Portfolio Advice (Australia)

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
alex123711
Posts: 137
Joined: Sun May 20, 2018 5:01 am

Portfolio Advice (Australia)

Post by alex123711 » Thu Jan 09, 2020 6:32 pm

Just looking for some comments on my portfolio holdings and allocations i've decided on:

Fixed income/cash
20% VAF (Vanguard Australian Fixed Interest Rate ETF)
5% cash

Equities
25% VTS (Vanguard U.S Total Market)
25% VEU (Vanguard All-World ex-US)
25% VGAD (Vanguard MSCI Index International Shares (Hedged)) for currency risk

Super
Hostplus balanced option (looking at alternatives as I would prefer less more international than this option gives.)
Last edited by alex123711 on Sat Jan 11, 2020 1:32 am, edited 2 times in total.

andrew99999
Posts: 558
Joined: Fri Jul 13, 2018 8:14 pm

Re: Portfolio Advice (Australia)

Post by andrew99999 » Thu Jan 09, 2020 9:05 pm

Easier to read with new lines

Fixed income/cash
20% VAF (Vanguard Australian Fixed Interest Rate ETF)
5% cash

Equities
25% VTS (Vanguard U.S Total Market)
25% VEU (Vanguard All-World ex-US)
25% VGAD (Vanguard MSCI Index International Shares (Hedged)) for currency risk

Looks good to me.

Comments
1. You need to be aware of the US estate tax issues with VTS/VEU due to being US domiciled.
2. What is the purpose of cash?
3. I don't have a link to the look at Hostplus balanced option to show asset allocation and fees and whether it is actively managed or not. I would also suggest looking at your super and taxable as a single portfolio.
4. For a better responses, consider using more detailed info as per sticky at the top "My portfolio: seeking advice", particularly the template.

User avatar
asset_chaos
Posts: 1702
Joined: Tue Feb 27, 2007 6:13 pm
Location: Melbourne

Re: Portfolio Advice (Australia)

Post by asset_chaos » Fri Jan 10, 2020 1:28 am

andrew99999 wrote:
Thu Jan 09, 2020 9:05 pm

1. You need to be aware of the US estate tax issues with VTS/VEU due to being US domiciled.
Not clear that VTS ensnares people in the US tax system. VTS is not VTI, rather VTS says it's a CHESS Depositary Interest. And the internet says
What is a CHESS Depositary Interest (CDI)? A CDI is the instrument developed by a subsidiary of ASX that gives investors the same beneficial interests in foreign companies and funds as holding these shares and funds directly on their foreign exchange.
I am not a securities lawyer, but VTS appears to be an Australian registered security, similar to an American depository receipt, that gives the Australian investor a beneficial interest in the underlying ETF VTI without actually owning the US registered ETF. If so, that would eliminate in particular any connection to US estate taxes. Similarly Vanguard.com.au says VEU is also a CDI. At the Vanguard AU site click on the link for Australian prospectus.

I make no promises that that interpretation is correct, but it might be worth a call by the OP to Vanguard to hear what they say about VTS/VEU being structured as depository interests means for an Australian investor.

The other thing to note is that VTS and VEU have a warning at the top of their Vanguard AU information pages that they're quoted and pay in US dollars.
Regards, | | Guy

AlohaJoe
Posts: 5081
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Portfolio Advice (Australia)

Post by AlohaJoe » Fri Jan 10, 2020 1:34 am

asset_chaos wrote:
Fri Jan 10, 2020 1:28 am
andrew99999 wrote:
Thu Jan 09, 2020 9:05 pm

1. You need to be aware of the US estate tax issues with VTS/VEU due to being US domiciled.
Not clear that VTS ensnares people in the US tax system.
We can just check Vanguard's site:

https://www.vanguardinvestments.com.au/ ... /?overview

They list the domicile as the US, so the US will try to take its cut. The prospectus for VTS also lists US estate tax as a consideration for investors.
VTS is not VTI, rather VTS says it's a CHESS Depositary Interest.
I'm not sure that means much. I hold VEU (the ASX version) via CHESS. But it is still US domiciled and I have to file a W8-BEN and US taxes get withheld, etc. It just all happens via CHESS. Which for some reason takes a month to pay out the dividends....December's Q4 dividends will arrive at the end of January.

andrew99999
Posts: 558
Joined: Fri Jul 13, 2018 8:14 pm

Re: Portfolio Advice (Australia)

Post by andrew99999 » Fri Jan 10, 2020 3:27 am

Yep, what AlohaJoe said. Cross listed but domiciled in the US. Requires W8BEN. Has withholding tax requirements.

Topic Author
alex123711
Posts: 137
Joined: Sun May 20, 2018 5:01 am

Re: Portfolio Advice (Australia)

Post by alex123711 » Sat Jan 11, 2020 1:34 am

andrew99999 wrote:
Thu Jan 09, 2020 9:05 pm
Easier to read with new lines

Fixed income/cash
20% VAF (Vanguard Australian Fixed Interest Rate ETF)
5% cash

Equities
25% VTS (Vanguard U.S Total Market)
25% VEU (Vanguard All-World ex-US)
25% VGAD (Vanguard MSCI Index International Shares (Hedged)) for currency risk

Looks good to me.

Comments
1. You need to be aware of the US estate tax issues with VTS/VEU due to being US domiciled.
2. What is the purpose of cash?
3. I don't have a link to the look at Hostplus balanced option to show asset allocation and fees and whether it is actively managed or not. I would also suggest looking at your super and taxable as a single portfolio.
4. For a better responses, consider using more detailed info as per sticky at the top "My portfolio: seeking advice", particularly the template.
Thanks, have edited.

I see a lot of Australians seem to have a high amount of VAS, I don't really see why apart from the franking credits, is it really worth looking at just for those?

andrew99999
Posts: 558
Joined: Fri Jul 13, 2018 8:14 pm

Re: Portfolio Advice (Australia)

Post by andrew99999 » Sat Jan 11, 2020 2:34 am

alex123711 wrote:
Sat Jan 11, 2020 1:34 am
I see a lot of Australians seem to have a high amount of VAS, I don't really see why apart from the franking credits, is it really worth looking at just for those?
Home country bias is a worldwide phenomenon.
As for reason to include/overweight Australian equities
1. Franking credits - although largely priced in but appears to still have some benefit but wouldn't count on it as may be gone in the future.
2. No (or at least low) currency risk - can be mitigated with AUD-hedged equities essentially for free (3 bps), as with VGAD/IHWL.

Other reasons used are contentious (arguable) or misinformed.

So yes, the main reason is the small remaining benefit of franking that is not priced in, and you're paying for that with concentration risk.

User avatar
asset_chaos
Posts: 1702
Joined: Tue Feb 27, 2007 6:13 pm
Location: Melbourne

Re: Portfolio Advice (Australia)

Post by asset_chaos » Sat Jan 11, 2020 6:20 pm

O well. Another one of my beautiful theories slain by distressing fact.
Regards, | | Guy

Topic Author
alex123711
Posts: 137
Joined: Sun May 20, 2018 5:01 am

Re: Portfolio Advice (Australia)

Post by alex123711 » Sat Jan 11, 2020 9:15 pm

I'm still a little unsure of what allocation I should give to International VS U.S:

I have read into some of the comments and posts (including from Bogle, Buffet and JL Collins) about only owning US stocks and no need for international other than maybe a small percentage, and it does make sense to me, however the problem is I am not American and do not live in America. So how does this advice apply to non Americans, if at all? Should we still have only US stocks?

andrew99999
Posts: 558
Joined: Fri Jul 13, 2018 8:14 pm

Re: Portfolio Advice (Australia)

Post by andrew99999 » Sun Jan 12, 2020 5:54 am

I just replied there
andrew99999 wrote:
Sun Jan 12, 2020 5:52 am
JL Collins is fantastic at explaining important investing concepts.
But I suggest you take his concepts, and not his implementation.
He takes the idea of not betting on a part of the market and buying it all, but somehow has decided the US instead of global is "all".
Use his concept of buying all and ignore his definition of "all" and instead go for the real "all" which is global equities.

Just because a person is very smart of knowledgeable doesn't make them infallible.

masterchief
Posts: 10
Joined: Tue Jan 14, 2020 4:29 pm

Re: Portfolio Advice (Australia)

Post by masterchief » Tue Jan 14, 2020 4:34 pm

If you're interested in ASX: IVV thats S&P 500 the domicile is Australia. :happy

Post Reply