIT's have always been a big deal here.
by Tonen
Mon May 26, 2014 6:55 am
Forum: Non-US Investing
Topic: Investment Feedback Particularly Welcome. [Australia]
Replies: 13
Views: 1235

Re: Investment Feedback Particularly Welcome. [Australia]

Aside from the investments, its important to think of the vehicle. Consider dropping a bunch into Superannuation depending on your marginal taxation rate (150k/year/ no tax?). 15% tax rate on earnings is attractive, and it also then gives you access to much cheaper life and income protection insurance than retail - typically costs <1/2. There are a few public offer ones around that give dirt cheap access to at least some of the Indices you mention - e.g. Sunsuper or Australian Super last I looked. Tend to be State Street Funds rather than Vanguard, but still vanilla indexes. Just be careful not to blow the $450k contribution/ 3 year limit that will include ongoing employer paid Super. 20% as play money seems high. Only 10% domestic? The pur...
by Tonen
Sat Apr 19, 2014 6:41 pm
Forum: Personal Finance (Not Investing)
Topic: Looking at top 1% for actionable insight
Replies: 73
Views: 12165

Re: Looking at top 1% for actionable insight

My take on smart vs lucky, and wealth.

Wage and salary earners that work hard, and are smart, disciplined and prudent can make it to the top with a reasonably narrow variance of expected outcomes, depending on their field of endeavour (= the work hard * smart paradigm). They are unlikely to be bankrupt, nor to be mega-millionaires.

Entrepeneurs that work hard, and are smart, disciplined and prudent can make it to the top with a huge variance of expected outcomes depending on the success or failure of their scalable outputs (= the work hard * lucky paradigm). They are at risk of bankruptcy, but aspire to be mega-millionaires.

Actionable? I guess it depends how lucky you feel.
by Tonen
Wed Mar 26, 2014 8:25 am
Forum: Personal Finance (Not Investing)
Topic: Sustainable wage increases over the long term?
Replies: 20
Views: 3229

Re: Sustainable wage increases over the long term?

2% for 35 years sounds like pie in the sky to me.
Australia has had one of the world's best economies over the last few decades, with no recession for I think 3 decades now. Even for the Goldilocks performance, it has only managed ~1.5% annual wage growth vs CPI. I imagine this is at least in the top decile for this period.
Reference http://www.rba.gov.au/statistics/by-subject.htm g02 CPI vs g08 Average weekly ordinary-time earnings:full-time adults (you'll have to do the Excels yourself)

Wage growth/ CPI/ Difference (annualised)
10 year 4.45% 2.80% 1.6%
20 year 4.27% 2.63% 1.6%
30 year 5.04% 3.79% 1.3%

Having said that, the difference is enough that I benchmark my portfolio vs wage growth rather than CPI.
by Tonen
Sun Feb 23, 2014 2:53 pm
Forum: Investing - Theory, News & General
Topic: How to convince family & friends to use Boglehead Method?
Replies: 61
Views: 7437

How to convince family & friends to use Boglehead Method?

The situation is a little easier in Australia Most workers have a portion of their salary directed to a retirement account by law. Those moneys tend to end up in "default" investments - typically around 60/40 stock/ bonds at around 0.7% MER. Not perfect, but mostly there. The conversation usually is just to reassure them that their "masterly inactivity" is a really good thing, and to forget about the commission-seeking shark/ "financial planner" trying to convince the they could do so much better. It usually doesn't take long for inertia to work it's magic, and for them to stick to benign neglect. More than once I've been pleased to hear how cranky some advisor guy got when their target said "no thanks&quo...
by Tonen
Wed Jan 22, 2014 7:14 am
Forum: Non-US Investing
Topic: Advice for Australian Couple
Replies: 7
Views: 1521

Re: Advice for Australian Couple

Hi illmaster, and welcome. Contributions New annual Contributions $12160 his superannuation $6525 her superannuation $90000 taxable (for retirement, not short term goals) The "90k taxable" - do you mean you plan to save $90k/ year outside super? If so, consider upping total Super to $25k/ year each (concessional) into Super to generate additional tax saving. Since this is meant to be retirement savings, maybe toss the whole lot into Super as concessional to the annual limits, and contribute the rest as non-concessional. Having said that, its probably not a bad idea at the beginning to keep a reasonable chunk of retirement money outside super - just in case circumstances change, and you really do want to lay your hands on say $100k...
by Tonen
Thu Jan 09, 2014 9:35 pm
Forum: Non-US Investing
Topic: Aussie Cash vs Govt Bonds
Replies: 11
Views: 1261

Re: Aussie Cash vs Govt Bonds

Thanks guys - most helpful.

Watty - they are taxed the same

At the moment then for Aussies it seems a CD ladder/ cash are a very reasonable alternative to government bonds.
by Tonen
Thu Jan 09, 2014 7:17 am
Forum: Non-US Investing
Topic: Aussie Cash vs Govt Bonds
Replies: 11
Views: 1261

Re: Aussie Cash vs Govt Bonds

So yes bonds have more risk, but in the long run, on average, they have higher returns. If you think the Australian Central Bank might cut rates in the future, then you will be stuck with an asset making you low or no return (or negative real return). Maybe I can try to be clearer by comparing CD vs Bond options with the same duration. That way future market movements are made irrelevant between the options. The nearest maturity Reserve bank bond matures in ~5 months and yields 2.41%. My banks current CD rate for 5 months is 3.91% . Reserve Bank Bond Mar '18 - (5 years) yields 3.42%. Bank 5 year CD yields 4.7%, All are equally guaranteed by the Reserve Bank (subject to $250k/investor/ bank). My interpretation is that in Australia at least ...
by Tonen
Thu Jan 09, 2014 2:22 am
Forum: Non-US Investing
Topic: Aussie Cash vs Govt Bonds
Replies: 11
Views: 1261

Aussie Cash vs Govt Bonds

Cash for an Australian investor can yield around 3.8% - about the same as a 7 year Treasury bond, with zero risk/ same government guarantee.

Given the general view is to keep coupon bond duration in the short to middling range anyway, is there any particular reason an Aussie should buy RBA coupon bonds instead of just keeping it as cash? To me it seems like a free lunch for small investors to be able to access the institutional 7 year-duration yield at zero duration and no credit risk. Am I missing something?

For clarification, Aussie cash for Australian investors is Government guaranteed up to $250k/ investor/ institution. Same concept as FDIC, except I gather in USA it only covers CD's.
by Tonen
Fri Jan 03, 2014 7:11 am
Forum: Personal Finance (Not Investing)
Topic: Home maintenance costs: Does 1% hold true?
Replies: 32
Views: 5205

Re: Home maintenance costs: Does 1% hold true?

What figure does USA tax department allow as depreciation for investors? That's likely to be close to a realistic number both for investors and home-owners. They don't give deductions away.
In Australia it's 4%/ annum - that pretty much reflects what I spend per year on average to maintain our home. For homeowners (like companies), it's easy to fudge the figures and let things become gradually more "tired" if you don't spend your depreciation.
by Tonen
Tue Dec 31, 2013 6:52 pm
Forum: Personal Investments
Topic: Asset Allocation for Middle Age
Replies: 32
Views: 7251

Re: Asset Allocation for Middle Age

When its time is indeed a mystery - for me it was about age 45 - once the kids started leaving school it dawned on me that I really may well stop working in 15-20 years. Before that age, having a young family meant retirement felt a pretty abstract concept! I try to avoid the "getting fooled" issue by mechanically adjusting my stock bond allocation each year to gradually get it to what I would like it to be when I retire. Lets say you pick 40/60 for retirement, and figure that you could reasonably save enough to retire in 20 years time. You are currently 80/20. Change your ratio by 2% per year. Given generous tolerance bands, this may well translate to very little portfolio turnover - dividends and new monies have a fair chance of...
by Tonen
Sun Dec 29, 2013 8:51 pm
Forum: Investing - Theory, News & General
Topic: Lots of ? market timing on bonds
Replies: 20
Views: 1961

Re: Lots of ? market timing on bonds

(Australia)
CD's here are a no-brainer over government bonds irrespective of whether you want short or intermediate duration.
Individual investors have it all over the institutions - CD's (at least as online accounts) are Government Guaranteed up to $250k/account, and generally yield around the same as 3-4 year government bonds. Nice, free lunches do occasionally exist.
by Tonen
Wed Dec 25, 2013 5:09 am
Forum: Personal Investments
Topic: slowly moving to 3 fund... role of REITs?
Replies: 29
Views: 3701

Re: slowly moving to 3 fund... role of REITs?

Residential real estate in Australia is estimated to be 3.5 times the value of our stock market - add in unlisted commercial property I guess may push that to over 4 times. Presumably the situation in the USA is similar. I don't have the time or interest to invest directly in real estate beyond owning our home.

Imperfect a surrogate as they might be, REITS reflects something of this vast asset class. 20% of my equity allocation in REITS (10% domestic, 10% international) really doesn't feel like overkill if you view it from the perspective of a passive, no effort, low cost investment in something that at the end of the day dwarfs the stock market.
by Tonen
Sun Dec 22, 2013 6:53 am
Forum: Investing - Theory, News & General
Topic: Commodities Funds: A Decade of Disaster
Replies: 196
Views: 26786

Re: Commodities Funds: A Decade of Disaster

These things were originally flogged to the market mainly on the basis of "normal backwardation"/positive roll return claims, with less mention of diversification/ inflation protection. Essentially, roll returns + the collateralised returns were supposed to give similar returns to that of equity markets, even if commodity spot returns were a wash. Historical evidence of these retrospectively constructed next-nearby long-only collateralised commodity futures purportedly showed there was a shortage of producers + speculators willing to provide the surety of future price that buyers wanted to lock in, hence buyers (on average) paid over the odds to lock those future prices in. I invested in GSCI for a brief period via a Euronext comm...
by Tonen
Tue Dec 17, 2013 6:47 am
Forum: Investing - Theory, News & General
Topic: misguided interest in div strategies
Replies: 200
Views: 23101

Re: misguided interest in div strategies

I personally agree high dividends are no advantage.
Having said that, there are two things that do niggle, despite the evidence to the contrary.
Firstly, agency risk - investors have arguably more interest in putting free cash flow (dividends) to good use than managers might with retained earnings.
Secondly, my understanding of economic theory is that the value of a company must be the net present value of all future anticipated dividend streams. Makes me wonder about companies that pay low or no dividend now with the promise of "pie in the sky".
by Tonen
Mon Dec 16, 2013 4:10 pm
Forum: Investing - Theory, News & General
Topic: Resist temptation of leverage
Replies: 7
Views: 1492

Re: Resist temtatiion of leverage

Just a thought bubble Larry ... stocks also have embedded leverage by virtue of company borrowings.

Though obviously different to what you are referring to here, do highly leveraged companies suffer similarly to what you describe? Have company leverage ratios been investigated in terms of factor investing? If company leverage is important, is it somehow already picked up in value/size/profitability factors?