26 got lucky now have 1.25M what ETF Australia

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Topic Author
aussiebloke111
Posts: 3
Joined: Wed May 08, 2019 3:18 am

26 got lucky now have 1.25M what ETF Australia

Post by aussiebloke111 » Wed May 08, 2019 3:24 am

My title says it all I need a bit of assistance from yall,

I live in Sydney and have a stable income of approx 90K p/a

I got a bit lucky in a deal i did... anyway i have 1.25M in cash sitting in my bank account, and i want to invest it for the long term
I'm not too risk-averse but i don't want to lose any of the principal.

Should i put it all in vanguard / ishares S&P 500 with drip on and do nothing or should i have this broken up into a few different ETF's?

Thanks for the help guys.

TedSwippet
Posts: 2182
Joined: Mon Jun 04, 2007 4:19 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by TedSwippet » Wed May 08, 2019 6:23 am

Welcome.
aussiebloke111 wrote:
Wed May 08, 2019 3:24 am
I'm not too risk-averse but i don't want to lose any of the principal.
Unfortunately, that's an internally inconsistent statement. Nobody wants to lose any principal, but accepting that you could lose some is pretty much the definition of 'risk'. :-)

Maybe you could say a little more about your long term goals for this money, investment timescales, other financial and family circumstances, and so on. That will help refine any responses. Otherwise, there's not much here for anybody to go on.
aussiebloke111 wrote:
Wed May 08, 2019 3:24 am
Should i put it all in vanguard / ishares S&P 500 with drip on and do nothing or should i have this broken up into a few different ETF's?
Even for a US based investor, holding only S&P 500 shares would be geographically over-concentrated. The US is around 57% currently of world market cap, and some US investors don't venture into non-US stocks, but ignoring the other 43% is particularly odd for a non-US based one.

Are you a US citizen? If yes, your choices will be different (and specifically, limited by your citizenship). Otherwise, if seeking a single-fund solution -- and there's nothing at all wrong with that -- then consider investing in a more globally diversified ETF or fund instead. Vanguard's VT (US domiciled) or VWRD (Ireland domiciled), for example. Australia has good tax treaties with the US, so you have an open choice about which ETF domicile to use without any need to worry about unpleasant US income tax or estate tax laws.

YRT70
Posts: 84
Joined: Sat Apr 27, 2019 8:51 am

Re: 26 got lucky now have 1.25M what ETF Australia

Post by YRT70 » Wed May 08, 2019 7:06 am

aussiebloke111 wrote:
Wed May 08, 2019 3:24 am
My title says it all I need a bit of assistance from yall,

I live in Sydney and have a stable income of approx 90K p/a

I got a bit lucky in a deal i did... anyway i have 1.25M in cash sitting in my bank account, and i want to invest it for the long term
I'm not too risk-averse but i don't want to lose any of the principal.

Should i put it all in vanguard / ishares S&P 500 with drip on and do nothing or should i have this broken up into a few different ETF's?

Thanks for the help guys.
Congratulations.

This is probably a good place to start: https://www.bogleheads.org/wiki/Investing_in_Australia
TedSwippet wrote:
Wed May 08, 2019 6:23 am
Are you a US citizen?
Going by his username I'm guessing no :)

TedSwippet
Posts: 2182
Joined: Mon Jun 04, 2007 4:19 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by TedSwippet » Wed May 08, 2019 7:36 am

YRT70 wrote:
Wed May 08, 2019 7:06 am
TedSwippet wrote:
Wed May 08, 2019 6:23 am
Are you a US citizen?
Going by his username I'm guessing no.
My guess also. But then, he did use the vernacular "y'all". :-)

MotoTrojan
Posts: 4220
Joined: Wed Feb 01, 2017 8:39 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by MotoTrojan » Wed May 08, 2019 7:46 am

How much principal do you think is at risk if you put it all into the S&P500 and reinvest dividends as suggested?

Valuethinker
Posts: 37892
Joined: Fri May 11, 2007 11:07 am

Re: 26 got lucky now have 1.25M what ETF Australia

Post by Valuethinker » Wed May 08, 2019 10:12 am

aussiebloke111 wrote:
Wed May 08, 2019 3:24 am
My title says it all I need a bit of assistance from yall,

I live in Sydney and have a stable income of approx 90K p/a

I got a bit lucky in a deal i did... anyway i have 1.25M in cash sitting in my bank account, and i want to invest it for the long term
I'm not too risk-averse but i don't want to lose any of the principal.

Should i put it all in vanguard / ishares S&P 500 with drip on and do nothing or should i have this broken up into a few different ETF's?

Thanks for the help guys.
There's no way you can protect the principal & have superior returns.

The S&P 500 can, and has, lost 50% of its value in the space of months. "It always recovers" is true of 2008-09, but in the 1929-1942 case, or the 1968-1981 case, it took a lot longer (the latter if adjusted for inflation it fell about 40%).

To protect the principal you put it into Australian government securities. Your returns will be low (around the Yield To Maturity of those bonds) but you will preserve your capital - Australia is not likely to default on its debts.

Any other investment exposes you to risk of loss of principal.

If you buy US Treasury bonds say, that is simply the risk of the exchange rate moving - AUD up against USD.

Any bond issued by a corporate or a lower credit rating government there is a risk of default - although it's small for developed countries (you'd need a rerun of the 1930s before Germany or Canada, say, would default).

If you own a fund, even of safe securities like the above, its value will fluctuate along with changes in interest rates (the opposite direction of the interest rate change). That's usually not too much worry, because your total return (price change + income) will be positive. But it's something to be aware of.

If you buy equities, then you take even more risk. The S&P 500 dropped nearly 50% in the financial crash 2008-09. In the earlier bear (down) market of 2000-03 it dropped about 35%. 20% drops in a few months are not uncommon (it was close to that by the end of December last year).

The best you can do is:

- decide on your absolutely safe pool of assets - say to buy a house within 5 years - your returns will be low but your capital will be guaranteed. Put that in an Australian government securities fund or ETF or buy the bonds directly.

You are then taking 1). no credit risk (risk of borrower defaulting) and 2). no exchange rate risk but the value will fluctuate (somewhat) with changes in interest rates.

- your medium risk assets - put that into a global (developed world) equity fund - rather than just concentrating on the US market (S&P 500) why not own the world?

You are taking 1). equity risk - equities are volatile, very volatile 2). exchange rate risk (unless you buy a currency hedged fund). But you will gain higher returns and you have a degree of diversification in that your job and other assets are in AUD, but your investments are globally diversified as to currency (mostly USD but some JPY GBP EUR etc).

- your high risk assets - maybe 5-10% - put that into an Emerging Market equity fund or ETF (you can dispense with this layer)

I must admit, in your shoes, I'd buy a house (for cash) - but I think the Australian housing market (like the Canadian) has further to fall (I've only been wrong on this for 7-8 years so far ;-)).

Topic Author
aussiebloke111
Posts: 3
Joined: Wed May 08, 2019 3:18 am

Re: 26 got lucky now have 1.25M what ETF Australia

Post by aussiebloke111 » Wed May 08, 2019 4:04 pm

TedSwippet wrote:
Wed May 08, 2019 6:23 am
Welcome.
aussiebloke111 wrote:
Wed May 08, 2019 3:24 am
I'm not too risk-averse but i don't want to lose any of the principal.
Unfortunately, that's an internally inconsistent statement. Nobody wants to lose any principal, but accepting that you could lose some is pretty much the definition of 'risk'. :-)

Maybe you could say a little more about your long term goals for this money, investment timescales, other financial and family circumstances, and so on. That will help refine any responses. Otherwise, there's not much here for anybody to go on.
aussiebloke111 wrote:
Wed May 08, 2019 3:24 am
Should i put it all in vanguard / ishares S&P 500 with drip on and do nothing or should i have this broken up into a few different ETF's?
Even for a US based investor, holding only S&P 500 shares would be geographically over-concentrated. The US is around 57% currently of world market cap, and some US investors don't venture into non-US stocks, but ignoring the other 43% is particularly odd for a non-US based one.

Are you a US citizen? If yes, your choices will be different (and specifically, limited by your citizenship). Otherwise, if seeking a single-fund solution -- and there's nothing at all wrong with that -- then consider investing in a more globally diversified ETF or fund instead. Vanguard's VT (US domiciled) or VWRD (Ireland domiciled), for example. Australia has good tax treaties with the US, so you have an open choice about which ETF domicile to use without any need to worry about unpleasant US income tax or estate tax laws.
Hi Ted ! thanks for the welcome ..

I do accept losing some principal not not all of it i want high growth. ( your and other comments have made me see the light regarding losing principal )

My long term goals are basically to not touch this money and be as rich as possible by the time im 40, i don't require any dividends as i can up my pay pretty easily when required.

I'm Australian based and right now after doing a little research im thinking ETF: iiv 70% and a bond index for the other 30% does this seem reasonable

Thanks

Topic Author
aussiebloke111
Posts: 3
Joined: Wed May 08, 2019 3:18 am

Re: 26 got lucky now have 1.25M what ETF Australia

Post by aussiebloke111 » Wed May 08, 2019 4:10 pm

Valuethinker wrote:
Wed May 08, 2019 10:12 am
aussiebloke111 wrote:
Wed May 08, 2019 3:24 am
My title says it all I need a bit of assistance from yall,

I live in Sydney and have a stable income of approx 90K p/a

I got a bit lucky in a deal i did... anyway i have 1.25M in cash sitting in my bank account, and i want to invest it for the long term
I'm not too risk-averse but i don't want to lose any of the principal.

Should i put it all in vanguard / ishares S&P 500 with drip on and do nothing or should i have this broken up into a few different ETF's?

Thanks for the help guys.
There's no way you can protect the principal & have superior returns.

The S&P 500 can, and has, lost 50% of its value in the space of months. "It always recovers" is true of 2008-09, but in the 1929-1942 case, or the 1968-1981 case, it took a lot longer (the latter if adjusted for inflation it fell about 40%).

To protect the principal you put it into Australian government securities. Your returns will be low (around the Yield To Maturity of those bonds) but you will preserve your capital - Australia is not likely to default on its debts.

Any other investment exposes you to risk of loss of principal.

If you buy US Treasury bonds say, that is simply the risk of the exchange rate moving - AUD up against USD.

Any bond issued by a corporate or a lower credit rating government there is a risk of default - although it's small for developed countries (you'd need a rerun of the 1930s before Germany or Canada, say, would default).

If you own a fund, even of safe securities like the above, its value will fluctuate along with changes in interest rates (the opposite direction of the interest rate change). That's usually not too much worry, because your total return (price change + income) will be positive. But it's something to be aware of.

If you buy equities, then you take even more risk. The S&P 500 dropped nearly 50% in the financial crash 2008-09. In the earlier bear (down) market of 2000-03 it dropped about 35%. 20% drops in a few months are not uncommon (it was close to that by the end of December last year).

The best you can do is:

- decide on your absolutely safe pool of assets - say to buy a house within 5 years - your returns will be low but your capital will be guaranteed. Put that in an Australian government securities fund or ETF or buy the bonds directly.

You are then taking 1). no credit risk (risk of borrower defaulting) and 2). no exchange rate risk but the value will fluctuate (somewhat) with changes in interest rates.

- your medium risk assets - put that into a global (developed world) equity fund - rather than just concentrating on the US market (S&P 500) why not own the world?

You are taking 1). equity risk - equities are volatile, very volatile 2). exchange rate risk (unless you buy a currency hedged fund). But you will gain higher returns and you have a degree of diversification in that your job and other assets are in AUD, but your investments are globally diversified as to currency (mostly USD but some JPY GBP EUR etc).

- your high risk assets - maybe 5-10% - put that into an Emerging Market equity fund or ETF (you can dispense with this layer)

I must admit, in your shoes, I'd buy a house (for cash) - but I think the Australian housing market (like the Canadian) has further to fall (I've only been wrong on this for 7-8 years so far ;-)).
I understand a bit more now about the principal thing and im willing to risk more.

my safe pool of assets is my salary per year ( i can increase this easily should i need too ) and will deposit roughly 30k per year into my equities when i decide on them.

I looked at bond etf's and just wanted to know your thoughts is there any real difference between the providers of these or basically i should just pick a AUS domiciled one and pump it?

Additionally i was thinking is it possible to have a bond ETF with DRIP on so that i don't have a capital gains event and can keep reinvesting the dividends as i don't really need them and would rather have the money in the market ?

Cheers and thanks for the very detailed post

Thesaints
Posts: 2632
Joined: Tue Jun 20, 2017 12:25 am

Re: 26 got lucky now have 1.25M what ETF Australia

Post by Thesaints » Wed May 08, 2019 4:12 pm

aussiebloke111 wrote:
Wed May 08, 2019 4:04 pm
I do accept losing some principal not not all of it i want high growth. ( your and other comments have made me see the light regarding losing principal )

My long term goals are basically to not touch this money and be as rich as possible by the time im 40, i don't require any dividends as i can up my pay pretty easily when required.

I'm Australian based and right now after doing a little research im thinking ETF: iiv 70% and a bond index for the other 30% does this seem reasonable

Thanks
Then, put all the principal you absolutely don't want to lose in an inflation-indexed government bond (does Australia issue those ?) and invest the rest in the vehicle with the highest expected return and risk. Think rolling market indexes call options, or something along those lines.

You will be guaranteed not to lose the money you don't want to lose and will have chances of making the highest profits you can afford within 14 years.

andrew99999
Posts: 349
Joined: Fri Jul 13, 2018 8:14 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by andrew99999 » Wed May 08, 2019 10:05 pm

aussiebloke111 wrote:
Wed May 08, 2019 4:04 pm
Hi Ted ! thanks for the welcome ..

I do accept losing some principal not not all of it i want high growth. ( your and other comments have made me see the light regarding losing principal )

My long term goals are basically to not touch this money and be as rich as possible by the time im 40, i don't require any dividends as i can up my pay pretty easily when required.
Before moving on to investing plan and asset allocation, when you say you want as much as possible by 40, does that mean you plan to withdraw and use it for something at that piont, or just to have as much as possible of which you can use to live off the passive income, yet continue to be invested?

aussiebloke111 wrote:
Wed May 08, 2019 4:04 pm
I'm Australian based and right now after doing a little research im thinking ETF: iiv 70% and a bond index for the other 30% does this seem reasonable
There is no reason to be only invested in the US. There are 22 other developed countries and 24 emerging countries to invest in.
Your equities allocation should begin with global cap weighting of all of these.
If you wanted to tilt (overweight) any particular allocation, you would then do it from this as a starting point.

For Australia this is either

VTS/VEU combo (total US and total ex-US markets)
VGS/VGE/VISM combo (developed countries large & mid companies, emerging countries, developed countries small companies)

The first option is super cheap and the most diversified option, but the funds are US domociled, so if you forget to fill out the W8Ben form every few years and die while holding these funds, the US govt takes a big chunk of your money that your heirs would otherwise get, so most use the second option.

Thesaints wrote:
Wed May 08, 2019 4:12 pm
Then, put all the principal you absolutely don't want to lose in an inflation-indexed government bond (does Australia issue those ?) and invest the rest in the vehicle with the highest expected return and risk. Think rolling market indexes call options, or something along those lines.
Yes Australia has government bonds. VGB. The alternative is VAF which is has some investment grade corporate bonds. VAF should be fine but obviously if someone strongly believes high quality corporates are not the definition of what your bond allocation should be, then VGB would be the choice.

By the way, if OP will have a home loan, then keeping the fixed income portion in a home loan offset account (not a redraw account) would be a far better choice than bonds.
I don't even know if other countries have offset accounts available, I have never heard the term, maybe it is called something else?
It is a savings account such that any money in there offsets the interest payable on the loan for the period it is in there, but the money still belongs to you and you can take it out any time as it is still technically your own money in your own savings account. The return is then home loan interest rates which are higher than bonds, it is also 100% risk free as it is literally in cash and it is not locked up for any time period.

landrover
Posts: 3
Joined: Sun Jan 27, 2019 11:16 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by landrover » Wed May 08, 2019 10:50 pm

I would open a wholesale account with vanguard. Allocate according to your risk profile. I would also put a small portion of it into property. Get a property loan for a large portion of it so you can use negative gearing initially (which although likely to change will be grandfathered in so won’t be affected if you buy before they change the rules) but make sure you buy somewhere that has a decent income to value ratio. For example where I live in South West Vic there is a strong rental market in many towns and you can get a home loan that will be covered by rental income pretty decently.

Also consider putting a few hundred into superannuation. The tax incentives are quite good and I think you can put something like 300k in as a lump sum. Then put 25k a year in afterwards.

andrew99999
Posts: 349
Joined: Fri Jul 13, 2018 8:14 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by andrew99999 » Thu May 09, 2019 12:02 am

landrover wrote:
Wed May 08, 2019 10:50 pm
I would open a wholesale account with vanguard. Allocate according to your risk profile. I would also put a small portion of it into property. Get a property loan for a large portion of it so you can use negative gearing initially (which although likely to change will be grandfathered in so won’t be affected if you buy before they change the rules) but make sure you buy somewhere that has a decent income to value ratio. For example where I live in South West Vic there is a strong rental market in many towns and you can get a home loan that will be covered by rental income pretty decently.

Also consider putting a few hundred into superannuation. The tax incentives are quite good and I think you can put something like 300k in as a lump sum. Then put 25k a year in afterwards.

--------------

Wholesale managed funds vs ETF's

I don't think there's much of a difference?

1. Wholesale managed funds have no brokerage so you can add money more frequently and maybe setup auto pay, but with ETFs you want to wait until you have enough so that brokerage cost is minimised, so generally wanting until you have at least say 4-5k at a time.
2. ETF fees are slightly lower due to lower cost for Vanguard, some funds 2 bps lower, some up to 7 bps, and ongoing fees are more important for the long term buy and hold investor than brokerage costs, but still 2bps is not much different.

Anything else?

--------------

Property investing takes more work to find market inefficiencies as well as to deal with the difficulties with maintaining the investment. It is an ok investment vehicle but only provided you were ok with the extra work.

I would certainly not do it for the purpose of tax deduction (negative gearing). That may be one of many swaying factors, but I would not use that as a main one.

South West Victoria, do you mean around Werribee? I thought since that is right around the edge of the city that there are still plots of land around there that have yet to be built, and the ongoing increase in supply would keep the price down. Sure it is being gentrified, but it still has a lot of crime. A buyer sure better know the difference between each street as to the value or they could buy in a higher crime area and not realise they are over paying by tends of thousands of dollars. Not only that, you will have lower quality tenants, which on average will cause more trouble with damaging property and so on.

Actually, even Werribee I doubt very much you can get a property that covers the costs unless you put down a big deposit.
Do you mean down towards Geelong? The crime areas are even more extensive there and much more chance of making a mistake unless you have local knowledge.

This is what I mean that it takes a lot more work. With shares you set an allocation and you are done. All you have to do is make sure you continue to add (maybe this is the final piece of the puzzle for going with Vanguards managed funds over equivalent ETFs. so there is literally nothing else to do once you set it up?

--------------

Valuethinker
Posts: 37892
Joined: Fri May 11, 2007 11:07 am

Re: 26 got lucky now have 1.25M what ETF Australia

Post by Valuethinker » Thu May 09, 2019 5:36 am

andrew99999 wrote:
Wed May 08, 2019 10:05 pm

By the way, if OP will have a home loan, then keeping the fixed income portion in a home loan offset account (not a redraw account) would be a far better choice than bonds.
I don't even know if other countries have offset accounts available, I have never heard the term, maybe it is called something else?
It is a savings account such that any money in there offsets the interest payable on the loan for the period it is in there, but the money still belongs to you and you can take it out any time as it is still technically your own money in your own savings account. The return is then home loan interest rates which are higher than bonds, it is also 100% risk free as it is literally in cash and it is not locked up for any time period.
Andrew

We do have them (UK) - the idea was imported from Australia ;-).

I think they have something similar in Canada now.

The problem is they don't work with fixed rate mortgages. Your mortgage has to be floating rate. And you usually need quite a lot of home equity - I think 50% when I took out mine (post Crash - the FCA/ financial regulator has really tightened up on them).

Historically Canadians always fixed for 5 years although I think with the housing boom (bubble in my view) people have gone to shorter term floating rate mortgages (ARMs I think in American parlance).

Brits were the other way. 2 year fix and then float and pay the Standard Variable Rate from your lender. Now there's a lot of incentive to switch mortgages (and pay a fee every time - £1000+ ish) once you are out of the fix period.

SVRs tend to be total ripoffs compared to mortgages on offer to new customers. But I hear that 3 and 5 year fixes are increasingly common - since these are the lowest interest rates ever recorded (data back to the 1600s at least) that makes sense. I have even heard of 10 year fixes.

Valuethinker
Posts: 37892
Joined: Fri May 11, 2007 11:07 am

Re: 26 got lucky now have 1.25M what ETF Australia

Post by Valuethinker » Thu May 09, 2019 5:42 am

landrover wrote:
Wed May 08, 2019 10:50 pm
I would open a wholesale account with vanguard. Allocate according to your risk profile. I would also put a small portion of it into property. Get a property loan for a large portion of it so you can use negative gearing initially (which although likely to change will be grandfathered in so won’t be affected if you buy before they change the rules) but make sure you buy somewhere that has a decent income to value ratio. For example where I live in South West Vic there is a strong rental market in many towns and you can get a home loan that will be covered by rental income pretty decently.

Also consider putting a few hundred into superannuation. The tax incentives are quite good and I think you can put something like 300k in as a lump sum. Then put 25k a year in afterwards.
I think there's a wealth of data that, after Canada and possibly HK & Sing, Australia is sitting on the mother of all housing bubbles (in Sydney and Melbourne, primarily).

I realize that as the only OECD country with no recession in the last 25 years the progress of Australian housing prices is not irrational. But I look at the Australian current account deficit, low personal savings rates, the amount of money that's gone into property and I think "this cannot go on". Sydney is one of the most expensive cities in the world now, to live. Melbourne similar. Philip Soos is a good guy to follow on Twitter on all this (Hillard Macbeth in Canada is the guru of housing pessimists).

If one can make a genuine 5-6% cap rate (yield = net rental income/ value) on residential property then OK, it washes its face*. But there is a lot of extra work in property management, and when you are a small investor you cannot necessarily outsource that reliably.

* by contrasts, condos in Vancouver were doing sub 2% at one point. That's the impact of offshore money which the provincial government is now restricting with taxes, but it's a very small return for the risk.

andrew99999
Posts: 349
Joined: Fri Jul 13, 2018 8:14 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by andrew99999 » Thu May 09, 2019 7:10 am

Valuethinker wrote:
Thu May 09, 2019 5:36 am
Andrew

We do have them (UK) - the idea was imported from Australia ;-).

I think they have something similar in Canada now.

The problem is they don't work with fixed rate mortgages. Your mortgage has to be floating rate. And you usually need quite a lot of home equity - I think 50% when I took out mine (post Crash - the FCA/ financial regulator has really tightened up on them).

Historically Canadians always fixed for 5 years although I think with the housing boom (bubble in my view) people have gone to shorter term floating rate mortgages (ARMs I think in American parlance).

Brits were the other way. 2 year fix and then float and pay the Standard Variable Rate from your lender. Now there's a lot of incentive to switch mortgages (and pay a fee every time - £1000+ ish) once you are out of the fix period.

SVRs tend to be total ripoffs compared to mortgages on offer to new customers. But I hear that 3 and 5 year fixes are increasingly common - since these are the lowest interest rates ever recorded (data back to the 1600s at least) that makes sense. I have even heard of 10 year fixes.
I think it's the same in Australia with fixed rates. The solution is to split your loan. So if you have say 500k loan and 50k in savings and expect to save up to maybe 100k by the time your fixed term is up, you would make it 400k fixed and 100k floating and then have the offset attached to the floating part.
If you wanted 5years fixed (not any good here now, 5 year rate is insane), you could also split it into different term lengths so for example 250k for 5 years fixed, 150k for 2years fixed, 100k floating with offset. When the 2 years is up you can re-split it into something more appropriate to maximise the use of the offset.

By the way, do you call it an "offset" account or is there another name for it? I've never heard of it in non-Aussie discussions.

IFYOUCAN
Posts: 12
Joined: Mon Dec 24, 2018 10:48 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by IFYOUCAN » Mon May 13, 2019 6:50 am

Ishares ILB etf is for inflation protected bonds. Vaf/vgb are the standard vanguard (non inflation protected).

User avatar
Watty
Posts: 15842
Joined: Wed Oct 10, 2007 3:55 pm

Re: 26 got lucky now have 1.25M what ETF Australia

Post by Watty » Mon May 13, 2019 9:20 pm

aussiebloke111 wrote:
Wed May 08, 2019 4:04 pm
I'm Australian based and right now after doing a little research im thinking ETF: iiv 70% and a bond index for the other 30% does this seem reasonable
Before you can decide how to invest the money you need to decide what you likely to use the money for and you may have multiple goals. For example of you are likely to buy a house with it in five years you would invest it a lot differently than if you are earmarking it for retirement. With multiple goals you could end up with multiple portfolios with different asset allocations.
aussiebloke111 wrote:
Wed May 08, 2019 4:04 pm
I'm Australian based and right now....
That could mean a lot of things that might be important to your investing decisions.

daffyd
Posts: 192
Joined: Sun Sep 29, 2013 11:51 pm
Location: Australia

Re: 26 got lucky now have 1.25M what ETF Australia

Post by daffyd » Wed May 15, 2019 8:22 pm

I have two options for you. The first, and best, is to look at things more holistically rather than quarantining these funds. What are your goals overall? Might you live overseas in the future (other countries' taxes might influence your choices)? Do you have debt? Do you own a house/want to own a house? How much super do you have and how is that allocated? Even if you opt for option 2, I'd recommend gradually looking through https://www.bogleheads.org/wiki/Getting_started (just noting 401k/IRA is roughly = Super, and that taxation recommendations might need adjustment).

The second option, if you're just looking for a quick allocation that you can leave for a decade or two, and assuming you're not likely to need the money in the next ~5-10 years for a fixed expense like a house, and unlikely to have tax complications such as living in the USA, can be kept very simple:

You've noted a rough risk appetite corresponding to 70% shares and 30% low-risk assets. Put:

70% Vanguard International Shares Index Fund (Wholesale)
30% Online savings accounts

Using the wholesale fund means you can BPay more money in whenever you like without having to go through a broker. You can have the dividend distributions go to one of the online savings accounts (e.g. Ubank below) and use them to rebalance if needed once a year or so. And today as a retail customer with online savings accounts you can get daily-accessible, government-guaranteed cash returning much more than any Australian government bond.

For the online savings accounts you can split the amount between 2 banks to remain government guaranteed. I'd personally use Ubank and RAMs as they have the simplest setup for high interest rates (e.g. have salary and distributions paid into Ubank, or set up a mid-month automatic $200 transfer from your regular account, and then have an automated monthly $200 transfer into RAMS) but there are others (e.g. ING Direct, requires some monthly transactions).

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