Thursday, 23 November 2017

Exciting News - VANGUARD AUSTRALIA





Hi Folks

Three days ago Vanguard Australia launched a suite of new products. These products are a game changer for Australians in my opinion.

Check out this article from the Financial Standard



A beautiful 1940's dining room in an airBnB we stayed at recently


The new Vanguard suite has four Diversified Index ETF options:

  1. Vanguard Diversified Conservative (VDCO)
  2. Vanguard Diversified Balanced (VDBA)
  3. Vanguard Diversified Growth (VDGR) 
  4. Vanguard Diversified High Growth (VDHG)

Our US readers have had access to a long list of cheap US Vanguard offerings for many years now, however Vanguard's Australian arm are still growing and evolving. Generally speaking Vanguard are known as arguably the holy grail of investment companies world-wide and are committed to low costs and prudent investment policies.


Our airBnB 1940s bedroom - on the Hay Plains Australia


I have been looking at so many differing non-direct share/ETF options for investing outside of Superannuation including Robo Investors like Stockspot et al, Vanguard Australian Retail funds etc but the fees for these non-direct share/ETF investment products have been a little too much for my liking and thus I have defaulted to buying ETF's and LIC's directly which only incur the cost of the trade and the underlying MER (Management Expense Ratio - a fancy name for the inbuilt fee).

Whilst I may still stick with directly trading in ETFs and LICs (this is still the cheapest way), Vanguard Australia's introduction of these four new Diversified Index ETF's is a real game changer for those of us needing and wanting to invest but are too time/inclination poor (or even fearful)  to be mucking around building a portfolio. Choosing one of these four new options and investing regularly may just be the answer to the simplest way to build wealth outside of superannuation in Australia. Vanguard Australia has created a real game changer with these four new offerings.


A 1940s cabinet full of local jams, jellies and chutneys for sale


Theoretically I would choose the Vanguard Diversified High Growth (VDHG) option as the 90% growth appeals to my needs. 

Why?
  • At 0.27% MER (for every $1 million invested you would pay $2700 yearly) this is a reasonable and fair fee for its excellent inbuilt growth diversification strategy using both international and Australian securities. 
  • 90% growth assets and 10% income assets (potentially tax effective)
  • Australian Domiciled, so no annoying international W-BEN8-E forms - it is all done for you by the fund.
  • It's Vanguard - highly trustworthy company
  • A full portfolio in one easy aggressive growth product.
  • Offers DRP (Dividend Reinvestment Plan)
  • I suspect these ETF's are subsets of Vanguard Australia's Wholesale Diversified Funds of the same name. If so, then the return, stock holdings and structure of these funds are excellent.
For Australians, two of the barriers to getting into Vanguard's Diversified Funds were the $500,000 minimum entry into their equivalent wholesale funds or the 0.90% MER on their equivalent retail funds.  These four new offering have instantly removed those two barriers ....well done Vanguard!

The 1940's fireplace with all the proper period utensils


Here is the link to Vanguard Australia hereScroll to the bottom of the list and you will see them with "new" next to each offering. Also, Vanguard's write up here.

Of course I am not a qualified finance guy, so all this information has been for sharing and encouragement only and cannot be classified as financial advice. Do your own research! Oh, and I am NOT getting paid by Vanguard either.


Take care and stay nice

Mr HM (Phil)

1940's single twin beds
P.S. We recently stayed on the Hay Plains as we were travelling to Adelaide. We stayed in an air BnB all done out in 1940s style.  It was just wonderful.  I felt totally at home.  The post header picture is taken from Granite Island looking back along the jetty to Victor Harbor South Australia.



9 comments:

  1. Folks, I have now added several more links directly to Vanguard's info pages throughout this post to make your own research easier. Phil

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  2. Snap! I was only thinking about Vanguards funds earlier today. Thanks for the information.

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  3. Thanks for the heads up, Phil.
    I have looked into ETFs and they make more sense compared to Vanguard's retail managed funds. 0.27% compared to 0.75%.
    Am I right that with ETFs you need to buy a larger sum at a time to make the brokerage?/trade fees worth it?
    Mathematically it might not make sense, but for a newbie like me, the retail funds feel 'safe'. And I can then add to the fund via Bpay with as little as $100. That way I could add weekly, rather than save up a lump sum for an ETF purchase.

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    1. Yes that's right jay. I would buy minimum 5K at a time (normally I buy in $10K lots). But do your math, as retail managed funds at 0.9 or 0.75 (depending on which product) is very expensive and will buy you an awful lot of brokerage. Remember that you are paying the MER no matter what for as long as you hold the product where as brokerage is an irregular fee only.

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    2. OK - I have done the Math for you. Comparing the exact same product as an ETF against a managed fund means you are paying $5.10 extra for every $1000 invested for the life of your holding yearly. The minimum entry into a managed fund is $5K so fees would cost you and extra $25.50 per year than the equivalent ETF.
      For arguments sake, just say you add another $5000 each year to your managed fund - it will cost you nothing to add but will cost $25.50 extra every year in MER fees compared to the ETF version. So year 1 = $25.50 extra than the ETF, year 2 $51 extra, year 3 $76.50 extra, right through to year 10 $255.00 extra etc etc. Compare that to doing the ETF version - Adding one $5000 brokerage per year only costs you $20 or so ... so after 10 years I have only spent $200 in total (not cumulative) in your yearly purchase of $5K of ETF. Massive difference in fees and the ETF wins hands down.

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  4. Thank you for doing the maths. I knew ETFs would work out better mathematically. However, for someone like myself, the retail fund makes better sense from a practical point of view - like the old debt snowball vs. debt avalanche method, the most cost effective way works better if you're highly disciplined. At this point, it's highly unlikely that I'd have the discipline to save a lump sum without dipping into it - if it were already socked away in the retail fund then it's 'out of reach'. This is purely a behavioural issue.

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  5. very charming B&B, looks totally comfortable!
    thanx for sharing

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