Another Newbie looking for advice

Another Newbie looking for advice

I posted this on the sister site, but theres hardly anyone online and I'm a little bit greedy for some advice hehe



Very new to any asset class apart from property. I am in the process of educating myself. I have/had next to no knowledge of most of the topics on this forum. Just started on bogles books and lurking a lot on PC's other asset classes.

Between having Investopedia up on one computer, vanguard assets class on another computer and reading forums on my phone just to understand what I am reading ..not to mention being dragged off chasing links on LIC's and bonds etc etc its a long process!!! and to be honest very overwhelming at the moment - though I'm sure everyone has gone through/is going through the same.

I want to keep my strategy as simple as possible to start off with (so that I do actually start!)

So these are my plans (ill try not to ramble too much)

When: Plan to start July next year (wanted to start ASAP but due to my tenants running off, extended vacancies + drop of rents along with some big unavoidable personal expenses, I need to take a step back to get my cash buffer back to a healthier level.

Time horizon of 20 + years (before I start to look at living off some of the dividends)

What? To start out with I thought of vanguards VAS and VGS ETF's (was going to go with a retail fund -but it seems to be less fees to go with ETF's plus that I can start straight away - i.e. don't need a minimum of $5000 to start)

Was looking at a split of 60/40 (VAS/VGS)

The portion I would of been putting into bonds I am just going to allocate to IP offsets - once there not so heavily neg geared then ill look to allocate those funds to bonds/high yield indexes

Am interested in LIC's but maybe later on once I'm more comfortable with all of this

How? Dollar cost averaging - at the moment its looking to be approx. 20% of my pay plus pay increases each year -or maybe putting the pay increase amount aside to buy into LIC's

Through a Disc trust (loaning the amounts each time) was originally going to gift but after reading 'Trust Magic' loaning seems to the smarter choice (will be verifying this with a lawyer next year)

Does this seem reasonable? Any advice/ critiques on any of these points? or points that I have missed

Again, I'm literally only halfway through my first non property investment book - I'm sure this will all change to some degree - just thought id get my thoughts on a page so all the more enlightened formumites can give me some direction from the getgo

Much appreciated!!

Kayne

 

I have VTS, the US share index one, very cheap fees (0.05% I think) and get me some exposure to US economy. You know what they say: Never bet against the Americans.
But the downside is, IMHO, exchange risk. So if AUS appreciate against USD, the price of the ETF goes down.
No exposure with LIC but I know a company (forgot the name sorry) has existed for over 80 years so if it survived the Great Depression era and the dot com bubble and most recently GFC, it must be doing something right!

 

Read Read read and read some more! This is a great forum and you seem switched on and long term it is your money!

I suggest reading the threads on "other asset classes" lic's, etf's, boglehead/vanguard way to retire among others.

If you seriously have a notebook and pen and several coffees you will be busy for a good few days and your notebook will be full but it will all benefit you!

I initially thought i would be given a magic pill or perfect portfolio when i initially posted however i realised i needed to improve my knowledge of where i wanted to invest my money for my goals and future use!

You will learn about structures, asset classes, allocations as well as % of large, mid and small caps to hold and the most important thing in my opinion is management fees!

So sit back and read and enjoy the forums, some unbelievably smart chaps are on here and they have great opinions! Never advice!

Best of luck!

 

Hi @KJB,

This post on InvestChat I thought would have interested you:

Hi from brisbane newbie

Seeing not much is happening over there I'll post my comments from that thread here. It's not what I do but for those looking for perhaps the ultimate disciplined, low cost, set and forget path and / or who possess undesirable psychological attributes for handling one's own share market investments it's hard to beat:

Just read your post a bit more carefully and noted that you weren't interested in the Vanguard managed funds. But will leave my post here incase others are interested.

 

Sounds like you've got a pretty good idea of what to do. Allocating to low cost ETFs in a sensible manner over time is probably going to work out pretty well.

I particularly like your idea of allocating your bond portfolio to the offsets!

Only advice is to keep reading as much as you can.

 

Getting back to this after realising my first post was potentially unsuitable I agree with @OscarBravo. You seem to have a good strategy.

VAS & VGS is a great foundation or some would suggest it's all you need other than cash and / or bonds at some stage. I like your current approach to IP offset vs bonds. Not a fan of high yield Index ETFs though. DCA into the ETFs to maintain the 60 / 40 balance. Simple as.

Unless potential litigation risk is an issue due to your work loaning funds to the Disc trust sounds good. There's other strategies that can be used with a Disc Trust to reduce risk without having to gift. Best discuss these with your lawyer / accountant.

All up your approach seems a very good one. Simple, low cost, reasonably tax effective and extremely low maintenance.

You're already well ahead of the vast majority of the population in regard to having an excellent investment strategy.

Only warning I would give is that investment education (especially on forums) is great but be careful not to let it lead you astray. There's a lot to be said for keeping things simple.

Not advice.

 

thanks for everyone input! Very Much appreciated. There is a tonne of info on here and I'm a bit guilty of procrastination when I see threads with 400+ replies!! But it's all good stuff. I will be seeking out professional advice once I'm more confident ill understand the answers ill get. Hehe

just read through QVE website I think @The Falcon mentioned in another post. I like the idea of including that. I knew the asx300 was resource/financial heavy but not that much !!

thanks again everyone

 

I'm not not Interested, I do like how it seems a lot easier to balance everything out. ETF's lower fees caught my eye though.

I posted this on IC Vanguard Retail VS ETF

what's your take on it all?

 

Unless you have enough cash to get into Vanguard's wholesale funds perhaps the ETF route may be more suitable.

If you're going to invest in ETFs you want to plan your purchases to minimise brokerage. You can't take the regular small BPay approach as is the case with many retail managed funds. A common strategy with shares / LICs / ETFs is to accumulate cash in a high interest online account until you have a minimum amount to keep brokerage to a sensible level. Probably $3 - 5K seems reasonable but this is open to debate.

Based on your other post here:
Vanguard Retail VS ETF
using DCA of $750 each fortnight as an example that's $19,500 pa. Hence you might choose to purchase a single ETF (VAS or VGS) every second month (or quarterly) with accumulated savings of $3,250 each period. Add to whatever ETF that has gotten out of balance (60 / 40).

That's only 6 trades a year costing around $120 (ComSec) vs $520 as per your example. Move to NABTrade which I use and it will only cost $14.95 for trades under $5,000. So $90 pa for brokerage!

If you do eventually get into LICs then substitute one of the older LICs or QVE (mid / small caps) periodically for VAS. If $20K is all you can afford to invest each year then DCA every two months or quarterly to minimise brokerage. Purchasing shares 4 - 6 times a year can work fine. Some might only invest two to four times a year depending on amount available to invest. Be patient, you don't have to be investing every fortnight.

Other ideas are:
1. Take advantage of DRP (dividend reinvestment plans). No brokerage is payable.
2. LICs are fantastic in that a number of them periodically offer discounted SPPs (share purchase plans) and Rights Issues to top up with as little as $1,000 and NO brokerage fee. Check out the following link to ARG's website detailing these plans which are typical of what is offered by others also:
How to Invest | About | Argo Investments Limited - ASX:ARG
Dividend Reinvestment Plan | Share Issues | Argo Investments Limited - ASX:ARG
Share Purchase Plan | Share Issues | Argo Investments Limited - ASX:ARG

So given the above options there's no reason you need to be spending a rediculous amount on brokerage relatively speaking.

Not liscenced to give advice.

 

Thanks for your reply, what your saying makes a lot more sense. I did like the bpay option with the retail funds, but I could just do the direct debit into the trading account. My brain works in weird ways - or maybe just like the majority of people - if there's money in my everyday account it usually gets spent - if its taken away before I notice its there I don't miss it and am grateful once its accumulated, so I usually wont touch it. (Thinking of changing an IP loan to P&I to force some extra saving too!) - not really thread related just thought id share my self pitying

 

Here is also a nice bit of reading more us related but you can put vas in there too! Good suggested reading books too! The are sitting nicely on my bookshelf as well as tablet form too!

 

Perhaps setup an auto-transfer from each employer payment to your Broker's high interest account. This is not to be touched for any other purpose other than to DCA periodically into your ETFs / LICs! Typical simple investing plan of transferring x% of your pay to a separate savings account before you can get your hands on it.