New to Passive Investing - Interested in ETFs, LICs and help with choice paralysis!!!!

Hey guys, I'm very new to the world of passive investing and I was thinking of throwing a few $ into a Vanguard ETF and an LIC like AFI or Argo. Honestly my head is currently spinning with all of the options out there and with the new diversified ETFs released by Vanguard last year, it has added even more to my anxiety lol. I have finally settled between the following two portfolios and was wondering if you guys might be able to help me decide on which to go with.

A little about me, I am in my early 30s, have just paid off the PPOR in full and is basically just looking for a set and forget vehicle to park my pay that will give me a bit more than a HISA. I plan to hold for at least 20 - 30 years, with re-balancing only done through addition to avoid any CGT events. Each parcel I purchase will be >$5000 with a max of 12 purchases per year (or once a month) to minimise brokerage.

Note that the portfolios will be balanced to achieve the following market allocations 35-40% in Aus and 60 - 65 % in International. As I am still young, I'm going for a balance between growth and income (hence the relatively high allocation to the Aus market - yes I have home bias sickness, maybe).

Portfolio 1
VDHG (as the Core ETF)
VGS
VAE
AFI/ARG/MLT

Pros: First parcel of VDHG will offer me instant diversification and access to International Small Caps which I believe is wholesale only? VAE will give access to the Asian markets particularly Korea which I noticed was missing in VDHG. The Aus LICs are to add a small active component and for smoother dividend payouts with VGS to re-balance the portfolio to achieve my intended International exposure.

Cons: I don't like the defensive asset component and the International hedged component of VDHG. Would be great if Vanguard could offer a full equities version as I would have gone with that instead (I prefer to keep my defensive assets in a HISA at this point in the form of emergency funds). I'm also concerned with how Vanguard intends to regularly re-balance the diversified fund. If they are constantly selling down assets for the purposes of re-balancing (or changing their asset allocations!), I'm worried the returns of the fund would be dragged down by CGT. This is the major hang up for me because otherwise I would have just gone with this portfolio.

Portfolio 2
VGS
VGE
VAE
VAS/AFI/ARG/MLT - strategy is to purchase VAS if the LICs are at too high a premium to their NTA

Pros: Lower overall MER compared to Portfolio 1. Eliminates the issues of Portfolio 1 as outlined above.
Cons: Miss out on International Small Caps which is a component of VDHG. The number of securities held by Portfolio 2 is only around 6000+ as opposed to the 10000+ offered by VDHG alone. I have looked into VTS and VEU as an alternative but at this point (an AU domiciled version of these would be great!!), I much prefer a portfolio that is easier to deal with around tax time and has DRP.

Am I thinking too much and splitting hairs?! Sorry for the long post, any help would be much appreciated. Thanks!

 

Have you read threads here on LIC, ETF, Thornhill, @sash threads on super reallocation of funds to shares, and the intro to LIC guide by @Nodrog ? Looks like you have a fair handle already, but it might be worth the time to do so. Note the longer ones are broken by year, and its worth going back to read the older ones too.

 

Welcome.

Before investing anything have you considered the most tax effective way to hold the Assets?

You’ve already given good reasons why VDHG may be unsuitable.

Given your own reasoning which seems quite well researched Portfolio 2 appears to be the cleaner option. But why both VAE and VGE? If Korea exposure is important to you and given VGE holds some less than desirable countries then perhaps VAE is more suitable.

As for Int Small Caps it’s probably only a matter of time before an ETF becomes available if you feel the need for it.

Therefore in terms of simplicity, low cost, control over rebalancing with new cash and minimising CGT VAS, VGS and VAE seem to cover most bases.

Not advice.

 

You say you plan to buy one LIC every month or so.

Rather that try to decide right now on an entire portfolio, just pick one and buy it. There are one or two common to both portfolios you mention, so maybe start with one of those.

That gives you a month to decide which to buy next.
Marg

 

That is an excellent outcome. It will be good to hear more about how you managed to do it and bit more background about yourself (if you are comfortable).

This is a great suggestion. There is no need to worry too much about building the perfect portfolio first up. Also, I have found with my own investing, my preferences and choices change every year. So instead, as @Marg4000 suggested, start with one (or perhaps two) and see how you feel. You can keep adding others as and when you feel more confident. You have a rough plan now, which is really good; refine it as you go along.

As always, excellent suggestion from @Nodrog. Worth thinking about which entities you want to hold the assets considering you have an investing time-span of 30 years plus. You have already demonstrated that you can think beyond the immediate and have a vision for the next few decades. Consider getting some paid advice on the most tax efficient way to hold it. If you have not done it already, good time to review life, TPD and income insurance. Also look at getting a Will in place and review Super while you are at it too.

Again, congratulations on paying off the PPOR and all the best for your next journey.

I am not licensed to give advice. Do your own research.

 

Friutcake
Try and get over to Invest Chat
I have recently and the advice I have received has been first rate - that's not to say the advice here is any less - just another option

 

I have actually the last few months and it has been a wealth of valuable information and as a result of browsing here, talking to people at work, and other finance forums, I think I have a fair idea on what I want to achieve with my portfolio, I guess in some ways I am getting hung up with the minutiae (tax, ease of record keeping) and stressing over not being exposed to 100% of the global market (must be my OCD) even though both portfolios I've outlined above are pretty well diversified as it is.

Thanks There wasn't much to it, we just threw everything we had into the mortgage. Didn't waste money on crap and opted to go away overseas every few years as opposed to every 6 months which a lot of my peers at the time were doing. We could definitely have been a lot more frugal (would have shaved 2-3 years more off the mortgage) but my husband and I wanted to enjoy life a little bit while we were young too. I just wish I had discovered this community 10 years ago. If I could go back in time, I would tell 18 year old me not to waste money on stupid/useless stuff (like my light saber collection >_>) and invest it all into a mix of ETFs and LICs. Oh well.

I have been thinking a lot lately about how best to structure the ownership of our assets as well, is a financial adviser or accountant best to talk to about this? I'm leaning more towards a good accountant as financial advisers just come across as snake oil salesmen to me, broad generalisation and I know there are good ones out there but I'm under the impression they are rare.

At this point I'm taking it in baby steps, primarily to keep things simple for my husband (his eyes glaze over every time I mention finance) but I am definitely having all of the above at the back of my mind.

The VGE component is for additional diversification (4700 holdings as opposed to 800 in VAE) but given the combined allocation I intend for these two ETFs (around 10%), it may be much of a muchness in the end.