Boglehead/Vanguard way to retire.

Read that and was very surprised by how poorly the Blue Chips had performed in comparison. In 18months the total return from the Top 20 on the ASX was 1.9%. The total return for the next 180 largest was 19.9%!!!

 

Yes exactly. Which is why much of my investing up until recently had been going into mid / small cap LICs and a little into International on weakness. The mid / small cap sectors are very expensive now however so I'm patiently sitting on the sidelines there. I have mostly only added to large caps during significant weakness such as when the ASX 200 index powered below 5000.

Hence why, despite Bogleheads being against market timing, I can happily state that even as a buy and hold investor my ASX Top 20, 18 month return was certainly much higher than 1.9%!

Which is why I always push the virtues of combining strategies. Take advantage of the strengths of different approaches and apply them at the right time!

 

i don't know where those numbers come from,but just done a quick percentage calculations on the home brew stout bottle label and most seem above 5% add franking credits maybe more....imho.

 

Please, please I'm begging you don't tell Troppo about this site. Most of us gave up on InvestEd because of him. Even I as an avid stock / futures trader very early on found him rediculously unbearable. If he ends up here I'm out of here for good.

PS: Great to see your calculations were done on a home brew label. Above 5% sounds about right for a stout.

 

No problem i did not know you were mates,,I got rid the name,there is a lot of people like that in those share trading fast bucks sites,and they have the power to multiply when they try to be serious..

 

Mates? No way. I avoid him like the plague.

 

More on active vs passive, SPIVA, Core & Satellite:

Latest Full SPIVA Report:
https://au.spindices.com/documents/spiva/spiva-australia-year-end-2015.pdf?force_download=true

More SPIVA related:
Vanguard Australia Advisers - Active vs passive - the latest SPIVA Australia scorecard
In active management we trust. Apparently. But why?
Managed funds versus index funds. What′s best?

CASE FOR INDEXING:
http://www.lifestyleadvisers.com.au/wp-content/uploads/2016/06/The-Case-for-Indexing-Australia.pdf

CORE & SATELLITE:
https://static.vgcontent.info/crp/i...eToCoreSatelliteInvesting.pdf?20160618|091500
Vanguard Australia Advisers - Core-satellite: Customising your core (Part 2 of 3)

PS: No I haven't switched to the dark side. But heard a rumour there is occasionally excellent home brew at some Boglehead events, so trying to win an invite.

 

hey @austing remind me again which small cap products you recommend? are they low cost? QVE?

 

Hi @CatCafe,

I don't want to post off-topic comments in this Boglehead thread or @Redwing will have his bouncers throwing me out again. So I have replied to this question of yours in the LIC thread:
Listed Investment Companies (LICs)

 

I've always liked the super simple concept of VAS + QVE for lazy operators wanting a well diversified Australian equities portfolio. Total MER 0.35% on a 70/30 weighting. QVE provides Small/Mid + Value + Industrials tilt which *should* outperform (note you also get a bit of this via VAS which is ASX300 vs. ASX200) while VAS takes care of the most efficient part of the market where indexing is most effective IMHO.

 

Sorry @CatCafe,

In the context of this thread @The Falcon answered the question more appropriately.

@The Falcon has offered this excellent solution a couple of times earlier in this thread from memory.

I'm not a Boglehead but it's pretty hard not to admit, given the preceding research evidence, that indexing just doesn't work in the small cap area of the OZ market. Just way too much speculative resource rubbish in there.

And at the opposite end there is little to be gained by using active management for the heavily researched area of the Top 20 stocks. This is where indexing works best as supported by preceding evidence.

Unfortunately our market has huge concentration risk in the Top 20 stocks. Essentially banks, miners, a telco and a couple of consumer staples dominate making up close to half of the entire index.

So the likes of VAS, AFI and ARG as index / index proxies are also dominated by same. Therefore what Bogleheads need is an Ex ASX Top 20 "ACTIVE" fund to fill the gap.

Thus @The Falcon's recommendation of:
VAS / AFI / ARG (Top 20 dominate)
QVE (The rest minus the rubbish)

70 / 30 split as @The Falcon suggests sounds right.

Simple as! And indexing research in the context of OZ is supportive of such an approach.

Bogleheads, rejoice!

NOT ADVICE.

 

From Vanguard on Rebalancing

Best practices for portfolio rebalancing

 

Hi, @The Falcon @Big Daddy and other respected members.

I am keen to understand and interested in Van and platinum.

Could you please explain how to get start?

Thx

 

Two fairly different offerings.

Vanguard offers index tracking products along with smart BETA style funds
Platinum offers actively managed funds

Vanguard ETF style products are most closely aligned with this threads theme. Specifically VAS and VGS, you can buy them through any broker, online ones tend to be cheaper. Online Brokers like commsec/eTrade/NAB broker are all similar and offer reasonable value through a platform that is user friendly.

Read the ETF and LIC thread along with both their websites for more info.

 

They market time to a degree though as when their asset allocation gets out of whack by X, they rebalance. Really Bad Days (RBD) or event driven balancing sounds a lot like market timing

Three recent events would have seen Bogleheads madly selling bondsand buying stocks (or stock indexes).

• September 2001 (World Trade Centre Crash)
• 2002/2003 (Iraq War)
• 2008/2009 (Financial Crisis)

 

Points/assumptions
1. Buy to hold and never sell
2. Large falls are good buying opportunities
3. It has been proven that statistcally buying now is better than waiting for RBDs

The dichotomy of 2 and 3 is interesting. Everyone goes on about how "you can't time the market ". Yet people hear "a market correction is imminent". Think Sydney property prices since 1990s or even sentiment earlier this year.

The market may or may not fall soon. No one knows for sure and if they do they should be able to make a fortune on shorts alone. However, a good value investors that pays dividends can't go wrong. That's why I am on this forum.

 

I've been looking recently at Vanguard's unlisted index products, specifically their multi asset vehicles. I must say that I believe that they are underrated for those that wish to follow the index/asset allocation model. Although the fee basis seems high at first blush (0.37% for wholesale high growth) I believe that in application there is real value here ;

1. Tax / frictional costs on rebalance - essentially zero. Vanguard rebalances with inflow/outflows. Not the case when you manage your ETF based portfolio and then sell down outperforming assets for rebalance (incurring CGT). Not a consideration if you have plenty of inflows, but one day it might be.

2. Ability to change asset mix without incurring CGT. The lifestrategy products allow switching between asset allocations with no tax consequences.

3. Forced rebalance ; asset allocation / indexing gets a free lunch of approx. 0.5% long term via rebalancing....it does it for you even if you don't want to. Another thing, the income is quite tax effective with typically 50% franking....the forced rebalance into the ASX stuff picks up that exposure.

4. Portfolio admin, there is none.

I guess my take away is look beyond the headline costs and work out practical application over the long term, the outcome might be different than you expect. Things that don't matter a lot when you have $300k will matter a great deal when you have 5-10M !! So plan for the very long term.....

 

Point 2 above may well be erroneous. I'll need to confirm that.

 

Hi everyone,

Just finished the bogle heads guide to investing, and a bit of john bogles commonsense guide in addition to this thread.

Couple of question regarding the book and the strategy

Book answered most questions I had, but raised this one;

'Buy funds after distribution date'

· Why? Wouldn’t it be better to receive dividends, pay some tax on them and have a larger asset base afterwards?

(maybe this is one of the more American-centric points?)


On Boglehead Strategy:

Basically, to invest in index funds and bonds, the volatility of stock markets partially offset by bond stability – one zigs while the other zags…. All the while gradually shifting portfolio % by selling down of portfolio towards bonds as retirement approaches to live of the lower yet more reliable and stable yields– correct?

Is it feasible (although more volatile) to invest and hold the majority in stocks well into retirement? (e.g VAS/VGS) and live off the dividends? Dipping into offset or relying on rental income when times (and dividends) are bad?

Ideally I would like to leave a lot of my future wealth to my future children – that is not be selling down a portion of my wealth each year of retirement.

I like the idea and term Boglichead (fist bump to whoever it was that coined that J ) and will be following a combination of bogle/lic/property. Just curious if living purely off of dividends from index funds is realistic?


Thanks


KJB

edit - I realise I said purely living off dividends but also using offsets and rent. what I'm trying to say is just keep your portfolio 100% index funds well into retirement. Sorry too much coffee and nightshift scrambling my brain !!

 

When a share goes exdividend the price usually drops - and generally by around the dividend amount. So one strategy is to wait and buy in the dip. But this would mean missing out on the dividend and franking credits for the one just declared. But you would be making more capital gain - maybe.

If you have enough shares you can possibly avoid selling. One thing with property is as the values rise faster than rents the yields drop. So on a Sydney property bought 20 years ago you may be getting just 2% yield - and then you have land tax and all the other costs. VAS on the other hand would be paying around 4% plus franking credits. Since the leverage has gone out of your property purchase selling it and paying the CGT and then buying shares can result in higher incomes - I think I have written a strategy post about this.