Passive shares

Yeah understand that, another point that she mentioned in that it is a one stop shop and down the track she could sell up and incur CGT and go to the Wholesale fund so I may have to show her some charts showing impact of fees and costs not only for 1 year but long term and how they will impact returns!

 

oh mate, you are 100% right there. The 2 biggest killers are fees and tax. Tax is massive! The way I think about investments now is that they must be able to compound tax effectively for 30+ years without needing to change horses mid race, and incur massive tax consequences. This is at the fund level, obviously. The same should apply to LIC selection.

 

ok. So with the wholesale, you would

1. Buy in (ie. give your hard earned $100k+ to them - is there an entry fee?)
2. They do everything to rebalance the investments = active management.
   Do they change the other (?) ETF's they invest in, or just change the shares within the wholesale ETF (as you can see, I'm fairly confused)?
3. (do they pay dividends?) all dividends are essentially drp'ed?
4. You can pay even small amounts via bpay
5. If you want to leave, I presume you have to leave with everything - $100k + earnings - rather than selling smaller parcels if you weren't in the wholesale fund?

 

No entry fee, they look after rebalancing. Yes they pay distributions, you choose whether to opt for DRP or not.

Read their doco taking into account what you've already been told about minimum investment etc:
Investment Products

https://api.vanguard.com/rs/gre/gls/stable/documents/8275/au

 

I'll presume you're asking about the diversifies wholesale funds (conservative -> high growth) as your questions don't quite make sense for the single asset wholesale funds.

1. Yes. There's a spread, I think it's 0.12%, but no actual "entry fee".
2. No. You misunderstand the difference between active and passive. What they do is to rebalance the portfolio to the set predefined asset allocation when specific triggers occur - this is passive. To shift money from one asset class to another due to a belief the new one will perform better would be active. They have recently changed the asset allocations of all their funds (simplifying them), but in general they just shift the money between the classes within the diversified wholesale funds.
3. They pay distributions, which are functionally nearly exactly the same as dividends and are exactly the same to you. You can choose to reinvest those distributions as in a DRP, but you can also choose to receive them.
4. Yes, relevant to some people but not most of this forum
5. No. You can sell as few or as many units as you like

Edit: spread is 0.12% buy or sell

 

This is cheeky and may not work for those who only want to commit say $50k to wholesale fund initially.

You can spread your $100K across mutiple wholesale funds. So say borrow $100k against PPOR, invest $50k in Diversified growth fund and $50k in Cash fund. From what I vaguely recall you can redeem units resulting in a balance less than $100k. After a short period redeem the $50k in Cash fund leaving the remaining $50k in the wholesale Growth fund. End result is you have only committed $50k but locked in the low fee.

Would this work?

 

Tried that a while back but u will get a request to get the balance back up to a certain level to maintain low fee wholesale ratio otherwise the account can be closed or moved to retail fund! Or so the consultant told me a good year or so ago!

Whether things have changed or not?

 

Posted this on the wrong thread. I'll try again.....

I have stated before I’m a fan of Vanguards wholesale lifestyle index funds (my wife certainly is). However the 100k minimum amount (down from 500k on request) can be out of many peoples reach. Another good index fund is the Bendigo Bank Index wholesale funds (Sandhurst trustees)

Minimum initial investment
$50,000
Minimum additional investment
$100 or a minimum of $50 per month via the regular savings plan
Management costs*
0.43% p.a.
Income distributions
Half yearly as at 30 June and 31 December and normally paid within 2 months

Not bad value!

Also Street Tracks offer one at .25%pa management cost (From memory) $25000 min. But minimum additional is $5000

 

I dont feel sorry for you at all!!! At least your wife will talk/debate investing subjects. My wife's eyes just glaze over and she says, 'really are we going to talk about this again.' In fact that is what you lot are for....... you fulfil needs that my wife wont!

 

Haha don't worry I get the glazed over look from my other half too!

And I think this is why she wants a one stop investing shop to take emotions and buyer behaviour out of the process but I will surprise her with a few managed fund fee calculators comparing old school lic's as well as vgs etf with the growth fund she seems fond of over 25 years!

We will see the outcome and look on her face when I show her how much makeup and shoes she could buy from savings in fees! Gotta put it into context

 

I'm not sure how I feel about this...

 

I'm a life member at Bendigo, might have to look into this.

 

@unwillingwillis said: ↑
In fact that is what you lot are for....... you fulfil needs that my wife wont!

LOL.

 

Post of the day material right there!

 

That is a very important point. The top tax bracket is almost guaranteed to be near 50% it is very important to have right structure in place to allow maximum compounding over the long term.

Basically, you have 3 choices

1) Personal name
2) Discretionary Trust
3) Company

Based on the current tax rates once your taxable income reaches $138,000 you are effectively paying 30.03% tax. ($38,692 tax + $2760 medicare levy = $41,452).

Therefore, if your total income (including investments) is going to exceed $138,000 then having investments in your name is not the most tax effective.

If you have a partner who is not on high income you can use Discretionary Trust. But your distributions to your partner still need to be below $130K limit to cap tax @ 30%. Also, Discretionary trust has to distribute all profits each financial year unless you are happy to pay top marginal tax rate.

Finally, if you can use company structure for investments where you pay flat 30% tax rate irrespective of your income. So if company income is below $130K you still pay 30% tax. But the good thing here is if your income is below $130K you can distribute the profits as franking credits and you should get some refund from the ATO.

I think the best solution is to have discretionary trust with bucket company for couples on high income who will most likely have 7 or 8 figure investment portfolio generating over $260K per annum. This provides maximum flexibility without ever having to sell your investments triggering capital gains tax. @Terry_w might be able to confirm the above. I think he has also addressed this topic in one of his tax strategy.

Cheers,
Oracle.

 

I like Company + Trust Shareholder ;

20 - Growth assets in companies? - The Dover Group

For very long term (inter-generational) accumulation. Lack of CGT discount doesn't bother me.

 

I have written about this here
Legal Tip 151: Structuring the Ownership of Shares Legal Tip 151: Structuring the Ownership of Shares

 

Yes, this is also very good structure. What would happen when it comes time to vest the trust after 99 years? Can company shares owned by trust be transferred to new trust without tax consequences? I know it might not be my problem but still good to know.

Cheers
Oracle

 

I think the DT and bucket company is preferrable over this because when the shares are sold there could be a 50% CGT discount.

The max an indiviudal would pay in tax would be 25% assuming distributions from a trust.

But if a company is owner then the tax would be 30%. The income would also change character and come out as dividends too, so could not be used to offset other capital losses an individual may have.

 

80 year rule in all states execpt SA. CGT would be triggered.