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IP Deposit Savings, Index Fund Better Option?

Discussion in 'Other Asset Classes' started by House, 21st May, 2016.

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  1. House

    House Well-Known Member Premium Member

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    Finally getting around to being a bit more proactive as ideally I want a decent portfolio of both shares and property (but buying the shares through redraw ;))

    Have about $7k saved but thinking I could put my money elsewhere for a better return than the laughable $4 interest I got last month.

    So did some reading... And then got very confused with all the acronyms and options! It seems Vanguard are regularly recommended for their index fund/ETF's and have low associated fees and DRP options on some.

    Given that I want to invest a small amount each month ($800) in something simple for the next 5+ years with the option of DRP and relatively low risk, would VAS be a good start? And through Commsec for the lower management fee? $5k entry stopped me before years ago but now thinking differently.


    LIC's such as AFIC and ARGO
    VHY- ETF tracking 40 ASX companies. High dividend
    VAS- ETF tracking ASX 300. DRP.
    VTS- ETF tracking US market
     
  2. Hodor

    Hodor Well-Known Member

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    Can you afford to suffer negative years with this cash? VAS certainly has potential to put you far ahead of a bank deposit, but it could go backwards also. Consider the risk of capital loss carefully.

    You would be better off saving a little more than 800 before adding to your holding to minimise brokerage. Other brokers are cheaper than commsec for brokerage. I use commsec still as I don't buy often so I haven't searched out the cheapest myself.

    There are unlisted funds that offer bpay and direct debit which might suit your 800pm strategy.
     
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  3. The Falcon

    The Falcon Well-Known Member

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    Yeah, I'd be inclined (as Hodor) suggests to consider the volatility of stock prices when thinking about this. Perhaps something like Vanguard's unlisted "balanced" fund may prove the right mix of income/growth and stability. Last thing you want to be dealing with is a 30% market draw down when you need to withdraw your cash.....
     
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  4. House

    House Well-Known Member Premium Member

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    Very true and naturally have considered the loss but it's a fairly small amount in the long run so wouldn't lose sleep over it. Think it's less risk than putting it into 2 or 3 individual stocks.

    Would the cheaper alternatives be CMC and Bell?


    I've been considering the loss of capital for 5 years and it has gotten me nowhere! Latest excuse would be the S&P500 50wma crossing the 100wma (apparently only seen twice, before tech crash and GFC) but 30%+ loss on $6k is pretty wearable for a worst case scenario.

    Thanks for the recommendation for the Bakanced Fund, is this it- Vanguard Balanced Index Fund
     
  5. The Falcon

    The Falcon Well-Known Member

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    Yep that's it.

    Problem is that you have identified you need the money at a defined point of time in the future for property deposit. Index funds are "forever" type products. Ignore all that market prediction noise, as nobody knows anything. What I can tell you though is that stocks will be volatile and cash wont be.
     
  6. trinity168

    trinity168 Well-Known Member

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    Total newbie on this, for the Vanguard Balanced Fund, what is the minimum amount to start on it? The site indicates $500k?


    MINIMUM INVESTMENT AMOUNT
    • Initial investment: $500,000
    • Additional investment : $5,000
    • Minimum account balance: $0

    Thanks.
     
  7. The Falcon

    The Falcon Well-Known Member

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    You've clicked the wholesale fund.
     
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  8. joel

    joel Well-Known Member

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    I put my savings into shares rather than in a bank account. Had lost about 5% by the time I sold em to buy a house. 6 months later and they'd now be up about 300%. Dont buy shares if youll need the money any time soon..
     
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  9. trinity168

    trinity168 Well-Known Member

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    Doh! :oops: Thanks Falcon!
     
  10. CatCafe

    CatCafe Well-Known Member

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    Would suggest you keep it in cash while you build up your first deposit. Assuming you purchase well you can then borrow against the equity to purchase shares later down the track.
     
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