10K Inheritance Set and Forget

Discussion in 'Shares & Funds' started by albanga, 13th Dec, 2020.

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  1. albanga

    albanga Well-Known Member

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    Hi PC Shares Gurus,

    Hoping to keep this nice and simple.
    I just got a small 10k inheritance that I would like to put into the share market to set and forget.

    The plan is to leave it for my 1 year old daughter for her 21st. If it provides any dividends I want them reinvested.

    I know very little about shares but what I do is I pretty much want it invested into an index fund like the vanguard.

    It won’t be an active strategy. I’ll make this one deposit and that is it and then hopefully rely on the power of compounding to give my little girl a head start for a house deposit.

    So what is the best way to go about this?
    I have read sometimes it’s better to use commsec but other times if buying in a lump sum like this to use a broker? Or I could just be making that up

    Thanks in advance!
     
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  2. MB18

    MB18 Well-Known Member

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    Commsec would be fine, I forget what they charge but maybe around $20. I use CMC these days and a transaction of that size would be $11 so they are all much of a muchness when it is a one off.
    The process of setting up an account will be about as difficult as opening an online bank account so no big deal there.

    You can then opt in the vanguard reinvestment plan and any dividends/distributions will automatically be reinvested.

    It couldnt be much easier from a set and forget point of view.

    The VDHG option by Vanguard looks attractive although it wasnt around when my journey began so I hold a number of thier other funds instead, although I'm sure you have found one that appeals.

    Keep a good paper or electronic copy of the reinvestment purchases to save an admin headache in 20 years time when you have to work out the CGT calculations.

    I assume these will actually be in your name? If not there may be other considerations but dont want to overcomplicate the one post by going down that road.
     
    Last edited: 13th Dec, 2020
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  3. SatayKing

    SatayKing Well-Known Member

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  4. Pier1

    Pier1 Well-Known Member

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    Hypothetically if it were me I would go:
    $10k VGS
     
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  5. Silverson

    Silverson Well-Known Member

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    I am in an almost identical position to you minus the inheritance. Looking to put into AFI, WHF and VGS. With AFI and WHF the DSSP will be selected. Shares will not be sold rather DSSP will be disengaged and dividends will start being received at the age of 21.

    wish my folks did this for me!
     
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  6. Shogun

    Shogun Well-Known Member

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    In another post set forget for $100k

    Barefoot 75% VAS 10% VTS and 15% VEU

    Motley 40% VAS 20% VGS 20% IEM 20% IXI
     
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  7. devank

    devank Well-Known Member

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    Put it in your offset.
    Keep an excel with all her incoming money. Give 2.5% interest at the end of each year.
     
  8. Danieljk101

    Danieljk101 Well-Known Member

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    I would try and turn 10k into something meaningful. Uranium, gold, commodity juniors. Also high growth spec / bio stocks.

    Anything else you will look back in 10 years and see your 10k is now 14k.... boring.. :)
     
  9. MB18

    MB18 Well-Known Member

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    As someone who speculated in uranium and commodity juniors myself I wouldnt spend my child's inheritance doing the same.
    Nearly 20 years ago infact, and the companies that are still listed are not worth the brokerage fees in trying to get rid of.

    Speculation has its place for sure, but I'm not sure I could do that with my kids money.
     
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  10. Shazz@

    Shazz@ Well-Known Member

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    Last edited: 13th Dec, 2020
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  11. albanga

    albanga Well-Known Member

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    Admittedly it’s 7am when I read this but the articles summary is EFT’a are a much better option? So curious why you recommend Bonds route?
     
  12. albanga

    albanga Well-Known Member

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    Curious where you got 14k from?
    A simple compound calculator at 10% for 20 years has it over 70k. But that doesn’t obviously include things like fees and tax?
     
  13. Phar Lap

    Phar Lap Well-Known Member

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    The publicly listed australian stock exchange, the very thing all aussie stocks rely upon to list publicly. No brainer for the next 20yrs IMO. No advice.
     
  14. Phar Lap

    Phar Lap Well-Known Member

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    How much will 70k be worth in 20 yrs time though?
     
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  15. inertia

    inertia Well-Known Member

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    You will need to consider the tax implications and how you would invest it for them. Minors that earn above $416 in investment income, they are taxed at 66%.

    I have just started an investment account for my kids. I have a minor trust for each of them, and I have started buying AFI for each. I have DSSP set up, so there is no income (there is a CGT impact, but my advice to them will be to never sell, and just keep it as DSSP until the need it to become an income producing asset)
     
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  16. willair

    willair Well-Known Member Premium Member

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    I don't think you will have any problems with CommSec ,if you place any order at market prices then but the time you have a cup of tea the settlement order will be complete and the statement within CommSec system..
    We did the same for our daughters about 25 years ago ,all into CBA the only item to study very carefully who's name is set on the share registration as you can milk the franking credits ,and reinvest all dividends from day one ..
    One other item is 10 percent over 20 years maybe high ..
    Myself if I was doing this again ,then it would be 80 percent on a bank and 20 percent in low cost specs ..good luck ..imho..
     
  17. Shazz@

    Shazz@ Well-Known Member

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    Apologies- I was also responding to the thread late at night and didn’t read the link properly (which is promoting one of their bonds). I guess my question is how do you plan to transfer the shares to your daughter? There will be a CGT event. Investment bonds are a tax effective option depending on your circumstances.
     
  18. SatayKing

    SatayKing Well-Known Member

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    Refer to the link to the ATO web-site in my post yesterday. Apply for a TFN for the child if they are a minor could be one way.
     
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You could Debt recycle into your non-deductible home loan and reborrow to buy some sort of income producing asset such as EFTs. You could get them in your name or a trust or spouse etc, doesn't matter too much because of the size.
    Reinvest all dividends and pay tax on it as per normal
    When the time comes to hand over control buy a new lot of the same shares in the relevant name at them point and hand over control.
    Saves you tax along the way as well as non-deductible interest and saves triggering a CGT event in 20 years.
     
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  20. Shazz@

    Shazz@ Well-Known Member

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    Agree. But as per @inertia post, the tax rate for a minor is at 66%, so something to consider.
     
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