Investing in Index Funds

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  cpho on 21/04/2016 - 22:20

  +6

  Mate, if you're going to drop $100k, asking randoms on the internet is possibly the worst place to go.

  Here is a list of Vanguard's "products".
  Familiarize yourself with them then go talk to a qualified financial advisor.

  • 

    [Deactivated] on 22/04/2016 - 11:13

    +1

    Good and kind advice cpho, even though you're a random on the internet :)

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  scotty on 21/04/2016 - 23:12

  +1

  Some relevant prior discussion threads:

  • Indexed Fund - Advice & Recommendations?
  • Exchange Traded Fund (ETF) - How?

  When you talk about dividends I guess you mean share based products? As cpho has mentioned it's best to download Vanguard's PDS of various fund products, and they will generally answer your (1) question. As of (2) it would be next to impossible to predict. There are past performance you can check, but they might have nothing to do with their future performance for the next 5-10 years.

  Also with $100k to invest you might be able to access wholesale fund, which would have lower management fee.

  Other products to look at would be ETF which are traded on ASX.

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  [Deactivated] on 22/04/2016 - 10:16

  +1

  CASH IS KING! Our taxes underwriting Bank deposits.
  On page 34 of the latest GW Mervyn King, governor of the Bank of England at the time of the great crash of 2007-8, foreshadows a dismal global economic future - with the banking system the weakest link.

  Investment TIMING is important!
  Many stocks are currently valued well above NTA (book, or underlying breakup value) with [grossly] overpaid executives, & board members also reducing earnings.
  Buying into an overpriced market can prove expensive :D
  [Admittedly channeling some 9% of wages into the market does pump it - ditto the housing market with the Banks greatly profiting from pumping out cheap loans. Two Bubble situations.]

  The Nobel Laureate economist would agree with buying through an indexed fund, however!
  In "THINKING, FAST and SLOW" Daniel Kahneman uses ACTUAL results to explode any myth about advisor expertise.
  Results being purely by chance. A monkey throwing darts at a chart would be just as effective - but A LOT CHEAPER!!!

  Perhaps you might park the money, & do some reading, pending the Crash.

  PS: I expect to be heavily downrated by the investment advisors who tout on forums ;D
  Happened when last I mentioned our Laureate's findings. LOL

  Vested interests can be remarkably vocal - witness our pollies.
  Did I read that the Lieberal Party have a [more than] $100M investment in the Banks.

  {I get around a 10% pa return on my 7 - keeping pace with embedded inflation.
  Have had healthy capital appreciation - rather more than the govt induced 2 - 3% pa target, or even CPI.
  Must admit I wasn't as sharp as a colleague who opened a CBA account to share in their initial privatisation - when shares floated at a NTA price of $5.40!!!
  Annual dividends, replete with franking credits, now exceeding $5.40.}

  My advice might be to not be greedy - a 'real' return of 3% pa doubling capital over a generation.
  Of interest I have seen suggestions that crowd-sourced 'green' infrastructure might give NOMINAL returns around 8% pa. Still healthy, after reducing for the inflationary component.

  Mervyn King writes:

  • "Much of the financial history of the past 150 years is the story of unsuccessful attempts to maintain the value of money."}

  Don't squander yours.

  Cheers

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  MustacheFire on 29/04/2016 - 20:31

  get advice.

  With $100k you could go individual stocks (more targeted and controlled) than broad index, especially for Australia where you are getting miners and banks.

  What structure will be used to hold the investment? You, partner, company, trust, super? All have materially different outcomes for same asset performance

  Invest in whichever asset you feel will perform best within your risk tolerance. Then secondly make sure it is efficient for tax.

  • 

    brainactive on 30/04/2016 - 07:42

    Will definitely try to get professional advice before making any drastic moves, just wanted to get a high level understanding as a first step.

    Are you able to summarise the tax efficiency of the different options? The structure used to hold the investment will be me. How does this outcomes for the same asset performance?

    • 

      MustacheFire on 30/04/2016 - 13:56

      If held in your name it will be taxed at your marginal rate, likewise if in your partners name. Given you have 100k spare I'm guessing your marginal rate is high (or could be as your investments grow).

      So in the simple case, your name if negatively geared (as tax benefit greatest for high marginal rate), if positively geared your partners name.

      A company would mean 30pct marginal rate, until you pay returns to shareholders (presumably you or partner) in which case tax will be at your marginal rates (you get credit for tax paid by company).

      If you put into super, earnings generally taxed at 15pct.

      With a family trust you can attribute earnings differently each year. So if you have relatives on low tax rates (e.g. Stay at home wife, student, elderly parent) tax paid will be significantly lower, and you can adapt as their tax rates change. There will be a set up fee and annual fees with a trust though