The Mystery of Dividend Preference

Yep, she is slowing turning me around! I like my relationship with my partner! Much better than being glued to commsec! i call her miss bogle!

 

This really is an exceptional post @pippen. Should be mandatory reading for all here new to investing in the sharemarket. And maybe some not so new investors as well.

 

Just out of curiosity, does anyone know if one can use the wholesale fund as security to leverage using margin loan?

 

Thanks Nodrog and Pippen
I am new to this so still learning and reading here. Was more looking into ETFs rather then mfunds. Good info and suggestion both you guys and some of others here are a wealth of knowledge for newbies like us. "hail the king"

 

Well easy if it’s ETFs you’re interested in. Low / lower fee than Vanguard wholesale funds and allowing for small brokerage cost around a minimum of $4K plus is all that’s needed to get started and continue to add to over time.

The ETF equivalent to what “Hail the Queen” @pippen invests in and I do also is VAS & VGS.

 

CGT scenarios between US investor vs Australian investor.

Long term CGT rate for US investor as per below would be 15% for majority of investors and maximum 20% for very high income earners.




For Australian investors after factoring in 50% capital gains tax discount for someone on 47% tax bracket it would be 23.5%??

If ALP manage to reduce the discount to 25% and also increase highest tax bracket to 49% it could be as high as 36.75% or 35.25% (on 47%)

Does the above figures look right?

Cheers,
Oracle.

 

I’ve just booked our tickets.

 

Wait until you see the tax rates in Singapore..you might have to re-book

Cheers,
Oracle.

 

@lamecrocs seems so. 70% LVR for Australians shares with nab

Approved Investments - NAB Margin Lending

 

Also, just noticed nab have recently added to their equity builder product the following asx etfs

DJRE
70%
SPDR Dow Jones Global Real Estate Fund

IFRA
70%
Vaneck Vectors FTSE Global Infrastructures (Hedged) ETF

 

I've been toying with the idea of saving 100k to get into the wholesale VAS and/or VGS. I like the concept of the BPay in 1k chunks and DCA'ing... But what about the timing of the initial buy of the 100k?

 

US does look tempting from that aspect. Then It is America. The land of the free where nothing is.

 

you could always use a cash reserve wholesale fund if you like and put say 50k in that and then 50 k split into vas and vgs wholesale equivalents.

But again what if the market keeps going up and today is the lowest it will be for years to come?????

Or you are fully invested and then you get cut in half???? what do you do??? will you keep bpaying or just wait till they go up again????? If they go roaring ahead will you keep topping up or just wait and stockpile cash and buy that famous dip?????

you really need to factor in worse case scenarios and find your tendencies and bias and risk averness.
Behavioural finance wins yet again!!!

 

Do you mean this cash reserve fund?
Investment Products

I'm unsure how thats any better than a regular banks savings account?



I totally agree that automating transfers and just sticking through the ups and downs can eliminate future bias. I'm sure it will be very difficult next recession to break the thinking that there will never be a good day for the aus economy again with china and india taking over, but I think long term VAS and our country are good bets

 

I think so that you are qualified for the wholesale fund which means lower fees

 

Yep spot on! If you are so nervous about the market you can do this and slowly dca out of the cash reserve and drip feed into the vas vgs equivalent funds whilst simultaneously building up a cash buffer in a high interest saver from employment income!

 

@pippen hope your partner enjoys the below video about the Oracle of Omaha and Compound Interest. She is definitely on the right track to benefit fully from the magic of compound interest no doubt!



Cheers,
Oracle.

 

Hi Folks,

Been interesting in reading your ideas about simplicity and the behavioural dynamics of investing and so on.

Although I understand from posts on here that there’s no mathematical difference between sequence risk and dividend cuts - there’s something psychologically comforting to me about the feeling of “hoarding” shares with a ‘never sell’ mindset. I gather it works out the same, but I guess I like the simplicity of it.

I had planned to go 100% Australian with either VAS or possibly a handful of the usual suspects from the thornhill LICs…but this election and the franking stuff got me thinking about the long term impacts of being 100% aussie. Australia’s market seems to have been one of the best in the world over the last century…but having all my eggs in one basket doesn’t make much sense according to the modern principles of diversification.

Even if our economy doesn’t tank - I’ve come to realise that in the fullness of time (even if not at this election) Australia’s payouts may eventually get more in line with the usa model of smaller dividends and capital growth rather than large dividends. If this happens - while I could still sell to fund the difference - it really highlights for me the concentration risk of being 100% australian. If i have to sell stuff anyway (kinda gross to my dividend hoarding mindset) then it seems pretty scary to only have banks and miners and whatever else lives in the ASX300.

Looking for a compromise I’ve been tinkering with the idea of opening up a wholesale account in Vanguards Managed Payment fund. I’m curious as to what others think of it.

The concept seems to be a fully diversified portfolio that aims to pay out ~4% per annum dividend (the maths is a bit more complex cos it’s based on a 3 year averages) while still aiming for capital growth on the principal. Seems they’re almost going for a sort of smoothing approach a bit like an LIC.

It’s a curious beast….it’s actively managed….in terms of deciding its asset mix to a range of other active and passive vanguard funds.

Vanguard International Shares Index Fund (Wholesale) 22.2%
Vanguard Australian Shares Index Fund (Wholesale) 15.1%
Vanguard International Fixed Interest Index Fund (Hedged) (Wholesale) 12.9%
Vanguard Global Minimum Volatility Fund (Wholesale) 10.0%
Vanguard Global Infrastructure Index Fund (Hedged) (Wholesale) 8.0%
Vanguard Australian Fixed Interest Index Fund (Wholesale) 8.0%
Vanguard Commodities Fund (Wholesale) 6.7%
Vanguard Global Value Equity Fund (Wholesale) 5.1%
Vanguard Australian Corporate Fixed Interest Index Fund (Wholesale) 4.0%
Vanguard Emerging Markets Shares Index Fund (Wholesale) 3.0%
Vanguard International Property Securities Index Fund (Hedged) (Wholesale) 3.0%
Vanguard Australian Property Securities Index Fund 2.0%

I’ve been toying with the idea of opening an account, putting on automatic reinvestment, paying into it as often as I can, then when it’s time to retire just turning the payouts back on - then my drawdown strategy is already sorted out - somewhat like the LIC approach to things.

What does anyone think of this strategy? Is my desire to Set and Forget overwhelming common sense? I’m also torn if it would be better to just do the same thing with VDHG - I can see that way i’d be 90% equities…as i’m a little worried that the Payout fund might have too much fixed interest stuff. Then again…the payout has some interesting exotic stuff in it - like infrastructure and commodity stuff - which i could imagine might help with income during some phases of the market cycles.

Nice to meet you all anyway, can someone tell me if I’ve lost my mind and should just go back to hoarding VAS!

 

If you are young, my advice would be to avoid and to focus on your saving and investment behavioural discipline. Just start now and DCA into an Australian equity index and a world equity index. VAS and VGS would do. It really doesn't need to be complicated.

 

When are you likely to retire?

The plan you have outlined is arguably as good (better) as any other. The fund is Vanguards most broadly diversified fund. It is however very similar to balanced, high growth options in industry superfunds. For a totally hands off approach you may be better looking there to get the tax benefits. Depends a lot on how close to preservation age you think you might retire.

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