Hypothetical situation: $200k cash to invest

I don't know exactly how the fees and allocation work with the Vanguard wholesale fund but my experience with pre-mixed super is that it's better to choose your own allocation and get a substantial discount.

Just visited the site Investment Products and my back of the beer coaster calculation:

38% Australia @ 0.18%
42% international @ 0.195% (average hedged and unhedged 0.18 / 0.21)
10% international small @ 0.39%
10% cash reserves @ 0.15%

.38*.18+.42*.195+.1*.39+.1*.15 = 0.2043 << 0.29

This will give you a 0.085% discount pa over the long term, which is significant. The other advantage is you can tweak to your OWN allocation if you want whereas the pre-mixed version gives you no flexibility.

 

Great point and question @ErYan - here's my current thinking (right or wrong): The difference is roughly 0.1% as you stated. On $100k investment that's a difference of $100 per annum ($290 vs 190). For $100 per year I'm paying for simplicity:

The unlisted fund::
- has instant diversification and rebalances automatically
- i can add small or large amounts via bpay and it rebalances
- has an easy online interface
- annual single tax statement

Note: I haven't taken into consideration brokerage vs entry fees.

Also my personal experience with unlisted funds is I'm less inclined to tinker with allocations or withdraw on a whim... I think this is something @austing has alluded to on other posts (one needs protection from themselves sometimes). Also the way I was able to build the $200k was via a much more expensive unlisted retail fund by making monthly payments starting about 7 years ago, starting with $500 a month and increasing the monthly payment as my income increased. Whereas my direct share investments (totalling abut o$30k) I have nothing to show for as they either tanked or I sold them at the wrong time and then ****** the rest of the money away.

@austing poor choice of words on my part. By "Current short-term plan" I mean I'll invest the $150k in the vanguard fund for the long term, but with the other $50k and monthly savings I just want to see what happens over the next 12 months with both property and sharemarket and adjust the plan for the $50k+savings depending on what happens.

 

You should be able to emulate the High Growth option precisely. It's still Vanguard's unlisted fund, but you can choose the constituent parts yourself. This gives you flexibility.

0.1% of $1000,000 is $1000. This compounds over time.

 

@ErYan Not trying to argue, but just clarifying 0.1% of $100k is $100 and 0.1$% of $1M is $1000, right?

Latest update, I've taken the plunge and put $100k into the Vanguard WS High Growth diversified fund as a start.

 

I just mean that when you have a million bucks it will be $1000 a year you lose in fees. And it will only go up from there.

Good choice, there is a small difference and I think you still have the flexibility to move it around if you want. 0.29% is still low, I'm just completely anti fees.

 

What's the point of the high growth fund @.29% fees if you can just copy the exact allocation for a lower fee of .20% as eryan has calculated.
Why does vanguard even bother calling it a wholesale fund if you can copy for less.

@austing you get this stuff, any thoughts mate?

 

Even ignoring the effort and transaction costs in trying to maintain a balance between all the separate funds that make up the Vanguard High Growth Diversified fund the critical reason for investing in such a product is to minimise destructive behavioural tendencies. One product, one single auto periodic Bpay to dollar cost average into it. No decisions to be made, rebalancing done for you, set and forget.

That said if you are disciplined and prepared to do a little extra work then owning separate funds is great also. In fact in regard to bonds owning just Government bonds is lower risk than an aggregate bond fund that contains corporate bonds as well.

In terms of a simple three fund portfolio the following funds would cover most bases:

Vanguard Australian Shares
Vanguard international Developed Shares
Vanguard Australian Government Bonds

Time permitting @Il Falco would be able to add great value to this discussion.

 

I have noted lots of discussion about the whole vanguard retail/wholesale v etf debate on the aussie investing forum on mr money mustache website!

 

And what's the consensus?

 

Jury is still out on that one!!!!

 

For many investors opening an online broking account can be a disaster. The ability to buy / sell (the most dangerous) in an instant depending on some tip from a friend / forum, panic when the market crashes and checking your share prices all the time etc can lead to destructive behaviour based on human emotion and personality traits,

The above is why investing in ETFs can be a big problem as you need an online broker to buy / sell them. Vanguard wholesale funds minimises those problems as it helps protect you from yourself.

Research tends to support this as it found on average that ETF investors performed noticeable worse than those who invested in traditional unlisted index funds. The main reason being that the ease at which ETFs can be traded encouraged investors to try to time the market and trade more often. That is, it can lead to destructive behavioural issues.

 

If someone has time, get the FY17 final distribution statements for ;

1.ETFs ; VAS/VGS
2. Diversified Managed Funds ; Wholesale class - Vanguard High Growth / Growth
3. Managed Funds ; Wholesale Class - Vanguard Australian shares/Vanguard Intl shares

From this we will be able to see if any divergence of tax treatment of 1 and 3. Really talking about capital gains. 2 will be a different kettle of fish I think.

 

I don't know about the unlisted fund distribution breakdown but here is the final distribution for VGS, over 24% LT Capital gains:

http://www.asx.com.au/asxpdf/20170704/pdf/43kdnnvf2nb62w.pdf

 

Spot on @austing, behavioural issues and psyche are key! In addition something I've had a chat with my 'older mentor' about is trying to time the market and wait for opportunities to buy lics since US election. He set me straight by showing me a complete excel spreadsheet showing his purchases over 40 years in argo saying "I didnt wait til it dropped in share price to 2 dollars again! Bit of a eye opener as I want prices to bottom out but want divs to rise!

He didn't have any offset accounts to build buffers just opted for the wog principle of paying off his ppor ASAP along with a IP unit fully paid off so he kept tipping money into the market religiously every quarter to 4 months allocating 20% of his pay packet! As for the nta premium discount he wasn't too hung up, didn't buy at big premiums but he said quite a few times I overpaid for my apples but later I got those apples cheaper too!

He always said just keep buying but don't forget to live in the present too!

 

Awesome post pippen!

The right time to buy is... whenever you have spare cash. In 30+ years it's not going to matter too much

 

Cheers @Snowball, great new article on your blog about savings rate being king! Brilliant piece! If I could attach the link from my phone I would! You should give yourself a plug! Keep up the good work!

 

Agree this is sooooo important. Business member @Alex Straker has extensive research on this area also basically concludes that successful outcomes are far more dependent on cash flow discipline and habits than clever investing.

 

Wow settle down it's not that good
Lol thanks a lot mate
Haha ok if you insist...
Did you mean this one Savings Rate Revisited: Our Journey In Numbers - Strong Money Australia
Or this one Earn More or Spend Less? Why Savings Rate is King - Strong Money Australia
It's funny I think most of the ppl who read it are already switched on and don't really need to read it!
But thanks for reading anyway