ETF Exchange Traded Funds (ETFs) 2017

That PC member was in the know! More changes are still to come!

 

The suspense is no good for my heart health as it causes me to consume excess home brew. Spit it out please or PM me if secrecy is required.

 

And once you know the homebrew will ensure we will all know!

Cheers,
Oracle.

 

He he. Nope never been so drunk that I couldn’t keep a secret. Or not that I can recall.

 

Since it's domiciled here, will it be franked? I couldn't see anything about it ...

 

Any distribution component from Australian Shares will have attached franking credits as per the underlying shares in ASX 300.

 

Doh. Of course - thanks for the reminder @Nodrog.

 

I thought it was reasonable, wholesale version is 0.29%. Plus you get those fancy coloured graphs.

 

Other than these behavioural issues, are there many other reasons why one would select the wholesale option over one of the new Diversified ETFs?

It appears to be a very similar vehicle with a lower fee.

 

I do like the ability of wholesale funds to bpay in an amount weekly - set and forget. Brokerage is more an issue with ETFs. Also the psychology is a bit different - when it comes to topping up an ETF, I feel I would 2nd guess the price, whereas the bpay is all automatic!

Having said that I would love to hear any other opinions, as I just can't decide which is the more optimal setup - wholesale high growth fund or corresponding VDHG (high growth) ETF.

 

Also wholesale fund would calculate your capital gains for you etc, which is not a small calculation over long time periods (eg decades) if you've been drip feeding into the ETF (and taking advantage of the DRPs too)...

... or I'm just very bad at record-keeping, am I the only one with this problem?

 

Thanks for posting this link Tess. These four diversified ETFS look interesting and the high growth option in particular has had quite a few buyers already. I will probably buy a little of the four of them, with the possibility of switching a chunk of my current holdings into these over time.

 

The Multi sector ETFs may be more tax efficient than the funds....the key will see distribution quality over a couple of years.

 

Partner really likes the newly listed etfs for the multisector funds.

Pros: lower fee, don't need 100k buy in as she only has around 50k built up and won't have to get a nab equity builder product for instance to borrow for it (if she wanted to use a nab equity builder she would go down the lic route to get the full franking to cover interest expense)

Only con is she won't have the bpay option but she insists on only buying every quarter via direct debit into a cdia account and then direct purchase per quarter regardless of price to take behavioural buying issues and emotions out of the picture and minimise brokerage and paper work for parcel buying down the track! So maybe a quarterly parcel size of 3 to 4k maybe on her behalf!

She seems to have turned up the research and reading on the investing front of late tho which is promising instead of wishing for a financially independent future!

 

Yes, excellent point. If behavioural issues are not a concern these new ETFs appear to be a more attractive option than the wholesale funds and much better value than the retail funds.

 

Interesting development, will keep an eye on this. I know some people who would benefit from the simplicity of them but didn’t like the higher retail fund fees when starting out

 

Just looking at the Vanguard Growth Diversified wholesale fund which the new ETF (VDGR) of same name will be investing into. Essentially the new ETF will be a separate class of units invested in the underlying wholesale fund.

One would hope that AMIT and the ETF overlay will result in a much improved tax situation for many of its investors.

Check out the breakup of distributions vs growth over different time periods in the following table. To date it would appear this is definately one that needs to be held in a low tax environment:



@Il Falco / others, thoughts?

 

Similar thoughts (bolded) from a poster on another forum to what I mentioned in the Vanguard thread. But as also mentioned Vanguard will be auto rebalancing periodically.

“With my wholesale fund I went with the high growth fund, then added term deposits to get the balance I was after, so that I wasn't locked in to a lot of bonds.

Also, to convert the Fixed Interest component to cash in case you wanted to snap up some value equities (for example following a market correction) you'd have to sell units in the fund which would include selling equities at a low point in the market – better to have the cash component outside the fund IMO.

If they offered a 100% equities diversified fund I would have used that.”

 

Agreed, it's still more desirable for me (in theory) to go 50/50 VAS/VGS. Or ARGO/VGS.

 

Vanguard launches diversified ETFs on ASX