Managed Funds vanguard australia

OK, so, it is imperative that you do nothing until you are confident that you understand - dabbling is not an option. The ETF (VAS which holds ASX 300) is the cheapest at 0.10 MER plus brokerage to buy and sell and definitely makes sense from a mathemetical view point. I use the wholesale managed fund version which although a little more expensive in MER suits my personality and emotional reality. Using the Wholesale fund allows me to just BPAY in an amount every payday (roughly $1600 - $2000) and DCA (dollar cost average) year in and year out without emotionally getting involved with the share price etc etc. Using the wholesale fund (instead of ETF's) also reduces my paper trail significantly as all I need is the yearly statement and tax summary which I download off the Vanguard site and just frisbee at my accountant. It suits my personality (a tightly wound bunny that is prone to fiddling with portfolio and terrible with paperwork!)

So even though Wholesale funds say you need $500k if you ring them they will let you invest from $100K - we did and they had no qualms at all. Do not use the retail fund as the MER currently is too expeno. Apparently MER for both managed funds are being reduced next year, so this could be interesting.

My suggestion would be to keep saving your coin and study, study, study till you clearly understand the product choices, their relative pros and cons and then commit and stay the course.

Not advice

(edit: added re paperwork)

 

@DoggaPP: if you reinvest dividends through managed fund, do you have to keep track of the prices each time? Thanks.

 

Nope - Vanguard do all that for you and taxable actions are put onto the yearly statement for tax.

The other benefit (for me at least) is that once I retire and start drawing down, I do not need to give any thought to which parcel of shares I am selling or any paperwork, I simply put in my withdrawal form and the dollars dump into my bank account 5 days later and all the taxable actions and calculations show up on that year's statement. The ease of this is a significant benefit for me. This is even more important if I drop off the perch before my better half who has zero interest in the mechanics of direct shares/ETFs holdings.

Also, even though Vanguard says that with Wholesale funds you need to add amount of minimum $5000, this is not true either. I fortnightly BPAY amounts much less that $5k with no issues.

 

@DoggaPP: I called Vanguard and they said that one needs at least $100K for each fund. So to have VAS, VGS, we need $200K to start with.

So maybe it makes sense to start with the retail one and then move to the wholesale version when it gets to 100K. I like the idea of BPAY as well. Do you BPAY into separate funds?

When you sell, do they do the capital gain tax/loss for you also ?

Thanks

 

I only do the VAS equivalent fund, so never ran into this scenario of using 2 funds.

The thing to be mindful of if starting with the retail funds (beside the horrendous MER) is that when you eventually liquidate the retail fund and then open a Wholesale fund, you will be up for any CGT. You cannot do an in-species transfer between retail and wholesale funds to avoid CGT.

You can BPAY into separate funds - each fund has its own unique BPAY code. I only have the one fund however.

Selling down your fund in part or total will attract CGT on any capital gains realised. In my own personal case I will only be drawing down on the fund in early retirement as I will have no other income, thus my CGT bill will be dramatically minimised compared to me drawing down on it now and copping CGT at my current marginal rate .... but this is true for ETF's as well as managed funds.

 

If Vanguard manage to bring the fees down on the retail version, or the minimums down on the wholesale version, it could really be a game changer for a lot of people. The simplesness of it all is very cool.

 

If retail goes down to 0.25% MER it would be just wonderful for so many people - but I doubt it will be that a dramatic drop. Even 0.5% would be reasonable for what you get - we'll have to wait and see.

 

Thanks @DoggaPP . I've been reading a lot on Vanguard Plain talk library about its products and other blogs & books on LICs & ETFs. I still haven't made a decision on what products to invest in.
In regard to investing in Vanguard managed funds only, what are the risks if and they goes down? I mean 'What If' they goes bankrupt, will I loose all the money I invested in their managed fund products? I'm still not sure how this works, and the same with EFTs? Can I ask you what is the name of the wholesale managed fund version of VAS?
Also, what sort of paper trails does one needs to keep up with if buying ETFs?
Thanks

 

If Vanguard goes down the gurgler then everyone will have much bigger problems than their investments! This link explains it pretty good Stocks -- Part X: What if Vanguard gets Nuked? | jlcollinsnh

If you are buying ETFs then keep ALL paperwork - seriously.

BTW, EFTs are different to ETFs. ETFs are what we talk about in investing viz:- Exchange Traded Funds

 

How concerned about keeping paper transaction records from SelfWealth and ComputerShare should I be?

I take it people are ok going paperless with these and just keeping digital copies? I'm now wondering if I need to keep some hard copies in a filing cabinet somewhere. Just in case.

 

Obviously your choice but as a backup I consider it is the best approach to maintain your own records and not rely on a third party.

As an example, ARG move share registry recently. Not all transaction history is necessarily available from the new share registry. If I hadn't kept records of all the transactions I have had with ARG over the years it would be necessary for me to obtain it from the new share registry - and I'm guessing it would ask you to pay for it.

Paper isn't the way to go in my view. Everything I have downloaded PDF. NAS, HDD and portable HDD.

Edit: Discussion on it here

Record Keeping (CGT / Estate) - Shares / LICs / ETFs ...

 

Thanks DoggaPP. It’s a typo mistake EFTs (Electronic Fund Transfer) and my iPad memorised it, instead of ETFs (Exchange Traded Funds).

 

Ha ha - don't ya just hate that!

 

Not advocating the below at all, just posting for interests sake

https://www.vanguard.com.au/personal/en/personal-investor

Vanguard launched a new investment platform designed to simplify the investing experience and provide low-cost access to the firm's most popular products.

The global funds management giant's new Vanguard Personal Investor offering will allow Australians to invest in the firm's Australian-listed ETFs brokerage free, in a move Vanguard said is aligned to its "ongoing commitment" to lower the cost of investing.

The "simple and straightforward" offer is being delivered alongside a new website, which provides investors with access to a "wide range" of managed funds and ETFs, Australian shares, and an integrated cash account.

Managed funds
• Access to our wide range of Vanguard wholesale managed funds
• Competitive low fees
• Minimum investment of $5,000

Exchange Traded Funds
• Access to our Australian listed Vanguard ETFs
• Brokerage free ($0)
• Minimum investment of $500

Shares
• Access to the top Australian shares (by market capitalisation)
• Competitive brokerage fee of $19.95 or 0.15% (whichever is greater), GST inclusive.
• Minimum investment of $500

The platform will charge investors 0.2% of their total account balance annually, up to a maximum of $600.

 

Doesn't look like it is available for SMSFs but nevertheless looks interesting.

 

If you have over 100k, what's the advantage of going vanguard wholesale vs ETF?
It looks like fees are higher in wholesale, so why would anyone go for wholesale?

 

My understanding, wholesale only worth if if you plan to regularly contribute to it (say every 2 weeks or so).

ETF better for less frequent and larger chunks I'd say

 

As mentioned, the wholesale funds can be cheaper if you make regular investments (taking advantage of dollar cost averaging for example).

Another consideration is that the Vanguard ETFs don't own shares directly, but instead own a portion of the underlying Vanguard Wholesale fund. Yet their prices move up and down along with the trading market.

In volatile times such as these, those prices can get out of kilter. This happened recently with some of their bond funds, and there have been rather large spreads for some of their less liquid ETFs (such as VVLU).

There are also differences (which have never been properly explained by Vanguard) in distributions. For example the Vanguard Australian Shares Retail Fund consistently pays a much higher dividend than the underlying wholesale fund or the ETF. As a consequence it also has lower capital growth. Total return is about the same (allowing for higher fees).

Rightly or wrongly, I feel more secure owning units directly from Vanguard rather than the market.

It'd be nice if selling and transferring was as easy as buying (and as easy as the US site) but hopefully that will change.

Plus I like the one piece of paper tax reporting, and the fact that they pre-fill my tax return so I really don't have do a great deal.

I'm less impressed by their recent decision to increase sell spreads to discourage people from jumping ship.

I have 11 or so different funds in my portfolio (mostly Vanguard, but also a few others). They have performed about as well as one could expect from a properly diversified portfolio with an Australian income tilt.

But were I to do it again, I would have simply chucked the lot into Vanguard's wholesale equivalent of VDHG, with a seperate Vanguard bond/cash component to suit ones risk level.

 

Hmmm - it looks like they are offering wholesale funds with $5000 minimum buy in (??) am I reading this correctly?
edit typo

 

Yeh that's how I read it but then they also take 0.2% of your portfolio at the end of the year up to $600. So I guess you just need to compare whether you pay more in their fee or in brokerage? Or am I looking at it too simply?