Is it a good time to invest in ETF index funds?

[divs4ever]

The index constituents are drawn from the universe of ordinary and preferred equity stocks listed on the ASX. The index only includes securities that are considered to be institutionally investable, and market capitalisation is a key criterion for stock selection.

The market capitalisation criterion for stock inclusion is based on the daily average market capitalisation of a security over the last six months.

Only stocks that are regularly traded are eligible for inclusion in the index.

A stock’s liquidity is measured relative to its peers. Index rebalancing occurs semi-annually in March and September.

ALSO for the most recent VAS PDS

some tiny details you may have overlooked , for instance i thought Index rebalancing was a 3 monthly thing ( with special exceptions , for say the S32 , EDV , or COL spin-offs )

 

[divs4ever]

Counterparty risk

The Funds may incur a loss due to the failure of a counterparty to meet their obligations under a contract. A Fund’s counterparties may include brokers, clearing houses and other agents, including an agent lender under the securities lending program. In relation to securities lending, there is a risk that a borrower defaults on its obligations to return securities.

This may in turn lead to collateral and liquidity risks if the value of the collateral and/or liquidity of the replacement securities decreases. Vanguard seeks to mitigate the risks of its securities lending program through strict credit monitoring and requiring the provision of highly liquid collateral. See “Securities Lending” in section 7 for more information.

ALSO from the most recent VAS PDS

not normally a game-changer BUT some shares in the top 200 are tightly held , there is always that tiny chance

 

[frugal.rock]

I am about to serve up dinner

Whats for din dins? ?

My Grandma used to make the best curried sausage stew thing.
Old world deliciousness...

 

[Belli]

As I'm in my eighth decade

For "eighth" read "seventh."

 

[Dona Ferentes]

For "eighth" read "seventh."

If you're in your 70s, you're in the eighth decade

 

[Belli]

If you're in your 70s, you're in the eighth decade

Yep.

 

[Smurf1976]

if Vanguard and Blackrock want to shape investment agendas , fine , but they can do it without my cash helping

I'll question whether a supposedly passive index fund trying to influence the activities of the underlying companies in the index really makes it still a passive index fund?

Doing that takes them at least one step away from the core concept in my view.

 

[Ann]

Whats for din dins? ?

My Grandma used to make the best curried sausage stew thing.
Old world deliciousness...

Roast Chicken, baked potatoes, french beans, sweet corn, carrots, sweet potato, topped off with chicken gravy and a pat of butter followed by rhubarb from my garden stewed with apples and ground cloves topped with custard and cream.

I love curried sausage, my mum made a lovely one, but husband must have ultra bland, so no curries sadly.

For "eighth" read "seventh."

Old fart like me in other words!

I'll question whether a supposedly passive index fund trying to influence the activities of the underlying companies in the index really makes it still a passive index fund?

Doing that takes them at least one step away from the core concept in my view.

Makes it a good cover Smurf.

In the meantime, while I seek out the company notice(s) saying someone has told Vanguard to go bye-byes for @Sharkman, which I think will take me an age, I will put up a Vanguard chart I found quite disturbing.

I am showing the response of the Positive Volume Index on the Vanguard High Dividend Yield Index. I look at the PVI as what the average punter is doing. In this VHY chart it looks like punters are just fleeing from this index.

And to be fair and balanced let's look at the response of the PVI on the High Dividend Yield Index from Statestreet SYI

Apples with apples, so to speak.

OK this rocks! I found a screenshot of the Vanguard outski I took before. There are far more than this one I have seen but this will do to show what is being said as they sell out of various stocks. The other notices say the exact same thing.

Now all of this may just be me creating an amazing but garbage story in my mind. So great caution must be taken on any decision you make with your investments. I am always subject to being completely wrong and please, look closely for yourself. Look into the Announcements. Make up your own mind.

 

[divs4ever]

I'll question whether a supposedly passive index fund trying to influence the activities of the underlying companies in the index really makes it still a passive index fund?

Doing that takes them at least one step away from the core concept in my view.

hmmm , i hadn't considered that angle but you are correct , at least SOL openly puts a director on the board and that director can be held accountable at the AGM ( well at least until the Zoom era )

 

[divs4ever]

I am showing the response of the Positive Volume Index on the Vanguard High Dividend Yield Index. I look at the PVI as what the average punter is doing. In this VHY chart it looks like punters are just fleeing from this index.

i find that surprising VHY ( DRPed ) has been a pretty good performer , mind you if going for the Capital Gains + divs VAS looks the better buy ( on past performance ) but VHY does it by solid divs and a lower SP ( than VAS ) so more shares ( most times ) per payday

yes i am still looking for the exit of the Vanguard holdings ( VAS and VHY ) but NOT because they are duds

i wonder where the liquidated ETF cash is going ?? are folks erasing debt while they can ?

 

[Value Collector]

..and if you had bought an investment apartment in 2007 for 100k including rent how would that equate today?

I think both options would have done well compared to holding cash at the bank, but I think the share portfolio would win out though, because dividends are all yours to keep and come with a franking credit, where as you have to deduct all sorts of costs out of your rent eg maintenance, management fees, insurance, rates etc.

so a 4% franked dividend, will compound faster than a 4% rental return. Also the companies on the share market retain a bunch of earnings that they use to grow, where as the rental property doesn’t grow extra bedrooms itself unless you put that rental return back into it.

 

[Ann]

I think both options would have done well compared to holding cash at the bank, but I think the share portfolio would win out though, because dividends are all yours to keep and come with a franking credit, where as you have to deduct all sorts of costs out of your rent eg maintenance, management fees, insurance, rates etc.

so a 4% franked dividend, will compound faster than a 4% rental return. Also the companies on the share market retain a bunch of earnings that they use to grow, where as the rental property doesn’t grow extra bedrooms itself unless you put that rental return back into it.

As I said, all investments must sit well with the person holding. With real estate it can be very labour intensive along with the lots of expenses. A hundred grand invested in a flat in 2002 is now worth around $400,000. Plus rent for those years at say average $250pw 13,000 a year multiplied by 17 years = 221,000. Minus body corp average 1000 pa, rates 700 pa water 400pa, repainting every decade $500 these of course, are all tax-deductible on an investment property. The rent can be put into the market by buying selected top 50 stocks which pay dividends or DRPs. There you have the beauty of diversification, chuck a bit of gold into the mix and you are pretty much good to go regardless of what the various markets are doing.

 

[Value Collector]

As I said, all investments must sit well with the person holding. With real estate it can be very labour intensive along with the lots of expenses. A hundred grand invested in a flat in 2002 is now worth around $400,000. Plus rent for those years at say average $250pw 13,000 a year multiplied by 17 years = 221,000. Minus body corp average 1000 pa, rates 700 pa water 400pa, repainting every decade $500 these of course, are all tax-deductible on an investment property. The rent can be put into the market by buying selected top 50 stocks which pay dividends or DRPs. There you have the beauty of diversification, chuck a bit of gold into the mix and you are pretty much good to go regardless of what the various markets are doing.

Yep, I am not against real estate, I own a couple of properties myself, the biggest problem I have with directly held residential real estate is as you said it’s labour intensive, which means it’s not as scalable, and it has low after cost returns, as I said dividends are yours and they have a tax credit, but rent has to be shared around with heaps of other groups before you can call the remainder profit.

——————-
In recent times I have been buying listed and unlisted property funds focusing on a diversified portfolio of industrial and commercial property, much better returns and far less work.

take a look at the CLW - charter hall long wale fund, I would much rather own a piece of that than buy another residential property directly.

when you invest in the ASX 300 index or the global index you actual do get exposure to real estate, just without the headaches.

 

[Sharkman]

I am showing the response of the Positive Volume Index on the Vanguard High Dividend Yield Index. I look at the PVI as what the average punter is doing. In this VHY chart it looks like punters are just fleeing from this index.

i won't pretend to be an expert chartist (because i'm not) so i had to google up what PVI was, and found that investopedia had this to say (emphasis mine):

The PVI is tracking the crowd, whose activity is typically associated with higher volume days. The crowd typically loses money, or fairs less well than professional traders. Therefore, the PVI is tracking the "not-smart money."

if that's the case, wouldn't that tend to suggest irrational panic selling might have been a factor, rather than (or in addition to) any actual/perceived issues with the fund and/or its constituent underlyings?

Apples with apples, so to speak.

i'm not so sure it is apples to apples. i looked up the constituents of both, as i'm not familiar with the ins and outs of either fund, since i don't invest in them (i'm not a big fan of investing for divs, capital growth is my main priority - apologies to divs4ever, who i would assume takes the opposite view to mine - but that's a separate topic altogether) and immediately noticed significant differences.

Vanguard Australia Personal Investor

www.vanguard.com.au

SYI: SPDR MSCI Aus High Dividend Yield | State Street ETFs

SPDR MSCI Australia Select High Dividend Yield Fund investment approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

www.ssga.com

VHY has about a 40% weighting in financials:

whereas SYI is heavily weighted towards mining, and has under 10% in financials. i'm not even sure what's going on with SYI - are they even tracking the index at all, or has the index simply changed that much between 30 nov and now:

pure speculation on my part, but possibly the "fleeing for their lives" that you mention could partially be explained by some sort of backlash against the big banks at that particular time? maybe even a bit of reallocation from VHY to SYI, which seemingly does not have much big bank exposure? the big banks' reputations in the eyes of the "average punters" as you put it has been in tatters for years, any sort of bad announcement/news isn't going to go down well. i've indulged in a fair bit of bank bashing myself in those years (though unashamedly kept habitually stripping their divs for franking credits when opportunities to do so arose!)

 

[Ann]

In recent times I have been buying listed and unlisted property funds focusing on a diversified portfolio of industrial and commercial property, much better returns and far less work.

take a look at the CLW - charter hall long wale fund, I would much rather own a piece of that than buy another residential property directly.

Yes agree, I have held CQE since it jumped over the 200dsma back in Oct 2020. It has been travelling well. I am looking at some of the REIT ETFs. Many like CQE are just level or wavering around the level they held before the 2020 fall. I reckon there is still quite a bit of upside left in them before they will need to be closed out.

 

[Ann]

if that's the case, wouldn't that tend to suggest irrational panic selling might have been a factor, rather than (or in addition to) any actual/perceived issues with the fund and/or its constituent underlyings?

I was being polite in my earlier post, I really call the PVI the 'prat meter'. It is actually a wonderful indicator if there is going to be a price rise, not always but often enough. I look at it as the retail buyers whereas the other indicator is called the NVI and that is supposed to be the 'smart' money. As best as I can work it out, the NVI is probably funds reflected either buying or selling. But the PVI can be a brilliant indicator, not to be discounted. I can see a lot of insider movement from the prat meter.

i'm not so sure it is apples to apples. i looked up the constituents of both, as i'm not familiar with the ins and outs of either fund, since i don't invest in them (i'm not a big fan of investing for divs, capital growth is my main priority - apologies to divs4ever, who i would assume takes the opposite view to mine - but that's a separate topic altogether) and immediately noticed significant differences.

The chart shape of both of them looks pretty similar and they both are focused on a high yield fund. I am sure there are differences but I decided they were not all that flash at the moment, so I am not in. However, if our markets take off to the upside, I am sure the holders will reap some rewards.

whereas SYI is heavily weighted towards mining, and has under 10% in financials. i'm not even sure what's going on with SYI - are they even tracking the index at all, or has the index simply changed that much between 30 nov and now:

Truthfully I haven't looked.

pure speculation on my part, but possibly the "fleeing for their lives" that you mention could partially be explained by some sort of backlash against the big banks at that particular time? maybe even a bit of reallocation from VHY to SYI, which seemingly does not have much big bank exposure? the big banks' reputations in the eyes of the "average punters" as you put it has been in tatters for years, any sort of bad announcement/news isn't going to go down well. i've indulged in a fair bit of bank bashing myself in those years (though unashamedly kept habitually stripping their divs for franking credits when opportunities to do so arose!)

That was an interesting thought of yours so I checked the PVI of each bank and while they are falling, they are doing it slowly with no rush or undue haste, even poor old WBC is not fleeing. So no, I don't think so. I would have no idea but perhaps time will tell. Let's hope there are no insiders telling their friends to get out of Vanguard. If Vanguard failed I could see the markets falling into infinity.

It may just be that enough punters have read that announcement about Vanguard losing a major investor, who would know? Certainly not this little mug punter!

 

[Smurf1976]

i wonder where the liquidated ETF cash is going ?

That is a very important question in my view. Perhaps not in answering the OP's question but from an overall macro perspective.

Someone's selling and they're doing ??? with the money.

 

[divs4ever]

i'm not so sure it is apples to apples. i looked up the constituents of both, as i'm not familiar with the ins and outs of either fund, since i don't invest in them (i'm not a big fan of investing for divs, capital growth is my main priority - apologies to divs4ever, who i would assume takes the opposite view to mine - but that's a separate topic altogether) and immediately noticed significant differences.

no apologies needed , the market is a big place for millionaires ( and those trying to become millionaires ) , there is plenty of room for us all ( but maybe not for another 20 Elon Musks )

from memory ( i have only held SYI from 2011 ) SYI goes where the divs are , i remember it happened to be well placed when Toll Holdings was taken over and with BHP likely to give out free WPL shares , but i AM surprised to see EVN at No. 10 ( not say FMG or OZL ) maybe they see more to EVN than i have

The Fund is an exchange traded fund or ETF which invests in a portfolio of securities which aims to track the composition of the customised MSCI Australia Select High Dividend Yield Index (the Index) which is described below. The Index comprises shares and units which MSCI selects using a rules-based process to be those considered likely to produce a higher dividend yield than the average for its âparentâ index ã

SYI top ten holdings

Portfolio Turnover
44.22%

CODE	COMPANY	ASSET
MQG	Macquarie Group Ltd	11.45%
WES	Wesfarmers Ltd	9.11%
BHP	BHP Group Ltd	6.88%
RIO	Rio Tinto Ltd	6.43%
ASX	ASX Ltd	5.29%

Top 10 Holdings

CODE	COMPANY	ASSET
COL	Coles Group Ltd	4.77%
CPU	Computershare Ltd	4.73%
APA	APA Group	4.38%
MPL	Medibank Private Ltd	4.31%
EVN	Evolution Mining Ltd	3.31%

while VHY

The fund employs an index management strategy designed to track the return (income and capital appreciation) of the FTSE ASFA Australia High Dividend Yield Index. To closely track the index, the fund will aim to hold all of the securities in the index (at most times) allowing for individual security weightings to vary marginally from the index from time to time. The fund may invest in securities that have been or are expected to be included in the index.

Portfolio Turnover
21.52%

CODE	COMPANY	ASSET
CBA	Commonwealth Bank of Australia	9.18%
WES	Wesfarmers Ltd	8.84%
BHP	BHP Group Ltd	8.63%
NAB	National Australia Bank Ltd	7.06%
TLS	Telstra Corp Ltd	6.63%

Top 10 Holdings

CODE	COMPANY	ASSET
ANZ	Australia and New Zealand Banking Group Ltd	5.96%
WBC	Westpac Banking Corp	5.90%
TCL	Transurban Group	5.70%
MQG	Macquarie Group Ltd	5.25%
RIO	Rio Tinto Ltd	4.77%

by the way i think both these are over-priced currently ( but then i bought both in 2011 , when the market was much lower )

there are several rivals to these two , it is very interesting to see how each defines 'high yield '

 

[divs4ever]

now again NOT comparing apples to apples ( despite the first glance )

ZYAU ( which i bought into only this week ) but bought to supplement HVST as HVST seems to be struggling with the strategy currently

ETFS S&P/ASX 300 High Yield Plus ETF (ZYAU) aims to provide investors with a return that (before fees and expenses) tracks the performance of the S&P/ASX 300 Shareholder Yield Index by holding all of the shares that make up the index closely in proportion to their index weights.

Portfolio Turnover
105.30%

top ten

Management Cost 0.35%

CODE	COMPANY	ASSET
FMG	Fortescue Metals Group Ltd	5.88%
CHC	Charter Hall Group	5.47%
ASX	ASX Ltd	5.43%
WES	Wesfarmers Ltd	5.10%
MIN	Mineral Resources Ltd	5.00%

Top 10 Holdings

CODE	COMPANY	ASSET
DXS	Dexus	4.94%
JBH	JB Hi Fi Ltd	4.92%
TLS	Telstra Corp Ltd	4.88%
SGP	Stockland Corp Ltd	4.68%
RIO	Rio Tinto Ltd	4.68%

compared to VAS

The ETF seeks to track the return (income and capital appreciation) of the S&P/ASX 300 Index before taking into account fund fees, expenses, and tax. The S&P/ASX 300 Accumulation Index is a free-float adjusted capitalisation weighted index of approximately 300 Australian equities (shares) representing over 90 per cent of the value of all Australian based companies and property trusts listed on the ASX.

Portfolio Turnover
0.82%

Management Cost 0.1%

CODE	COMPANY	ASSET
CBA	Commonwealth Bank of Australia	7.47%
CSL	CSL Ltd	6.56%
BHP	BHP Group Ltd	5.45%
NAB	National Australia Bank Ltd	4.23%
ANZ	Australia and New Zealand Banking Group Ltd	3.57%

Top 10 Holdings

CODE	COMPANY	ASSET
WBC	Westpac Banking Corp	3.54%
MQG	Macquarie Group Ltd	3.27%
WES	Wesfarmers Ltd	3.03%
WOW	Woolworths Group Ltd	2.32%
TLS	Telstra Corp Ltd	2.27%

there are BIG differences between these two , the MER charged by each is very different and ZYAU is a relatively new entrant ( so not much of a track record

 

[qldfrog]

S&P/ASX 200 NET TOTAL RETURN​

ASX: XNT Index

Last Price81,350.300
Today's Change Up 1,037.200 (1.29%)

relax i am not super clever .. i had to look it up myself ( because i had no idea either )

cheers

Was going to answer @Belli but @divs4ever was faster XNT is actually what you were talking about: the dividends returns included.
This is indeed the right baseline..but for the fact it is not inflation corrected..and as you know 1000$ today is not exactly the same as $1000 in the 70's