Investing for teenagers (Australia)

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Topic Author
Australianfamily
Posts: 2
Joined: Fri Apr 23, 2021 5:49 pm

Investing for teenagers (Australia)

Post by Australianfamily »

Thank you in advance for any assistance and advice you can give us.

We have three children: 17, 16 and 14 and plan to give them $10,000 worth of ETF / LIC when they reach 18 (and hence can have investments in their own name).

The 16-year-old has already invested $10,000 of his money (November 2020) earned from part time jobs (with me as trustee until he turns 18) in the following

VAS – 29%
VGS – 25%
VGAD – 16%
VGE – 15%
VISM – 15%

So very similar to VDHG but bought individually. The rationale for not buying him VDHG was that he did not need VAF and VBND as he had a long time to invest and did not need these at his age.

He is in the dividend reinvestment option for each of his ETF.

He follows the ETF daily and understands about rebalancing (with further purchases) as time goes on. He is overweight in VGE and VISM, with a plan to mostly just reinvest in VAS/VGS/VGAD going forward.

He also wants to invest in some sort of cryptocurrency or blockchain - type stock with his next tranche of money and has a number of these on his watchlists.

We have a couple of questions, although any feedback is useful on what I have already done with my 16-year-old.

1. Should we just stick to VDHG for the $10,000 we are going to give them on their 18th birthdays?
2. Any comments on the following instead: AFIC for Australian portion or ETFs other than Vanguard used in combination to give them a broad base with Australian and international stocks.
3. Does the higher and fully franked AFIC dividend (using dividend reinvestment) mean it is better for them in the long run than VAS?
4. Any suggestion for a cryptocurrency / blockchain investment for the 16-year-old? What about DigitalX?

Thank you so much
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andrew99999
Posts: 1021
Joined: Fri Jul 13, 2018 8:14 pm

Re: Investing for teenagers (Australia)

Post by andrew99999 »

Welcome to the forum.

There are some great people on here who aren't from Australia and don't know the tickers, so it would be good to edit your post and note what they are so that they can offer their valuable thoughts:

VAS (Australian index) – 29%
VGS (developed LC/MC index) – 25%
VGAD (developed LC/MC index AUD-hedged) – 16%
VISM (developed SC index) – 15%
VGE (EM) – 15%


The allocation looks good.

They are so far from retirement that they could leave out VGAD for simplicity.

Hard to say whether to stick with VDHG. It's a personal decision. The difficulty in managing it is minuscule, but the ability to make a single payment each month and ignore it otherwise and focus on other things can be useful for many. Neither option is particularly bad.

If not using the all-in-one, then remember to make one purchase at a time - rotating - and not one of each every month. The brokerage of buying each one every month would eat into your returns.

The higher franked dividends don't help because AFI just paid the tax from your investment before it got to you. There's no free money there.

Crypto is gambling. It's entirely up to the individual if they want to gamble, although if so, keep it to a small part of your investment in a separate portfolio and don't rebalance into it, and just be aware of what it is - gambling and not investing.

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The one comment I have is that you can set up a minor trust through many brokerages, which means that when they are 18, it is moved into their name without having to realise capital gains at that time. Also, if they are not working at 18 (e.g. studying still), they can sell some down and rebuy something similar to wipe out capital gains accrued along the way (up to their tax-free threshold). Also, you could use AFI with DSSP turned on so that distributions are given by way of more shares (i.e. capital gains) instead of income, which you can gain the benefits of capital gains on.

Some info in the below links
https://www.youtube.com/watch?v=_o1upyF8um4
https://www.reddit.com/r/AusFinance/com ... r_a_child/
Topic Author
Australianfamily
Posts: 2
Joined: Fri Apr 23, 2021 5:49 pm

Re: Investing for teenagers (Australia)

Post by Australianfamily »

Andrew99999 thank you very much for your thoughts. It is so helpful to get the advice.

I see in a lot of other posts that the asset allocation is more heavily weighted towards VGS, and only to have three or four ETF

For the $10,000, would it be better to just do

VAS (Australian index) – 20 %
VGS (developed LC/MC index) – 60%
VISM (developed SC index) – 10%
VGE (EM) – 10%

At what age would they need to start buying VAF (Australian bonds) and VBND (international bonds)?
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andrew99999
Posts: 1021
Joined: Fri Jul 13, 2018 8:14 pm

Re: Investing for teenagers (Australia)

Post by andrew99999 »

Yeah, I like that allocation.

The other question is how much you will be contributing. If it is in small amounts (eg under about 1.5k per month), then the cost of brokerage would be too high and require waiting for a long time before making a purchase to make the brokerage cost-effective. In that case, I would consider something like DHHF which is an all-in-one similar to VDHG but with no bonds, no AUD-hedged equities, and marginally less Australian equities — and you can make a single purchase that contains the whole thing. It has more Australian equities than I like (37%), but the other upsides when contributing smaller amounts might make it reasonable. You could split DHHF/VGS in about a 2:1 ratio and be very close to your portfolio. The only potential issue is that it is provided by BetaShares and it is new (they changed the allocation 6 months ago after an attempt that didn't fly). I assume that with a better allocation and no bonds (no other all-in-one has no bonds), that the fund will grow rapidly and not have a concern, but that's an assumption.

I think both are fine options.
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