Australia - Please help me with my first portfolio

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Topic Author
swifteagle
Posts: 10
Joined: Sat Feb 18, 2017 6:49 am

Australia - Please help me with my first portfolio

Post by swifteagle » Sun Feb 19, 2017 2:17 am

Hi, Can someone please lend me a hand.

What would be a good ETF portfolio to setup from Australia? I am mindful that our market is quite small and it is also dominated by the financial sector, so what would be a smart way of doing a 3 to 4 eft portfolio to be well diversify, have stable growth and be tax efficient?

I am 30 years old with about 200k to invest. I would very much appreciate the help you can give me.

Debt: N/A only rent
Country:Australia
Age:30
Defacto relationship with a one child
Income: 55k per year
Savings: 200k for investing
Emergency funds: 40k on another account

Goal: Invest my money so it grows in the long run... Maybe when I am 50 I can have a nice pool of cash, either then buy a nice house outright or depending on my situation keep the money on the index fund until I am older. So a time horizon of 15-20 years with the potential of longer.

I am happy to buy the ETFs myself, $9.50 per transaction.

P.S My daughter is only 5 months old, I am thinking of copying my portfolio for her with 5k and add 1-2k per year until she is 18. I will probably wont do any bonds for her.


Thank you!
Last edited by swifteagle on Mon Feb 20, 2017 6:06 am, edited 2 times in total.

ATope
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Joined: Tue Jan 06, 2015 7:36 am

Re: Australia - Please help me with my first portfolio

Post by ATope » Sun Feb 19, 2017 4:21 am

Perhaps more info is needed on your investment goals, timeframe, risk appetite, tax situation. I would frame the request in the standard Boglehead style.

FYI. There is a pretty robust Oz-centric investment thread on the Money Moustache forum:

http://forum.mrmoneymustache.com/invest ... read/2750/

As Bogleheads is largely US focused, it might be helpful. But I would still use the Bogleheads standard template for laying out your situation.

Lou354
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Re: Australia - Please help me with my first portfolio

Post by Lou354 » Sun Feb 19, 2017 4:33 am

Check out "Investing in Australia" in the wiki. https://www.bogleheads.org/wiki/Investing_in_Australia

Ma15
Posts: 55
Joined: Tue May 12, 2015 1:21 am
Location: Australia

Re: Australia - Please help me with my first portfolio

Post by Ma15 » Sun Feb 19, 2017 6:16 pm

swifteagle wrote:Hi, Can someone please lend me a hand.

What would be a good ETF portfolio to setup from Australia? I am mindful that our market is quite small and it is also dominated by the financial sector, so what would be a smart way of doing a 3 to 4 eft portfolio to be well diversify, have stable growth and be tax efficient?

I am 30 years old with about 200k to invest. I would very much appreciate the help you can give me.

Thank you!
Can you please edit your OP to include information as per Asking Portfolio Questions.

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asset_chaos
Posts: 1647
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Location: Melbourne

Re: Australia - Please help me with my first portfolio

Post by asset_chaos » Sun Feb 19, 2017 7:05 pm

swifteagle wrote:What would be a good ETF portfolio to setup from Australia? I am mindful that our market is quite small and it is also dominated by the financial sector, so what would be a smart way of doing a 3 to 4 eft portfolio to be well diversify, have stable growth and be tax efficient?
Note that it could be tax efficient to salary sacrifice the maximum into super and use your $200k to live on for several years until effectively you've transferred all savings into super. You'll have to run your own numbers and account for your own priorities to see if that would be a good path for you.

For an etf portfolio, you could start by investigating

VAS - Vanguard Australian Shares Index (ER 0.14%)
VGS - Vanguard World ex-Aus Shares Index (ER 0.18%)
VAF - Vanguard Australian Fixed Interest Index (ER 0.20%)

The combination of VAS and VGS gives an Australian investor a simple two fund solution to index (nearly) global equity markets and use VAS to have their precise preferred weighting of Australian shares. It's not quite as good as it could be, hence my 'nearly' equivocation, because it appears the World ex-Aus fund is developed markets only, no emerging. There are, of course, other options you could look at. It's most important to make a plan that you can stick to, regardless of what the markets do.
Regards, | | Guy

Topic Author
swifteagle
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Re: Australia - Please help me with my first portfolio

Post by swifteagle » Mon Feb 20, 2017 6:06 am

Thank you guys for getting back to me, I really appreciate the help! As simple as index fund investing could sound, once you get deeper there are a lot of questions that then need to be answer, it can be a bit overwhelming.

I have updated my original to include further information, also I am thinking of copying my portfolio for my 5-month-old baby so when she is 18 hopefully she can have a good start. Hers would be started with 5k and then 1-2k per year until she is 18 year old.

@asset_chaos,
Thank you for the portfolio suggestion. How would you split that portfolio? Just thirds?

@Lou354,
Thank you, I will have a read.

@ ATope
Thank you, awesome link... definitely, will be reading that thread.

I hope with the updated info you guys could provide me with further information. Thank you all once again!

Topic Author
swifteagle
Posts: 10
Joined: Sat Feb 18, 2017 6:49 am

Re: Australia - Please help me with my first portfolio

Post by swifteagle » Tue Feb 21, 2017 8:31 pm

Bumping for help!

Miriam2
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Re: Australia - Please help me with my first portfolio

Post by Miriam2 » Tue Feb 21, 2017 8:37 pm

swifteagle wrote:I have updated my original to include further information, also I am thinking of copying my portfolio for my 5-month-old baby so when she is 18 hopefully she can have a good start. Hers would be started with 5k and then 1-2k per year until she is 18 year old.
At 5 months old, I would guess your baby daughter is probably the youngest Boglehead we have on the forum :happy

Topic Author
swifteagle
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Re: Australia - Please help me with my first portfolio

Post by swifteagle » Tue Feb 21, 2017 9:54 pm

Miriam2 wrote:
swifteagle wrote:I have updated my original to include further information, also I am thinking of copying my portfolio for my 5-month-old baby so when she is 18 hopefully she can have a good start. Hers would be started with 5k and then 1-2k per year until she is 18 year old.
At 5 months old, I would guess your baby daughter is probably the youngest Boglehead we have on the forum :happy
I am going to start calling her Boglehead :D. I hope she is deserving of the money when the time comes, if she is, hopefully it will set her for an easier financial journey through life. I did not get any financial help from my parents (they didn't have the money) and nor will I get any inheritance so I want to help her where I can.

Ma15
Posts: 55
Joined: Tue May 12, 2015 1:21 am
Location: Australia

Re: Australia - Please help me with my first portfolio

Post by Ma15 » Tue Feb 21, 2017 10:43 pm

swifteagle wrote:I have updated my original to include further information
Some additional considerations:
1. Since you have a spouse and child, investing through a family trust (with a corporate trustee) is common. It allows tax-efficient distribution of taxable profits from your investments as well as asset protection. You could potentially your $200k + your child's funds together. I am with SunSuper.

2. You could also pool your super funds together between you and your spouse. Super should also be considered as part of your overall portfolio (super + non-super). Refer to my post here for index fund options in super. For tax-efficient allocation of stocks/bonds, I would consult the wiki - the principles can be applied to Australian investors as well. Bonds are generally tax-inefficient compared to stocks and therefore should be held in super at 15% instead of outside super with most people's tax rates being over 15%. I've detailed a simple example here on allocating stocks/bonds between super/non-super.

3. For a model portfolio, I think iShare's Core overall is the easiest to follow. It's based on holding 3-5 'core' holdings. You could implement a portfolio outlined by asset_chaos.

4. If you have $200k to invest, I would not go with ETFs. I would call Vanguard and request that you can have access to their wholesale funds. They've allowed investors with $100k to invest in their wholesale funds (which are minimum $500k). I hold several of their wholesale funds.

Topic Author
swifteagle
Posts: 10
Joined: Sat Feb 18, 2017 6:49 am

Re: Australia - Please help me with my first portfolio

Post by swifteagle » Wed Feb 22, 2017 12:22 am

Ma15 wrote:
swifteagle wrote:I have updated my original to include further information
Some additional considerations:
1. Since you have a spouse and child, investing through a family trust (with a corporate trustee) is common. It allows tax-efficient distribution of taxable profits from your investments as well as asset protection. You could potentially your $200k + your child's funds together. I am with SunSuper.

2. You could also pool your super funds together between you and your spouse. Super should also be considered as part of your overall portfolio (super + non-super). Refer to my post here for index fund options in super. For tax-efficient allocation of stocks/bonds, I would consult the wiki - the principles can be applied to Australian investors as well. Bonds are generally tax-inefficient compared to stocks and therefore should be held in super at 15% instead of outside super with most people's tax rates being over 15%. I've detailed a simple example here on allocating stocks/bonds between super/non-super.

3. For a model portfolio, I think iShare's Core overall is the easiest to follow. It's based on holding 3-5 'core' holdings. You could implement a portfolio outlined by asset_chaos.

4. If you have $200k to invest, I would not go with ETFs. I would call Vanguard and request that you can have access to their wholesale funds. They've allowed investors with $100k to invest in their wholesale funds (which are minimum $500k). I hold several of their wholesale funds.
Thank you for your input!

1. Meeting with the accountant next week, so I will be asking about the family trust option.

2. Not sure if I would like to mix our supers.... you never know there might be a separation and that would complicate things even more.

3. Very handy!

4. I was offered the 100k buy in few weeks ago when I called Vanguard. I even started a thread asking about ETFs vs Fund as I was starting to think the fund was better value... I added all the ETFs I would need to replicate the holdings of the growth fund and it seemed the fees were a lot higher if I were to go with 9 ETFs over the one fund. What is the overall better option in your opinion?
viewtopic.php?f=1&t=211453&p=3244722#p3244722

Cheers!

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Redstorm
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Re: Australia - Please help me with my first portfolio

Post by Redstorm » Sat Mar 11, 2017 6:41 pm

(Australian)
I had simple

VAS
VTS
VEU
VGB

Though over recent times I've added VGS as its Aussie domiciled to substitute VEU/VTS and VAF rather than VGB

A Listed Investment Company such as AFI, WHF, ARG, or MLT may also be a consideration for your daughters allocation of funds, AFI has been running for near on 80 years now, has outperformed the Aussie Accumulation Index (dividends reinvested) fees included and is low fee in line with index/etf funds.

http://www.afi.com.au/Investing-for-Children.aspx

Valuethinker
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Joined: Fri May 11, 2007 11:07 am

Re: Australia - Please help me with my first portfolio

Post by Valuethinker » Sun Mar 12, 2017 11:36 am

swifteagle wrote:Hi, Can someone please lend me a hand.

What would be a good ETF portfolio to setup from Australia? I am mindful that our market is quite small and it is also dominated by the financial sector, so what would be a smart way of doing a 3 to 4 eft portfolio to be well diversify, have stable growth and be tax efficient?

I am 30 years old with about 200k to invest. I would very much appreciate the help you can give me.

Debt: N/A only rent
Country:Australia
Age:30
Defacto relationship with a one child
Income: 55k per year
Savings: 200k for investing
Emergency funds: 40k on another account

Goal: Invest my money so it grows in the long run... Maybe when I am 50 I can have a nice pool of cash, either then buy a nice house outright or depending on my situation keep the money on the index fund until I am older. So a time horizon of 15-20 years with the potential of longer.

I am happy to buy the ETFs myself, $9.50 per transaction.

P.S My daughter is only 5 months old, I am thinking of copying my portfolio for her with 5k and add 1-2k per year until she is 18. I will probably wont do any bonds for her.


Thank you!
For your daughter it depends upon whether there are tax protected accounts (e.g. educational savings accounts) and how her tax works (does her income, under 18, get blended with yours?).

Also you have to consider what happens if your relationship breaks up (sorry, but one has to think of these things) and what happens if you die?

As to investment weightings:

-- most of us who started investing in our 20s would, I think, say that being more than 80% in equities is a mistake. When the next crash/ Bear Market comes, it will really test the nerve. I would seriously think about having 20-30% in bonds, "age in bonds" or "age in bonds - 10%" is not a bad rule of thumb.

Depending on how your tax works, and if Australia offers inflation linked government bonds, putting half of your bonds into that might not be a bad idea. Your big risk is a devaluation of AUD which causes inflation to risk, and inflation linked bonds protect against that (to an extent).

Also if there are government savings certificates (such as American ibonds, or British National Savings) that have advantages in terms of taxability, inflation protection or cashability (liquidity). And also bank Certificates of Deposit (CDs) or equivalent, which may pay higher interest rates than bonds.

But otherwise, I would tend to hold my bonds in Australian Federal Government securities.

on equities global diversification. Like Canada (my home country) Australia has:

- a small economy, heavily dependent upon natural resource exports (and thus how China & India are doing)
- a volatile currency highly linked to those prices (when prices are down, things are bad at home, is also when the currency is down. CAD was almost at parity with USD when the boom was on, now c. 80 cents, could easily go down to mid 60s (lower, if the housing crash I think is about to happen does)
- a stock market which is a tiny part of world markets (less than 5%) and heavily skewed to banks and natural resources (financials are c. 50% of the Australian index last time I checked?)
- highly leveraged personal consumers, and housing valuations which are the highest in the world now (see the chart in The Economist Magazine this week) and are worse than the US was when its bubble blew in 2007-8.

http://www.economist.com/blogs/graphicd ... ly-chart-6

click thru the tabs on the lower graph. Remember, what goes up... tends to come down. If Canadian housing markets are say 5x times the bottom, they are quite likely to fall 50%, go back to 2.5x.

Syndey Melbourne Auckland Toronto (GTA) Vancouver (GVA) are the most highly overvalued metropolitan regions in the world (Hong Kong, London, New York, San Francisco are up there too, but each has its own reasons around land supply & economics why that might not blow up). I am convinced they will blow (track Paul Soos in Australia, his twitter feed at least, and Hildred Macbeth in Canada; in the US the housing guy is Bill McBride who runs a blog called Calculated Risk, called the top of the US housing bubble and the bottom correctly, also Robert Shiller's website and book Irrational Exuberance are great on how these bubbles happen).

I saw this movie before when Toronto housing prices dropped c. 40% in real terms 1989-1994 and didn't recross the levels of 1989 until around 2005-6. People were trapped in negative equity and homes became unsaleable. The Canadian recession of the early 1990s was brutal (worse than 2001 or even 2009). The saving grace was to drop the dollar from high 80s cents down almost 60 cents, and we have a lot of manufacturing (e.g. cars) that go across the adjacent border. Also the US had pretty steady economic growth from 1992-2000 so we were exporting to a growing market. And NAFTA was signed, too.

But it was brutal. High unemployment, people lost their homes, governments slashed spending and a lot of people were really on the edge (or over it) for years. People who went through that, who'd bought their homes in the late 80s, psychologically have never fully recovered. LIke those of us whose careers lived through the dot com crash of the early 2000s (which hit the whole tech industry not just whifty dot coms) mentally (and sometimes career wise) you never quite recover. Losing money like that, and your job, too.

I imagine Perth is living the same nightmare now that Calgary is-- huge falls in natural resource prices (Calgary it is oil, and Canada is the world's high cost producer (tar sands mining)), everybody is overextended, employers cutting back, provincial government slashing costs where it can, etc. etc.

So as an investor you fortunately don't have a big home investment but you do have a career investment in a currency that could go down and an economy that could turn to mud if China's bubble blows, say.

So you want your equities to have global diversification (without currency hedging). Forget Home Country Bias, you want global exposure to your equities.

alex123711
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Re: Australia - Please help me with my first portfolio

Post by alex123711 » Thu Oct 10, 2019 6:57 pm

Ma15 wrote:
Tue Feb 21, 2017 10:43 pm
swifteagle wrote:I have updated my original to include further information

4. If you have $200k to invest, I would not go with ETFs. I would call Vanguard and request that you can have access to their wholesale funds. They've allowed investors with $100k to invest in their wholesale funds (which are minimum $500k). I hold several of their wholesale funds.
Curious about this also, what is the benefit of wholesale vs ETF? Also is it 100k in one or could you spread it over a few different areas?

Ma15
Posts: 55
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Location: Australia

Re: Australia - Please help me with my first portfolio

Post by Ma15 » Thu Oct 10, 2019 7:23 pm

alex123711 wrote:
Thu Oct 10, 2019 6:57 pm
Curious about this also, what is the benefit of wholesale vs ETF? Also is it 100k in one or could you spread it over a few different areas?
Note that the post your replying to is obviously a few years ago.

I would reconsider my post regarding wholesale vs ETF and would now lean towards the latter rather than the former.

But to answer your question, yes you can spread it over more than one finds as long as your total assets are at least $100k (according what last I spoke with Vanguard)

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