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Nuts and bolts of ETF's

Discussion in 'Other Asset Classes' started by balwoges, 2nd Apr, 2016.

  1. balwoges

    balwoges Well-Known Member

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    Was going to invest in a commercial property again after selling my industrial units, moving house etc. however, find I cant stomach the thought of dealing with tenants again.:(

    Am going to invest in the stock market [have done well with shares over the last 25 years] been doing a lot of reading about EFT's and plan on dipping my toe in and investing the minimum with Vanguard. What I dont understand is can I sell them when I want, do they pay dividends, are they franked and do I have the freedom to do what I want as I would with ordinary shares?
     
  2. Hodor

    Hodor Well-Known Member

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    ETF's are traded the same as shares, so freedom to buy and sell is the same.

    Not sure which Vanguard ETF you are looking at specifically. From memory VAS last time I looked is paying around 5.1% yield and is partially franked (70-80%), Divs are paid 4x a year.

    Other ETF's may have different dividend disbursement schedules and franking will vary depending on the underlying stocks (from my understanding).

    Check out the below for Vanguard info
    Vanguard Australia Retail - Investment products
     
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  3. balwoges

    balwoges Well-Known Member

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    Do I trade the ETF's on the share market or does Vanguard sell and remit to me.

    Thanks Hodar for the above!
     
  4. The Falcon

    The Falcon Well-Known Member

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    On the market.

    There are 2 forms the index funds take ;

    1. Exchange Traded Funds
    2. Unlisted index funds (think managed funds)

    Vanguard offers both
     
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  5. austing

    austing Well-Known Member

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    Re ETFs,

    Just treat them like any other share.

    Franked dividends are only available to Aussie investors investing in Aussie shares. Of course not all Aussie shares pay "fully franked" dividends.

    Here is a list of Vanguard's ETFs. Take note of the Identifier. This is the ASX code you use to trade through your broker.

    Vanguard Australia Retail - Investment products

    For example two of Vanguards popular ETF:

    VAS - all Aussie shares in ASX 300. So whatever shares in that index pay dividends will be paid out quarterly by the ETF. Think of it as a "listed" on ASX Index fund. Not an unlisted managed index fund. A tiny fee of 0.15% pa is all it costs to own the ASX Top 300 shares held by this ETF.

    Vanguard Australian Shares Index ETF

    VGS - International Developed markets eg US, Europe, Japan etc.

    All the companies making up that index will pay any dividends available but they won't have franking credits attached to them. Again tiny fee of 0.18% pa.

    Vanguard MSCI Index International Shares ETF

    You will receive an annual tax statement for tax purposes.

    In summary just think of these ETFs as a "flow through" structure albeit they look like any other share listed on the ASX. Any dividends that are paid by the companies that make up the index used by an ETF just flow through to you, the investor.

    Have a read of the above web links to find those you like. All the information you need is there on both ETFs in general and available products from Vanguard.

    The Falcon is much better at explaining this stuff than me. Check out the ETF thread he started some time back:

    Exchange Traded Funds (ETFs)
     
  6. balwoges

    balwoges Well-Known Member

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    Thanks to everyone for help in understanding the way ETF's work. :)
     
  7. larrylarry

    larrylarry Well-Known Member

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    I currently hold few shares on ASX and I bought them through westpac broking services. Does that I mean I can buy Etfs such as VHY (as an example) on ASX like I would as a stock?
     
  8. Hodor

    Hodor Well-Known Member

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    Yes, they trade just like stocks do.
     
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