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Up2
Hi There,
Looking for some advice! I am a new member but have been investing for several years, I have a handful of ETFs, a LIC and a property Trust, and a spattering of blue-chip shares.
I am looking to tidy up a little and channel my portfolio to grow.
I currently hold
LIC (AFI)
ETFs – (VAS, VEU, VTS, VGAD)
Property trust (HPI)
I would like to follow something like the Jupiter model.
Would you recommend selling down my portfolio to restructure, or not selling and using divided income and future contributions to build my new structure?
Any advice would be welcomed.
Cheers,
Dave
Up1Hi, Dave
Specific advice is always difficult as nobody knows your personal circumstances. From my own reading and information gathering, the default recommendation in circumstances like this is usually not to sell in a bear market, unless you have an urgent need for the money as you will just be confirming paper losses.
It also makes sense to continue to invest when prices are low so your second option would I think be the favourite until the market recovers and you can rebalance without incurring losses.
Warren Buffet famously suggests that you should be fearful when others are greedy and greedy when others are fearful- sound advice.
Up1Hey @davew, I hope you are doing well. You too @FraserT (thanks for sharing your two cents!).
First up, Dave, I want all of us to be mindful that what we typically talk about here inside of Rask Core is very general in nature because (as Fraser rightly alluded to) it can be very risky to rely on information that ‘seems’ personal but isn’t. For example, selling shares at a capital gain (in order to buy something else) might not be a big deal for an investor — if that investor had tax losses or a low tax bracket. However, if the tax rate is really high (or capital gains tax discounts don’t apply) there is a greater risk in selling now and going across.
I only use this as an example of how it can be difficult (and unfortunately, illegal) to offer something like quasi-personal “advice”. Even here. For what it’s worth I know you know all of this, Dave — but it’s a warning for those who come after you.
From now on, I reckon we should lampoon the word “advice” in the Rask community and exchange it for “opinions” or “information” — for anything other than “where can I get professional advice?” 🙂 (I say this tongue in cheek because I know it’s not always possible).
Now, back to the (general) question of ‘when is it worth selling?’
For me, I’ve taken the broad view that ‘it depends’. Bear with me. It depends on a few things:
1. Tax status. Obviously, in retirement or Super, tax isn’t such a big issue because of the tax-advantaged status. So ‘the cost’ of selling isn’t a high hurdle to overcome. It also depends on the gains from the assets themselves — for example, if the assets been held for 12 months the investor might get the CGT discount (which lowers the hurdle), etc.
2. Long-term earning potential. More earning potential for an individual tax payer means it’s often easier to readily buy new positions rather than rely on selling old positions (and incurring tax). If it’s possible to slowly add to positions, a slow and steady accumulation strategy is often the way to go from a tax-adjusted perspective. But again, bear with me…
3. The ‘likeness’ of the assets. This is best illustrated through an example. For example, we now consider the IVV and IHVV ETFs to be our preferred global equities/shares exposure — however, VGS and VTS do a very similar thing at a very similar price. In talking with consultants I trust, almost all of them tell me that ‘it doesn’t matter nearly as much which ETF is chosen, provided it is slow cost and ‘does what it says”. This belief stems from the old studies which show the asset class overall is the most important consideration — rather than which ETFs to use for it. So, for example, if the old exposure is very similar to the new one, the risk (tax) and reward (an easier portfolio or slightly better ETF) might not shake out.
Examples
I can only speak from my experience on some things, so feel free to pick this up or not.
I sold VTS a few years back because at the time I didn’t have a lot of capital gains built into the position and I knew my taxable income that year would be lower than the next FY. Contrast that with…
The Rask Group Pty Ltd itself has a very small position in the BetaShares A200 ETF, and I’ll likely keep it. Over time I will just reinvest the dividends from A200 into something like VAS (most likely) as that’s my preferred exposure. Why wouldn’t I sell A200? The capital gains from the A200 position are negligible however because our company isn’t eligible for capital gains tax discounts (like an individual might be) it makes more sense to just keep it and hold on. And what I keep in mind is the A200 share exposure (top 200 ASX shares) and fee load (0.07%) is nearly identical exposure (300 shares) and fees (0.1%) with VAS — so the ‘likeness’ is very high!
I hope that helps. Sorry for the long-winded answer!
Owen
Up0Thank so so much, FraserT and Owen for your “opinions and information”
This has given me some great information to think about.
Really appreciated,
Cheers,
Dave
Up0Hi Owen, will be interesting to look at the performance of this RASK Core portfolio over the years. shame Pearler rebalanced out of A200 completely. I’ve wondered if A200 would slightly outperform VAS over time with fees rebalancing turnover and franking credits. My thinking is that there are more stocks moving in and out of the bottom 100 stocks of the ASX 300, so as the index rebalances, there’s more turnover. The bottom 100 are also smaller and less likely to pay franked dividends. Oh well, might have to remain one of life’s great unknowns. 😃.
On a separate note, I’m interested in the tactical tilt towards IHVV. Looking at the macro and the domination of USD as worlds’ favourite currency. I know that currency prediction is nigh impossible, but Is the thinking that USD will peak and start to decline at some stage? In which case currency hedging is beneficial to returns. Or is this more a strategy to reduce volatility from currency risk? Or is this a “likeness” thing to enable comparison & allow slight tactical tilt?
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