Best strategy for investing $3mil + into shares?

Discussion in 'Shares & Funds' started by MsNewbieInvestor, 21st Apr, 2021.

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  1. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    Thanks for that article -it was easy to understand.

    I wouldn't be doing the rebalancing myself, I would be asking my FP to do it, so that would mean that I'd have to keep paying them to do it. A fund would mean that once all the money is invested, I wouldn't need a FP anymore (aside from annual portfolio reviews if I want them). I like the idea of not needing a FP.
     
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  2. sfdoddsy

    sfdoddsy Well-Known Member

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    I've come into this thread late, but from the sounds of it you are in a very similar situation to what I was a couple of years ago (same age, similar funds, similar income need).

    I also went to a highly regarded FP who recommended a rather complex mix of direct shares and various managed funds in an asset mix that was presented as 60/40 but was in fact rather more risky.

    Deciphering their strategy it boiled down to getting as much as possible into super and then using TTR for income.

    They also recommended family trusts. Which might make sense for some, but not with an 8 year old as the tax avoider.

    For which I'd pay around 3%.

    After much research here, and a healthy amount of ego, I decided I could do at least as good a job on my own.

    So I chose some sensible index funds in a similar proportion to those mentioned in your first post, dabbled in some dividend harvesting, tried timing the market, thought about DCA, restructured twice based on FP advice, dabbled with factor tilting, dabbled with bonds, went all-in in January last year, then was down $1 million a few months later, tax loss harvested and bought back in at the bottom, watched with relief as everything zoomed back, dabbled a bit more.

    Back above water, and thanks to the excellent portfolio tracking on Sharesight, I took stock.

    Whilst I had been somewhat clever and somewhat lucky, I would have been slightly more successful if I had simply dumped everything into VDHG, with a fixed interest component to suit my acceptance of risk, and a couple of minor satellite punts to suit my desire to dabble.

    Which is what I have now done.

    We have enough stashed away that we don't need to take risks to grow it. The long term average returns are just fine. In any case I can't outperform a diversified index fund or the balanced option of my super fund over the long term and neither can any other strategy.

    I'd be very suspicious of a FP who suggested changes to your long-term strategy after only a year. Even a weird year.

    So I now simply have 80% of equities in VDHG with 20% for dabbles in Hyperion managed funds.

    I have 30% in fixed interest.

    Hypocritically I also have an overlarge chunk of cash poised to buy if things go south, but in the last year that attempt at market timing has cost me $200,000 in lost opportunity.

    I stick as much as possible into super, and let Australian Super manage it for me.

    Investment life is more boring now. But less nervy.
     
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  3. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    Thank you for sharing your story -I find other people's experiences really helpful.

    A trust does not make sense in our situation either (despite my FPs push for one). I have asked my FP, repeatedly, for trust viability modelling that shows me when the savings from having a trust are going to outweigh the compliance costs associated with one. And all I get is reassurance that it's good to have one as it will offer flexibility. That's not a good enough response for me.

    I am keeping some cash aside to "dabble", too. But I want to invest the bulk first.

    What do you mean by 30% fixed interest? VDHG has only 10% in bonds/fixed interest.

    I feel that VDHG is too volatile for my liking. I'm leaning toward Vanguard's diversified growth or balanced options.

    Yes, I won't be market timing when I DCA. But I will keep some aside in case there's a correction and I want to buy more.

    Did you consider investing your super in one of Vanguard's diversified funds, too? Why did you opt for an industry fund? Deciding what to do with my super is one of the last decisions I need to make. My FP is pushing a Vanguard diversified index fund for super, too. I can't really decide what's best.

    That's my goal.
     
  4. Hockey Monkey

    Hockey Monkey Well-Known Member

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    FP's love these wrap platforms like Praemium as it allows them to charge their permanent, invisible, ongoing AUM based fee which will be a significant drag on returns over time. If you do go with an FP, look for an independent one that follows a fee for service model.
     
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  5. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    Yes, I'm well aware. We're not going with an adviser platform. We're going with BT Panorama. I want the option of switching the platform to my control (once everything is set up) and then any FP portfolio reviews going forward will be fee for service.
     
  6. Hockey Monkey

    Hockey Monkey Well-Known Member

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    I didn’t realize BT Panorama allowed you to trade without an advisor outside of their BT Super Product.

    What happens to the fees?

    From https://www.btpanorama.com.au/conte...oad/panorama/documents/Panorama-Super-PDS.PDF

    What happens if you no longer have an adviser?
    If you cease to have an authorised adviser, this may impact your ability to continue to use your Panorama Super account. It is important you understand the consequences as set out below.
    – You will need to manage your Panorama Super account directly and place transactions online via bt.com.au/panorama.
    – Your fees may change. Any reduction to any administration fee following negotiation by your adviser or their dealer group will cease to apply and will revert to the standard level without notice should you cease to be advised by your adviser or their dealer group.
    – The terms and conditions of your Panorama Super account, the investment options and product features available to you may change.
    – You will receive communications from us directly and may not receive certain communications previously provided by your adviser, unless required by law to be provided by us.
    – The name and branding of your account may change (if your distributor changes).
    – Your Panorama Super account may, in some circumstances, be closed, and your balance may be rolled over to our nominated eligible rollover fund or transferred to the ATO.
     
    Last edited: 13th May, 2021
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  7. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    Yes, BT Panorama Super (for super) and BT Panorama Investment (for non-super) are both 'Adviser Sold' options which you can switch at any point to 'Investor Maintained'. The switch will then give your choice of FP read-only rights to your portfolio.
     
  8. Hockey Monkey

    Hockey Monkey Well-Known Member

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    Are you investing in anything not available directly? Eg just invest in VDHG via a broker
     
  9. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    I've spoken to BT about all of the points above, and none of them are anything I'm concerned about. I'm happy with BTs standard fees and I also doubt my FP will negotiate a better fee for us anyway, given that they don't want us to go with BT.

    Sorry, I'm not sure what you mean. Are you suggesting we invest in a fund using a broker as opposed to a FP? The Vanguard diversified index funds are only available on the BT Panorama Super and BT Panorama Investment options (I can't invest in them directly myself, an adviser has to do it). I can of course invest directly through Vanguard's platform, but I prefer a wrap platform for simplicity (I also want my FP to do the initial set up and DCA).
     
  10. Hockey Monkey

    Hockey Monkey Well-Known Member

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    I'm suggesting to just use a broker like SelfWealth to avoid the ongoing fee altogether.

    What are you getting for the $2435 annual fee on $1M AUM for something a simple as VDHG compared to a one off $9.50 from SelfWealth
    ($540 admin fee + $395 expense recovery + 0.15% AUM)
     
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  11. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    I'm not familiar with SelfWealth. Can SelfWealth be used for super investing? Would you have to set up a SMSF?

    Or are you referring to non-super shares? I believe SelfWealth is the same sort of thing as Commsec.
     
    Last edited: 13th May, 2021
  12. Hockey Monkey

    Hockey Monkey Well-Known Member

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    Yes SelfWealth are another broker like Commsec but with a fixed cost of $9.50 regardless of the size of the trade. A great way to get bulk funds invested at a low cost either outside of super or via an SMSF.

    An SMSF is probably overkill for a simple ETF portfolio. For that you might want to look into something like HostPlus Choice Plus or Australian Super Direct Member options which support direct investment in ETFs at a lower cost to BT Panorama. Vanguard are also launching their own super offering soon but you might not want to wait that long.

    Another popular technique is to roll your own VDHG equivalent using Sunsuper index options, but with the amounts you are looking at, direct ETF's become more cost effective.

    This is worth a read The problem with pooled funds — Passive Investing Australia

    BT Panorama seems overkill for a simple ETF portfolio.
     
  13. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    The cost isn't all that much for BT Panorama Investment. Over $1mil, AUM is Nil. Then there's an expense recovery of upto $80pa plus a $540pa account fee. It works out quite a bit more for super because my balance won't exceed $1mil. I've heard/read that the simplified reporting of a wrap platform is worth it.

    I don't want a SMSF -I agree that it's not necessary, plus my balance is not high. I have had a look at the Member Direct options -the problem is that they only let you invest 80% into shares. I wasn't a fan of that restriction.

    Vanguard don't even know if their super will be up and running by the end of 2021. I need to make my first super instalment before the end of this financial year, so Vanguard's super is not an option for me.

    I have thought of doing that, but then the responsibility of rebalancing becomes mine, right?

    Thanks for sharing that helpful article, I actually read it not too long ago. I found a thread in this forum with a lot of helpful info from @dunno on the same topic. I wasn't sure if worrying about pooled funds was overkill.
     
    Last edited: 13th May, 2021
  14. number 5

    number 5 Well-Known Member

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    VDHG does the rebalancing for you. That is literally why you invest in VDHG. Its a one stop shop.
     
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  15. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    Yes, I'm aware of that, but @Hockey Monkey suggested "rolling your own VDHG equivalent using Sunsuper index options" -I understood that to mean replicating VDHG using the various ETFs. If I were to invest in the individual ETFs, then the portfolio would require rebalancing. Right?
     
  16. number 5

    number 5 Well-Known Member

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    Sorry yes. Re-read HM post. I read your post in isolation. Yes doing it the Sun Super way you would need to rebalance yourself.
     
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  17. Hockey Monkey

    Hockey Monkey Well-Known Member

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    With HostPlus you can invest in their IFM - Australian Shares option for the other 20% which is essentially like VAS. Note you have to roll your own for the rest using VGS/VTS/VEU etc as they also only allow 20% per ETF.

    For a $500k balance, HostPlus ChoicePlus Admin fees are $258 vs $1535 for BT Super Invest, but it does come at the complexity of having to rebalance yourself. I'm a tight wad so would rather save the fees :)
     
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  18. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    I can see your point -I also hate wasting hard-earned money. But I won't be doing the rebalancing myself, so I would still have to pay a FP to do it for me.
     
  19. Hockey Monkey

    Hockey Monkey Well-Known Member

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    Can I ask what you find daunting about rebalancing yourself? It might not be as bad as you think as HostPlus will actually force you to rebalance in a way by keeping each holding to 20%

    eg
    20% IFM Australian Shares
    20% VGS
    20% VGAD
    20% VTS
    20% VEU

    Or whatever you settle on with the FP with a bond allocation etc.

    DIY isn't for everyone. Nothing wrong with going down a higher cost wrap platform if it will give you peace of mind and is likely to cost less than a FP if it allows you to eliminate then from the ongoing maintenance
     
    Last edited: 13th May, 2021
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  20. MsNewbieInvestor

    MsNewbieInvestor Well-Known Member

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    I understand the process and I'm confident I'd be able to do it if I was taught how, I'd just rather focus my energy on doing things I find more enjoyable.

    I will gladly pay a little extra if it means eliminating a FP from the ongoing maintenance of my portfolio.
     
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