Boglehead/Vanguard way to retire.

Discussion in 'Share Investing Strategies, Theories & Education' started by 2935, 7th Sep, 2015.

Join Australia's most dynamic and respected property investment community
  1. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,238
    Location:
    Homeless
    Very much so, Peter Thornhill (maybe read the thread here next) speaks about the benefit of this kind of approach and avoiding bonds all together. Dividends tend to be much more stable than equity prices even in times of extreme turmoil like the GFC where the price of equities dropped by ~50% but dividends dropped by ~8% (from memory).
    Having a couple of years worth of living expenses solves any sleep at night problems.

    Along with the property I hold the Peter Thornhill dividend approach is pretty much what I am following with new capital (Peter would probably slap me for holding property*)

    * I don't know Peter so this is pure speculation, he does however not promote investment property
     
    Ynot, KJB, Banawarra and 1 other person like this.
  2. L3ha7

    L3ha7 Well-Known Member

    Joined:
    24th Apr, 2016
    Posts:
    858
    Location:
    Syd
    Thanks for starting this thread
     
  3. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,379
    Location:
    Buderim
    Bored out of my brain lying around with a nasty viral infection (too crook to enjoy some home brew in recent days) so I thought I'd pop in here for a brief visit to harass the Bogleheads:).

    I've never been a fan of bonds especially now that the 35 year bond bull market appears to be at an end. The main reason being that as a dividend investor there is little to fear from volatility. Hence there's no need for bonds to "supposedly" lower volatilty. And as for income well bonds aren't even worth looking at compared to stock dividends.

    The following article shows that investors have a choice of cash vs bonds. This preceding extract from the article is important to note, in particular the outperformance of cash when the bond returns are negative which is a very high probility going forward for quite sometime.
    As the article points out it's whatever the investor feels most comfortable with. For me I'll take cash over bonds any day for the defensive part of our portfolio given it's safety ($250K per ADI Gov't Guarantee), NO NEGATIVE RETURNS, competitive interest payments, liquidity and Opportunity (easy access without possibility of loss to buy shares during market crashes).

    As for the author's comment that bonds may provide a higher yield at times well remember he's referring to the US which doesn't have the high dividends and magnificent franking credits in Australia.

    Even as a retiree I generally only hold enough Cash to cover 2 - 3 years generous living + emergency + upcoming major (eg new car) expenses. At this point in time that equates to less than 8% of our investment portfolio.
    Better head back into hiding now as this will no doubt upset the Boglehead's. They've still got a hit out on me for my previous posts:eek:.
     
    Last edited: 26th Nov, 2016
    Ynot, Heinz57, orangestreet and 2 others like this.
  4. Banawarra

    Banawarra Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    61
    Location:
    Rural NSW
    So, after spending the day with Mr Thornhill, I've come away with plenty of messages, but, in the context of this thread, and Austings previous post, the bond market is heading for the worlds biggest shake up of all time, AND his thoughts on Vanguard and their ETF's..............He has no thoughts, he gave us a blank stare, don't touch them
     
    Anne11 likes this.
  5. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,379
    Location:
    Buderim

    He he,

    Yes, I've discussed ETFs with Peter in the past. Dare I say, he's not a fan:).
     
    Ynot likes this.
  6. Northy85

    Northy85 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    444
    Location:
    Brisbane
    Why what's wrong with them? I have a few grand in VAS and VHY but am thinking of just buying regular stocks from now on.
     
  7. Banawarra

    Banawarra Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    61
    Location:
    Rural NSW
    In his words "why should I have all that other CRAP dragging my performance down" - resources & property most probably
     
  8. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    41,675
    Location:
    Australia wide
    Makes perfect sense now you say that!
     
    Ynot likes this.
  9. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,379
    Location:
    Buderim
    It was quite some time ago I asked Peter about ETFs. In addition to the crap in the index he at that stage was also concerned about counter-party risk with some ETFs especially in a market crash situation.

    Then there's the ETF trust structure vs LICs (company) in regard to distribution of capital gains etc.
     
    Ynot and trinity168 like this.
  10. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,379
    Location:
    Buderim
    @Redwing, this will bring a smile to your face:

    How the Bogle Model Beats the Yale Model
     
    Redwing likes this.
  11. Big Daddy

    Big Daddy Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    998
    Location:
    Perth
    Hi,
    Can i get some advice regarding my Daughters portfolio. Currently going for an agressive strategy as she wont need any of the money until she turns 18 in 10 years time. Currently purchasing ~ $1500 twice a year and using DRP.

    IEM 15.08%
    IOO 16.36%
    VAS 42.13%
    VGS 26.43%
    note: Sold all VAF bond ETF holdings late last year


    Aust Shares VAS VAS - Vanguard Australian Shares Fund (fee: 0.15%)
    Global Shares IOO iShares Global 100 Fund (fee: 0.40%)
    Emerging Markets IEM IEM - iShares MSCI Emerging Markets Fund (fee: 0.67%)
    International Shares VGS MSCI Index International Shares ETF (0.18% p.a)
     
  12. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,379
    Location:
    Buderim
    Why hold IOO? It's constituents are in VGS and the fee is noticeably less.
     
    Ynot likes this.
  13. Big Daddy

    Big Daddy Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    998
    Location:
    Perth
    I cant recall. I had my reasons for holding IOO and selling VAF but i cant find my journal.

    I might not sell it but just stop buying it over the next 10 years so its weight is considerably less. Is there another ETF / LIC i should purchase or how should i balance the weights ? And should i be looking to reduce beta (systematic risk) by diverisying more or increase it to magnify gains(risk)?
     
  14. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,438
    Location:
    WA
    No bonds in my kids funds, 100% stocks via ETF and LIC
     
    Terry_w likes this.
  15. ollidrac nosaj

    ollidrac nosaj Well-Known Member

    Joined:
    27th Apr, 2016
    Posts:
    1,481
    Location:
    australia
    Hi guys, my personal 3 ETF portfolio which i have set up recently.

    Betashares QOZ (fundamentally weighted RAFI index of asx shares)
    Betashares HEUR (Euro share index selected on companies with high dividend and receive at least 50% of revenue outside Europe)
    Betashares Food (global agriculture sector)

    QOZ was selected for my asx exposure because i like the concept of fundamental over market cap weighting.

    HEUR was selected for non sector correlation to the asx (Finance/Mining). And comprising of companies with Premier/Hard to replicate brands, BMW, Daimler, LVMH, Kering etc.

    FOOD was selected again for non correlation to either fore mentioned indexes. I also believe consists of companies with stable/predictable earnings futures and should benefit from a growing demand in this sector.

    Betashares ETF's were selected for there hedged currency exposure and non cross listed exposure.
    (domiciled on the asx).

    feel free to comment and tear it apart ;)
     
    Perthguy and wombat777 like this.
  16. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,423
    Location:
    AU
    Firstly, I'd be concerned with the survivability of FOOD and HEUR.

    For HEUR, I think its an interesting niche product, and picking up this on US exchange where there is more support for an ETF based on this index and it will likely last.

    WisdomTree Europe Hedged Equity Index
    The WisdomTree Europe Hedged Equity Index is designed to provide exposure to European equities while at the same time neutralizing exposure to fluctuations between the Euro and the U.S. dollar. In this sense, the Index "hedges" against fluctuations in the relative value of the Euro against the U.S. dollar. The Index is based on dividend paying companies in the WisdomTree International Equity Index that are domiciled in Europe and are traded in Euros, have at least $1 billion market capitalization, and derive at least 50% of their revenue in the latest fiscal year from countries outside of Europe. The component securities are weighted in the Index based on annual cash dividends paid with the following caps: maximum individual position capped at 5%, maximum sector weight capped at 25%, and maximum country weight capped at 25%.

    FOOD is another interesting niche product, though I would favour consumer staples over Ag businesses over the long run to produce higher return on equity.

    Both of these are very low cap and don't be surprised to see them pulled in the next couple of years if they don't gain traction.

    Whereas a RAFI ETF is a core product, these are very niche products. I would be personally looking for a world all cap type product (Vanguard) for core international exposure and add these other two for the type of exposure you want. I would not be building a long term portfolio around them.

    just my thoughts, we each spend our money and take our chances.
     
    Anne11, Redwing and Nodrog like this.
  17. Zenith Chaos

    Zenith Chaos Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    1,673
    Location:
    Sydney
    I thought the whole point of the Buffet versus hedge fund argument was that you don't know what the crap is, so you get a piece of everything which then mitigates the risk of missing the ones that shine.

    What are Peter's LICs of choice?
     
    Nodrog likes this.
  18. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    3,423
    Location:
    AU
    The point of Buffett vs. Hedge fund (fund of funds) was that on average, they don't outperform, after fees (the key detail!) a low fee index fund. When you are giving up a near 2% pa head start it makes things tough! US Hedgies have typically charged "2 and 20", 2% management and 20% performance fee, yep, they take a cut of the outperformance above the index.....same kind of rort exists in Oz in unlisted and some LICs too....
     
    Anne11, Redwing, Nodrog and 1 other person like this.
  19. Zenith Chaos

    Zenith Chaos Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    1,673
    Location:
    Sydney
    Hi @Il Falco, I know you've espoused the virtues of QVE. Do you consider the 0.9% MER worth paying for? I understand that small/mid caps require more effort. What about WAM (1%), WHF (0.35%), MIR (0.7%), PMC (1.5% plus 10% outperformance of benchmark plus 5%), MFF (1.25%).

    With a high concentration based on cap weighting of the ASX in a relatively few stocks, the general agreement about avoiding resources, and an obvious preference to minimise fees, would it be better than to just buy the entire ASX industrials as individual stocks? That wouldn't work well with a small amount of money, but with say 500K, one could equally or cap weight across the top 20 stocks at 25k per parcel. When a share becomes cheap, buy more.

    Advantages:
    > fees = 0 - can easily copy the top 30 list of all LICs
    > Avoid the crap (Peter Thornhill's love of industrials)
    > In full control
    > Buying opportunities more frequent (I'm finding all LICs expensive but I can see opportunities in TLS or PTM for example)
    > Don't need to start with 500k, just buy parcels as the shares become cheap

    Disadvantages:
    > rebalancing could be expensive, although I wouldn't worry about asset allocation, I'd be more focused on the cheap buying
    > requires more effort / time
     
  20. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    11,379
    Location:
    Buderim
    Couldn't agree more.

    Build your foundation first with "core" ETFs such as:
    Local: VAS / QOZ
    International: VGS

    Then you can add "satellite" ETFs (optional) specialising in niche areas that might spice things up. But these are not the main game.

    Not advice.
     
    Ynot, Anne11 and Observer like this.

Buy Property Interstate WITHOUT Dropping $15k On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia