Both AFI and VAS? Or just one of them?

[bomz_21]

Hi! I'm trying to get the bulk of my savings doing something and putting 25% of my portfolio into 'Australia'. At this point I have decided a 50% 50% split between AFI and VAS to get the benefits of low level management and the long-term safety of an index.
To me, that logic seems okay, but comments here and there and in feedback to my plans say that I only need one of them.

What should I do? I keep flipping my decision!

I'm 30 yrs old, starting investing late, putting down $15K savings toward 'australian' market, want high risk I'm not scared of market fluctuations. I don't mind watching the stock market/rebalancing when necessary.

 

[Boggo]

...

What should I do? I keep flipping my decision!

I'm 30 yrs old, starting investing late, putting down $15K savings toward 'australian' market, want high risk I'm not scared of market fluctuations. I don't mind watching the stock market/rebalancing when necessary.

I can't tell you what to do for two reasons, one being the obvious, the other being that I am not familiar AFI.

I do however park funds in VAS, it hasn't done anything spectacular price wise recently but does keep on paying a partially franked dividend.

 

[kid hustlr]

I like ETF's.

what I typically do every time I'm due for a purchase is check the LIC NTA discount schedule. It's a little delayed but it let's me work out if the LIC's I like are trading under value. I stick to the high volume LIC's which have been around a while.

if they are trading at a discount I'll buy one of them, if there's nothing I like I'll just buy the ETF like Mr Buffet recommends

https://www.morningstar.com.au/LICs/MonthlyReports

EDIT: read Craft's thread if you haven't already

 

[bomz_21]

I like ETF's.
EDIT: read Craft's thread if you haven't already

Tried finding that one - mind sharing the link?

 

[watsons]

I like ETF's.
if they are trading at a discount I'll buy one of them, if there's nothing I like I'll just buy the ETF like Mr Buffet recommends

Sorry this is a really dumb question but how do you know if it's on a discount or not? Is it when it says e.g. -15% meaning it has a 15% discount or if it just says 15% that's when it has a 15% discount?

 

[bomz_21]

Sorry this is a really dumb question but how do you know if it's on a discount or not? Is it when it says e.g. -15% meaning it has a 15% discount or if it just says 15% that's when it has a 15% discount?

Not dumb at all. I had the same difficulty, it's confusing!

Afi usually trades at a premium. Ppl think the shares are worth more than their underlying assets. To be honest with afi and quite a few others, the premium doesn't fluctuate to give you massive savings that often so best to not bother trying to time the market and just go for it. Imo

 

[watsons]

Afi usually trades at a premium. Ppl think the shares are worth more than their underlying assets. To be honest with afi and quite a few others, the premium doesn't fluctuate to give you massive savings that often so best to not bother trying to time the market and just go for it. Imo

Ah I see! So what did you end up going with in the end?

 

[kid hustlr]

Sorry this is a really dumb question but how do you know if it's on a discount or not? Is it when it says e.g. -15% meaning it has a 15% discount or if it just says 15% that's when it has a 15% discount?

I ask plenty of dumb questions don't worry.

https://www.morningstar.com.au/s/documents/201710_ASX-LIC-NTA-Report.pdf

There's a little bit to it but i use prem/disc to NTA column. if it's at a negative it means the LIC is trading 'cheap' relative to it's NTA. The larger ones typically don't move around that much but if you can buy them at a 3/5/7% discount to NTA it's pretty handy. I know AUI & DUI quite often to on market buy backs if they are trading cheap so I don't see much risk in the discount to NTA's really blowing out.

 

[watsons]

i use prem/disc to NTA column

Thanks kid hustlr! Do you look at the prem/disc pre-tax NTA or the prem/disc post-tax NTA column?

 

[kid hustlr]

I look at Pre tax. I'm not across the detail as to which one I should be looking at - the firm I used to work for 4-5 years ago always worked off pre tax so I have subsequently done the same.

 

[bomz_21]

Ah I see! So what did you end up going with in the end?

In the end I actually just went with afic. There was too much overlap in them to bother splitting and just would have meant more brokerage. I chose afic cos I like that they have the ability to make some judgement about their weightings whereas vas is kinda bank heavy by default. Also dividends are a little more reliable /simpler. Also since it's managed it will tend to outperform when the market is fairly flat which asx is.

 

[So_Cynical]

AFI pays fully franked dividends and has a slightly higher yield, i plan to sell my index fund shares soon and will buy another LIC, 100% franking is a big deal.

Bell Potter quarterly LIC report SEPT 17: https://cuffelinks.com.au/wp-content/uploads/LIC-201709.pdf

While on the subject of LIC's - i was looking at this comparison chart last night AFI v DJW, 5 year chart shows them moving in close correlation up until about 18 months ago, both big LIC's both holding lots of top 10/20 shares...DJW looks to be trading at a bit of a discount.
~

 

[Belli]

Bit late to this party. Regarding how to work out whether an LIC is at a premium to NTA or not, you can look at the website of the respective LIC. Most display the previous month's NTA and the share price (albeit delayed by 20 minutes). Website of AFI provided as an example.

http://www.afi.com.au/

Divide the share price by the NTA, eg 6.2/6.03 = 1.028. Result is the share price is at a 2.8% premium. Reasonably simple maths.

As for DJW, it mainly concentrates of the Top 50 I understand and has options over the holdings in a lot of cases. I think it is more of a dividend income share rather than a capital growth one. Seems to get hammered at the slightest hint of a market downturn.