# Walking the Road to Riches



## Ryan C

Hey everyone,

Last few months I've been educating myself on the investing approach I will take.  I wanted to use this forum to track my journey to accumulate wealth _slowly_ just before I begin.

Please feel free to follow and critique my plan to help me learn and hopefully you can learn something from me too.

*Current Situation*
*Age:* 32 years old
*Emergency fund:* $0
*Assets:* $280-300k investment property, $80k in SMSF, $16k cash
*Debt:* $8k borrowed from family, $260k IO mortgage
*Income:* $85k– 100k+ pa
*Savings per month:* $2k+ pm

*Approach*
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

*Asset allocation:* 80% stocks (40% US / 40% International) / 20% bonds

*Goals:* 
Repay outstanding debt
Build emergency fund to $6k then split savings thereafter 50% to emergency fund until $24k and 50% to funds for investing
Invest / rebalance to asset allocation every Jan and July.

Here it goes!  Thanks for reading.


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## burglar

Ryan C said:


> ... Here it goes!  Thanks for reading.




Watching with interest!!


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## So_Cynical

Ryan C said:


> Hey everyone,
> 
> Last few months I've been educating myself on the investing approach I will take.  I wanted to use this forum to track my journey to accumulate wealth _slowly_ just before I begin.
> 
> Here it goes!  Thanks for reading.




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burglar said:


> Watching with interest!!




Also watching with interest.


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## Ryan C

Just thought I'd share what I'll be investing in

Outside Super: 
*VTS *- Vanguard US Total Market ETF -40% - Management cost: 0.05%
*WXOZ *- SPDR ® S&P ® World ex Australia Fund ETF - 40% - Management cost: 0.42%
*VAF *- Vanguard Australian Fixed Interest Index ETF - 20% - Management cost: 0.20%

Inside Super:
*Vanguard LifeStrategy High Growth Fund* - 90% shares / 10% bonds

I chose *WXOZ *over *VEU *- Vanguard All-World ex-US Shares Index ETF with its slightly higher management cost because of potentially claiming back non-US withholding taxes (Ill check this out with my accountant when I get my tax done so it could change).  Ill have my Australian share exposure in Super.


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## robusta

looks like a good plan to me, congratulations on beginning the journey, many don't.


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## minwa

Ryan C said:


> *Approach*
> "Buy-and-hold, long-term, all-market-index strategies,* implemented at rock-bottom cost*, are the surest of all routes to the accumulation of wealth" - John C. Bogle




Excellent planning. However I must point out one thing: 




I am going to suggest that current prices are not rock-bottom to satisfy that quote. The last time was in 2009 and 2003 before that. And the one before that was before that was before you were born. You will probably want to drop down the time frame and look at buying temporary dips if you don't want to wait for the next big bottom. 

Doesn't mean you can't make money buying right now, just that you will not be following your stated approach.


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## Ryan C

minwa said:


> Doesn't mean you can't make money buying right now, just that you will not be following your stated approach.




Really appreciate you taking the time to comment minwa.  

However when I stated rock-bottom cost, I meant it for management cost of the chosen index funds.  Higher management costs will eat into my real returns.  Since my portfolio will be comprised of whole market funds I can expect the same results with comparable whole market funds but I wont be paying extra for those same results. 

I will not try to time the market with this approach and will buy every Jan and July to bring my asset allocation into line with the 40/40/20 split I want to achieve.  I'm doing this for three reasons:
1) I don't believe I can consistently time the market over the long term,
2) I want to avoid selling out of panic and;
3) I can control my asset allocation.

Should the market crash, I'd expect to buy more of what index wasn't matching my allocation and ride it out.  Sounds good in theory.  Fingers crossed I have the stomach to put it into practice should a crash occur.


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## Ryan C

So after some thought I decided to drop *Vanguard VTS* and just go with *SPDR WXOZ* because I would be over-weighting my US market exposure.

I have however bought 11 units of VTS and 22 units of VEU with my 10 year old daughter to start teaching her about investing and using this long term approach.  It's a small amount but she has plenty of time.  I matched what she was able to save over the past twelve months and invested with her.  Trading cost wasn't an issue with these transactions because I used a Commsec promotion with free trades.  Kid has more money than me right now


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## coolcup

Hi Ryan C. I'll be keenly watching this thread with interest. The strategy you have outlined clearly shows that you are seeking to follow a highly disciplined methodology with somewhat limited flexibility in your path for seeking wealth. I hope it works out well for you and I am keen to see just how rigidly the rules you have set are followed. From personal experience, I have always found it difficult to follow such plans, but will watch with interest. Thanks for sharing your plans and progress with us.


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## minwa

Ryan C said:


> Really appreciate you taking the time to comment minwa.
> 
> However when I stated rock-bottom cost, I meant it for management cost of the chosen index funds.  Higher management costs will eat into my real returns.  Since my portfolio will be comprised of whole market funds I can expect the same results with comparable whole market funds but I wont be paying extra for those same results.
> 
> I will not try to time the market with this approach and will buy every Jan and July to bring my asset allocation into line with the 40/40/20 split I want to achieve.  I'm doing this for three reasons:
> 1) I don't believe I can consistently time the market over the long term,
> 2) I want to avoid selling out of panic and;
> 3) I can control my asset allocation.
> 
> Should the market crash, I'd expect to buy more of what index wasn't matching my allocation and ride it out.  Sounds good in theory.  Fingers crossed I have the stomach to put it into practice should a crash occur.





I see ! Thanks for explaining that. I just googled John Bogle and it turns out he's the founder/CEO if Vanguard. It's a bit like if Richard Macdonald stating "Having a Macdonalds Big Mac meal everyday is the surest of all routes to a healthy lifestyle". It may or may not be true, but it certainly is advertising-based for his funds.

Look into covered calls strategy - it may come in useful when market goes sideways or down and it's pretty low maintenance.

After your emergency funds is $24k - is the other 50% going to go into repaying your debt above minimum payments or into investments ?

Good luck and great job on getting your daughter on board - she will be thanking you many years into the future.


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## Ryan C

minwa said:


> ...but it certainly is advertising-based for his funds.



Absolutely agree!  I take everything I read with a grain of salt however so much of his philosophy resonated with me. 



> ...Look into covered calls strategy...After your emergency funds is $24k - is the other 50% going to go into repaying your debt above minimum payments or into investments ?






			
				coolcup said:
			
		

> I hope it works out well for you and I am keen to see just how rigidly the rules you have set are followed.




After the $24k, I'll create a small fun (~$5k) 'gambling' fund that I could use to buy individual company stocks and look into other strategies like options.  This will help curve my itch to speculate and deviate from plans as my investments starts to build and feeling too restricted.  I can be my own worse enemy at times.

After that I'll slowly build up my emergency fund to $48k over time for 12 months of living expenses and I'll be working to reduce my LVR on my investment property to 50%.



> Good luck and great job on getting your daughter on board - she will be thanking you many years into the future.



Her wealth is part of my retirement plan. She better put me in a schmick retirement home with pretty nurses haha


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## luutzu

I'd hold off buying bonds for now. 

Best time to buy into bonds is when interest rates are high - at least 6 or 7% for my money... 
From what i remember, when the economy and the stock market are hot is when rates are higher - the central banks tend to increase borrowing costs to cool down or slow down markets expansion... that's when you'd want to lend money [thru bonds] because it usually follows that high interests won't put off some people and the market/s tend to crash, then gov't will lower the rates to stimulate activities again.

So at currently low rates, leave in cash or buy into index as well... then when high buy so that when the stock and other markets crashes, you could sell your bonds at higher price too if you want.

When will it rise? I have no clue.


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## prawn_86

Ryan C said:


> *Current Situation*
> *Age:* 32 years old
> *Emergency fund:* $0
> *Assets:* $280-300k investment property, $80k in SMSF, $16k cash
> *Debt:* $8k borrowed from family, $260k IO mortgage
> *Income:* $85k– 100k+ pa
> *Savings per month:* $2k+ pm




Firstly, congrats on your detail approach and plan. Having something written down is always the first step.

Is that income quote pre or post tax? If you are earning 100k before tax, then saving 25% of that, you must be running a very tight budget. By my calcs >40% of your wages would go to tax and savings. Then there is rent on top of that...

The main point i wanted to raise however is the issue of return. I understand you are wanting to diversify, but some would argue that if you already have a mortgage, unless you can guarantee yourself a return above your current interest rate, you are better paying that down. The fact that it is IO also means that you are simply waiting for capital growth, which may or may not occur, and leaves you with a lot of debt still in place.


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## McLovin

Ryan C said:


> Just thought I'd share what I'll be investing in
> 
> Outside Super:
> *VTS *- Vanguard US Total Market ETF -40% - Management cost: 0.05%
> *WXOZ *- SPDR ® S&P ® World ex Australia Fund ETF - 40% - Management cost: 0.42%
> *VAF *- Vanguard Australian Fixed Interest Index ETF - 20% - Management cost: 0.20%
> 
> Inside Super:
> *Vanguard LifeStrategy High Growth Fund* - 90% shares / 10% bonds
> 
> I chose *WXOZ *over *VEU *- Vanguard All-World ex-US Shares Index ETF with its slightly higher management cost because of potentially claiming back non-US withholding taxes (Ill check this out with my accountant when I get my tax done so it could change).  Ill have my Australian share exposure in Super.




Hi Ryan

The first thing that stands out to me is that you're investing in fixed interest while you have a mortgage. This seems a bit counterproductive, unless you expect big capital gains in fixed interest (you'd be in the minority on that if you are! )

I also agree with prawn that you must be living very frugally if you're managing to save $24k/year on that income.


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## burglar

McLovin said:


> ... I also agree with prawn that you must be living very frugally if you're managing to save $24k/year on that income.




Nothing wrong with "frugal", as long as you allow for an occasional dessert.


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## Ryan C

luutzu said:


> So at currently low rates, leave in cash or buy into index as well... then when high buy so that when the stock and other markets crashes, you could sell your bonds at higher price too if you want.



I'll only hold bonds through an index.  This is my security that in the event of a crash in equities, chances are, bonds won't.  I'd also sell some bonds to bring my stocks allocation back up to what I've set, picking up stock funds on the cheap.  Holding some bonds will have little effect on my expected gains while reducing my risks significantly.  Ideally my bond allocation should match my age (32%) but right now I don't mind planning to hold a slightly riskier portfolio.



			
				prawn_86 said:
			
		

> ...The fact that it is IO also means that you are simply waiting for capital growth, which may or may not occur, and leaves you with a lot of debt still in place.



Sadly, this property was my first attempt into investing in property and I made plenty of mistakes.  I've learnt a lot since but right now I don't feel comfortable having everything I have just in this property so I'm working to change that.  
You're right.  There's little to no capital growth, rent pays the IO at current rates, making it neutral or even slightly positive after depreciation etc. It doesn't stress me and that's why I don't mind holding it. If I sell now I'll _definitely _realise a loss.  Holding on long enough, which I will, there's a good _probability _to see some growth. I could always stop renting and make it my PPOR again too.  



			
				prawn_86 said:
			
		

> Is that income quote pre or post tax?






			
				burglar said:
			
		

> Nothing wrong with "frugal", as long as you allow for an occasional dessert.



Before tax.  I do live *very *frugally.  I save as much as 45% of my weekly income, not including rent and rental income. However I don't go without should I want to splurge a little.  I can also add as much as $2k to my monthly income which I don't count so I'm not reliant on it.  If I don't spend it all, guess where it goes?  
I'm very disciplined.

Really appreciating the response guys because it really gets me thinking why and how I'm going about investing.
Cheers


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## luutzu

You're 32? What are you doing diversifying into bonds?
At ur age and with what seems a long term investment timeframe, I'd put all mine in the stock index.

Too much diversification can be a bad thing, same with too much portfolio balancing and age dependent financial planning. 

Don't know how ur index operates but if it's 10pc bonds, chances are if the stock market rise and say bonds vale remain or fall, they'll go out and buy more bonds to balance the portfolio, which doesn't make sense but that's what they'd do to not get sue.

In case you think that a bond is safer, it might not be. Depends on the term of the bonds, the borrowers, the economic environment. Bonds from companies trying to take over the world now might not be; long term bonds at the moment is probably a bad investment... Depends.

Look up Peter Lynch. His 'one up on wall street' is very good. And as a successful fund manager, he doesn't like bonds at all.


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## DeepState

From the latest BRK-US annual letter.


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## luutzu

DeepState said:


> From the latest BRK-US annual letter.
> 
> View attachment 58753




Buffett is 84 years old.


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## skc

Just a couple of suggestions (you may be doing that already).

1. Make sure you have an offset account to park your $24k emergency fund.
2. Make sure you shop around for the right loan, if you haven't looked at the loan market for 12 month.
3. You only have $80k, are you sure SMSF is the right thing to do? Especially considering that you are new to the market and aren't doing anything too active investing wise.
4. Assuming you keep your SMSF vehicle, have you looked at doing more investing in that vehicle and maximise the tax advantage (and the fixed cost base)? Chances are some of the $$ you make and invest today won't be touched until you retired, so putting it in SMSF might be a good thing.
5. Consider repaying your family (if the loan has non-deductible interest) before you have your full $24k emergency fund. Especially if you think you can borrow it again in case of an emergency. A supportive family can "pool" their resources for an emergency backup. If it's interest free, then it depends on your relationship with the lender...


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## DeepState

luutzu said:


> Buffett is 84 years old.




Did you read the part that the bequest is for his wife before shooting out that insight? She is 68 and, according to the CDC actuarial life tables (2009), can expect to live another 18+ years on average as a basic US woman. Given she probably has better dental care than the average, I'd say she can expect to live longer than average.  This is a long term investment. 

Buffett will give away or bequest to charity 99% of his wealth.  That still leaves about $640m to divide amongst his kids and wife.  Presumably she won't blow it all on a visit to Tesco and actually pass a good amount along.  Given that size of wealth, he should invest more aggressively than the general populace.  Most people with 2x leverage and savings intensity of 1/3rd of AWOTE or thereabout, speaking of the need to build emergency buffer funds, are not in a similar ability to absorb risk.  If a bequest was handed out with, say, $10 million and spending was proportionate, there is a hard floor below which people would say there was hardship (of a kind).  This means that they would invest less in equities than Buffett's instructions to the Trustee.  This is asset-liability management under conditions of risk.

I am not sure, but think to ask.  He is renting.  Maybe he wants a house even though this is not mentioned.  The desire for a house is actually a liability on his balance sheet.  This increases effective leverage if so.  But this is a type of liability that moves around in value. Buying equities to finance a (desire for) a house is a massive mismatch when all is totaled up and would argue for an even more conservative setting if he wants to buy one in the next 10 years or so.

Key point:  On a long term basis, exposure to bonds should probably be greater than the 10% supplied by Buffett, and initially applied to offset existing debt as previously mentioned by McLovin.

The investor may wish to take the Balls of Steel approach and max out risk with a 100% equity position under leverage, but if at the limit of frugality, success would be akin to a negative odds bet come good.  People do it. Some win. Some move back with their parents at 35.  Your move.


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## luutzu

DeepState said:


> Did you read the part that the bequest is for his wife before shooting out that insight? She is 68 and, according to the CDC actuarial life tables (2009), can expect to live another 18+ years on average as a basic US woman. Given she probably has better dental care than the average, I'd say she can expect to live longer than average.  This is a long term investment.
> 
> Buffett will give away or bequest to charity 99% of his wealth.  That still leaves about $640m to divide amongst his kids and wife.  Presumably she won't blow it all on a visit to Tesco and actually pass a good amount along.  Given that size of wealth, he should invest more aggressively than the general populace.  Most people with 2x leverage and savings intensity of 1/3rd of AWOTE or thereabout, speaking of the need to build emergency buffer funds, are not in a similar ability to absorb risk.  If a bequest was handed out with, say, $10 million and spending was proportionate, there is a hard floor below which people would say there was hardship (of a kind).  This means that they would invest less in equities than Buffett's instructions to the Trustee.  This is asset-liability management under conditions of risk.
> 
> I am not sure, but think to ask.  He is renting.  Maybe he wants a house even though this is not mentioned.  The desire for a house is actually a liability on his balance sheet.  This increases effective leverage if so.  But this is a type of liability that moves around in value. Buying equities to finance a (desire for) a house is a massive mismatch when all is totaled up and would argue for an even more conservative setting if he wants to buy one in the next 10 years or so.
> 
> Key point:  On a long term basis, exposure to bonds should probably be greater than the 10% supplied by Buffett, and initially applied to offset existing debt as previously mentioned by McLovin.
> 
> The investor may wish to take the Balls of Steel approach and max out risk with a 100% equity position under leverage, but if at the limit of frugality, success would be akin to a negative odds bet come good.  People do it. Some win. Some move back with their parents at 35.  Your move.




I don't think investing in index funds, with exposure to the US and the World and Australia is a Balls of Steel approach. It's a sensible, conservative approach... and I have said that Bonds may be a good idea, just maybe not under current situation... and not a good idea for someone at 32 and investing for the long term, and to not buying bonds through an index fund.

Where in Buffett's 10% "short term government bonds" does he say expose to bonds through an index fund?

If Ryan is exposed to bonds through an index fund, can he be sure that the fund manager/s will only buy government bonds and not bonds from risky businesses? Can he be sure that the bonds are short term? And under current low interest rate environment, would the bond be worth more or less in a likely near term future?

To suggest that a person should spread their capital over everything across every corner of the world is insane...not with the capital Ryan has most definitely.


Unless a person have billions of dollars and no opportunities around, I honestly don't know why they would want to invest in bonds in the first place. Unless they don't know what they're doing for themselves and their clients so just spread the "risk" and charge a fee...

To go out and buy a bit of bond, a bit of property, a bit of stock in this and that continent... that's only advisable for very rich people who haven't a clue and whose manager have many friends in the industry over the world.

I don't know alpha kappa theta etc... but if I were to put my money into a company, it doesn't warm my heart thinking that if the company go broke, I'd be among the first in line to get what ever is left.


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## DeepState

luutzu said:


> 1. I don't think investing in index funds, with exposure to the US and the World and Australia is a Balls of Steel approach. It's a sensible, conservative approach... and I have said that Bonds may be a good idea, just maybe not under current situation... and not a good idea for someone at 32 and investing for the long term, and to not buying bonds through an index fund.
> 
> 2. Where in Buffett's 10% "short term government bonds" does he say expose to bonds through an index fund?
> 
> If Ryan is exposed to bonds through an index fund, can he be sure that the fund manager/s will only buy government bonds and not bonds from risky businesses? Can he be sure that the bonds are short term? And under current low interest rate environment, would the bond be worth more or less in a likely near term future?
> 
> 3. To suggest that a person should spread their capital over everything across every corner of the world is insane...not with the capital Ryan has most definitely.
> 
> Unless a person have billions of dollars and no opportunities around, I honestly don't know why they would want to invest in bonds in the first place. Unless they don't know what they're doing for themselves and their clients so just spread the "risk" and charge a fee...
> 
> 4. To go out and buy a bit of bond, a bit of property, a bit of stock in this and that continent... that's only advisable for very rich people who haven't a clue and whose manager have many friends in the industry over the world.
> 
> 5. I don't know alpha kappa theta etc... but if I were to put my money into a company, it doesn't warm my heart thinking that if the company go broke, I'd be among the first in line to get what ever is left.




Here is what a 'conservative' investment mix looks like for Australia's largest superannuation fund:




Please add the numbers 22 and 21 together.  That would be the asset allocation to equities for something the industry regards as 'conservative'.  

Let's have a look at something Australia Super regards as 'High Growth'.  Something which is suitable for investment horizons of 20+ years and not recommended at all for people who may need to draw down on their capital in the interim:




Please add the numbers 34 and 35, and, I'll be generous...throw in a 7.  According to my insane calculations, that adds up to 76%.  Somewhat below 100% and somewhat below 90%.

You can do what you wish with your money.  The above is the practice.  Ryan has drawn from Bogle and Vanguard to ascertain his asset allocation.  It is in line with what is recommended as a long term asset mix.  This is in line with Buffett's bequest for his wife in that the exposure to equities is lower than that appropriate for the super-rich. You may know better than the industry, Bogle and Buffett.  


2. An index fund is an index tracker.  It will track the index.  Governments manage their borrowing requirements.  Ryan can see the exposures regularly for changes in index composition.  These change at a glacial pace.

We are thinking long term. That's what you have been saying.  Who cares what short term bonds will do in the near term future?  It doesn't impact a long term strategy.  Since you are curious: Delta(Value) = Duration x Delta(i) + Carry(t, i(t), i(t+d)).  Go for your life.


3. Guess what, he's doing it.  At low cost.  Did you just imply that Ryan is definitely insane?  Let me look....yes you did.


4. You need to find out about investing for real.  That's a ridiculous statement ad extremis.


5. Does it warm your heart that when a company goes broke you'll be last in line?


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## luutzu

DeepState said:


> Here is what a 'conservative' investment mix looks like for Australia's largest superannuation fund:
> 
> View attachment 58757
> 
> 
> Please add the numbers 22 and 21 together.  That would be the asset allocation to equities for something the industry regards as 'conservative'.
> 
> Let's have a look at something Australia Super regards as 'High Growth'.  Something which is suitable for investment horizons of 20+ years and not recommended at all for people who may need to draw down on their capital in the interim:
> 
> View attachment 58758
> 
> 
> Please add the numbers 34 and 35, and, I'll be generous...throw in a 7.  According to my insane calculations, that adds up to 76%.  Somewhat below 100% and somewhat below 90%.
> 
> .
> 
> You can do what you wish with your money.  The above is the practice.  Ryan has drawn from Bogle and Vanguard to ascertain his asset allocation.  It is in line with what is recommended as a long term asset mix.  This is in line with Buffett's bequest for his wife in that the exposure to equities is lower than that appropriate for the super-rich. You may know better than the industry, Bogle and Buffett.
> 
> 
> 2. An index fund is an index tracker.  It will track the index.  Governments manage their borrowing requirements.  Ryan can see the exposures regularly for changes in index composition.  These change at a glacial pace.
> 
> We are thinking long term. That's what you have been saying.  Who cares what short term bonds will do in the near term future?  It doesn't impact a long term strategy.  Since you are curious: Delta(Value) = Duration x Delta(i) + Carry(t, i(t), i(t+d)).  Go for your life.
> 
> 
> 3. Guess what, he's doing it.  At low cost.  Did you just imply that Ryan is definitely insane?  Let me look....yes you did.
> 
> 
> 4. You need to find out about investing for real.  That's a ridiculous statement ad extremis.
> 
> 
> 5. Does it warm your heart that when a company goes broke you'll be last in line?




Since Ryan has better things to do than watch stocks, since he is, I'm assuming, new to the subject, what he is doing is reasonable. And I have said that as much before.

For a "professional" manager to spread  the risk by buying here there everywhere charge a fee, then add insult to injuries, measure their performance against the very measure they tries to emulate... Wow, no wonder the market crash every few years.

I don't know what the disclaimer about not knowing ur financial situation to customise financial advise is used for when all the pro does is spread it everywhere. Just a marketing jingo and a legal shield all in one then.

I don't think a fund manager ever ask themselves what value they bring to investors spreading, oh, diversifying, stuff and charges billions for work any high school kids could do in a few seconds - if they know the lingo and wear expensive suits.


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## luutzu

It's good to know "real" professionals just sit there rejigging funds to and fro one asset class to another.


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## Ryan C

DeepState said:


> Here is what a 'conservative' investment mix looks like for Australia's largest superannuation fund:
> 
> ...
> 
> You can do what you wish with your money.  The above is the practice.  Ryan has drawn from Bogle and Vanguard to ascertain his asset allocation.  It is in line with what is recommended as a long term asset mix.  This is in line with Buffett's bequest for his wife in that the exposure to equities is lower than that appropriate for the super-rich. You may know better than the industry, Bogle and Buffett.
> 
> 3. Guess what, he's doing it.  At low cost.  Did you just imply that Ryan is definitely insane?  Let me look....yes you did.
> 
> ...




I can not do a better job explaining what DeepState has explained it the last few responses.  Come time to invest in Jan I may even hold bonds index as high as 33%, increasing each year by 1%.  Watch this space.  This may be an insane plan to some and that's fair enough but for me I believe it'll pass my "sleep at night" test.

If you really want to understand this approach may I recommend "If You Can" by Bill Bernstein.  In it he outlines the long term approach I am going to implement to a varying degree.  There is a reading list of books that may take you some time to get through but the time invested is well worth it if you're interested in knowing this approach.


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## luutzu

Ryan C said:


> I can not do a better job explaining what DeepState has explained it the last few responses.  Come time to invest in Jan I may even hold bonds index as high as 33%, increasing each year by 1%.  Watch this space.  This may be an insane plan to some and that's fair enough but for me I believe it'll pass my "sleep at night" test.
> 
> If you really want to understand this approach may I recommend "If You Can" by Bill Bernstein.  In it he outlines the long term approach I am going to implement to a varying degree.  There is a reading list of books that may take you some time to get through but the time invested is well worth it if you're interested in knowing this approach.




Diversification ought to be a concept, a general principle, not a formula. 

Let say one of ur funds is doing really really well while the bond or property is in decline, by following a precise formula you'll buy more of a bad investment and dump the ones that could make ur entire investment journey.

There ought to be more common sense and less mathematics, even simple ones, in investing. 

I think a cautious approach like u r taking is perfectly rational, just keep an open mind and see if the approach need some minor modifications as u go along.


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## Ryan C

skc said:


> Just a couple of suggestions (you may be doing that already).
> 
> 1. Make sure you have an offset account to park your $24k emergency fund.
> 2. Make sure you shop around for the right loan, if you haven't looked at the loan market for 12 month.
> 3. You only have $80k, are you sure SMSF is the right thing to do? Especially considering that you are new to the market and aren't doing anything too active investing wise.
> 4. Assuming you keep your SMSF vehicle, have you looked at doing more investing in that vehicle and maximise the tax advantage (and the fixed cost base)? Chances are some of the $$ you make and invest today won't be touched until you retired, so putting it in SMSF might be a good thing.
> 5. Consider repaying your family (if the loan has non-deductible interest) before you have your full $24k emergency fund. Especially if you think you can borrow it again in case of an emergency. A supportive family can "pool" their resources for an emergency backup. If it's interest free, then it depends on your relationship with the lender...




1. Definitely offset.  It'll increase my cash flow.
2. I haven't shopped around although maybe I should.
3 & 4. I made the decision to go SMSF because my administrators are cheap. See XpressSuper.  I decided to go SMSF because an example for the cost of $50k in an industry fund I had was already $620+ per annum.  Having SMSF also allows me to invest in property should I wish to do so. Other things I could explore are self installment warrants.  Right now though I'll just invest in Vanguard LifeStrategy High Growth which is 90/10 stocks/bonds allocation.  Long term and not touching those accumulated $$ is a very good thing for me.
5. Paying it back is the priority.  No investing or building of emergency funds for me will happen until this is paid in full.


----------



## DeepState

luutzu said:


> 1. I don't think a fund manager ever ask themselves what value they bring to investors spreading, oh, diversifying, stuff and charges billions for work any high school kids could do in a few seconds - if they know the lingo and wear expensive suits.




What do you know of what is in the minds of the funds management industry?  On just the sample of one say, me, we worked really hard to manage risk.  Diversification is a key part of it, depending on purpose. It is by no means the only way to manage risk. Look around this ASF site and you will find many/most of the experienced set will emphasise the importance of risk management so you can actually survive the journey and reach your financial goals.

Show me the kid.  I have some coding I need done.  I pay very well. Given they are so cheap and plentiful, I'll have a dozen please. Is it FOB or CIF?


----------



## Ryan C

luutzu said:


> Diversification ought to be a concept, a general principle, not a formula.
> 
> Let say one of ur funds is doing really really well while the bond or property is in decline, by following a precise formula you'll buy more of a bad investment and dump the ones that could make ur entire investment journey.
> 
> There ought to be more common sense and less mathematics, even simple ones, in investing.
> 
> I think a cautious approach like u r taking is perfectly rational, just keep an open mind and see if the approach need some minor modifications as u go along.




I feel I am keeping an open mind.  Other things I haven't mentioned I take into considerations are my temperament, my current and changing situation, my bad habits and impulsiveness and more. I value your input luutzu however I think we have different approaches.  That's not a bad thing.  

If one of my funds is doing really really well while the bond is in decline, I'd follow my asset allocation, meaning I'd buy more of the declining bond/stock index.  I wouldn't do this by selling the stock/bond index that was going up but by using my investing money to top up the declining allocation come Jan or July.  It's being a contrarian long term investor.


----------



## DeepState

luutzu said:


> It's good to know "real" professionals just sit there rejigging funds to and fro one asset class to another.




Please supply evidence to support your proposition.  In reality, many of us stood up.


----------



## luutzu

DeepState said:


> What do you know of what is in the minds of the funds management industry?  On just the sample of one say, me, we worked really hard to manage risk.  Diversification is a key part of it, depending on purpose. It is by no means the only way to manage risk. Look around this ASF site and you will find many/most of the experienced set will emphasise the importance of risk management so you can actually survive the journey and reach your financial goals.
> 
> Show me the kid.  I have some coding I need done.  I pay very well. Given they are so cheap and plentiful, I'll have a dozen please. Is it FOB or CIF?




What other ways do you manage risks? Further diversification within asset class I bet. Oh wait, looking at those juvenile "research" from Morningstar PRO and economic forecasts and forecasts by others pro looking at the same or no data at all.

I'm not sure if by risk management, the pros are referring to risks to their own job, risks to not look foolish and be wrong against the crowd, risks to be wrong with the crowd... Risks to "perform" just as well or as badly with the tide. It definitely isn't any kind of risk mitigation the dumb money like me can see.

The way risks are managed there, it's like a game with fancy charts to show the clients to either pay  more fees with a rising tide or "yea we lost ur money, but so were everyone else suck it up, invest for the long term, remember. And where are r u going to take the money to anyway? My cousins down the street?".

I was always taught by my father that to reduce the risk of being wrong and lose, I ought to learn more and know more about what I'm doing. I was never told to reduce it by doing more and more different things in the same careless way. But then he's never a smart money like the masters of the universe.

If only a handful of you guys know what ure doing, have some common sense like Peter lynch, the world would literally be trillions richer and the wars since the collapse in 2008 might not happen t all.

You do know that an industry that brings no value to society will not last right?


----------



## luutzu

DeepState said:


> Please supply evidence to support your proposition.  In reality, many of us stood up.




You already supply the evidences above - those two funds. Wow, you guys really take liberty with the word "strategy". 

That or ur telling me that those guys and their analysts there study all the corporate data, all the global economic blah blah and based on theirs and their consultants and consultants consultants and his good luck charm, it just happen that a portfolio ought to have that breakdown in assets like that for optimum risk-reward hahaha... I couldn't even finish the sentence.



What's the strategy bob? 
Ummm... To grow, we must take on more risk, and more risks came from stocks, so more stocks for growth!
How much more stocks bob?
Ummm.... 5, no, 10 per cent more.
Brilliant! Let's sit down before our brilliance hurt us.


----------



## burglar

luutzu said:


> ... Brilliant! Let's sit down before our brilliance hurt us.




Please tone it down, ...

The OP and I are having trouble coping with this excess of brilliance!


----------



## Vixs

@Luutzu: I'm having a hard time understanding what your point is. Are you saying that diversifying within asset classes through using an index fund and diversifying across multiple asset classes by using multiple index funds for the various asset classes is not a useful approach?

You say that you think there should be less mathematics and more common sense in investing, but asset allocation isn't exactly complex financial mathematics - you are simply using non-correlated or lower correlated asset classes in combination to smooth out your returns over time, and make sure that you have some powder dry to take advantages of weakness in market valuations.

@Ryan C: One thing to consider is that your mortgage is essentially already fixed interest exposure. The cost to you (and therefore the impact on your wealth) over the course of your loan will go up and down with interest rates. The capital value of your bonds will also go up and down with interest rates. The difference is you are the borrower not the lender.

Say you have 25 years to run on your mortgage - it's essentially a floating rate bond with 25 years until maturity. As interest rates go up, the impact on your wealth is negative. As interest rates go down, the impact on your wealth is positive. You are effectively significantly overweight fixed interest in an environment where it doesn't pay to be overweight fixed interest. Interest rates really only have one direction they can go, and that's up. Government bonds are issued as fixed interest with a fixed coupon. If rates go up, capital value will fall on your fixed interest holdings and your mortgage liability will increase at the same time, doubling the impact on your financial position. At the same time, your bond coupon payments will be relatively lower as they've stayed the same, while your mortgage repayments will be higher.

Long story short, it may be worth reconsidering using a bond fund with a real return objectives of 3-5% that has exposure to interest rates while you have an interest rate liability that costs you 5-7% with the same risk exposure. When we return to a higher interest rate environment where interest rates and bonds have two directions to move in rather than one, it would be time to revisit using fixed interest in a portfolio again. Until then, the fixed interest asset allocation outside super is going to be offering you a greater compounding return in your offset account. Might as well sell the bonds and put the cash there.


----------



## Ryan C

Vixs said:


> @Ryan C: One thing to consider is that your mortgage is essentially already fixed interest exposure. The cost to you (and therefore the impact on your wealth) over the course of your loan will go up and down with interest rates. The capital value of your bonds will also go up and down with interest rates. The difference is you are the borrower not the lender.
> 
> Say you have 25 years to run on your mortgage - it's essentially a floating rate bond with 25 years until maturity. As interest rates go up, the impact on your wealth is negative. As interest rates go down, the impact on your wealth is positive. You are effectively significantly overweight fixed interest in an environment where it doesn't pay to be overweight fixed interest. Interest rates really only have one direction they can go, and that's up. Government bonds are issued as fixed interest with a fixed coupon. If rates go up, capital value will fall on your fixed interest holdings and your mortgage liability will increase at the same time, doubling the impact on your financial position. At the same time, your bond coupon payments will be relatively lower as they've stayed the same, while your mortgage repayments will be higher.
> 
> Long story short, it may be worth reconsidering using a bond fund with a real return objectives of 3-5% that has exposure to interest rates while you have an interest rate liability that costs you 5-7% with the same risk exposure. When we return to a higher interest rate environment where interest rates and bonds have two directions to move in rather than one, it would be time to revisit using fixed interest in a portfolio again. Until then, the fixed interest asset allocation outside super is going to be offering you a greater compounding return in your offset account. Might as well sell the bonds and put the cash there.




I understand what you are saying.  The reason I want to start this 2-3 fund portfolio is to diversify and create more assets away from just a single rental property.  The only asset I 'own' right now is that property, not counting super, and it's not liquid or delivering capital growth right now. 
Apologies if I wasn't clear in past posts but the portfolio I will hold will only consist of 2-3 low cost index funds through ETFs with 80% all world equities index funds and 20% bonds index funds allocation.  No individual stocks or bonds (not including my 'gambling' fund investments)


----------



## Vixs

Ryan C said:


> I understand what you are saying.  The reason I want to start this 2-3 fund portfolio is to diversify and create more assets away from just a single rental property.  The only asset I 'own' right now is that property, not counting super, and it's not liquid or delivering capital growth right now.
> Apologies if I wasn't clear in past posts but the portfolio I will hold will only consist of 2-3 low cost index funds through ETFs with 80% all world equities index funds and 20% bonds index funds allocation.  No individual stocks or bonds (not including my 'gambling' fund investments)




I follow what you mean, but from an overall return perspective and an 'asset allocation' perspective, the bonds may not achieve what you want them to at this stage. Sure it will smooth out the volatility of the portfolio returns because they are more capital stable than the international and Australian shares, but the actual return will be worse than what you could be getting by offsetting interest.

If you get a 4% p.a. return from, say, $5,000, that's $200 in taxable income. Taxed at 32.5% + 2% Medicare levy, you get $131 in net income. *2.62% net income return,* with no expectation of capital growth as it is not a growth asset, and the risk of capital loss as we're more likely to experience an increase in interest rates than a decrease. 

Duration of the portfolio for VGB is 4.62 yrs, VAF is 4.22 yrs. That means if interest rates go up 1% you can expect VGB to lose 4.62% in capital value. For VAF, they could be expected to lose 4.22% in capital value. The Vanguard Australian Fixed Interest index ETF yield-to-maturity is 3.33%. The yield-to-maturity on VGB, the Vanguard Govt Bond index ETF is 3.24%. That means that 4% p.a. income return looks pretty, in fact very, rosy from a bond index ETF perspective.

If you are paying 34.5 cents in the dollar tax (sub 80k tax bracket, so a conservative estimate based on your stated income as there will be deductions there as well), then your effective investment loan interest rate is let's say 5.5% p.a. before tax, or 3.6% p.a. after tax (5.5% p.a. x 0.655).

Keeping your cash in an offset account against your IP will effectively give you a tax-free return of *3.6% p.a.* by not incurring the interest on your investment loan.

You've got the right idea in diversifying your portfolio, but the reasons for including fixed interest in a portfolio are to provide some consistent income, non-correlated returns to equities and a less volatile portfolio return. Basically, in this low interest rate environment where bond yields are appalling and there is significant downside risk in the short-term as a result of capital loss when interest rates rise, there's no point someone like you holding them. You don't want taxable income as you don't need more income to get by. You don't need lower volatility as you are still very much an accumulator and it doesn't really matter if your portfolio drops 25% next year, because long-run you anticipate it will perform significantly better than that and it's just going to represent a great buying opportunity - in which case you have significant cash in your mortgage offset account ready to be put to work, because you were holding that money as your 'fixed interest' exposure.

Does that make sense?


----------



## Ryan C

Vixs said:


> I follow what you mean, but from an overall return perspective and an 'asset allocation' perspective, the bonds may not achieve what you want them to at this stage. Sure it will smooth out the volatility of the portfolio returns because they are more capital stable than the international and Australian shares, but the actual return will be worse than what you could be getting by offsetting interest.
> 
> If you get a 4% p.a. return from, say, $5,000, that's $200 in taxable income. Taxed at 32.5% + 2% Medicare levy, you get $131 in net income. *2.62% net income return,* with no expectation of capital growth as it is not a growth asset, and the risk of capital loss as we're more likely to experience an increase in interest rates than a decrease.
> 
> Duration of the portfolio for VGB is 4.62 yrs, VAF is 4.22 yrs. That means if interest rates go up 1% you can expect VGB to lose 4.62% in capital value. For VAF, they could be expected to lose 4.22% in capital value. The Vanguard Australian Fixed Interest index ETF yield-to-maturity is 3.33%. The yield-to-maturity on VGB, the Vanguard Govt Bond index ETF is 3.24%. That means that 4% p.a. income return looks pretty, in fact very, rosy from a bond index ETF perspective.
> 
> If you are paying 34.5 cents in the dollar tax (sub 80k tax bracket, so a conservative estimate based on your stated income as there will be deductions there as well), then your effective investment loan interest rate is let's say 5.5% p.a. before tax, or 3.6% p.a. after tax (5.5% p.a. x 0.655).
> 
> Keeping your cash in an offset account against your IP will effectively give you a tax-free return of *3.6% p.a.* by not incurring the interest on your investment loan.
> 
> You've got the right idea in diversifying your portfolio, but the reasons for including fixed interest in a portfolio are to provide some consistent income, non-correlated returns to equities and a less volatile portfolio return. Basically, in this low interest rate environment where bond yields are appalling and there is significant downside risk in the short-term as a result of capital loss when interest rates rise, there's no point someone like you holding them. You don't want taxable income as you don't need more income to get by. You don't need lower volatility as you are still very much an accumulator and it doesn't really matter if your portfolio drops 25% next year, because long-run you anticipate it will perform significantly better than that and it's just going to represent a great buying opportunity - in which case you have significant cash in your mortgage offset account ready to be put to work, because you were holding that money as your 'fixed interest' exposure.
> 
> Does that make sense?



Thanks for that excellent and detailed explanation. Just to clarify, given my situation,  as long as I have a mortgage on my IP, it makes more sense to hold my bonds/fixed interest allocation in my offset account to avoid me paying more tax and because of the higher interest 'saved' for my money?


----------



## So_Cynical

luutzu said:


> What's the strategy bob?
> Ummm... To grow, we must take on more risk, and more risks came from stocks, so more stocks for growth!
> How much more stocks bob?
> Ummm.... 5, no, 10 per cent more.
> Brilliant! Let's sit down before our brilliance hurt us.




Yep that's pretty much it, that's all it can be at the end of the day.


----------



## luutzu

Vixs said:


> @Luutzu: I'm having a hard time understanding what your point is. Are you saying that diversifying within asset classes through using an index fund and diversifying across multiple asset classes by using multiple index funds for the various asset classes is not a useful approach?
> 
> You say that you think there should be less mathematics and more common sense in investing, but asset allocation isn't exactly complex financial mathematics - you are simply using non-correlated or lower correlated asset classes in combination to smooth out your returns over time, and make sure that you have some powder dry to take advantages of weakness in market valuations.
> 
> @Ryan C: One thing to consider is that your mortgage is essentially already fixed interest exposure. The cost to you (and therefore the impact on your wealth) over the course of your loan will go up and down with interest rates. The capital value of your bonds will also go up and down with interest rates. The difference is you are the borrower not the lender.
> 
> Say you have 25 years to run on your mortgage - it's essentially a floating rate bond with 25 years until maturity. As interest rates go up, the impact on your wealth is negative. As interest rates go down, the impact on your wealth is positive. You are effectively significantly overweight fixed interest in an environment where it doesn't pay to be overweight fixed interest. Interest rates really only have one direction they can go, and that's up. Government bonds are issued as fixed interest with a fixed coupon. If rates go up, capital value will fall on your fixed interest holdings and your mortgage liability will increase at the same time, doubling the impact on your financial position. At the same time, your bond coupon payments will be relatively lower as they've stayed the same, while your mortgage repayments will be higher.
> 
> Long story short, it may be worth reconsidering using a bond fund with a real return objectives of 3-5% that has exposure to interest rates while you have an interest rate liability that costs you 5-7% with the same risk exposure. When we return to a higher interest rate environment where interest rates and bonds have two directions to move in rather than one, it would be time to revisit using fixed interest in a portfolio again. Until then, the fixed interest asset allocation outside super is going to be offering you a greater compounding return in your offset account. Might as well sell the bonds and put the cash there.




I'm saying that the pros, who if I remember right, charges Australian investors some $20 billion last year for management fees of their super, seem to do nothing for it except "diversify" the funds here there and everywhere. If that's risk management, I'm not sure whose risk they are managing - theirs or the investors money.

So say bond, or property, is at the moment a pretty bad investment, in general there are better opportunities out there in stocks, let say. These pros, in all their wisdoms, and all the fees great wisdoms costs are charged to the average bloke who's working hard and hoping for a decent retirement with his savings still intact, decides it's safest to buy a bit of everything regardless... It's the long term thing, we can't predict the market... 

That's like feeding your kids their breakfast, second breakfast, brunch, lunch, snacks, deserts... All at once because over the day, they'll need it anyway.

No one is asking for wizards with market timing abilities, we're asking that for that 20 billion and those great mental and financial resources, at least not spend all of it covering your behind and act slightly to our interests and maybe use a little common sense. 

The funny thing is, in diversifying and not timing the market as they claim, guess how they value a stock? Based on future forecasts of its earnings, cash flow estimates etc. 

----

I'm not having a go at RY, I'm seriously not qualified and who could fault a guy that retire early to spend more time with his kids, who spend some spare time trying to teach us and share with us his knowledge and understanding, and who goes to church every Sunday....

Issue is bigger than RY...

I mean, asking us to put some 12 per cent of our salary towards retirement? If that we're passed, that's asking for a 33.333333 per cent extra revenue.

When people muck around with a nations savings like this, they at least ought to be honest about it. Instead they lobbied for more money, increase retirement age... Because the working man, like them, can certainly work another 10 years.

The funny thing is that most people that join the industry are actually among our best and brightest, not necessarily our warmest or most industrious, but they're smart and could do great things. But when hired, their hands are tied and they're fed rubbish and legal doodle speech and action.

How many smart graduates you reckon would stand up to the boss and ask why does beta measure risk again? Why do we have to buy the top 10 blue chips even though the 100th to 120th is a much better investment? Why bonds now?

If the graduate know enough career risk management to stay quiet and learn his Greek alphabets, he'd get paid pretty well and soon start to believe and practise it too.

The result will be a 15pc super, full upfront payment to GPs and older retirement age.

When Buffett closed his partnership and bought Berkshire, the capital base was around 17million... I don't think any of his original investors are forced to work longer and give him more savings to manage to make ends meet since then, same with peter lynch, Phillip fisher... 

Is it too much to ask that our best and brightest, and their bosses and the 20 billion annual fees, with all the information at their fingertips can't do anything close to what a few smart, but by no mean genius smart, men with common sense, some basic maths and a mindset to cover their clients money first before covering their own hide and sing among themselves "all for one and one for all (fund mangers)"?


----------



## Vixs

Ryan C said:


> Thanks for that excellent and detailed explanation. Just to clarify, given my situation,  as long as I have a mortgage on my IP, it makes more sense to hold my bonds/fixed interest allocation in my offset account to avoid me paying more tax and because of the higher interest 'saved' for my money?




Yes. At the end of the day everything is just a tool used to build wealth. Fixed Interest/bonds is not the most effective use of your 'defensive' asset allocation from a total return perspective. You are going to get a greater return by keeping cash in the bank than by putting money in the bond market with the potential for capital losses in a rising interest rate market.

When the key elements are risk and return if you can get a better return with lower risk, that's a win. No point using a riskier asset for a lower return.


----------



## skc

Ryan C said:


> Thanks for that excellent and detailed explanation. Just to clarify, given my situation,  as long as I have a mortgage on my IP, it makes more sense to hold my bonds/fixed interest allocation in my offset account to avoid me paying more tax and because of the higher interest 'saved' for my money?




Yes. Don't borrow at 5% so you can earn a 2% return (unless you have really strong conviction that the 2% yielding asset will enjoy capital growth), is the long and short of what Vixs and McLovin are saying. 

Incidentally, that's what most people are doing when it comes to investment properties... borrowing @ 5% while earning net yield ~2-3%, while hoping there'd be capital growth.

If your IP turn into your PPOR, then the equation is even more skewed.


----------



## tech/a

I've read through all these excellent replies.

At best the result is going to be ho hum and
and un inspiring.

At 32 take some *calculated* RISK.
It appears your too concerned about losing money than 
having a real go at making it!

But if ho hum is ok------


----------



## So_Cynical

tech/a said:


> I've read through all these excellent replies.
> 
> At best the result is going to be ho hum and
> and un inspiring.




Have to agree, tech said the same thing to me about an experiment of mine a little over 12 months ago and has now been proven correct, in my case it was the fact that my funds were spread too widely (to many stocks) and not exposed to enough risk...in your case the same is proposed to be happening except via index ETF's and bonds.

No Risk = No outperform.

I have just run a report on my IB account covering the first 12 months of operation and last FY, Aussie stocks and writing covered calls, account has grown by 19% meanwhile the ASX300 ETF went up 11% over the same time frame...i retire in 3 years.


----------



## tech/a

So_Cynical said:


> Have to agree, tech said the same thing to me about an experiment of mine a little over 12 months ago and has now been proven correct, in my case it was the fact that my funds were spread too widely (to many stocks) and not exposed to enough risk...in your case the same is proposed to be happening except via index ETF's and bonds.
> 
> No Risk = No outperform.
> 
> I have just run a report on my IB account covering the first 12 months of operation and last FY, Aussie stocks and writing covered calls, account has grown by 19% meanwhile the ASX300 ETF went up 11% over the same time frame...i retire in 3 years.




With a 19% return in less than ideal times---I doubt retirement will be too much of a financial burden!

Three ways to skin the cat.

Bulk Funds at the end of the day (Regardless of how you generate them/Business/Trading/Investing/Property)
OR
The capacity to turn a decent profit year in year out! (Regardless how you generate them/Business/Trading/Investing/Property)
OR
Both!


----------



## Ryan C

Thanks for all the great responses.  Im learning from it all.



tech/a said:


> I've read through all these excellent replies.
> 
> At best the result is going to be ho hum and
> and un inspiring.
> 
> At 32 take some *calculated* RISK.
> It appears your too concerned about losing money than
> having a real go at making it!
> 
> But if ho hum is ok------




Tech, I have to admit im fine with ho hum rather than a loss. I'm clearly not being very risky, limiting my stock exposure to an all market index at a max of only 80% allocation, is what works for me. Happy to just match the market and not beat it.   I'll be risky with my 'gambling' fund and that's all. 
My overall goal is to create another income stream in the long term. Can't do that if I lose all my money on a few highly probable incorrect stock picks. I know my limitations.


----------



## tech/a

Ryan C said:


> Thanks for all the great responses.  Im learning from it all.
> 
> 
> 
> Tech, I have to admit im fine with ho hum rather than a loss. I'm clearly not being very risky, limiting my stock exposure to an all market index at a max of only 80% allocation, is what works for me. Happy to just match the market and not beat it.   I'll be risky with my 'gambling' fund and that's all.
> My overall goal is to create another income stream in the long term. Can't do that if I lose all my money on a few highly probable incorrect stock picks. I know my limitations.




Fair enough.
You certainly are not alone!!


----------



## Vixs

tech/a said:


> I've read through all these excellent replies.
> 
> At best the result is going to be ho hum and
> and un inspiring.
> 
> At 32 take some *calculated* RISK.
> It appears your too concerned about losing money than
> having a real go at making it!
> 
> But if ho hum is ok------




I'm with you tech/a, indexing and putting cash in an offset account isn't the most exciting move at this stage, but it's certainly a start and far from a bad decision. I'm not a big advocate for indexing, but I certainly see it as preferable to not being invested.

What Ryan has referred to now as 'gambling' would probably become more targeted 'investing' with a little more experience and exposure.


----------



## TPI

I've got a 60+ year time-frame so am opting for the Balls of Steel approach and forgetting about bonds for now.


----------



## DeepState

TPI said:


> I've got a 60+ year time-frame so am opting for the Balls of Steel approach and forgetting about bonds for now.




What happens to you at airports?


----------



## TPI

DeepState said:


> What happens to you at airports?




Nothing... I don't follow?


----------



## Vixs

TPI said:


> Nothing... I don't follow?




Balls of Steel. Metal detectors. Frisking. Airport security violation etc etc.


----------



## DeepState

TPI said:


> Nothing... I don't follow?




Set up your mental TV screen....

TPI heads to the airport. Checks in. Puts his luggage on conveyer belt into XRAY machine.  Walks through metal detector....."BZZZZZZ".  Female guard says, would you mind walking through the gate again sir?  BZZZZZZ....

https://www.youtube.com/watch?v=-IQkg21Qw1k

As per the above instructional video, except your version goes a few steps further.  High risk investment strategies come with unanticipated risk....


----------



## luutzu

burglar said:


> Please tone it down, ...
> 
> The OP and I are having trouble coping with this excess of brilliance!




he started it


----------



## luutzu

Ryan C said:


> I feel I am keeping an open mind.  Other things I haven't mentioned I take into considerations are my temperament, my current and changing situation, my bad habits and impulsiveness and more. I value your input luutzu however I think we have different approaches.  That's not a bad thing.
> 
> If one of my funds is doing really really well while the bond is in decline, I'd follow my asset allocation, meaning I'd buy more of the declining bond/stock index.  I wouldn't do this by selling the stock/bond index that was going up but by using my investing money to top up the declining allocation come Jan or July.  It's being a contrarian long term investor.




I don't mean that you're not open minded or such.. meant to say, and it could just be from my own experience with trivial matters like learning some historical facts I thought makes sense until I heard another perspective that contradicts that belief, but either ignore the new contradicting evidence or be open minded about things and look it up to see what's the truth.

At 32 and having a daughter that's 10, it must have not been easy, financially... and to get to where you are now financially is quite an achievement. To look for safe investment options and do what you're doing, it's the way to go... 

But since you have planned for some "gambling" account to take a punt here and there, just in case that get you interested in looking into investment options and take a more active approach towards your investments... and this could be 5 or 10 years from now... what i meant by being open minded is to see if the index has been doing OK, see if risks is actually minimised by spreading far and wide, see if perhaps you could do an OK job yourself.

Anyway, good luck.


----------



## Ryan C

luutzu said:


> I don't mean that you're not open minded or such.. meant to say, and it could just be from my own experience with trivial matters like learning some historical facts I thought makes sense until I heard another perspective that contradicts that belief, but either ignore the new contradicting evidence or be open minded about things and look it up to see what's the truth.
> 
> At 32 and having a daughter that's 10, it must have not been easy, financially... and to get to where you are now financially is quite an achievement. To look for safe investment options and do what you're doing, it's the way to go...
> 
> But since you have planned for some "gambling" account to take a punt here and there, just in case that get you interested in looking into investment options and take a more active approach towards your investments... and this could be 5 or 10 years from now... what i meant by being open minded is to see if the index has been doing OK, see if risks is actually minimised by spreading far and wide, see if perhaps you could do an OK job yourself.
> 
> Anyway, good luck.



No need to explain mate.  You mean well and I haven't taken anything you've offered with offense or ridicule luutzu.  It's great to have valuable input as it raises questions or concretes things for me.  That's how I like to learn.  I'll be watching my investments carefully and sharing my results, good or bad, for all to see.


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## DJG

opcorn: Also watching this one with interest


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## DeepState

Hi Ryan

Classic:




                                                                             Source: Bernstein (2014)

But so true.

RBA Gov Glen Stevens made a speech at the Anika Foundation lunch.  Here are two sets of highlights.  They indicate that even the guys pulling the levers didn't know if we were headed for a Great Depression Mk II at the time. They did not know.  I worked in a firm where Geithner would call our Chairman to ask him how markets would react to this or that initiatve - a lot.  Everyone was flying by the seat of their pants and the fixed income markets essentially shuttered. It is consensus opinion that the US banking system was actually insolvent at the time. Apart from unprecedented liquidity release by the central banks, pulling the economy back from off the edge, a global pact had to be made to avoid mercantilism that marked to Depression era. The pledges the G7 ministers made crippled many economies when selfish alternatives were available which would be more populist.  Consider how hard this was to pull off when you look at how hard it is to get anything done in the EZ. They did not know. Anyone trying to analyse the outcomes could not know...because they were analyzing people who did not know what action they would be taking 24 hours from now and what catastrophe awaited them at 4am.

1./



2./



Questions: 

1./ Will you hold come hail and shine? 

2./ Should you hold come hail or shine?

I do not have an answer guide and am interested in your and others' response.


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## Julia

DeepState said:


> Questions:
> 
> 1./ Will you hold come hail and shine?



No.  Protection of capital and profit will always be a priority for me, fwiw.


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## Ryan C

DeepState said:


> Questions:
> 
> 1./ Will you hold come hail and shine?
> 
> 2./ Should you hold come hail or shine?
> 
> I do not have an answer guide and am interested in your and others' response.




Great question.

1. Yes, for two reasons
- I wouldn't know if a crash had occurred.  My plan when I put my first dollar in is not to watch financial news, listen to experts and their recommendation and I'd only look at my portfolio to buy each half year to rebalance.  I'd hate to panic and not be able to sleep at night so I wouldn't fill my head with noise. Ignorance is bliss.
- I'm stubborn. Once I've set my mind to a goal I like to see it through.  If I learn a better way regarding my specific situation I'd adjust (example: Vixs recommendations to hold my fixed interest in my offset account) but I'm really just tweaking my share investing game plan.

2.  Yes.  

Books I've read that has influenced my thinking about crashes and manias have noted that the markets has always recovered after a period of time.  The most recent book I've read from Nicholas Nassim Taleb on the Black Swan theory has also influenced my thinking.  Another recommendation   To show I'm not all books knowledge, my only investment in shares during the crash of 2008 was in a high growth fund consisting of Australian and international market shares in a super fund I never looked at seems to have benefited so that's backed up what I've read.

I do not know the full context of your snippets however this stood out for me:
"Anyone trying to analyse the outcomes could not know...because they were analyzing people who did not know what action they would be taking 24 hours from now and what catastrophe awaited them at 4am."  

If people in the know didn't know what to do in a Black Swan event I'd like to think I have as much chance as them to getting it right and the best chance I've got of that happening is following my plan that I set when I wasn't in a panic and was thinking rationally.


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## DeepState

I'm guessing that Ryan does not need to consume from capital and Julia is closer to doing so or already doing so.  The more you do, the higher the risk is to you and the less tolerant you are to holding on.  At the limit, you can totally exhaust your portfolio if consuming during weak markets - even if they subsequently rebound.

I utilize a type of protection on my net equity exposure which pulls me somewhat out of sharply falling markets and then, usually, buys in at a lower level when things have calmed down. In deep falls (>20%) it will essentially cut me out of the markets.  I will miss the worst experience, but will not pick the bottom for the most part.  It does some profit taking when markets are strong.  This is a much more comfortable and survivable approach for me.  The costs of doing this on overall returns is very small over the long haul. "Loose change" I am happy to pay for this kind of pay-off profile.


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## Julia

DeepState said:


> I'm guessing that Ryan does not need to consume from capital and Julia is closer to doing so or already doing so.



Much as I value your contributions, RY, I'm a bit confused about what you actually mean here, i.e. are you suggesting that I am close to consuming from capital or not?  I'd really rather not have my situation guessed at on a public forum just because I answered the question about holding on through all markets (or whatever the question was).  

As I've said in the past, with the GFC I sold everything soon after it started, went to cash.  Gave back some profit but protected most of it.    If I'm generating a living from my capital then protecting that capital is a priority.  I walked away from the work force late 40's and have added to the capital every year since then, never used any of it.


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## DeepState

Julia said:


> Much as I value your contributions, RY, I'm a bit confused about what you actually mean here, i.e. are you suggesting that I am close to consuming from capital or not?  I'd really rather not have my situation guessed at on a public forum just because I answered the question about holding on through all markets (or whatever the question was).
> 
> As I've said in the past, with the GFC I sold everything soon after it started, went to cash.  Gave back some profit but protected most of it.    If I'm generating a living from my capital then protecting that capital is a priority.  I walked away from the work force late 40's and have added to the capital every year since then, never used any of it.




Julia, sorry for involving a guess at your situation in my response.  I should have used a blank-name illustration instead.  Let me re-state.

If a person happened to be consuming yield from their capital, a sharp market correction - which is usually accompanied with a fall in dividends - may require them to eat into capital.  By eating into capital, there is less capital available to invest in any subsequent reversion in the markets.  In the event that the weak markets and dividends persists for a while, it is quite possible that a material amount of capital is consumed.

Hence, looking at equity market returns and saying we buy and hold with strength will be less appropriate when you are consuming a reasonably material amount of yield from the capital or already consuming capital.  The more extreme that situation, the less able this person is to incurring capital losses in general.  It would reasonably lead them to sell out entirely in weaker markets.

In contrast, if you are not consuming yield from your investments but are adding to investment periodically, holding through the weak markets and even adding to them on the expectation of reversion is perfectly reasonable.

The response to the question of whether a person might hold or not ought, therefore, consider their particular cashflow requriements.  The same person, with otherwise identical risk profile, would reasonably make different decisions depending on their circumstances.


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## Ryan C

*Update:*

_"Do what you can, with what you have, where you are" -Theodore Roosevelt_

This is the plan I immediately put into action when my SMSF funds and tax refunds were cleared in the last few days.

*(Inside super)
50% US market - VTS
31% International market - VEU (~5% is AU market)
9% A-REIT - VAP
10% Fixed Interest - VAF*

Here is what it will look like in the medium term:

*(Inside Super)*
50% US Market
17% International
9% - A-REIT
10% Fixed Interest (split between super and my mortgage offset account)

*(Outside Super)*
14% - Australian

I split it this way for tax effectiveness.
I want to keep my home bias to a minimum and may only go as high as 15% Aussie of my portfolio.
My 'gambling' funds aren't counted as part of this portfolio. 

I repaid my family loan with my tax refund and started building my emergency fund with any remaining.

I relaxed my frugality a bit and decided to treat myself and family by taking advantage of recent Jetstar sales and booked short holidays to Japan and Vietnam for 2015.  I consider these value investments for the price I got them for.  :


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## Ryan C




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## DeepState

Ryan C said:


> *Update:*
> 
> _"Do what you can, with what you have, where you are" -Theodore Roosevelt_
> 
> This is the plan I immediately put into action when my SMSF funds and tax refunds were cleared in the last few days.
> 
> *(Inside super)
> 50% US market - VTS
> 31% International market - VEU (~5% is AU market)
> 9% A-REIT - VAP
> 10% Fixed Interest - VAF*
> 
> Here is what it will look like in the medium term:
> 
> *(Inside Super)*
> 50% US Market
> 17% International
> 9% - A-REIT
> 10% Fixed Interest (split between super and my mortgage offset account)
> 
> *(Outside Super)*
> 14% - Australian
> 
> I split it this way for tax effectiveness.
> I want to keep my home bias to a minimum and may only go as high as 15% Aussie of my portfolio.
> My 'gambling' funds aren't counted as part of this portfolio.
> 
> I repaid my family loan with my tax refund and started building my emergency fund with any remaining.
> 
> I relaxed my frugality a bit and decided to treat myself and family by taking advantage of recent Jetstar sales and booked short holidays to Japan and Vietnam for 2015.  I consider these value investments for the price I got them for.  :




Hi Ryan

Post #4 states you have planned to have Aust equities in Super.  The above states otherwise.  Which of the statements is an accurate depiction of your situation?

Cheers


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## Ryan C

DeepState said:


> Hi Ryan
> 
> Post #4 states you have planned to have Aust equities in Super.  The above states otherwise.  Which of the statements is an accurate depiction of your situation?
> 
> Cheers




Changed my mind on that after considering franking credits. VAS is what I will buy in a couple of months.


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## DeepState

Ryan C said:


> Changed my mind on that after considering franking credits. VAS is what I will buy in a couple of months.




Maybe it's my math that needs checking, but I think VAS is best held within super.

Reasoning as follows:

Assume for VAS and international shares assets are hold to death.  You have stated that you are after an income stream.  Although super assets can't be touched for a while, income from these can be offset against income from personal exertion. That is, even if you can't get money out of your super, you can spend as if you did.

Australian shares yields around 4% pa with 80% franking.  An after tax yield in super is the grossed up yield (5.4%) less tax at 15% equaling 4.6%.  You will get a tax refund.  Outside of super, even at 30% tax rate (that's before you get rich, to be conservative) the after tax yield is 3.8%.

Overseas shares yields around 2% and might get you a smidge of withholding tax credits not worth mentioning in this context.  After tax yield is 1.7% for a super arrangement.  The after tax yield outside of super is 1.4%

So, the benefit for going into super vs not for Australian shares is 4.6% less 3.8% = 0.8%.

For overseas shares, the difference is 1.7% vs 1.4% = 0.3%.

The gain for moving Australian shares into super is greater than obtained for moving overseas shares into super.  If you had to choose which was moved into super, it would be Australian shares.

If you considered capital gains as well, it would point more firmly in this direction too if the total pre-tax returns on Australian and overseas shares are assumed to be identical (which is the outcome of one theory emerging from cost of capital equality across the world).


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## Ryan C

DeepState said:


> ...Although super assets can't be touched for a while, income from these can be offset against income from personal exertion. That is, even if you can't get money out of your super, you can spend as if you did.




How does that work? I thought money in super stays in super until I retire.


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## DeepState

Ryan C said:


> How does that work? I thought money in super stays in super until I retire.




I was not clear enough.  Given you are investing for income but choose to house some of it in super for the tax benefit even though you can't touch it. I just figured that you can reduce your saving from personal exertion income by the amount of income generated from investments within the super arrangement. That way, you can spend the income as you had imagined.


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## Ryan C

Update:  I achieved my goal early to save $3000 by end of 2014 to invest in my first lot of VAS.  I settled a purchase for 43 units @ 63.47 today.  While Commsec is offering no brokerage fee I'll be buying $700 a month into VAS until it runs out before I revert back to bi annual purchases and adjusting my allocations.  I continue to build my emergency fund within my offset account.

Index investing is simple but boring.  I hardly check how my ETFs are performing and do not concern myself with the daily movements.


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## >Apocalypto<

Ryan C said:


> Update:  I achieved my goal early to save $3000 by end of 2014 to invest in my first lot of VAS.  I settled a purchase for 43 units @ 63.47 today.  While Commsec is offering no brokerage fee I'll be buying $700 a month into VAS until it runs out before I revert back to bi annual purchases and adjusting my allocations.  I continue to build my emergency fund within my offset account.
> 
> Index investing is simple but boring.  I hardly check how my ETFs are performing and do not concern myself with the daily movements.




love your signature.


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## DeepState

Ryan C said:


> Update:  I achieved my goal early to save $3000 by end of 2014 to invest in my first lot of VAS.  I settled a purchase for 43 units @ 63.47 today.  While Commsec is offering no brokerage fee I'll be buying $700 a month into VAS until it runs out before I revert back to bi annual purchases and adjusting my allocations.  I continue to build my emergency fund within my offset account.
> 
> Index investing is simple but boring.  I hardly check how my ETFs are performing and do not concern myself with the daily movements.




Keep walking the path RC.  You are doing really well.


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## slothman

Ryan C said:


> Update:  I achieved my goal early to save $3000 by end of 2014 to invest in my first lot of VAS.  I settled a purchase for 43 units @ 63.47 today.




Congrats! I just purchased my first lot of VAS today @ 65.75 and considering buying some WXOZ once I feel comfortable enough to pull the trigger. Still paying down PPOR debt so not in a mad rush. 

Have you come across this blog? 
http://superannuationfreak.blogspot.com.au/


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## Ryan C

Update:

Today, I added another 19 units of VAS at $67.50 each.  I intend to make full use of the free brokerage whilst it last.  Side note: Correction on my last purchase of 43 units of VAS.  It was purchased at $68.74 a unit.

As I mentioned in my last post this style of investing is boring but on the upside it's hassle free.

I've also mentioned that I'll have a 'gambling' fund which I will use on individual shares but this has changed somewhat.  Now I literally have a gambling fund that I use at the casino instead to play poker.  This has curved any interest in me taking a gamble at picking individual companies to make money.

I've built a comfortable and consistently growing bankroll and play on profit.  I've dipped into my bankroll to tuck away a few hundred into my investing account for ETFs (and small gifts for family) every so often whilst leaving me enough to play with.  I understand this may not be the best way to build wealth but it's helping me with extra income.  And if I lose it all tomorrow, well, I feel good some of it went into my share portfolio.  

It's funny that every thing I've learned about investing translates right into to how I handle my gambling money.  I do not risk what I can't afford to lose.  I'm just as frugal with it.  And every extra bit I can spare goes right into my portfolio.


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## Ryan C

slothman said:


> Congrats! I just purchased my first lot of VAS today @ 65.75 and considering buying some WXOZ once I feel comfortable enough to pull the trigger. Still paying down PPOR debt so not in a mad rush.
> 
> Have you come across this blog?
> http://superannuationfreak.blogspot.com.au/




Good job! Keep at it.  I was actually thinking of buying WXOZ but went with more VAS today only because I hold international shares in super and my daughters account.


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## Ryan C

Update: With the recent dip in Aussie Shares I added another 31 unit of VAS at 66.70.  Happy to see it bounce back up to 67.32 yesterday.  Not really a big deal in the long term scheme of things.

Hoping my buy order on WXOZ happens before my free brokage with Commsec is over this month otherwise it'll have to wait.


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## Ryan C

Update: Finally bought 100 units of WXOZ.  Wasn't too happy with how I went about this buy.  I bought it in the higher end of what I wanted to pay.  In the past few weeks as I was watching it I tried to save a few bucks by setting a price below bid and I just watched as it climbed in the following weeks.  

Also, topped up the ETFs in my super to be 50% VTS, 31% VEU, 9% VAP and 10% VAF.  All these purchases have increased since I bought my first lot when I started my SMSF so happy to see my holdings are in the green with about $7000 profit.


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## hiddencow

You might want to check out VGS, new vanguard ETF.
Similar to WXOZ but fees are lower.


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## Ryan C

> You might want to check out VGS, new vanguard ETF.
> Similar to WXOZ but fees are lower.




Awesome! Thanks for that!  Possibly will add it in future.

*Update:*
Accidentally bought 93 units of WXOZ - I had an outstanding buy order which I missed and didn't cancel.  It executed today and what a big shock it was when I received a confirmation email 

Also added 100 units of DJRE in last few days.  I like having a small real estate allocation.

Outside of my super, I now hold 50% VAS, 35% WXOZ and 15% DJRE.  I haven't followed an allocation to these holdings and just bought what I could.  I'll set one before my next buys and adjust accordingly.


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## VSntchr

Ryan C said:


> *Update:*
> Accidentally bought 93 units of WXOZ - I had an outstanding buy order which I missed and didn't cancel.  It executed today and what a big shock it was when I received a confirmation email
> .




I know the feeling! I had a contingent order on a stock a few months back (stop loss) which I forgot to cancel. The trade been completed within a few days...but over a week or so later the contingent order triggered and I had bought a parcel I had no idea about!!
Closed it off instantly but gave me a heart attack!!


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## Ryan C

*The Education of a Value Investor by Guy Spier*

Here's a great book I wanted to share with you all.  I listened to it twice already (got the audiobook version) and I will no doubt listen to it again on my investing journey to save myself from myself.  Loved most of his insight into self awareness, processes, values and importance of mentors (I need to find one).  This is not a how-to book though.  

Hope it helps you in some way on your long term investing journey.


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## Ves

Hey RyanC

Wondering if you had the chance to have a look at VGS yet.

Is it worth holding both VEU / VTS to make up international exposure  (they're both non-domiciled)   or is it better to just hold one fund  VGS  (Aust domicile)  or even WXOZ (I think you may have this)?

I believe that VEU and VTS  have more underlying stocks compared to VGS and WXOZ,  not sure if that leads to better index tracking.  VGS also doesn't have any emerging markets exposure  (this is about 10%-12% of the world I believe). But you *could* use VGE.

However the non-Aust domiciled funds have lower MER,  but both have foreign paper work to fill out,  no DRP  and possible loss of foreign tax credits  (any idea how much the long-term return loss is??).

Interesting dilemma, is it not?


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## Ryan C

Ves said:


> Hey RyanC
> 
> Wondering if you had the chance to have a look at VGS yet.




Howdy Ves,

Yes I looked but I haven't bought it.   I think VGS is much better when looking it holds over 1500 securities in 22 countries vs 1108 securities in 25 countries at much lower management cost.  However VGS has smaller volumes.



> Is it worth holding both VEU / VTS to make up international exposure  (they're both non-domiciled)   or is it better to just hold one fund  VGS  (Aust domicile)  or even WXOZ (I think you may have this)?




I wasn't aware of VGS until I'd bought WXOZ.  for myself, I'd still prefer WXOZ over VGS because I have nearly everything with Vanguard and want to avoid some shutdown risk. 

I prefer US and International exposure split up because I may want to change my asset allocation and gain more exposure to certain markets. 



> I believe that VEU and VTS  have more underlying stocks compared to VGS and WXOZ,  not sure if that leads to better index tracking.  VGS also doesn't have any emerging markets exposure  (this is about 10%-12% of the world I believe). But you *could* use VGE.




I know VTS covers more of the US market compared to WXOZ.  For the US, I believe this provides a better index tracking than an S&P 500 index alone.  I think using VGE is a good option to allocate exposure to emerging markets but I wouldn't allocate more than 10% of my International percentage.  However the 0.48% management cost is a worry for those small markets.



> However the non-Aust domiciled funds have lower MER,  but both have foreign paper work to fill out,  no DRP  and possible loss of foreign tax credits  (any idea how much the long-term return loss is??).




Admittedly, I only concerned myself with low MER and I didn't mind the paperwork when choosing my ETFs.  I had no control over foreign tax so i didn't bother too much, filled in the forms and sent it off.   Having a DRP is preferred but when it's not available I just park the dividends with my savings ready for my next round of purchases.  I let the accountant work that out because I don't fully understand it too.  Sorry I have no idea on long-term loss. 

May I ask how youre assets are split and what you used?

Cheers,
John


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## Ves

Hi John

When it comes down to it,  the international exposure seems to come down to these things:


Diversification  (As you mentioned Vanguard comes out ahead here)
Control  (How much control do you wish to have over the break-up of the exposure?  ie.  Tilt to US / Europe etc.)
Cost   (MER, Buy or sell spread,  brokerage)
Taxes   (Treatment of foreign tax credits,   and I have discovered Estate Taxes - see below)

I tend to agree with you on most points that using VEU and VTS is preferred over VGS or WXOZ  (with perhaps a small portion for VGE).

However.  There is a catch  and it has to do with the fact that VEU and VTS have a US domicile.   From a Vanguard prospectus  (and iShares says something similar):



> US estate tax
> US estate tax may apply to an investor who is a natural
> person who is not a US citizen and who is not domiciled in
> the US and, at the time of death, is the beneficial owner of
> the US ETF securities. The amount of the estate tax may
> be determined by the quantum of the ETF interests
> owned at the time of death. The value of an investor’s
> holdings as well as capital gains and income may be subject
> to tax. The amount of tax may be reduced under an
> Australia/US estate tax treaty. There may be some exemptions
> to these rules depending on the structure that owns
> the ETF interests.
> Investors are warned that they should seek professional tax
> advice in relation to the US estate tax issues, as they are
> fundamentally different to the Australian system.




I have done some digging,   and Australia does have a tax treaty with the USA.   I am unable to locate a definite answer to this question,  how much tax is payable by an Australian resident who holds USA assets at death?  It's very important,  because the US estate taxes are quite heavy from what I recall  (can be as high as 55% above certain thresholds).  It is enough to choose an Australian domiciled ETF such as VGS if there is no exemption under the tax treaty.

I also understand that there are gifting taxes for US assets  (ie. if you gift your ETF units to someone below their market value).

Do you know anything?



> May I ask how youre assets are split and what you used?



I'm actually a stock picker.  I don't have any exposure to any of these ETFs at the moment.  However,  I have been doing some research into some alternate strategies lately and your thread struck me as a very good example of the Bogleheads approach in action!


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## Ves

Sorry to be a pain....

But did you think much about ETFs vs Index Funds  (ie.  Vanguard retail and wholesale).

ETFs look heaps cheaper on the surface.

But I was more thinking of liquidity and its associated costs.  Do the buy / sell,   premium to NTA costs on large sums?  

What if you reached your retirement goals,  and not only that,  had lots of excess cash,  and wanted to cash out a large sum,   is this easy?  Would it be easy for someone else to do without running up "costs" (selling below NTA by moving the market)  if you were incapacitated / dead?  

Are there circumstances where index funds may actually be more suitable?

I should stop thinking.   More questions than answers. 

PS:  a lot of my questions are general,  and may or may not apply to you,  but it'd be great if others with some experience could join in the conversation.


----------

