Is it time to get on the banks?

U gotta be careful with ETFs. They may trade like stocks but they are not really stocks per se but funds.

 

Fool article excerpt on Bank Dividends from the start of the year

NAB has a grossed-up dividend yield of 9.4%.

Westpac has a grossed-up dividend yield of 9.25%.

ANZ has a grossed-up dividend yield of 8.1%.

BOQ has a grossed-up dividend yield of 12.6%.

Mystate has a grossed-up dividend yield of 7.8%.

CBA has a grossed-up dividend yield of 7.4%.

Bendigo and Adelaide Bank has a grossed-up dividend yield of 9.9%.

It’s clear that banks like NAB, Westpac and BOQ have some of the biggest dividend yields, but they could be yield traps if the dividends are cut again in 2020.

 

Not sure if we will have this???

NAB has a grossed-up dividend yield of 9.4%.

 

No:

 

When you say carefu with etfs l, in what regards?

 

Didn't they just reduce divided to 30c. But with a share price $15/$16 still a fair yield?

 

mainly i would say liquidity risks. Many investors put money into ETFs and during periods of big volatility or sell downs, it might be a problem to get out when the whole herd tries to sell at the same time. Really depends on what the underlying investments the ETF is representing. The way ETFs try to "mirror" the price of their underlying indexes etc. is not as simple as buying and selling the underlying investment.

Of course if you are more of a long term buy and hold kind of investor then this is not such a big thing.

 

This was proven to be a furphy. It didnt happen on 23/3 in the mad rush for the exit making many commentators including me eat humble pie.

 

@mtat So I've finally made my way back from that website and many of its extra info links. Very, very informative and I definitely feel like a have a better foundation knowledge now so thank you for that. I've even forwarded it to a few friends at work for a read.

I feel like taking the ETF route is definitely going to be a far simpler and easier option to get started so will likely purchase this week.
It seems like a rough 70/30 split international/Aus might be an ok way to go so was tossing up between 2 suggested options:

Option 1: Simply 30% VAS and 70% VGS, or

Option 2: 30% VAS, 20% VGAD and 50% VGS.

There was a lot of mention of keeping a high international exposure but reducing currency risk with an AUD hedged ETF such as VGAD but is that really worth the effort?

VGAD has a higher (although not much) management fee, and looking at the info I could find on it, doesn't always pay out dividends. I'm not concerned with drawing dividends as I would reinvest it immediately anyway but if no return is made where are the management fees being drawn from?
Apologies for the rookie questions but I feel like I'm finally starting to piece the basics together so the clarification from these forums is greatly appreciated.

 

No rush. Decide on an asset allocation, set how often and how much you will invest, and stick to the plan.

Can't give advice, but I like both of those options. I personally hedge 1/3 of my international equities.

You're missing the 10% VGE (Emerging markets) often recommended, but that's alright. Depends on who you're with for super, you might want to invest in Emerging markets there (I'm with Sunsuper - investing in EM is super easy and cheap).

I wouldn't go higher than 30% in Australia. If you do, you could go with VDHG instead for an all-in-one option.

Hedging gains/losses are treated as income/expenses. If AUD falls then the fund records an expense that offset any income it earns from underlying assets (which would normally flow through and be distributed to shareholders). But if AUD rises, then that's income to the fund which gets distributed. Hence you will see VGAD either having no distributions (when AUD falls) or very high distributions (when AUD rises).

Because of these higher distribution periods, it's often suggested to put hedged investments in super, which is normally a lower tax environment.

As for management fees on ETFs, these are not taken from distributions. I'll quote my other post:

I like to imagine a daily fee on my bank account that I don't see on my statement. It just takes a percentage off the balance each day.

 

If you're new to investing in shares, something to be aware of is that Passive Investing Australia heavily favours the "Boglehead" approach, so he favours ETFs over LICs and emphasises the importance of international shares. Not everyone fully agrees with that approach (although I tend to). For other perspectives, you might like to read Strong Money Australia - BUILDING FINANCIAL STRENGTH AND A LIFE OF FREEDOM and the LIC threads here, if you haven't already.

 

The emerging markets do sound like something I wouldn't mind looking at investing in but due to having minimal funds in the market at the moment I think I'll leave that until after I have a bit more of a foundation in the others first. 10% of my current stock investments would hardly be worth the brokerage costs.

Unfortunately my employment locks me into a super fund with no self management option so the only real input I can have is choosing between the standard risk based investing options. There's no real scope for me to have any influence on the actual securities themselves. But I don't think it would really matter too much putting a little into VGE myself anyway.

Thus the currency risk, makes sense. Having that management fee deducted like that also makes everything a lot simpler so, happy with that. Thank you for clearing all that up, the pieces are definitely starting to fall into place so I'm gradually getting a better grasp of it all. The wealth of knowledge across these threads has helped enormously.

Cheers @MarkW , I'll try and get my head into that over the next couple of weeks. Different perspectives can only help broaden my knowledge on all of this.