Aus , got 60k to invest. Which index funds should i look into ?

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
skyhigh872
Posts: 15
Joined: Wed Sep 02, 2015 3:27 am

Aus , got 60k to invest. Which index funds should i look into ?

Post by skyhigh872 »

Hey im a beginner
I have 60k cash i want to invest in index funds and will make contributions after
Im 26 and going to be long term investor 25plus years

Which index funds should i look at ?
I would like to invest in America markets maybe the s&p 500 and maybe the asx 300 in aus.
Or the us total markets ?
Any help into which index funds i should look into?
Thanks
User avatar
asset_chaos
Posts: 2628
Joined: Tue Feb 27, 2007 5:13 pm
Location: Melbourne

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by asset_chaos »

Welcome to the forum. I don't recall ticker symbols offhand, but you can find them here.

From four etfs you can build a global balanced portfolio with whatever ratio of stock to bonds and whatever ratio of World ex-Au versus AU stocks and bonds that you want.
  • International shares ex-AU index fund has the developed world stocks outside Australia.
  • Australian shares index fund invests in the ASX200.
  • Australian fixed interest invests in Australian bonds
  • Global aggregate bond index (hedged) invests in the global aggregate bond index and hedges the investment back into A$ to eliminate volatility from currency fluctuations
You can add a small of emerging markets stocks if you want.

But you shouldn't start your investing plan thinking about ticker symbols for etfs.

The most important thing to start with is how much you want in stocks vs bonds. Stocks grow more but every now and then lose 50% of their value over a short time. This can be difficult to experience. Called your risk tolerance, think about how you would react to your stock investment dollars halving. You're young so should have most, if not all, your investments in stocks. But if you think you might not be able to withstand the inevitable stock market crashes, bonds dampen the volatility.

Then decide how much home bias you want. I think you should try to invest the same as the global stock index, but Australia is only around 2% of the global stock market. Many Australian investors want more than that, mostly because they are more familiar with Australian companies, but also there are tax advantages for Australian investors with Australian stocks.

Picking the specific funds that have low cost and broad diversification is a tertiary consideration for a good, long-term investment plan.

You're off to a good start. Keep asking questions from the board.
Regards, | | Guy
Topic Author
skyhigh872
Posts: 15
Joined: Wed Sep 02, 2015 3:27 am

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by skyhigh872 »

Hey thanks for your response. Are you also from Australia?
As for prices dropping 50% im okay with that aslong as they recover and go up in vaule again. Which from the little research ive done it seems that long term ull always recive 8ish % return. And if the market drops it may take 5 -7 years depending on the drop for it to go back up in value again is that correct?
So considering i have 30 years ahead of me i should be okay
Hockey Monkey
Posts: 93
Joined: Thu Aug 13, 2020 10:23 pm

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by Hockey Monkey »

Bogleheads.org hosts a wiki which is a great starting point https://www.bogleheads.org/wiki/Investi ... _Australia

andrew99999 on this forum host a great site worth reading from cover to cover https://passiveinvestingaustralia.com

Popular Australian Equity ETFs include

VAS - Vanguard Australian Shares Index ETF (ASX300)
VGS - Vanguard MSCI International Shares ETF. Currently 72% US, but also diversified into 21 other developed countries
VGAD - AUD hedged version of VGS
VGE - Vanguard FTSE Emerging Markets Shares ETF

Some specific pages on risk tolerance, the above equity funds, currency risk and how to get worldwide exposure from Australia.
https://passiveinvestingaustralia.com/a ... -tolerance
https://passiveinvestingaustralia.com/equity-funds
https://passiveinvestingaustralia.com/p ... allocation
https://passiveinvestingaustralia.com/h ... on-the-asx

Please come back with any followup questions.
SR7
Posts: 106
Joined: Fri May 15, 2020 4:06 am
Location: Down Under

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by SR7 »

I would have a read of Passive Investing Australia, it follows the Boglehead principles from the Australian perspective
https://passiveinvestingaustralia.com/t ... -portfolio
The above link will help you design an Australian Vanguard ETF portfolio

Or you could just buy VDHG (plus a bit more VAF if required) and call it a day.
https://passiveinvestingaustralia.com/v ... l-your-own

VAF = Vanguard Australian Fixed Interest Index ETF, Australian Government and investment-grade corporate bonds
VDHG = Vanguard Diversified High Growth Index ETF, 90% stock / 10% bonds, with both Australian and International exposure
I studied Physics not Finance, so best to ignore anything I say about money.
Topic Author
skyhigh872
Posts: 15
Joined: Wed Sep 02, 2015 3:27 am

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by skyhigh872 »

Hockey Monkey wrote: Sun Jul 25, 2021 5:37 am Bogleheads.org hosts a wiki which is a great starting point https://www.bogleheads.org/wiki/Investi ... _Australia

andrew99999 on this forum host a great site worth reading from cover to cover https://passiveinvestingaustralia.com

Popular Australian Equity ETFs include

VAS - Vanguard Australian Shares Index ETF (ASX300)
VGS - Vanguard MSCI International Shares ETF. Currently 72% US, but also diversified into 21 other developed countries
VGAD - AUD hedged version of VGS
VGE - Vanguard FTSE Emerging Markets Shares ETF

Some specific pages on risk tolerance, the above equity funds, currency risk and how to get worldwide exposure from Australia.
https://passiveinvestingaustralia.com/a ... -tolerance
https://passiveinvestingaustralia.com/equity-funds
https://passiveinvestingaustralia.com/p ... allocation
https://passiveinvestingaustralia.com/h ... on-the-asx

Please come back with any followup questions.
Il have a read of them too and definitely come back with questions. So your from Australia too ?
And thanks
Hockey Monkey
Posts: 93
Joined: Thu Aug 13, 2020 10:23 pm

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by Hockey Monkey »

skyhigh872 wrote: Sun Jul 25, 2021 8:10 am Il have a read of them too and definitely come back with questions. So your from Australia too ?
And thanks
Yes, I'm Australian and living here.
Topic Author
skyhigh872
Posts: 15
Joined: Wed Sep 02, 2015 3:27 am

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by skyhigh872 »

Hockey Monkey wrote: Sun Jul 25, 2021 5:37 am Bogleheads.org hosts a wiki which is a great starting point https://www.bogleheads.org/wiki/Investi ... _Australia

andrew99999 on this forum host a great site worth reading from cover to cover https://passiveinvestingaustralia.com

Popular Australian Equity ETFs include

VAS - Vanguard Australian Shares Index ETF (ASX300)
VGS - Vanguard MSCI International Shares ETF. Currently 72% US, but also diversified into 21 other developed countries
VGAD - AUD hedged version of VGS
VGE - Vanguard FTSE Emerging Markets Shares ETF

Some specific pages on risk tolerance, the above equity funds, currency risk and how to get worldwide exposure from Australia.
https://passiveinvestingaustralia.com/a ... -tolerance
https://passiveinvestingaustralia.com/equity-funds
https://passiveinvestingaustralia.com/p ... allocation
https://passiveinvestingaustralia.com/h ... on-the-asx

Please come back with any followup questions.
Hey mate after doing some reading im liking VDHG and DHHF do you think i would be better off with dhhf as its 100% stocks . Only different between dhhf and vdhg is dhhf is 100 % stocks and unlike VDHG non of the stocks are hedged.
Which brings me to my second question do tou think its important to have a good percentage of your global stocks hedged ?
Also have you heard about the 3 fund profileo?
I seen a blog here about it.
Its basically 3 etfs . 1 aus stocks , 1 international stocks and 1 aus bonds. Thoughts on somthing like this ? Or would i be better off just going in a all in one fund like the 2 i listed above ?
Another question say i hold vdhg or dhhf for 30 years then decide i want more bonds how does that work do i just add a bonds etc with them ? Like does it merge with them ? Not sure if that makes sense
Hockey Monkey
Posts: 93
Joined: Thu Aug 13, 2020 10:23 pm

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by Hockey Monkey »

skyhigh872 wrote: Thu Jul 29, 2021 10:43 am Hey mate after doing some reading im liking VDHG and DHHF do you think i would be better off with dhhf as its 100% stocks . Only different between dhhf and vdhg is dhhf is 100 % stocks and unlike VDHG non of the stocks are hedged.
Which brings me to my second question do tou think its important to have a good percentage of your global stocks hedged ?
Also have you heard about the 3 fund profileo?
I seen a blog here about it.
Its basically 3 etfs . 1 aus stocks , 1 international stocks and 1 aus bonds. Thoughts on somthing like this ? Or would i be better off just going in a all in one fund like the 2 i listed above ?
Another question say i hold vdhg or dhhf for 30 years then decide i want more bonds how does that work do i just add a bonds etc with them ? Like does it merge with them ? Not sure if that makes sense
VDHG has been a hot topic recently due to high distributions and their tax implications. They are due to multiple reasons
1) High Australian equities allocation (our companies tend to pay more dividends than the US)
2) Hedging results. This depends on currency movements year to year. This year was particularly high
3) Internal rebalancing. This can be avoided if you instead roll your own (VAS/VGS/VGE etc) and rebalance via inflows
4) Tax inefficiencies. VDHG is made up of wholesale funds internally so other investors selling in periods of volatility can pass on capital gains to other investors. Rolling your own ETF's or DHHF avoids this issue.
5) 10% Bonds which pay out income, although this year were low or negative so not such a factor.

Ultimately it comes down to simplicity via single fund like VDHG/DHHF or to roll your own with the additional overhead and risk to returns if you fiddle or don't have the discipline to rebalance.

VDHG has the benefit of being from a trusted fund manager Vanguard. DHHF overcomes some of the above issues (2, 4 and 5) but is newer and some people have concerns on how BetaShares may behave in the future.

If you are happy with 40% Australian equities, I'd say either is a great option or else if you want a different allocation you could roll your own if you are confident in your discipline as an investor.

These three articles have some more information that may help you make a decision.
https://passiveinvestingaustralia.com/v ... l-your-own
https://passiveinvestingaustralia.com/d ... it-a-no-go
https://passiveinvestingaustralia.com/d ... ternatives

If you want to reduce your equities allocation 10-20 years before retirement you can simply add a bond fund and add inflows to that avoiding having to sell down triggering a tax event.

Hedging for currency risk is a whole of portfolio decision. If you have Australian property and a high allocation of Australian equities you may not need hedged equities. Some further reading https://passiveinvestingaustralia.com/p ... allocation
Topic Author
skyhigh872
Posts: 15
Joined: Wed Sep 02, 2015 3:27 am

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by skyhigh872 »

Hockey Monkey wrote: Thu Jul 29, 2021 7:30 pm
skyhigh872 wrote: Thu Jul 29, 2021 10:43 am Hey mate after doing some reading im liking VDHG and DHHF do you think i would be better off with dhhf as its 100% stocks . Only different between dhhf and vdhg is dhhf is 100 % stocks and unlike VDHG non of the stocks are hedged.
Which brings me to my second question do tou think its important to have a good percentage of your global stocks hedged ?
Also have you heard about the 3 fund profileo?
I seen a blog here about it.
Its basically 3 etfs . 1 aus stocks , 1 international stocks and 1 aus bonds. Thoughts on somthing like this ? Or would i be better off just going in a all in one fund like the 2 i listed above ?
Another question say i hold vdhg or dhhf for 30 years then decide i want more bonds how does that work do i just add a bonds etc with them ? Like does it merge with them ? Not sure if that makes sense
VDHG has been a hot topic recently due to high distributions and their tax implications. They are due to multiple reasons
1) High Australian equities allocation (our companies tend to pay more dividends than the US)
2) Hedging results. This depends on currency movements year to year. This year was particularly high
3) Internal rebalancing. This can be avoided if you instead roll your own (VAS/VGS/VGE etc) and rebalance via inflows
4) Tax inefficiencies. VDHG is made up of wholesale funds internally so other investors selling in periods of volatility can pass on capital gains to other investors. Rolling your own ETF's or DHHF avoids this issue.
5) 10% Bonds which pay out income, although this year were low or negative so not such a factor.

Ultimately it comes down to simplicity via single fund like VDHG/DHHF or to roll your own with the additional overhead and risk to returns if you fiddle or don't have the discipline to rebalance.

VDHG has the benefit of being from a trusted fund manager Vanguard. DHHF overcomes some of the above issues (2, 4 and 5) but is newer and some people have concerns on how BetaShares may behave in the future.

If you are happy with 40% Australian equities, I'd say either is a great option or else if you want a different allocation you could roll your own if you are confident in your discipline as an investor.

These three articles have some more information that may help you make a decision.
https://passiveinvestingaustralia.com/v ... l-your-own
https://passiveinvestingaustralia.com/d ... it-a-no-go
https://passiveinvestingaustralia.com/d ... ternatives

If you want to reduce your equities allocation 10-20 years before retirement you can simply add a bond fund and add inflows to that avoiding having to sell down triggering a tax event.

Hedging for currency risk is a whole of portfolio decision. If you have Australian property and a high allocation of Australian equities you may not need hedged equities. Some further reading https://passiveinvestingaustralia.com/p ... allocation
So basically if i have the disaplane not to sell in lows and panic etc then rolling my own would be recommended as i would avoid all the issues you mentioned and pay a lower fee
So is it hard to rebalance? Or is it quite simple also how often would i need to rebalance?
Basically if i need to rebalance when adding funds ill add to the lows and if i need to add some more then ill sell some of the highs and add them to the lows aswell ?

I do own 1 investment property and plan on getting more as for down the line i wouldn't be renting either id have a mortgage or have it paid off. So in my case i shouldn't have my global equitys hedged? If anything nomore then 10% hedged?
User avatar
asset_chaos
Posts: 2628
Joined: Tue Feb 27, 2007 5:13 pm
Location: Melbourne

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by asset_chaos »

skyhigh872 wrote: Fri Jul 30, 2021 8:07 am So is it hard to rebalance? Or is it quite simple also how often would i need to rebalance?
Basically if i need to rebalance when adding funds ill add to the lows and if i need to add some more then ill sell some of the highs and add them to the lows aswell ?
You rebalance to keep your potfolio risk at a more or less constant level, the level you've deliberately set according to your understanding of your personal risk tolerance. But rebalancing is a trade off between paying a known cost now to receieve a benefit of unknown size at an unknown time in the future. As you can direct new savings to rebalance for no cost, always do that first. You can also stop reinvesting dividends into the fund that is too high and redirect them to the fund that is too low. Dividends have a tax cost, but you have to pay that cost regardless of which fund you invest the dividends into. The last resort should be selling and paying capital gains tax. But occasionally that has to do done.

As to how often to rebalance, search the board. There are a lot of threads on this question, and there's no uniquely correct answer. One popular way to to set a rebalancing band, say plus-minus 10%. If you have two funds you want to be 50:50, you let their ratio float in the range 40% to 60% and rebalance when the funds are outside that band. Personally I have two rebalancing triggers. The narrower, lower cost band is "soft" where I redirect dividends. The broader, higher cost band is "hard" where I sell, but even there I only sell down to the edge of the soft band to save cost. I also don't bother to look at the portfolio more than a couple times a year to even make the rebalancing calculation. This may well cause me to miss seeing breaches of rebalancing bands that subsequently---and relatively quickly---went back into balance. This has meant that over 35 years of investing, I have sold according to my plan and incurred a tax cost to rebalance twice. NB most of that time was in the accumulation phase where almost all of the rebalancing was done with new savings. You'll have to pick rebalancing triggers and intervals to suit yourself, but you shouldn't really need to do much more than once every year or two.
I do own 1 investment property and plan on getting more as for down the line i wouldn't be renting either id have a mortgage or have it paid off. So in my case i shouldn't have my global equitys hedged? If anything nomore then 10% hedged?
Unhedged foreign stocks are likely the only cost effective way you can diversify your total financial life out of Australia. Your income, your property(ies), your cash savings, super, pension credits, debts, bonds, Australian stocks, in fact most everything you have is in Australian dollars and exposed to the Australian economy. I stick with unhedged ex-Au stocks for that reason. But, of course, as it's your investment plan that you will have to be able to stick with, you'll have to decide how much to hedge.
Regards, | | Guy
Topic Author
skyhigh872
Posts: 15
Joined: Wed Sep 02, 2015 3:27 am

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by skyhigh872 »

asset_chaos wrote: Fri Jul 30, 2021 11:05 pm
skyhigh872 wrote: Fri Jul 30, 2021 8:07 am So is it hard to rebalance? Or is it quite simple also how often would i need to rebalance?
Basically if i need to rebalance when adding funds ill add to the lows and if i need to add some more then ill sell some of the highs and add them to the lows aswell ?
You rebalance to keep your potfolio risk at a more or less constant level, the level you've deliberately set according to your understanding of your personal risk tolerance. But rebalancing is a trade off between paying a known cost now to receieve a benefit of unknown size at an unknown time in the future. As you can direct new savings to rebalance for no cost, always do that first. You can also stop reinvesting dividends into the fund that is too high and redirect them to the fund that is too low. Dividends have a tax cost, but you have to pay that cost regardless of which fund you invest the dividends into. The last resort should be selling and paying capital gains tax. But occasionally that has to do done.

As to how often to rebalance, search the board. There are a lot of threads on this question, and there's no uniquely correct answer. One popular way to to set a rebalancing band, say plus-minus 10%. If you have two funds you want to be 50:50, you let their ratio float in the range 40% to 60% and rebalance when the funds are outside that band. Personally I have two rebalancing triggers. The narrower, lower cost band is "soft" where I redirect dividends. The broader, higher cost band is "hard" where I sell, but even there I only sell down to the edge of the soft band to save cost. I also don't bother to look at the portfolio more than a couple times a year to even make the rebalancing calculation. This may well cause me to miss seeing breaches of rebalancing bands that subsequently---and relatively quickly---went back into balance. This has meant that over 35 years of investing, I have sold according to my plan and incurred a tax cost to rebalance twice. NB most of that time was in the accumulation phase where almost all of the rebalancing was done with new savings. You'll have to pick rebalancing triggers and intervals to suit yourself, but you shouldn't really need to do much more than once every year or two.
I do own 1 investment property and plan on getting more as for down the line i wouldn't be renting either id have a mortgage or have it paid off. So in my case i shouldn't have my global equitys hedged? If anything nomore then 10% hedged?
Unhedged foreign stocks are likely the only cost effective way you can diversify your total financial life out of Australia. Your income, your property(ies), your cash savings, super, pension credits, debts, bonds, Australian stocks, in fact most everything you have is in Australian dollars and exposed to the Australian economy. I stick with unhedged ex-Au stocks for that reason. But, of course, as it's your investment plan that you will have to be able to stick with, you'll have to decide how much to hedge.
Hey , im thinking a combination like this
Vas 20-25%
Vgs 60%
Vgad 15-20%
I could include small caps at around 10% or leave it out for now
If i was to go with the 3 funds above do you think thats still pretty well diversified?
As for small caps fund is it just like vgs same country etc expect small caps ?
Thoughts?
User avatar
asset_chaos
Posts: 2628
Joined: Tue Feb 27, 2007 5:13 pm
Location: Melbourne

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by asset_chaos »

skyhigh872 wrote: Wed Aug 04, 2021 5:21 am Hey , im thinking a combination like this
Vas 20-25%
Vgs 60%
Vgad 15-20%
I could include small caps at around 10% or leave it out for now
If i was to go with the 3 funds above do you think thats still pretty well diversified?
As for small caps fund is it just like vgs same country etc expect small caps ?
Thoughts?
That seems reasonable. If you're happy, pull the trigger and invest. There are endless ways to tinker with a portfolio, make a small change here, a small adjustment there. But tinkering can't replace time in the market to let compound growth work.
Regards, | | Guy
Topic Author
skyhigh872
Posts: 15
Joined: Wed Sep 02, 2015 3:27 am

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by skyhigh872 »

asset_chaos wrote: Wed Aug 04, 2021 9:11 pm
skyhigh872 wrote: Wed Aug 04, 2021 5:21 am Hey , im thinking a combination like this
Vas 20-25%
Vgs 60%
Vgad 15-20%
I could include small caps at around 10% or leave it out for now
If i was to go with the 3 funds above do you think thats still pretty well diversified?
As for small caps fund is it just like vgs same country etc expect small caps ?
Thoughts?
That seems reasonable. If you're happy, pull the trigger and invest. There are endless ways to tinker with a portfolio, make a small change here, a small adjustment there. But tinkering can't replace time in the market to let compound growth work.
Yes thats true , last question mate even now with the co#id and all the uncertainty u think its still good to go now as time in the market will win overall ?
User avatar
asset_chaos
Posts: 2628
Joined: Tue Feb 27, 2007 5:13 pm
Location: Melbourne

Re: Aus , got 60k to invest. Which index funds should i look into ?

Post by asset_chaos »

skyhigh872 wrote: Thu Aug 05, 2021 3:53 am
asset_chaos wrote: Wed Aug 04, 2021 9:11 pm
skyhigh872 wrote: Wed Aug 04, 2021 5:21 am Hey , im thinking a combination like this
Vas 20-25%
Vgs 60%
Vgad 15-20%
I could include small caps at around 10% or leave it out for now
If i was to go with the 3 funds above do you think thats still pretty well diversified?
As for small caps fund is it just like vgs same country etc expect small caps ?
Thoughts?
That seems reasonable. If you're happy, pull the trigger and invest. There are endless ways to tinker with a portfolio, make a small change here, a small adjustment there. But tinkering can't replace time in the market to let compound growth work.
Yes thats true , last question mate even now with the co#id and all the uncertainty u think its still good to go now as time in the market will win overall ?
There's always something going on. Stock returns are uncertain; that's the essence of stock risk. If that risk and uncertainty did not exist, stock returns would be bond like. If you're leery of stock risk, then you should not be 100% stocks. This is the essence of understanding your personal risk tolerance. Be honest with yourself and invest what you can in stocks now; invest now the money you know you won't need to spend for 30 years. Keep what you can't tolerate to lose part of in bonds and cash. There are no guarantees, but history has rewarded the venturesome and is likely to do so in the future.
Regards, | | Guy
Post Reply