Best strategy for investing $3mil + into shares?

Just out of curiosity, could you please tell me how often a portfolio needs to be rebalanced? Is it a once a year thing?

 

I don't think there is a hard and fast rule. Yearly should be fine.

Larry Swedroe talks about a 5/25 rule where you rebalance only when certain thresholds are met
The Larry Swedroe 5/25 Rule

 

Thank you.

 

With a discretionary trust it would be difficult to model because circumstances change and incomes can be distributed to many different beneficiaries each year.

If you income is unlikely to exceed the point where your tax is 30% or more than a trust may not be worth it. It might be better to personally own the shares and then leave them to testamentary discretionary trusts (TDT) as that is the point at which the benefits will come in. If you hold the shares in a discretionary trust now you can't get them into a testamentary trust on your death, unless perhaps if you vest the trust before death. But that will trigger CGT.

Also it is not a matter of one structure for everything. You could have a mixture - some in a trust, some in a company and some in personal names. You could also divert all income from the shares to a bucket company, if they are held by a discretionary trust, and you could personally own the shares and then leave those shares to the TDT so the bucket company, pregnant with franking credits, could become owned by the TDT and minor children, your grandchildren, can receive dividends tax effectively - as well as giving good asset protection.

 

@MsNewbieInvestor

Something that just came to my attention and that I am changing myself with regards to the BT Panorama platform. We previously spoke about fees and costs of the BT platform. The .15% of assets capped a $1500 p.a plus the $540 p.a account fee per account being personal and super. There is an option to reduce the account fee to $180 p.a for the two accounts. You can choose a thing called the compact menu. This limits the amount of managed funds you have access to. It takes away access to individual equities as well. But if your intending to invest in index funds then it will be more than sufficient. I am about to switch my accounts to the compact menu and save on fees.

 

Thanks for letting me know, but unfortunately the Vanguard diversified index funds (what we plan to invest in) are not offered on the Compact Menu. The following links show what is available on the Compact and Full Menus...

https://www.bt.com.au/content/dam/p.../pdf/BT-SMSF-Compact-Available-Funds-List.pdf

https://www.bt.com.au/content/dam/p...ownloads/pdf/BT-SMSF-Available-Funds-List.pdf

It is disappointing that we'll have to pay for the full menu (for one fund), but $540 is still not too bad when compared to other platforms.

Thanks anyway.

 

Thanks for the link to the compact menu. I tried to find that on the BT website today and couldn’t locate it. I even called them and they said it’s not on their website and they would email it to me.

Looking at the compact menu it looks like it might be useless to me too. It doesn’t even have access to the basic vanguard index funds. What a joke. It’s pretty much a useless option and the full menu and fee is the default.

 

I've found that it's a bit of hit and miss when it comes to phoning BT. On a few occasions, I've asked the same question to two different people (on two different calls) and received two very different answers!

I phoned BT a while back and someone guided me to the two menus on the webpage below...

BT invest in your super

If you scroll down to 'Documents and downloads' on the above webpage, you'll find the compact and full menus as the last two links.

The menus refer to super, but I was told that they are the same for non-super.

Are VAS and VGS classed as listed securities? If so, listed security investments fall under their Full menu. See Page 6:

https://www.bt.com.au/content/dam/p...rama/documents/BT-Panorama-Investor-Guide.pdf

I agree that it's pretty ridiculous if something as basic as VAS is not on the Compact menu.

 

Regarding the trust, inner situation I am 9/10ths retired (aged 60), but my wife (aged 40ish) has her own full-time business and earns $150K plus. We have a 9 year old child.

Since I now, for tax purposes, basically have no income other than our investments returns, and our son is 9, a trust would divert any income to me anyway.

So the cost and complexity is pointless.

Regarding the 30% fixed interest, I have VDHG as the core holding. Plus some dabbles. But I also have a chunk in a Pimco Bond fund and a Macquarie one.

Anathema to most here, but reassuring during the Covid slump.

Again, unlike most here, my emphasis is not growing my investments. I just want to maintain them.

Regarding using VDHG (or one of the less aggressive funds) for my super, I 'm not in favour. The Vanguard funds are shares and bonds only. The big super funds have access to far more diversified assets like private equity, property, infrastructure etc etc. Their long-term returns are better, with less volatility.

Even better would be allowing us to default our super into the Future Fund, which has performed superbly since inception.

The big super funds come closer.

As for rebalancing, I used to have the individual VDHG funds. It is slightly cheaper. But it is a hassle for admin and being sensible. You can't help but take a tilt when you rebalance, which defeats the purpose. VGS or VGAD? You are buying VDHG so Vanguard does the hard work. They are cleverer than us. Let them do it.

 

You wouldn't be saying that if you had bought the shares in your wife's name.

 

I'd love to know why.

My wife earns $150K plus a year from her business. So she'd be paying the 45% rate on the extra income from our shares.

I earn (shares aside) nothing. I paid around 4% on the income from our shares.

 

Flexibility

 

That's not really an answer.

 

circumstances change. So imagine you purchase all the shares and are stuck with the income and then your wife stops work and your child reaches 18 and starts uni and you get a job.

 

Naturally one would consider changing circumstances.

But, as in our case, when one person is retired and unlikely (and unwilling) to work again, the other is 20 years younger in the prime of her working life, and the child still a child it is unlikely things will change that much.

Most annoying is when one financial adviser recommends liquidating everything to prepare for a trust, then (after you’ve done it) another tax advisor from the same firm recommends the same structure you just liquidated.

I also think having a DT these days is like painting a target on yourself for the ATO.