My portfolio. Does this look ok?

It is that simple, mate.

Buy an index fund and don't worry about any one specific company. Long term if the market goes up, so too will the value of your money without any wastage on management fees to monkeys that can't out perform the market.

I'm not too familiar index funds (never used one), but my understanding is that a fund just mirrors the weighting of whatever index it's meant to track. So if it's the asx300, it holds the all the companies making up the asx300 in proportion.. i.e. If CBA makes up 7%, Westpac 5%, bhp 10%, it will hold these shares in the same proportion for he money it has.

Fees for an index fund are much lower, between 0.18% to 0.3%? Will have to check vanguard.

So if an index goes up 10% in one year and the fund closely resembles that movement at 9.7% that is a good outcome.

Someone charging you 1% to manage your money will be lucky to resemble the 10% movement of an index so closely, let alone out perform the index... and of course you're paying them 1% to manage your money so you're already behind the 8 ball.

 

You're seriously getting me thinking now.. If buying an index is all I need to do then that's it. I'll do it and send you all a case of beer

I thought I needed a bunch of shares / funds that balance each other and that need looking at every few months to make sure they stay within my risk profile etc etc..

I was never interested in hiring an advisor to out perform an index anyway, I'm happier doing everything myself but the only reason I thought to hire one was so that I don't make a huge mistake and lose my money in general.


-Frank

 

It is still worthwhile to see a financial advisor (a fee for service type, who does not get commission by recommending you with managed funds, especially not the one that will charge you 1% each year to manage your investment for you) to draw up a plan (could cost around $4-5k) that looks at:

• your risk profile, asset allocation within and outside super,
• how much to put into super after/before tax
• what is your super returns?
• do you currently have income? how % of your total funds to keep in cash
• which funds to buy outside super, maybe a combination of a couple of low fee, older LICs and ETFs
• estate planning
• etc..

 

1% is likely to be around 10% of your long term returns. Not sure how it's good advice to throw away 10 cents in the dollar ongoing.

Another way to look at it is your balance would be 50% higher (and associated income) in around 40 years without it assuming everything else is equal.

1% is huge.

The advisor has just picked a splattering of companies well represented in the ASX200 (or even 50) and got fund managers to do the selecting elsewhere in more difficult (doesn't equal better) market segments (for further fees).

I'm all for paying an advisor, the ongoing fees are ridiculous IMO. Indexing should be more popular with these jokers taking 1%

 

Just had a quick look at EGP for interests sake

EGP Concentrated Value Fund closed to new investors when it reached AU$50m under management. The fund will continue to accept investment from existing investors, but will close to all investment once it reaches AU$100m under management.

The fund currently oversees AU$54m of assets.​

 

Your point is it's closed to new investors? Fair enough. I think it's a great example of when/what is worthwhile paying someone to manage your money.... and given there is no fee unless EGP outperforms the market, it is very hard to lose!

There are other similar companies around such as:

Castlereagh Equity (disclaimer: I also have money invested) - castlereaghequity.com.au

I am sure there are others out there. These two are enough for me until they are both hard closed.

 

Let me see if I'm beginning to understand stuff.

Is this an example of a fund that is tracking an index?
https://www.mlc.com.au/content/dam/mlc/documents/pdf/super/antares-dividend-builder-sma.pdf

I'm assuming that this is an ETF maybe? that tracks the S&P/ASX 200 Industrials Accumulation Index, right?

From what I'm learning, it will track the index by buying all the companies in the ASX200 and trying to mimic how they are performing.. right?


-Frank

 

I found it interesting @pwnitat0r , thanks for posting. I see they also attracted Chris Cuffe to EPG

EGP Capital - If we don't deliver, you don't pay

I got burnt by a fund in the early days that only had a fee for out-performance of the S&P200 Index, they later changed their fee structure and no longer exists

 

Here's a couple

Australian index ETF showdown: IOZ, STW & VAS compared

STW = SPDR S&P/ASX 200 Fund

IOZ = iShares S&P/ASX 200 ETF

VAS = Vanguard Australian Shares Index ASX 300

 

I'm curious how everyone here invests in the share market,

Can I assume that most here do not pick stocks to buy (unlike what my advisor has done for me) but rather buy into an index or into a few of them perhaps?

Is anyone here actively buying direct shares? What's a good reason to do this, why would you?


-Frank

 

Frank,
Paying 1% to an advisor is exorbitant. As others have mentioned that will greatly reduce your return in the long run. The compounding works against you paying that much.

As I mentioned before you need diversified assets but nowhere near the complication suggested by your advisor.

The very simplest and low cost portfolio is VAS, VGS, VGB and cash (these are Vanguard ETFs but there are alternatives too). This represents Australian equities, International equities, bonds and cash. The fees for these are in the order of 0.1% which is 10 times lower than what you would be paying your advisor alone. Details of this approach are found by searching for bogle in this forum or online.

If you want to tweak then read the LIC for beginners article and then the LIC thread. I like LICs because they can offer very low fees like the index ETFs but offer something different, often better and the opportunity of diversification across the equity's company size, which we refer to as large/mid/small caps. The LICs can work in tandem with the index ETFs (VAS etc). Ideally you want to cover both Australia and International regions.

There's no real need to buy direct shares, because the index ETFs do that for you and they do it in direct proportion to the market.

Don't waste your money on a financial advisor. Your best investment now is on your own knowledge.

 

@Frank Manno - you asked how others invest. I will tell you about me - but must point out that I am seriously a beginner. I have spent over 12mths reading the whole LIC thread, the Peter Thornhill thread, and the LIC beginners guide. I still know nothing! Yet I have recently felt that I have enough knowledge now to make a small start.

I currently own LICs only. (I like them).
MLT, ARG, AUI, BKI.
I plan to purchase some WHF when I have some more funds.

My long term plan - add to these and add to my super. I have no idea what my super is doing - I am with QSuper and happy to leave it with them for the next 20 years - then I might take more of an interest in it. I want to maximize what I can put into super - and the rest into the above 5 LICs. I get excited about the SPPs (I have only participated in 1 since I am new to all this). And I have just last week got my very first dividend!!!

I have no idea what you should do.

Cheers,
S.

 

Thanks ErYan,

Where can I find info on how much growth / dividend I will receive for an investment of $1m in VAS, VGS, VGB?

I have a few questions hopefully you and others can answer. This is apart from the idea of investing in VAS VGS and VGB.. These are just general questions to better help me understand investing.

1. Keeping in mind I'm 52 and would like to retire in 8-10 years and want to invest long term,..

Should I be targeting growth or dividends or doesn't it even matter? In my small portfolio should I be looking to mix some funds to get dividends and other funds to target growth so that both angles are covered? Or doesn't it even make any difference. i.e., Can a share or Fund have both dividend and growth or do you need a portfolio of a mix to get both ?

I'm thinking that if I have a fund that brings in mostly dividends, the total sum will grow anyway so whats the point of growth? (Unless I want to sell for profit which I don't)..

Or if the fund is mostly growth I can always sell some once a year for income anyway so again same thing right? But then the following year I have less shares because I sold some so this seems bad?

Is growth better than Dividends or visa versa? I know that with Sydney/Melb property most people agree that growth is king because rents are usually low. Is this the same with shares?


-Frank

 

"mimic the performance" is self-correcting via the prices
But a fund needs to match which coys drop out or get added to the index

 

The best website that I know of is etfwatch. Here are links:
VAS-Vanguard Australian Shares Index – ETF Watch
VAS yield 4% 67% franked = 5.97% grossed up

VGB-Vanguard Australian Government Bond Index ETF – ETF Watch
VGB yield 2.64%

VGS-Vanguard MSCI Index International Series – ETF Watch
VGS yield 3.07%

VGB is the theoretical low risk option of the 3 - you shouldn't lose capital but you get a lower return. The other two are index ETFs that are higher risk because they invest in shares but lower risk because of the diversification.

Only you can decide how much income you need if at all. You can get it via dividends or selling down. I prefer dividends but other schools of thought say companies with lower dividends are reinvesting to provide a higher total shareholder return, ie via growth.

You can combine yield and growth as you see fit but ultimately the goal is maximising TSR and minimising risk. You need to consider your tax situation because if you are on a higher tax bracket your dividends will be taxed at the higher rate. You want to avoid this if possible, which is why I mentioned seeing an accountant.

This is another advantage of FGG and FGX - their dividends aren't huge as yet, they are aiming for growth with an eventual income stream, and you can buy and sell down without brokerage. Note, don't buy them without understanding what all that means and what they are.

Your highest risk option is plonking all your money on a single share. It may give you the best return, but it may give you the worst return.

Do some more reading and then ask more questions.

 

Yes, a great website to look into various aspects of each LIC and ETF

 

I wouldn't bet on this. Effective duration of the fund at 5.5 years! There's a big difference between a bond fund and direct bonds. The increased yield will likely compensate but a loss of capital is highly likely when interest rates continue to rise.

Personal view only.

 

FWIW

Yield on VGB at present is 2.56%

Market-cap weighted Dividend Yield for the Australian stock market is at about 4.18%

 

Why Own Bonds in a Portfolio?

Comments are interesting also

 

You don't need to buy shares or open a trading account. You can buy the wholesale funds using b pay if you want after downloading the forms from the Vanguard website. Then get the dividends paid into your bank account or reinvest them. That way you won't be tempted to trade in shares.

I assume you already have a home to live in and don't need any of the funds to buy one.