Finance/portfolio advice for 30 YO [Australia]

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Topic Author
BinChicken
Posts: 2
Joined: Tue May 11, 2021 4:20 pm

Finance/portfolio advice for 30 YO [Australia]

Post by BinChicken »

Hi all,

I'm relatively new to this forum, but I've been learning a lot over the last few months from reading posts. I've finally entered the workforce in a stable capacity and I thought that it would be a good idea to put together a financial plan and get some feedback from the collective wisdom of my fellow Bogleheads.

About Me

30 YO living with long-term partner in Australia. I've been studying forever and have only been working FT for most of the last 3 years (brief unemployment in 2020 due to the pandemic). Just switched into a new role and company within the last 3 months. Currently renting. Partner is working part-time due to study (current income ~$40k with $100k in savings) and is expected to move up to ~$70k next year.

No plans to move internationally.

Income

Salary: $93K + 9.5% superannuation.

Costs

~$1700 per month (includes $700 per month in rental costs). Generally frugal mentality.

Debt

$28.7K in HECS/HELP (for non-Australians, this is an indexed, interest-free student loan).

Goals

Probably looking to buy first home within the next 2 years, but no need to rush this.

I don't have a firm what my goals are for the longer term (i.e. 10-20 years+), but I do like the idea of being financially independent in 20 years time. Specifically, being able to choose to live solely on passive income from investments if I choose to.

Current Portfolio

$85k in HISA.

I've chosen a 90/10 split of equities and bonds given that I've got potentially 30 years of working life ahead of me.

I have a small amount ($5k) investment in Vanguard index-tracking ETFs according to the split below. Very open to suggestions on how to tweak this. Works out to be ~75% non-Australian, ~50% AUD/50% other currencies. VAS is included for franking benefits.

Equities (90%):

45% VGS (Vanguard MSCI Index International Shares) - 0.18% MER
22.5% VGAD (Vanguard International Shares Index Fund AUD-Hedged) - 0.21% MER
22.5% VAS (Vanguard Australian Shares Index) - 0.1% MER

Bonds (10%):

10% VAF (Vanguard Australian Fixed Interest Index ETF) - 0.2% MER

Emergency Funds

$6k in HISA.

Superannuation

~$22k in Unisuper (high growth portfolio). For non-Australians, superannuation is a compulsory government scheme where employers pay ≥9.5% of before-tax work earnings into a pension fund.

Questions

How does my portfolio look in the context of my goals? Any suggestions or advice around this?
Is there are other suggestions for things that I should be doing that I've missed?
Does it make sense to focus on developing my ETF portfolio, or should I focus on playing catch up with my superannuation?
Last edited by BinChicken on Fri May 14, 2021 7:10 am, edited 1 time in total.
bos1234
Posts: 4
Joined: Thu May 13, 2021 9:28 am

Re: Finance/portfolio advice for 30 YO [Australia]

Post by bos1234 »

You must not be in Melbourne or Sydney if you're looking to buy in the next two years.

Does your partner also work?

IMO, you need to increase your salary over the next few years. Only way to get solid passive income is if youve dumped alot of cash into ETFs.

You mentioned that you studied for a long time, so you should have a good base to increase your salary after you get some experience.
Topic Author
BinChicken
Posts: 2
Joined: Tue May 11, 2021 4:20 pm

Re: Finance/portfolio advice for 30 YO [Australia]

Post by BinChicken »

Whoops. Forgot to add this to my original post (updated now).

Partner currently working part-time due to study with an income of $40k and $100k in savings. Expected to earn around $70k next year when they move up to full-time. I've also got an additional $85k in savings that I didn't mention.

I'm am actually based in Melbourne :-| .

Definitely hoping to increase my salary once I get some more experience.
andrew99999
Posts: 840
Joined: Fri Jul 13, 2018 8:14 pm

Re: Finance/portfolio advice for 30 YO [Australia]

Post by andrew99999 »

Welcome to the forum.

It looks like you are in a good situation now and able to save very aggressively.

Your emergency fund counts in your total portfolio, so you can leave out the VAF for now. Probably for quite a while.

Your portfolio split looks good to me, although since you will have a house, I think you can reduce VGAD because that means you will already have a lot of AUD based assets. Maybe 65/10/25 VGS/VGAD/VAS.

Hopefully you are rotating buying one fund each time to reduce brokerage.

The main issues I would see are:

1. if you are saving for a house within about 4-5 years, the money for the deposit should not be in the market.
2. If not to be used for the house or other short term savings goal, I would focus on super. Whatever money you will need after the age of access to super, should ideally be saved before the part you want invested outside super for potential early retirement due to the increased compounding of the money you save in tax. The exception is if you have something relatively soon but over 7-10 years, then inventing outside super would take precedence.

Generally
• whatever you need within 5 years, use a HISA
• whatever you need beyond 10 years but before 60, invest outside super
• whatever you need after 60, use super
jg12345
Posts: 104
Joined: Fri Dec 11, 2020 1:03 pm

Re: Finance/portfolio advice for 30 YO [Australia]

Post by jg12345 »

Great advice from Andrew99999

One little note: I'm not Australian so feel free to ignore, but I would move your bond allocation from Australia only to a total world bond ETF hedged to AUD if available.
andrew99999
Posts: 840
Joined: Fri Jul 13, 2018 8:14 pm

Re: Finance/portfolio advice for 30 YO [Australia]

Post by andrew99999 »

jg12345 wrote: Fri May 14, 2021 1:16 pm One little note: I'm not Australian so feel free to ignore, but I would move your bond allocation from Australia only to a total world bond ETF hedged to AUD if available.
The options are a bit frustrating.

Total market funds:
Au: VAF
Global: VBND

However, VAF has more government and high-quality bonds (75% AAA, 20% AA), and the overall grade is high enough to be a contender against government bonds. Whereas VBND has a lot more at the lower end of high-quality bonds (42% AAA, 16.3% AA, 23.5% A, 17.2% BBB).

An alternative would be global government bonds (VIF), but for some reason that I can't comprehend, they included developing countries, so again, the rating is lower. Otherwise, this would be my choice over all existing options.

With those alternatives, it's a tough call between VAF and the international alternatives, particularly considering that Australia is one of the most stable and well-developed countries in the world, so the government isn't likely to default, and 75% of the bonds are Aus govt. bonds.
jg12345
Posts: 104
Joined: Fri Dec 11, 2020 1:03 pm

Re: Finance/portfolio advice for 30 YO [Australia]

Post by jg12345 »

Got it! excellent answer. indeed I started my comment as "I'm not an Australia expert"... hence OP please ignore my comment and/or read Andrew answer for more info :)
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