ETF Long Term ongoing ETFs ideas

Hello everyone!

So I have decided to start my long term investment journey where I would buy ETFs on a monthly bases, fixed amount for dollar cost averaging.

Based on the reading and my understanding I have broken down the portfolio I would like to have at least for forseeable future (at least 10 years) is:
- VAS - 35% - For exposure to AUS
- VHY - 15% - For high dividend yield
- VGS - 25% - For International exposure
- VGE - 25% - For exposure to emerging markets

Opting in for Vanguard mainly due to its low fees and high liquidity. Not worried about the brokerage as I will purchase them through Superhero who do not charge for ETF trades and I am aware of its custodian structure

What do we see with this portfolio that could go wrong?
What could otherwise be better option for long term?
Should I also look at LICs?

Any feedback positive or negative would be great.

Thanks in advance!!!

 

If it's for long term growth, I'd consider not including the VHY. There's a school of thought that believes it's better for companies to focus on growth than paying out dividends and that the high dividend yielding stocks have slower growth. Same thing for LICs - you'll need them later when switching to living off dividends but it could be too early to accumulate now if you'll still be working for a while. If you didn't want VHY then it might just be 50% VAS or A200.

Personally I prefer Betashares A200 to VAS, since I have other Vanguard funds I don't want everything with one manager.. some other reasons too that I've managed to forget.. but VAS is very popular and fine.

25% emerging markets is higher than most people allocate, but if that's your risk profile and you're holding a long time its a personal choice.

With VGS at 25% I'd say you're underweight USA which is probably no a bad thing given the overpriced stock market they have currently. Some things in America make me nervous..

Have you considered 1%-5% in bitcoin or gold for insurance against war and catastrophes etc? Idea is that when the stock markets crash, the 5% gold/bitcoin can go up to offset it a bit.

 

Not a bad mix of funds. I would personally drop VHY. Last time I checked it pays higher dividends but overall it underperforms. Higher dividend with a poorer overall result makes no sense.
I also don’t bother with emerging markets. Nothing wrong with having exposure to emerging markets but 25% is a high exposure considering you will also only have 25% in VGS.

I prefer a simpler mix of 50% VAS and 50% VGS. Nice and easy.
That’s my thoughts on it.

 

Forgoing CHESS sponsorship to save $5 seems crazy to me.

 

If it were me I would also dump VHY (but keep the AU allocation at 50%). I like the decent chunk of emerging markets (I am similarly invested). I think there is no guarantee the S&P500 will perform as well in the future as it has in the past decade or so...

 

There’s no guarantees full stop, when it comes to investing.

 

I’d suggest swapping VHY for VGAD if you want to maintain 50% AUD exposure. Lower your VGE exposure to max 10-15% and put towards VGS

 

Thanks all for your constructive feedback.

Collectively, below are the feedbacks:

- Dump VHY all together and focus on growth than dividend.
- Keep AU vs Overseas exposure to 50%-50%.
- Forgoing CHESS sponsorship is a crazy idea
- Swap VHY for VGAD for some AUD exposure
- Exposure to Crypto/Gold

Based on them and with some further reading, I am thinking to go with the following:

- VAS - 35% - AUS
- VSO - 15% - AUS Small Companies
- VHY - 10% - Although less performing, it provides regular (in most cases) stream of dividend income irrespective of company share prices going up or down.
- VGS - 10% - Given many including me believe US markets are highly inflated
- IOO - 15% - Investing in Global 100 big companies
- VGE - 15% - At this stage, personally I have more confidence in emerging world than others.


This would give 60% AU vs 40% overseas exposure. Not so much in Gold but I would like to also explore Crypto ETF if one could suggest here in AUS. I have heard of RIOT in US being very popular but not aware of anything similar in AUS.

Regarding CHESS sponsorship, I am yet to find a CHESS sponsored broker with $5 brokerage. But, I will still save on it if I can. The reason being, I can always initiate (say on yearly bases) broker to broker transfer to convert my shares into CHESS sponsored. Correct me here if not possible.

The problem with dividing 100% into 6 ETFs is that my investments every month will vary based on ETF share price. Say I want to invest $1000 every month, the ETFs I acquire will be different since we cannot buy them in fractions, like in US.

And lastly, Divedend Reinvestment Plan, how do we arrange that?

Many thanks again!

 

None of those pay dividends. They pay distributions.
A $5 broker will produce (very) poor records and you will need to keep very diligent CGT records incl for each purchase, sales and income reinvestment - Sharesight may assist.

Vanguard can be purchased directly
https://www.vanguard.com.au/personal/en/personal-investor

 

• There's not much benefit to holding VSO. VAS on its own is fine.
• Way too much exposure to Australia, especially if you have any property / income exposed to Australia as well. I like to keep it under 30%. I know many here have >50%, but a lot of them are also slowly increasing their international allocation.
• VHY - it's just a worse VAS. It can't provide dividends irrespective of share price movements, as the share price always drops to account for the dividend payout. But up to you.
• VGS - allocation too low.
• IOO - you're paying a lot (0.40%) for the same companies included in VGS. It's just not worth it.

A three-fund portfolio of VAS/VGS/VGE (maybe VGAD too) and you're good to go.

Just buy one ETF at a time, whatever is below your desired allocation (e.g. if you want VGE to be at 15% and it's currently at 10%, just buy that and move on)/ You don't have it split it across every ETF evenly every time, you're incurring additional brokerage for no benefit.

 

I'd also ditch VHY. I did hold ot once but its really too similar to VAS (heavy on banks and miners).
I swapped it out for MVW for that reason which sits nicely alongside VAS now for oz allocation.

Instead of VGE I went for VAE but again they are similar, main difference being the latter is more skewed to Asia & India which sits better with me.

My main portfolio is now VAS+MVW for oz, and VGS+VAE for international.

Dont bother with the DRP, its an administrative nuisance dealing with the CGT. Just take the distributions in cash and add them to you next purchase.

 

The key is 50/50 AUD/non-AUD currency exposure, rather than 50/50 AU equities exposure.

Australia is about 2% market cap weight. Sure overweight it to 20%, 30% or perhaps in a stretch 40%, but I see no reason to overweight further when there are many AUD hedged globally diversified options like VGAD. Keep in mind currency is a whole of portfolio decision, so if you have other AUD assets like property, you may not need to hedge at all, instead increasing unhedged international exposure.

Currency risk - personalising your AUD to non-AUD allocation - Passive Investing Australia

Agree with mtat, drop VSO, VHY and IOO and keep life simple

 

You have had some great responses here. The cheapest options for diversity would be VAS/VGS/VAEorVGE. You are not prepared to pay for chess sponsorship (non negotible for me) but considering the higher fees of some of those other ETF's for no real benefit to your portfolio - my opinion only of course

 

Think carefully about the trading platform you select. Will something like Superhero still be around in 10 years? I wonder how their business model could be sustainable with $5 trades and no brokerage for ETFs.
Vanguard personal investor is OK if you have mostly Vanguard products but the costs add up: for say $300000 invested the ongoing costs are $600 p.a.
Compare that to NABTrade (which is what I use) a $300000 portfolio would cost you $330 initially in brokerage with no ongoing costs. Plus any cash can earn .6% with NABTrade compared to .35% with Vanguard PI.

 

He is purchasing the shares through Super Hero as he said there is no brokerage fee . No reason to just buy one at a time, for starter positions it could be better to buy a bunch. There probably would be benefit from splitting funds into diverse ETF's such as NDQ, ASIA, CLDD, ATEC, ARK. There has been a now may not be a bad time to start building position 's as it would apear he hasnt done so. If you make multiple purchases $5 can be a lot, 5 buys a day 5 days a week could be all your profits or put you in the red. Here is a tip the secret to investing is adding a little consistently and not trying to time in the market. Super Hero shares are held with a HIN in the CHESS system with Super Hero as nominee. Super Hero dont have legal ownership their business is a separate entity . The shares are held in the name of the entity on the account who is the beneficial share holder . The share account can be transferred to another broker if Super hero goes broke.

 

To be honest if you're just starting then it doesn't matter much, it's more about your savings rate. The absolute investment returns on your first couple of hundred k aren't going to make that much difference. Choose something you can stick with and don't overcomplicate it. You're overthinking it. And then spend whatever time it takes to accumulate your first 100k or more reading the LIC and ETF threads going back a few years. You'll figure it out.

Ohh and forget that superhero crap and use a broker with actual chess sponsorship. $5 ffs. That's a coffee.

Agree with @Islay there are some very good responses here. Look carefully.

 

Boy I'm starting to feel old.

Read about MF Global Australia, Sonray, Opes Prime and others I don't recall.......Its all very well to be the beneficial owner, but end of the day if the bank account is not yours and the shares are not registered in your name than you are not the legal owner. You have very little visibility about how they run their business and whether or not they are are trading in their book etc. If something goes wrong then you are just a creditor, best case scenario is a couple of years of stress with no access to your money and then maybe 70-80cents in the dollar if you are lucky.

Is every generation destined to make the same mistakes?

 

How to these platforms deal with the Annual Tax Statements from the ETF's and, in any case, how would the beneficial owner be certain they are accurate?

As to brokerage, it's getting closer.

 

OpenTrader
your own HIN
$5 brokerage per trade upto $5k
CHESS sponsored (and owned) by Openmarkets - same mob that executes trades for selfwealth, stockspot, raiz, etc.

note: i havent tried them myself, but plan to for a potential switch from nabtrade

 

Thank you very much for all the constructive responses everyone and many apologies for disappearing from the thread for some time, due to some personal reasons.

@Islay and @ChrisP73 , I am grateful to everyone having so many fruitful responses received.

Based on all your feedback, I think below is what I believe will be a good combination of AU vs overseas with both hedged and unhedged funds:

VAS
VGS
VGAD
VAE

@mtat - Including VGAD in the list will give some exposure to Hedged VGS. I do have an investment property and also home. So already have quite a bit exposure to AUD. Do you think considering this, I should increase my international exposure by investing in VGAD instead of VGS? Also, dropped IOO from the list, thanks for pointing out that it carried the same portfolio as VGS.

@Hockey Monkey - Sorry not sure how you meant by this? "so if you have other AUD assets like property, you may not need to hedge at all, instead increasing unhedged international exposure." - Did you mean if I have other AUD assets like property, I may not need to consider VGAD, and rather increase VGS? Not sure if that also aligns with what @mtat mentioned? Sorry, I am little confused here with holding hedged/unhedged funds if I already have an investment and a home in AU.

@MB18 - Thanks for pointing out the VAE. I am also, like you, more inclined towards Asian and India markets and VAE seems to be the perfect one for that. On top of that, it has 0.08% less performance fees than of VGE.

Lastly, I think I am convinced to only use CHESS sponsored broker given number of examples by @dunno . Thanks very much for highlighting that @dunno . @nofriends - Yes I have also heard of OpenTrader and will look at opening the account with them.

Thanks again everyone, all your responses are highly highly appreciated.