Hi everyone, I hope you're all doing well.
I'm considering a long-term investment strategy (5-7 years) and I'm thinking about allocating $12,000 each to IVV and VGS through STAKE, planning to do this as a single transaction annually. I'd love to hear your thoughts on this approach. Any other recommendations would be greatly appreciated.
Thanks!
Thanks
They seem to be similar in performance (currently); I like this summary. VGS is diversified in more countries across more industry sectors… if that matters to you? If choosing two, I'd get an Australian and an international; e.g. VAS & IVV
Thanks
Just be aware 5-7 years wouldn't be considered long term for etfs. There's every possibility you will lose money with that sort of time frame.
For how many years, should I hold the ETF? What do you recommend?
They all state a risk level & suggested investment timeframe. VGS: high to very high & 7 years+; IVV: medium to high & 5 years
Thanks
My recommendation is you hold them till you retire if in super, or forever (in your estate) if not in super.
(I hate CGT.)
If you need the money, you need to be planning your exit 5-7 years before that date.
What is in super mean?
@aussieboosie: It means buying them within your super, either using a member direct style option or via a Self Managed Super Fund
You're better off putting the money in as soon as you have it. The fees on stake are cheap enough to make regular purchases.
Any reason why you would only buy once a year? Is this bonus money or something? If not you should be buying more regularly like once a month.
I have the savings that I can invest at once.
Consider Commsec as they have a free brokerage offer
I already have STAKE account and once a year investment will cost $3.
@Fifths: There are other brokers that offer free etf trades so you can dca more often
cmc - chess, under 1k free trades per share per day, so you could get 1k of ivv, 1k of vgs
webull - chess, free etfs no limit
betashares, no chess, free etfs no limit
And then you are locked into their fee structure if you sell
Once you decide you're in (i.e. that you don't need the money in next 5-7 years), you should just put it all in.
DCA is good if you only have dribbles of money becoming available, but it's not better than all in.
You want your money in the market while it grows, and you want it there while it recovers from drops. That outweighs it also being there during falls.
That is my conclusion after looking into it. I had a lump sum to invest but did it in dribbles, just recently, you know, before ASX reached all time highs.
Again the OP is kind of all over the map here - reeks to me of someone who KNOWS they should do something but not sure of exactly what they should do. Hence why I really think they should go and update their info overall first as there's a high chance they do something, then feel it was wrong & change course.
Back testing has shown that as the markets historically have gone up over time - lump sum investing has beaten DCA around 60% of the time. Whats right now? Who knows - hence play the numbers. But as i stated before putting one purchase in a year is poor practice - hence lump sum initially , then DCA throughout the year in ongoing manner.
@Daniel Plainview: Yeah good that he came here IMO. He should be able to glean some direction hopefully :)
I think we're in agreeance that letting investable money sit in a bank account for a year until the scheduled investment date isn't the best place for it.
But it sounds like you're suggesting to do the same, but with a different schedule?? That's what DCA is - whether it's daily, weekly, monthly or yearly.
The best day to invest is always the day the funds are available, short of having a crystal ball or inside information.
@SlickMick: Honestly I think folks like the OP go away more confused than EVER - look at some of the daft stuff suggested in here. This is why I always think DYOR is the best approach, plus the sweat equity you have in the outcome - folks too often come here wanting an instant solution given to them when they need prep & education beforehand or it's wasted. i.e I tell you what to invest in, but you go away do this but then blow it as you don't stay course etc
No, you have misread me - I agree best place for funds is in the market ASAP - hence as I said lump sum anything they have now and then DCA as regularly as possible after that.
So we agree entirely. :-)
@Daniel Plainview: So OP are you paying attention? DYOR then DIY by buying ETF DHHF (or maybe A200 & BGBL) with CMC Markets ASAP then do DCA; disregard 5 & 10 year performance in favour of diversification and portfolio construction. LMFAO
@sumyungguy: Pretty average trolling - as with your investment advice or rather lack thereof, try harder next time - something I'm sure you've gotten used to hearing throughout the years. ;-)
@Daniel Plainview: Pot kettle black. The troll is the guy negatively judging OP and everyone else's contributions. If you desire respect, work on your tone.
- OP is kind of all over the map here
- look at some of the daft stuff suggested in here
- now I hate to agree with @sumyungguy
- you got the asset mix so wrong
- your argument is a slippery slope
- I've no interest in talking you around
- yet another submission that your points are 'questionable'.
- your investing approach has all the hallmarks of the novice investor
- asking him such info is a waste in time
@sumyungguy: You're one of these 'always need everything said as a positive' types right?
Might I put it to you that there's something of a difference between openly trolling and someone stating they see other than you do. Thats aside 2/3's of those I placed after you nailed your colours to the pole i.e you weren't posting to assist the OP merely wishing to post at me to push your agenda of naivety in this area.
Aside your advice on super (which is hardly rocket science) your assertions are utterly baseless when it comes to merit - that said as a 'great' philosopher once said, 'The sun shines on even a dogs arse some days' - so maybe it'll come up dandy if for reasons that escape me the OP or anyone takes it.
OP are you paying attention? DYOR then DIY by buying ETF DHHF (or maybe A200 & BGBL) with CMC Markets ASAP then do DCA; disregard 5 & 10 year performance in favour of diversification
While sarcastic, this is 100% excellent advice for an investment strategy for an all round, low effort , regular investment option.
A massive portion of financially literate people would fall under the investment strategy you have listed above and would be, on average, doing better than those that cherry picked the best performer of the prior year and tried to chase those returns. I reckon on finance forums you would find your advice given very regularly for a recommendation
@sumyungguy: First correct thing you've said in a while. How ironic you are so misguided you thought you were potshotting me quoting my advice - only to be told this, by a single user - yes - but clearly one who is educated to such matters. My thanks to them.
https://www.ozbargain.com.au/comment/15815309/redir
@Daniel Plainview: Not potshotting you, just summing up the word salad you're posting in this thread. Of course its actually in the realm of possibility there's someone out there who disagrees… but lets not go there. One swallow can make a summer for now.
@SBOB: Sorry SBOB, I've been distracted by the member who appears to have less than zero respect for any opinions that differ from his own. I was more smart-arse illustrating how poorly this thread may be meeting the needs of first time enquirers (like OP). But it's no better over on Reddit and I haven't checked Whirlpool. I do "coach" a cohort of young people on graduate starting salaries; some of them have accessed professional advice while I network extensively, socialise with some active investors and of course research myself. For this age group I actually don't recommend DHHF but I'm not going to share my reasoning here as I understand my assertions are utterly baseless when it comes to merit. But if you want to chat offline, happy for a PM.
I'm considering a long-term investment strategy (5-7 years) and I'm thinking about allocating $12,000 each to IVV and VGS
You still actually haven't told us what you are planning to achieve?
There is a correlation between risk and returns. VGS is more diversified than IVV. But then most of the returns have been driven by mega cap stocks in the index.
Then there is a high conviction (not convicts) portfolio which is holding small number of individual stocks (like just the FAANGs) and out perform.
Since there is significant overlap because it is market cap weighted then you have a high concentration of mega cap stocks. Question is whether you think they will out perform going forward?
Thanks for your reply. I'm 44 and just starting to invest, aiming to build a sufficient retirement corpus.
If it's for retirement put it in your super, change investment option to high growth; way more tax effective. If you're planning to spend it on something further on, ETFs.
@Fifths - now I hate to agree with @sumyungguy - but on this, I agree with him 100%
The problem here is you said you're wishing to invest for 5-7yrs, which you said was 'long term', which I disagree with - it's medium term - but anyway. So that doesnt really align with your being 44yr old and super being viable for it.
So again i think you need to check what you're doing with underlying research, info etc - if you want to be able to access it in 7yrs, can't go super. But if it's for retirement, then super is best by far.
Like @SlickMick I too have set up an SMSF, which is its own conversation but makes sense for many if you value transparency, flexibility & after a certain point significant costs savings on your super. Great thing is if you know how to manage your investments outside it, doing the SMSf is very little extra effort after setup.
Perhaps you should work all this in reverse and tell us why you went with VGS & IVV and also why you feel the once a year outside of super investment is the RIGHT approach. We might be missing something in your thinking/variables. :-)
@Daniel Plainview: Just trying to offer an occasional learned opinion to the mix. I understand there now so many investment options inside retail/industry super this may require another post/thread
^ What @sumyungguy said. Once you enter pension phase, earnings are tax free and no CGT.
If you can leave your investment till you retire, there are enormous savings in super.
It doesn't sound like your set on particular ETFs?? If you are, find a super that lets you choose. Personally, I set up a SMSF, but that's not for everybody.
This is in theory true, however of you're like 90%+ of Aussies and have your super with a regular fund manager, you'll find that the CGT is deducted annually - it's the issue with 'pooled funds' which is well covered by this excellent article:
https://passiveinvestingaustralia.com/the-problem-with-poole…
Some funds have as the public got heads up to this started to give 'retirement bonuses' where they give back a very small, often capped amount of this saving to the new retiree.
But you are far better off taking advantage of this excellent strategy, which I do myself - via a SMSF. As this way many years unrealised CGT is wiped away 100% tax free when you change the fund status to pension rather than accumulation.
Is yet another perk SMSF's have and you can imagine what decades of CGT might amount to when it's taxed at 0% rather than 10% & 15% for that final 12mths. Even for the average Aussie balance thats a pretty hefty sum.
Can you recommend high conviction ETF. Thanks
Unless you go for active ETFs which is basically a version of managed funds then no you don't really have one.
NDQ (Nasdaq 100) is top 100 (it is borderline thematic)
There there is a global 100 called IOO (ishares)
Thematics are investing in themes and trends such as healthcare, cyber security, etc. Believe they are out there
Thanks for that. I will look into this. Feel free to share more info that can help. I am very new to investing just started.
@Fifths: look into CMC markets stock broking. You can by up to $1k a day without paying brokerage which might work out to be cheaper than Stake if you are feeding money in monthly or weekly.
You can by up to $1k a day without paying brokerage
It's per stock also.
So if you were buying different stocks you could buy up to $1k of each stock per day with no brokerage
@netjock: CMC would be great for trickling in funds as they become available.
Unfortunately thier automated application process (which I found incredibly fast and easy) couldn't handle a name change from our SMSF trust deed, and it was just too hard to sort out with thier help desk.
I ended up using Vanguard Direct Investor, which is fine for thier ETFs.
I've just realised that Bearshares Direct is now available for SMSFs so will consider thier ETFs.
@SlickMick: I am also considering Betashares. Because their BGBL is cheaper than VGS plus you can just set and forget and they do regular investment for you.
I'm from the cruel to be kind school, so take this with a shaker of salt - but if VGS and IVV bought once a year was your plan - then I recommend you go back to the drawing board completely as the rationale used to arrived at this is fundamentally flawed as pointed out above many times.
So if you got the asset mix so wrong - what else have you missed?
Read this website through completely as I strongly suspect you're missing a bunch of this info - and before setting out on such investments its much better to have everything sorted - as changing horses midstream can suck & be expensive:
https://passiveinvestingaustralia.com/
If you want to keep simple (which there is a LOT to be said for) - just buy DHHF as is already diversified very nicely and is very cost effective vs a DIY approach. A once a year buy is sub-optimal. More regular buys will work better both from 'smoothing' the price (DCA) and also the money is in the market (which has historically gone up). If you want a tad more complex go with 30% A200 and 70% BGBL - just buy whichever side of that is underweight.
I use Stake myself but you can register with Betashares Direct and have zero $ brokerage on ETFs or CMC markets for a free $1000> trade each day. Cheers.
Thanks for this. I will read the website. Feel free to share more info or resources if you can. Thanks again.
I wouldn't sweat it. Any investment is better than no investment. I'd just stick to ETFs tracking the major indexes. They've all provided somewhat similar returns over the long term.
You don't want to trust a fund manager to pick shares for you - that's risky. (Unless they're good, it which case it's excellent. But I'm not a gambler.)
It doesn't matter whether you have one or a dozen ETFs tracking the same index.
I'm in VAS & VGS only because it was convenient to use Vanguard Personal Investor. Now I can use Bearshares Direct, so I'll probably start investing in A200 rather than VAS.
edit: and look into the pros and cons of DCA. My research concluded it's a dud idea to leave money sitting in the bank waiting for next investment day. To me, DCA is a form of trying to guess the market, but with your eyes closed.
I get your overall message but down at the detail level, VGS and IVV appear to be returning higher than DHHF with fees about the same. So what am I missing; why should OP choose DHHF over any of the others? BTW, this just in: InvestSMART ETF Scorecard 2024
This is going to sound like I'm being a jerk on purpose but if you are assessing SOLELY based on return (time period of this aside) then your argument is a slippery slopethat will end in going red vs black at the casino or whatever speccy takes your fancy.
Respectfully if you think VGS & IVV are in themselves a great portfolio - go buy them. But if you want balance, optimal diversification & much more I'd reconsider. There is no right and wrong way…..invest in what you like BUT if you want to play the numbers there are several doctrines you should abide by. I myself try and do that, I have found folks I know are much savvier than myself and used their approach with our finances after back checking the logic.
Sometimes a good plan will give bad results and a bad plan good results - investors NEED to be able to have the insight into this and know the difference - doing the right thing will work out long term, doing the wrong thing won't e.g going red vs black at the casino could see you have a HUGE night - but do it longterm and you will certainly end up broke. Investing in DHHF or a good 2-3 ETF portfolio might give short term loss, but stick with it and over 7-10yrs its near certain to perform at 8%+p.a.
And if you're referencing Investsmart as a meaningful tool, again I'd check again. I'd recommend you read the passive investing site - it's very good - the author is regular Aussie and posts on Whirlpool and others all the time.
Yep, that's a bridge too far. Using your logic, we shouldn't shop for the lowest rate mortgage or the best performing superannuation fund because there are so many other factors at play. And no, I'm not one of those people. But I am familiar with passiveinvestingaustralia, one of many non-licensed advisors posting freely accessable advice.
@sumyungguy: Hmmm not at all - you're saying this returned more than that - hence why isn't it better. That is so simplistic as an approach if you're as familiar with portfolio construction as you allude- I am unsure what I can say further. How you took my logic that that example of yours is beyond me.
Again if you like them so much - be my guest and buy them, I've no interest in talking you around.
LOL non-licenced advisors - as opposed to the licenced ones that force feed you a limited selection of stuff they receive commission for you mean? If you have an issue with at that site, it's yet another submission that your points are 'questionable'.
@Daniel Plainview: I haven't purchased them personally but know many others who have, which corresponds with their popularity among Australian investors. I'm only spitballing with you in the interests of providing counterpoints to OP. I don't have an issue with that site but you look like a shill linking it so frequently; and dissing all others. It's just one person's opinion among many. Or perhaps you're Eli actual?
@sumyungguy: Ummm look at the end of the day I'm not sure what constructive you perceive you are doing - I replied to the OP - you then claim you're 'spitballing' and on the basis of returns alone suggest what I state is incorrect. You then state an incredibly highly regarded site is being shill linked (which you've misused the term shill as I have nothing to do with that site) by me etc. Stated I am 'dissing' all others - and I have no idea wtf Eli Actual is.
The reason I link that site so much, is rather than it being for my own financial gain - as Investsmart does with their products & ad revenue - it's rather because its a very rare independant site, done by a normal investor, no agenda, product pushing and has Oz specific info, written very well etc. In short it's a bloody good site, which is why you will see MANY on here recommending it as a gateway to info on how to invest well.
Your investing approach has all the hallmarks of the novice investor - who chases past success above all else, often getting some good gains initially - & then believing his own bad practices are correct doubles down - then coming unstuck entirely in time incurring significant losses.
Perhaps instead of trying to sell me on your approach, which I have fundamental issues with - insteadpost up your own thoughts to the OP and they can do with them what they wish. Ciao.
@sumyungguy: Are these all ETFs tracking an index? If so, in the long term, the only difference is going to be which has the lowest fees…
… except I recall some aren't setup correctly and cause frequent CG events, so unless you're retired they should be avoided.
@SlickMick: My guy asking him such info is a waste in time - he knows some guys who bought some and seems to feel the historical return is all one needs to factor in.
Yes & no. Some investment managers will engage in heartbeat trades/share lending to boost the returns e.g Vanguard - Betashares doesn't do this. Stated MERs are far from being indicative of actual fee efficiency by the ETF, there's a very good review of the true cost of many main ones done by a very savvy user - so other factors such as the accounting methodology used factors in.
All further reasons that as with good carpenters, measure twice cut once - hence I think the OP should hold off on doing anything - until they flesh out all of their needs, preferences, risk appetite & options. They seem wanting to put the horse before the car which isn't a good idea IMHO.
Thanks for that.
An MSCI world index fund and if you must have Aussie shares or need income, a high yield Australian ETF to take advantage of franking credits.
CMC has a daily cap of $1000 free brokerage. IVV has been trending up for a long while now. I wouldn't want to miss out those gains by waiting a year. If investing with Vanguard, consider buying direct from them. No brokerage fees with them.
@Fifths , I see you. ;-)
https://www.reddit.com/r/fiaustralia/comments/1g73zo3/advice…
Protip for getting good advice - it's a garbage in garbage out situation, i.e if you give very little info, you're going to get essentially guesses back. As we don't know enough about you or your situation to give the SPECIFIC advice nearly everyone should want.
This is where educating yourself on your risk profile & all the variables that go into an investment decision (existing assets etc) make a big difference - as you can see fromt he answers you've gotten on there (and is a smart lil sub that one) - you've not given enough info to get meaningful responses - hence why I recommended you go and read that site all the way through - making notes etc - as you've admitted yourself you're a novice investor, so I'd do that first - as it will place you in a better spot to ask questions & provide proper info FOR responses.
But FWIW even though I did all that and have a tailored protfolio - I often think DHHF would have been a lot easier, search that sub for discussion on it. Now that said you still need to understand your risk profile etc - i.e are you a person who will panic if the market drops 20% due to an invasion of Taiwan etc - it's fine for others to tell you what to buy, but you need to know what you will be fine with holding & sticking with. I am certain you do not currently know that - hence your initial suggestion of IVV & VGS, which has a massive crossover of holdings with IVV of atleast 70%+ - i.e underlying assets held on BOTH IVV and VGS - so they're poor complimentary partners for each other & either need to buy another instead e.g VGS and VAS - but that you arrived at this pair is indicative of needing to go back to drawing board from entry level - so you do right from get go.
Curiously you mentioned nothign about retirement or super at the reddit thread - which you said here - so if this is for a house buy etc thats again very important as you will not want to exit if its at a bad point. Again the info folks give is only as good as what you provide - which here, has not been very much. Not sure why but best of luck.
IVV and VGS are almost identical in nature in terms of it's top holdings. There is a lot of overlap with US equities if that's your strategy.