Australian index funds

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Topic Author
spsbo1
Posts: 64
Joined: Wed Sep 15, 2010 1:33 pm

Australian index funds

Post by spsbo1 »

Hi there,

I'm hoping you guys can help me.

My sister who lives in Australia has saved up $7K AUD that she wants to put in a safe investment for her 2 daughters (10 and 8). The time horizon is about 13 years (until the youngest is 21).

Can anyone recommend a good product that is safe and will grow in value and be low cost that is easy to buy in Australia?

Many thanks,

Mark
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stratton
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Location: Puget Sound

Re: Australian index funds

Post by stratton »

Vanguard Australia.

https://www.vanguardinvestments.com.au/ ... t/home.jsp

Upper right corner has links to introductory documents. I don't know the fund minimums so check that.

Paul
...and then Buffy staked Edward. The end.
Topic Author
spsbo1
Posts: 64
Joined: Wed Sep 15, 2010 1:33 pm

Re: Australian index funds

Post by spsbo1 »

Thanks.
Any particular funds you can recommend?
mark
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joe8d
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Location: Buffalo,NY

Re: Australian index funds

Post by joe8d »

Vanguard.Au Life Strategy Funds.5K AUD Min. Would use the 90/10 Fund.
All the Best, | Joe
vencat
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Joined: Thu Sep 10, 2009 6:30 pm

Re: Australian index funds

Post by vencat »

I would suggest Vanguard Lifestrategy Highgrowth or Growth fund. High growth is the 90/10 fund mentioned above.
AlohaJoe
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Location: Saigon, Vietnam

Re: Australian index funds

Post by AlohaJoe »

FWIW, I don't like the Vanguard Australia funds. The Lifestrategy recommended above has an ER of 0.9%. A similar fund in the US us 0.18%, so the Australian fund is five times more expensive. Sure, for $7,000 that's only $63 a year but it still irks me. You can buy index ETFs through a broker that have substantially lower ERs. (The SPDR World ex Australia is 0.42% for instance.) Buying through a brokerage like CMC will cost you $11 so you're ahead on costs from day one and they just continue to accumulate over the years.

Over 13 years it adds up to about $600 difference (assuming a 5% growth rate).
vencat
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Re: Australian index funds

Post by vencat »

Advantages of Vanguard Lifestrategy funds:

1) Fantastic diversification covering global stocks, bonds and real estate. For the Australian investor probably a better, sophisticated alternative than the 3 fund one available in the US. Everything in Australia is more expensive than US except for kangaroo pie :wink:
2) Simplicity obviously, in view of one fund and automatic rebalancing. Probably the best choice for a know nothing investor
3) No broker or adviser required. Just buy directly from Vanguard Australia.
4) Minimum of 5000 AUD.

Disadvantages of ETFs:
1) Broker or online trading account. Apart from commissions may require minimum trading activity and higher minimum balance.
2) Just try creating a similar portfolio to the ones above.
3) Monitoring and rebalancing required. More opportunities for unwise tinkering.
4) Not for the know nothing investor like the OP's sister, I'm guessing.

I had recommended the Vanguard funds to my sister and her son for years and they have finally seen the light.

Of course, Mark and his sister need to understand that there is no guarantee this is 'a safe investment which will grow in value'. There is no such thing that I know of.
Best wishes.

Venkat
Topic Author
spsbo1
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Joined: Wed Sep 15, 2010 1:33 pm

Re: Australian index funds

Post by spsbo1 »

thanks everyone!
daffyd
Posts: 199
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Location: Australia

Re: Australian index funds

Post by daffyd »

A slightly lower cost option is available from Colonial First State for 30%, 50% or 70% equity (Wholesale Multi-Index Conservative, Diversified and Balanced Funds):

http://www.colonialfirststate.com.au/fo ... tureId2130

They also have basic asset class funds (Australian and International Shares, Australian Property, Fixed Interest).

The only thing to watch is to make sure you choose the lower-cost index options (they also have more expensive actively managed funds available), e.g. for the investor who wants to keep things simple choose from:
FirstChoice Wholesale Multi-Index Conservative
FirstChoice Wholesale Multi-Index Diversified
FirstChoice Wholesale Multi-Index Balanced

These are still more expensive than building your own from component parts but less complicated to manage for a new investor. They are also not necessarily that tax-efficient (which again requires greater understanding of asset allocation and asset location).
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asset_chaos
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Location: Melbourne

Re: Australian index funds

Post by asset_chaos »

You specified a safe investment. How safe do you mean? If your sister means an investment gift that the girls will tap one day for their own retirement, then several of the stock heavy suggestions are reasonable. If, however, she means that the money should be there with certainty in 13 years to be spent for a specfic purpose, then I suggest you want safer than even a balanced stock and bond fund. 13 years is short and a lot of things, including large losses, are possible in the stock market. If you want safe, then my credit union, for instance, has a 36 month term deposit paying 4.1%. Term deposits from your sister's favored credit union or bank would probably be similar. If the term deposit is in the name of the children with mom as signatory, the tax due from the interest generated by $7k at prevaling interest rates may be nil, but see the ATO https://www.ato.gov.au/Individuals/Fami ... -accounts/ or check with a qualified tax advisor to be sure (I am neither).

If a term deposit doesn't offer the growth potential sought, for the 13 year time frame I still wouldn't be more than 30/70 growth/income (LifeStrategy Conservative).

It'll depend on what your sister means by safe.
Regards, | | Guy
daave
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Re: Australian index funds

Post by daave »

One option to consider is opening superannuation accounts for the kids. There's an initial 15% tax hit, but tax-advantaged growth. I like to use Plum Super and some recommend Sun Super, both of whom have access to Vanguard funds, and are relatively low cost (but still much more expensive that comparable retirement accounts in the US).
TedSwippet
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Location: UK

Re: Australian index funds

Post by TedSwippet »

Just a quick check... neither your sister nor her daughters are US citizens or green card holders, right?
AlohaJoe
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Re: Australian index funds

Post by AlohaJoe »

daave wrote:One option to consider is opening superannuation accounts for the kids. There's an initial 15% tax hit, but tax-advantaged growth. I like to use Plum Super and some recommend Sun Super, both of whom have access to Vanguard funds, and are relatively low cost (but still much more expensive that comparable retirement accounts in the US).
AFAIK SunSuper doesn't have access to Vanguard funds. All of their index funds are from State Street Global Advisors. (Regardless, they are still good choices.)
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