ETF Exchange Traded Funds (ETFs) 2020

hi @dunno interesting comment re fiat and degradation of currencies. how have you factored that into your investments ?

 

I don't know why VGAD didn't, but it is kind of odd since the wholesale fund version paid a hefty one, and other hedged funds like VIF paid a huge one.

Not that surprising given it is up more than 25% this quarter thanks to the AUD slump then recovery.

 

Out of interest for those investing in US market ETFs- are you reducing your investment amounts or delaying putting more in given the lack of fundamentals in the wake of unprecedented Fed printing? I'm still DCAing into VGS (around 65% US) but with some psychological discomfort given how artificial it feels.

 

Plenty of psychological discomfort over here. Like you though, I'm still DCA'ing into VGS.

 

Continuing on from @dunno great charts. Here is my data (manually kept).


1) VAS




2) IVV (S&P 500 locally domiciled unhedged)



I would like to draw the attention to the CAGR (compounded annual growth rate) for both VAS and IVV.

I do realise VAS had a 25% cut in dividends and some of that cut might come back next financial year. But growth of IVV dividends has been amazing. Something that I have learnt to appreciate more and more. Low payout ratios provide cushion if and when earnings take a hit dividends need not take any hits.

Company keeping money to re-invest at better rates than I could is more preferable when it comes to compounded returns. The preference of higher dividends comes at additional cost of having to pay tax on it before it can be re-invested thus it's an investment cost for anyone who is required to pay tax. What's the point in saving 0.5% on expense ratio when you later end up paying 30% tax on half of your investment returns?

Something for everyone to think about even if you prefer dividends than capital growth.

Cheers,
Oracle.

 

Thank you for contacting Vanguard.

The fund had incurred significant hedging losses over the past financial year meaning there was no income to distribute. This was attributed to the poor performance of the AUD relative to the other currencies the fund's assets are priced in.

 

Good reason to just stick with VGS I think

 

Don’t fight the fed

 

My oh my that dividend growth for IVV is something else!
Past returns are no indication of future and all that ....

 

Some of it is because of currency gains. Remember AUD went from parity to around 0.65 cents. That's a good 40% gain not to be repeated. I hope not

Cheers
Oracle

 

Yes good point, what would benefit from a weaker US dollar in your opinion? Emerging markets?

 

It doesn't hugely matter since any dividend would be reflected in the price of the fund, but I continue to find the variations in Vanguard dividends curious.

The response from Vanguard doesn't explain why the underlying wholesale fund paid a dividend whereas the ETF based on that fund didn't.

And whilst VGAD was hammered in the first quarter by the collapse of the AUD, in the second it was up 17% compared to 5% for VGS.

Other Vanguard hedged funds (ie VIF) distributed the currency gain.

I always thought ETFs had to distribute.

 

Nice. I'd forgotten VAS & VGS payments were today. Best email notifications I've received all week.

 

Chicken breast prices are still stable btw!

 

One must get one's priorities right. Freezer has a couple of kg's of them.

Back to somnolence; a condition associated with investing.

 

ETF and Managed Fund distributions (not dividends) will always different, even where the ETF is a sub-class of the fund. An ETF will typically distribute less capital due to market makers unit creation / redemption ability to largely match capital flows which creates less capital events that must be distributed in the managed fund structure - i.e. due to redemptions that create a fund wide capital event. It's a complex area here, but worth looking into to gain an understanding roughly of how things work. I only understand this superficially.

 

I want more ...

 

HaHa, what are you going to invest it in? or are you going to spend it? I want to know more about the gin soaked chocolate @SatayKing mentioned in another thread!

 

Regarding the gin soaked chocs, see the link I posted in the LIC thread yesterday evening.

The horse and mule live 30 years.
And never knows of wines and beers.
The goat and sheep at 20 die
Without a taste of scotch or rye.
The cow drinks water by the ton
And at 18 is mostly done.
The dog at 15 cashes in
Without the aid of rum or gin.
The modest, sober, bone-dry hen
Lays eggs for noggs and dies at 10.
But sinful, ginful, rum-soaked men
Survive three-score years and 10.
And some of us...though mighty few
Stay pickled 'til we're 92.

As for wanting more, bro, buy more. Simples. Greed rules.

 

Thank you for contacting Vanguard.

The underlying fund activities for VIF were such that a distribution was able to be paid, this was largely due to substantial gains made from selling particular bonds. This and other activities within the fund lead to the distribution payment.

The International Shares Index Fund Hedged saw all of it's distribution made up of realised capital gains, the ETF product VGAD did not have these same realised capital gains forced upon it. Despite the two funds having the same base fund, they are two different pools of money and must be managed according to the activity around those funds. Hence, you may see this type of difference between similar products from time to time.

If we can be of further assistance, please do not hesitate to contact Vanguard Client Services on 1300 655 101, between 8.00am and 6.00pm, Monday to Friday, Melbourne time, or alternatively, via return e-mail.