Australian Vanguard ETF for three-fund portfolio

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Topic Author
markinvest
Posts: 7
Joined: Fri Apr 10, 2015 8:22 pm

Australian Vanguard ETF for three-fund portfolio

Post by markinvest » Sat May 23, 2015 12:14 am

Hi,

I'm looking to start a three fund portfolio using Vanguard Australian ETFs. I was wondering if someone would be able to have a quick look/offer any suggestions before I buy. I'm looking to pick:

25% in Vanguard® Australian Government Bond Index (VGB)
50% in Vanguard® Australian Shares Index ETF (VAS)
25% in Vanguard® MSCI Index International Shares ETF (VGS)

I'm 25, and I'm looking to invest around $12k initially.

lack_ey
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Re: Australian Vanguard ETF for three-fund portfolio

Post by lack_ey » Sat May 23, 2015 12:30 am

Looks to me like Australian Fixed Interest Index ETF (VAF) is broader and has more assets than Australian Government Bond Index (VGB). Credit quality is still very high, but it has a bit of corporates and is more of a "total bond" approach, not like it makes that much of a difference.

Others may disagree, but I would seriously consider putting about half the stocks (if not a bit more) in the MSCI Index International Shares ETF (VGS). Australia's market cap is not that large compared to the rest of the world (under 3%), and it's heavily weighted in financials. For the very long term you want heavier diversification and a broader representation of stocks, and you can ride out the currency fluctuations.

Note that VGS does not include emerging markets, but this is not as important an omission. Perhaps a 5% allocation or so would be reasonable to the emerging markets fund, but particularly with the low (for now) totals you're working with, it's kind of a rounding error at this point. To be honest, the AUS / ex-AUS split in the short term probably isn't that big a deal either, not with this amount, but you should think about that long term.

AlohaJoe
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Re: Australian Vanguard ETF for three-fund portfolio

Post by AlohaJoe » Sat May 23, 2015 3:36 am

I agree with lack_ey.

I use VAF instead of VGB. And I think you need way more outside of Australia. I mean, I'm totally on-board with the fact that over the past 100 years Australia has outperformed the US and been the single best place on Earth for equities. (Not that Americans seem to know that.) But it is still a tiny market dominated by a handful of sectors.

daffyd
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Re: Australian Vanguard ETF for three-fund portfolio

Post by daffyd » Sat May 23, 2015 7:17 am

I lean towards 50/50 Australian Shares vs International but 1/3rd as you have will likely be fine.

When starting out I would use an online savings account instead of bonds to save on transaction costs (and interest rates available are currently higher than the yield to maturity of either Vanguard bond ETF; although bond values have risen as interest rates fell recently, bond values will also fall if rates rise).

And keep in mind if this is for long-term financial independence/retirement then it can be helpful to think of all your investments (other than emergency funds) as one portfolio. i.e. consider your Superannuation asset allocation also. When you have more investments and/or are in a higher tax bracket you may benefit from keeping more of your bonds/cash in super (where these benefit from a low tax rate on earnings in super) and more of your outside-super investments in equities (which under current tax arrangements would see a capital gains discount either inside or outside super). You should do some calculations to see what makes sense for your situation (It's a little controversial either way. There are similar examples for 401k's floating around here: http://www.bogleheads.org/wiki/Asset_al ... e_accounts).

Topic Author
markinvest
Posts: 7
Joined: Fri Apr 10, 2015 8:22 pm

Re: Australian Vanguard ETF for three-fund portfolio

Post by markinvest » Sun May 24, 2015 12:35 am

lack_ey wrote:Looks to me like Australian Fixed Interest Index ETF (VAF) is broader and has more assets than Australian Government Bond Index (VGB). Credit quality is still very high, but it has a bit of corporates and is more of a "total bond" approach, not like it makes that much of a difference.

Others may disagree, but I would seriously consider putting about half the stocks (if not a bit more) in the MSCI Index International Shares ETF (VGS). Australia's market cap is not that large compared to the rest of the world (under 3%), and it's heavily weighted in financials. For the very long term you want heavier diversification and a broader representation of stocks, and you can ride out the currency fluctuations.

Note that VGS does not include emerging markets, but this is not as important an omission. Perhaps a 5% allocation or so would be reasonable to the emerging markets fund, but particularly with the low (for now) totals you're working with, it's kind of a rounding error at this point. To be honest, the AUS / ex-AUS split in the short term probably isn't that big a deal either, not with this amount, but you should think about that long term.
I have heard that it would be a good idea to invest more in international. As others have said in the thread too. I might make it a 50/50 split as you've said. I will also swap out the VGB index with VAF.

I want to keep investing a set amount each year, probably $5k using the amount split by 'your age in bonds'. So I might include the 5% in emerging markets as you said, making it for this year:

25% in Vanguard® Australian Fixed Interest Index (VAF)
25% in Vanguard® Australian Shares Index (VAS)
20% in Vanguard® MSCI Index International Shares (VGS)
5% in Vanguard® FTSE Emerging Markets Shares (VGE)

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james99
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Re: Australian Vanguard ETF for three-fund portfolio

Post by james99 » Mon Mar 07, 2016 4:33 am

Hi all,

just wondering if anyone's considered VIF Vanguard International Fixed Interest Index Fund (Hedged).

VIF is mainly Treasuries (US, UK, Japan, Australia etc.)

VIF credit rating is lower (AA-) than VAF (AA+)

RandomWalking
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Re: Australian Vanguard ETF for three-fund portfolio

Post by RandomWalking » Mon Mar 07, 2016 11:22 am

AlohaJoe wrote:I mean, I'm totally on-board with the fact that over the past 100 years Australia has outperformed the US and been the single best place on Earth for equities. (Not that Americans seem to know that.)
Did not know that Australia outperformed the USA. By how much?
AlohaJoe wrote:And I think you need way more outside of Australia. ... But it is still a tiny market dominated by a handful of sectors.
What is the range of percentage of equities (or ETFs) that should be Developed or International Ex-Australia?

Ma15
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Location: Australia

Re: Australian Vanguard ETF for three-fund portfolio

Post by Ma15 » Mon Mar 07, 2016 8:12 pm

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Last edited by Ma15 on Sun Apr 03, 2016 4:27 am, edited 1 time in total.

Ma15
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Joined: Tue May 12, 2015 1:21 am
Location: Australia

Re: Australian Vanguard ETF for three-fund portfolio

Post by Ma15 » Sun Apr 03, 2016 4:24 am

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Redstorm
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Re: Australian Vanguard ETF for three-fund portfolio

Post by Redstorm » Thu Aug 17, 2017 4:28 pm

Re Aussie Shares the Vanguard (Australia) charts tell a good story, plus there are franking benefits

http://www.smh.com.au/money/investing/a ... mmb26.html

https://www.fool.com.au/2016/01/21/the- ... -all-time/

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Lancelot
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Location: Philippines

Re: Australian Vanguard ETF for three-fund portfolio

Post by Lancelot » Thu Aug 17, 2017 5:57 pm

At age 25 I would suggest 100% equities, if you are saving for retirement.
No Where for Very Long...

Peter G
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Joined: Sat Apr 30, 2016 8:14 pm

Re: Australian Vanguard ETF for three-fund portfolio

Post by Peter G » Thu Aug 17, 2017 8:41 pm

Do they have to be Vanguard ETF's?
iShares' IOZ is a very similar cost to VAS, and covers the biggest 200 rather than 300 ASX stocks; I think 80% rather than 85% of the ASX total. That's probably tweedledum vs tweedledee.
And you diversify the risks of being with just one financial business.

retiremefast
Posts: 10
Joined: Sun Sep 22, 2019 4:37 pm

Re: Australian Vanguard ETF for three-fund portfolio

Post by retiremefast » Fri Oct 04, 2019 2:50 am

markinvest wrote:
Sun May 24, 2015 12:35 am
I want to keep investing a set amount each year, probably $5k using the amount split by 'your age in bonds'. So I might include the 5% in emerging markets as you said, making it for this year:

25% in Vanguard® Australian Fixed Interest Index (VAF)
25% in Vanguard® Australian Shares Index (VAS)
20% in Vanguard® MSCI Index International Shares (VGS)
5% in Vanguard® FTSE Emerging Markets Shares (VGE)
Hey man, how did the years go for you?
Really curious on what have you decided on for portfolio and if you have had a liniar investment path as proposed.
What platform have you taken for your investment plan?

andrew99999
Posts: 515
Joined: Fri Jul 13, 2018 8:14 pm

Re: Australian Vanguard ETF for three-fund portfolio

Post by andrew99999 » Fri Oct 04, 2019 4:16 am

retiremefast wrote:
Fri Oct 04, 2019 2:50 am
Hey man, how did the years go for you?
If you click on the users name, it is showing their last active date of 2015 high chance they may not reply.
PassiveInvestingAustralia.com

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