Smartshares - Bogleheads phiosophy, and the US500 vs Total World Fund

[Vedious]

Hey everyone,

I'm new to investing and have been trying to absorb all the knowledge available online. I've found Bogleheads Investment Philosophy to be of great help for someone starting out, which can be found here:

https://www.bogleheads.org/…/Bogleheads%C2%AE_investment_ph… (https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy)

The idea of a three-fund portfolio (https://www.bogleheads.org/wiki/Three-fund_portfolio (https://www.facebook.com/l.php?u=https%3A%2F%2Fwww.bogleheads.org%2Fwiki%2F Three-fund_portfolio&h=mAQEmnquoAQGqGW_6dHez6bfV8-a3KB1bI7onl3dDdhRFPg&enc=AZMFrvRufi5oKBFZCADHj0zU8E1TsRdb68wT9YDH0KVzzw el6l19ZfhYz0Pt9G9iIAbbDrgW45Hd-QgHVUAqEcD1pbi_XnZqtVhwB0KDG-KmJNAtngG_QiwBHYqUr_MBlD3F4Ts8nx6bUdX0PoCe7dc0Mw6D 006bZn788pLvraRfATfHoiEPYLPpd7HgoPnSlk4&s=1)) seems appealing due it's simplicity. This involves:

1. A US total market index fund
2. An international total market index fund
3. A bond total market index fund

Bogle recommends holding roughly your age in bonds to reduce the risk of having all your money in stocks.

So following that mindset, and looking at the ETFs available to us in NZ, I would appreciate a bit of advice.

Firstly, what is everyone's thoughts on SmartShares US 500 fund vs their Total World Fund (TWF) bearing in mind the S&P500 is often heralded as the best option for beginner investors and carries lower fees.

Secondly, can anyone recommend an international total market index fund? I can see the benefit of investing in these to diversify and prevent having your investments solely in the US market, but am not entirely sure of their value. Perhaps there is more benefit in investing in one of our domestic ETFs, such as the NZ Top 50 Fund, thereby reducing exchange rate risks.

Lastly, the options for gaining exposure to a bond index appear even more limited. SmartShares offer their NZ Bond Fund and Global Bond Fund. It seems obvious that the Global option would be more diversified and thus lower risk, could anyone advise on these two options?

Sorry for the long post but any advice would be appreciated.

[huxley]

I think you can still invest in this through super life (though would expect them to start pushing new clients into a mix of their ETFs). I think the fund manger is State Street.
https://www.msci.com/resources/factsheets/index_fact_sheet/msci-world-ex-australia-index.pdf

[HRM]

Also check out the Vangaurd ETFs listed on ASX. Cheaper fees compared to Smart Shares.

[zgnz]

Hey Vedious,
30% VEU ( Vanguard World ex USA) on the ASX with no DRP available.
30% VTS ( Vanguard USA Total) on the ASX with no DRP available.
I would sign up to ANZ Securities or the ASB online broker. This is not that involved, The biggest hassle is getting the W-BEN form sorted to claim a reduced tax treaty rate. Computershare send this form to

I was wondering how dividends were handled on the ASX listed vanguard funds. So you get the full dividend amount (e.g. the Australian government doesn't take their cut, which you can't credit back in NZ.) I assume not, since your signing a W-8BEN form (US based.) Is my assumption correct?

Apart from the more expensive brokerage fees, are there any advantages/disadvantages of buying the same vanguard funds on the US market (held through an asb/anz nominee service -- Although I personally wouldn't hold US shares through ANZ nominee service, due to their 0.25% p/a fee!)




Bogle recommends holding roughly your age in bonds to reduce the risk of having all your money in stocks.


Some people recommend to use the 110 - minus your age (as people are living longer.)

Edit: Also, I'd approach your equity/bond/cash allocation depending on what you are trying to achieve, and when you think you'll need the money (or some of the money). If it's purely a retirement fund & you are young, then you can skew more heavily towards equities etc.

[voltage]

or you could use 60% VGS MSCI World ex-Australia (with net dividends reinvested), in Australian dollars Index, Mer 0.18%. This would replace VEU & VTS.

[zgnz]

or you could use 60% VGS MSCI World ex-Australia (with net dividends reinvested), in Australian dollars Index, Mer 0.18%. This would replace VEU & VTS.

Interesting, looks like a fairly newly introduced fund.. hadn't seen it before.

I guess another issue to be aware of is death duty taxes for US domiciled funds. I assume you'd still liable with asx:VEU & VTS.. where as VGS is Australian domiciled, so not an issue (I think ?)

However as Australian based fund, for VGS would the dividends be taxed by the Aus Govt, by taking their cut? (which you can't credit back in NZ)

[Vedious]

Thanks for the great replies.

Does any know how the Foreign Investment Funds (FIF) Income Tax applies when investing in the Vanguard ETFs listed on the ASX? I imagine investing in these funds through this manner, takes away the PIE label too. Aside from this, the brokerage fee and inability to drip feed make me less excited about investing through the ASX. Furthermore, what about the currency implications? I suppose its the simplicity that makes Smartshares attractive.

Investing in the FONZ ETF through Smartshares has also made little sense to me. A lot of people seem to think this is one of the best ETFs offered by Smartshares, despite the high management fee (0.75%), lack of diversification and lower potential for growth when compared to say, the US500. Anyone care to explain this?

[voltage]

Yes FIF does apply, IRD has the list of stocks that are exempt, mainly those in the asx200. Investing long term reduces currency implications. I use an australian online broker, commsec, brokerage is 0.12%. FONZ ETF is expensive, I choose my own basket of NZ shares and why not use an LIC on the asx for shares in australia, like ARGO or Austrailan Foundation (AFI) Mer around 0.18% or vanguard ETF that represents the top 300.

[morphs]

I'm pretty sure that all ASX LICs are exempt from the FIF regime, in which case you will pay NZ taxes on any dividends received only. Many of these LICs invest globally so it is an alternative way to get international exposure without the hassle of FIF and FDR. A full list of LICs is here: http://www.morningstar.com.au/LICs/MonthlyReports