Putting all my eggs in the VDHG basket?

Discussion in 'Share Investing Strategies, Theories & Education' started by Jmillar, 21st Jul, 2020.

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  1. Redwing

    Redwing Well-Known Member

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    Had a nice year

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  2. Redwing

    Redwing Well-Known Member

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    VAS (ASX 300)

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  3. clarenceT

    clarenceT Member

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    If I invested all of my money into VDHG, what would it look like if I were withdrawing 4% during a market downturn? Should we hold more cash outside of emergency fund or invest into bonds as well?

    Thanks
     
  4. mtat

    mtat Well-Known Member

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    If you only have VDHG then you just draw down whatever you need.

    But let's say you had an 80/20 allocation:

    Equities: $800,000
    Bonds: $200,000
    Total: $1,000,000

    Market drops 40% while bonds stay the same.

    Equities: $480,000
    Bonds: $200,000
    Total: $680,000

    You would draw down your 4% ($40k) from bonds.

    Equities: $480,000 (75%)
    Bonds: $160,000 (25%)
    Total: $640,000

    You will want to sell down bonds and buy back equities to get back to your desired asset allocation.

    Equities: $512,000 (80%)
    Bonds: $128,000 (20%)
    Total: $640,000

    With the current yields I would just keep a bit of cash (2-3 years of expenses) instead of bonds myself, but YMMV.
     
  5. Northy85

    Northy85 Well-Known Member

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    VDGH seems like the simplest way to invest and I like how the dividends paid quarterly too.

    I keep trying to work out how the CGT works when the fund rebalances the portfolio. When the fund sells shares for a profit to re buy lower value shares does this trigger CGT to be paid by the investor?
     
  6. Redwing

    Redwing Well-Known Member

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    Vanguard controversy: Does VDHG lead to higher taxes?

    A passionate group of retail investors is steering clear of Australia’s most popular multi-asset ETF, arguing the fund lands them with unnecessarily high tax bills and drags on long-term performance.

    Their target is Vanguard’s Diversified High Growth ETF (ASX: VDHG), an ETF with $1.4 billion in assets and a behemoth in the direct-to-retail multi-asset space. Their complaint is Vanguard's decision to construct VDHG out of unlisted managed funds. Reddit is bristling with investors claiming that means higher capital gains tax (CGT) forcing investors to pay the taxman and lose out on compounding.

    They voice their concerns in Reddit threads with titles such as: “VDHG tax efficiency”, “Tax inefficiency associated with VDHG” and “Tax Inefficiency of VDHG for High Income earners”.

    “I would off (sic) been forking out tens of thousands of taxes due to the inefficiency of how the fund is structured,” said one participant.

    “For those of us lucky enough to be in the top tax bracket (47%) we should be (sic) abandon ship,” commented another.

    They lament that it could be different, claiming that were Vanguard to build VDHG using its staple of ETFs, instead of its unlisted funds, the potential tax bill would be reduced.

    Vanguard acknowledges there could be small tax impacts from the current structure of VDHG but argues the fund’s diversification and performance outweigh any tax drag.
     
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  7. SatayKing

    SatayKing Well-Known Member

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  8. Nodrog

    Nodrog Well-Known Member

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  9. Redwing

    Redwing Well-Known Member

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    A year on (just noticed they've changed their colour scheme also :D)

    Not as great as last year, but better than my savings account

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  10. Luca

    Luca Well-Known Member

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    If they give the option to have VDHG in their super fund I`ll go all in, I am sure the tax implications will be resolved with some artistic structuring of the superannuation fund!
     
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  11. Oats

    Oats Well-Known Member

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    How would something like VDHG or DHHF work when you start drawing down. When selling shares to fund retirement, would it be more inefficient than say a VAS/VGS portfolio where you can sell the higher performing asset, whereas VDHG/DHHF you have no choice but to sell the lot?
     
  12. Frosty123

    Frosty123 Well-Known Member

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    I'm interested in investing in VDHG due to it's set and forget simplicity, but I see the growth of the fund since inception isn't all that impressive (20% over 6 years plus dividends).

    Is this partly because it doesn't include any tech stocks, and hasn't rode that boom?
     
  13. Hockey Monkey

    Hockey Monkey Well-Known Member

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    You shouldn’t ignore dividends.

    total return since inception 7.4% p.a.
    ETF

    The managed fund version has been around since 2002 and returned 8.11% p.a. over that period
    Fund

    DHHF is another simple option that is more tax efficient and 100% equities
     
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  14. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    This isnt right If you had 80/20 you could have up to 27% in bonds, up to 4% in fixed interest, and only about 70% in whatever the index funds are investing in, some of which may be cash. VDHG has up to 9% in bonds and 5% in fixed interest. You would be undoing the balance you are paying the fund manager to optimize,
     
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  15. Hockey Monkey

    Hockey Monkey Well-Known Member

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    Perhaps the comparison was to roll your own rather than 80% VDHG / 20% additional bonds
     
  16. sfdoddsy

    sfdoddsy Well-Known Member

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    Indeed. If you are a roll your owner there is no point owning VDHG unless you have a core satellite strategy.

    I used to have basically all VDHG, but I’m a tweaker and now roll my own.

    I’ve been lucky with some of my tweaks, but if I’m being honest I’d be in pretty much the same position if I’d just stuck with boring old Vanguard
     
  17. Redwing

    Redwing Well-Known Member

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    How's it all going?