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Why You Should Mind Your ETPs and Other Investing Acronyms – Vanguard Report

Posted on June 21, 2024 by Arrowroad

From our friends over at Vanguard, this article delves into the various acronyms you might encounter in the investing world, particularly focusing on exchange traded funds (ETFs) and managed funds (MFs).

Why You Should Mind Your ETPs and Other Investing Acronyms

Let’s face it, the investing world seems to thrive on the use of acronyms. Understanding exactly what they stand for can go a long way in expanding your financial literacy and helping you to make better and more informed investment decisions over time.

The list of investing acronyms is quite vast, covering everything from general financial and accounting terms to different types of investment securities, market indexes, industry regulators, and organisations.

For the purposes of this article, we will just focus on acronyms that specifically relate to investing in exchange traded funds and managed funds.

ASX: (Australian Securities Exchange)

This is the logical place to start the acronyms exercise because essentially the majority of Australian-listed fund investment avenues ultimately lead to the Australian Securities Exchange (the ASX). The role of the ASX is to enable the trading of shares and other types of investment securities, including the units of listed fund products.

ETPs: (Exchange Traded Products)

ETPs stands for exchange traded products. It’s a broad term that covers the products traded on share markets, but not individual shares or other securities. The most common type of ETPs are ETFs, which are covered below, but they also include products enabling trading in currencies, debt securities, and commodities. There are currently more than 350 ETPs available for investors on the ASX.

ETFs: (Exchange Traded Funds)

ETFs stands for exchange traded funds. An ETF is a professionally managed, share market-listed investment fund that is bought or sold on exchanges such as the ASX in the same way as company shares. ETFs often invest in hundreds, and sometimes thousands, of companies listed on different share markets. Other types of ETFs invest in bond issues or other asset classes, including property and infrastructure. ETFs are generally an easy way for investors to gain broad exposures to different types of investments in a single market trade.

MFs: (Managed Funds)

MFs stands for managed funds. Similar to an ETF, a managed fund pools together money from different investors to invest in different types of assets, such as shares and bonds. Some MFs are listed on the share market; however, the majority are not listed and are only available for investment directly through product owners such as Vanguard, or via financial advisers. Just like ETFs, MFs are open-ended funds, which means the number of units they have on issue at any point is not fixed. New units can be created when investors buy into the fund, or existing units can be taken out of circulation when investors sell their units. This contributes to strong liquidity for investors. But there are important differences between ETFs and MFs.

Other Fund Acronyms

PDS: (Product Disclosure Statement)
PDS stands for product disclosure statement. All investment funds, whether listed or unlisted, must provide a PDS that includes specific information about the product, including its key features, its investment strategy and return objectives, its level of risk and who it might suit, its management fees and any other costs, taxation information, and other relevant details to help investors make an informed investment decision.

AUM: (Assets Under Management)
AUM stands for assets under management. This is the total amount of money being managed by a particular fund on behalf of its investors. Some ETFs and managed funds have billions of dollars of AUM, while others have significantly smaller amounts, which can relate to their investment performance, their investment strategy, or both. A fund’s AUM will rise or fall based on asset price fluctuations and on investor inflows or outflows. Funds with a larger AUM will typically provide strong trading liquidity for investors.

NAV: (Net Asset Value)
NAV stands for net asset value, which is the value of a fund’s total assets minus its total liabilities. This net amount is divided by the number of fund units on issue to calculate the NAV price per fund unit (which is similar to a share price). The intra-day NAV price on an ETF will typically fluctuate during market trading sessions based on trading movements. By contrast, the NAV price on unlisted managed funds is calculated daily at the close of each market trading session.

MER: (Management Expense Ratio)
MER stands for management expense ratio. An investment fund’s MER is a ratio that includes total annual management fees and other expenses such as transaction charges, account fees, and other operating costs. It’s normally shown as a percentage of every dollar invested. An MER does not include other external costs, such as stock brokerage fees and certain taxes.

DRP: (Distribution Reinvestment Plan)
DRP stands for distribution reinvestment plan. Many ETFs and managed funds offer investors the choice of receiving income distributions as cash or reinvesting distributions to purchase additional units in the fund through a DRP. Choosing the DRP option can significantly compound both capital growth and income returns over time. Another key advantage of a DRP is that no brokerage fees are applied when adding fund units to an existing holding, meaning lower investment costs and higher returns.

To learn more about the different types of investments available through ETFs and managed funds, click here.

General Advice Warning

Vanguard is the product issuer and the Operator of Vanguard Personal Investor. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) is the trustee of Vanguard Super (ABN 27 923 449 966) and the issuer of Vanguard Super products. We have not taken your objectives, financial situation or needs into account when preparing this report so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs and the disclosure documents of any relevant Vanguard financial product before making any investment decision. Before you make any financial decision regarding a Vanguard financial product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained at vanguard.com.au free of charge and include a description of who the financial product is appropriate for. You should refer to the TMD of a Vanguard financial product before making any investment decisions. You can access our IDPS Guide, Product Disclosure Statements, Prospectus and TMD at vanguard.com.au or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This report was prepared in good faith and we accept no liability for any errors or omissions.

Posted in Financial Literacy, Financial Planning, Investment Strartegies, May Vanguard, Vanguard Insights | Tagged AUM, DRP, ETFs, ETPs, Financial Literacy, Financial Planning, Investing Acronyms, Managed Funds, MER, NAV, Vanguard Insights | Comments Off

The Advantages of Investing Early – Vanguard Report

Posted on June 21, 2024 by Arrowroad

From our friends over at Vanguard, this article explores the benefits of investing early and how time can work in your favor.

The Advantages of Investing Early

You may have heard it said, “No risk, no reward.” But did you know that time can actually decrease your risk while increasing your reward?

Investing: Risky Business?

When some people think of investing, they focus on the potential for great rewards—the possibility of picking a winning share that will increase in value over time.

Other people focus on the risk—the possibility of losing everything in a market crash or on a bad stock pick.

Who’s right? Well, it’s true that all investing involves some risk. It’s also true that investing is one of the best ways to build your wealth over time.

In fact, there’s typically a direct relationship between the amount of risk involved in an investment and the potential amount of money it could make.

Different types of investments fall all along this risk-reward spectrum. No matter what your goal is, you can find investments that could help you reach your goal without taking on unnecessary risk.

Time is on Your Side

Here’s the secret ingredient that can make investments less risky: time.

But there’s a caveat.

If you invest in just a handful of investments or only within the same industry, time won’t necessarily make your portfolio any safer.

The reason it works for diversified investment portfolios that incorporate a range of asset classes (i.e., bonds), regions, and markets is that over time, there tend to be more “winners” than “losers.” And the investments that gain money offset the ones that don’t do as well.

The More Time You Have, the More You Benefit from Compounding

Not only can the passage of time help lower your investment risk, it can potentially increase the rewards of investing.

Imagine you place one checker on the corner of a checkerboard. Then you place two checkers on the next square and continue doubling the number of checkers on each following square.

If you’ve heard this brainteaser before, you know that by the time you get to the last square on the board—the 64th—your board will hold a total of 18,446,744,073,709,551,615 checkers.

While there’s no guarantee you can double your money every year, the principle behind this – known as “compounding” – is important to understand that when your starting amount is higher, your increases are higher too. And over time, it can add up to be a material increase.

For example, if you earn 6% on a $10,000 investment, you’ll make $600 in the first year. But then you start the second year with $10,600—during which your 6% returns will net you $636. This is a hypothetical example that does not take into consideration investment costs or taxes.

In the 20th year of this example, you’ll earn more than $1,800—and your balance will have increased more than 200%.

A Caveat: Reinvesting is Key

If you take your earnings out of your account and spend them every year, your balance will never get any bigger—and neither will your annual earnings. So instead of making more than $20,000 over 20 years in the hypothetical example above, you’d only collect your $600 every year for a total of $12,000.

If you instead leave your money alone, your “earnings on earnings” will eventually grow to be larger than the earnings on your original investment – and that’s the power of compounding!

General Advice Warning

Posted in Financial Planning, Investment Strartegies, May Vanguard, Vanguard Insights, Wealth Building | Tagged Compounding Interest, Financial Planning, Investing Early, Long-Term Investing, Risk Management, Vanguard Insights, Wealth Building | Comments Off

How to Build Financial Trust Across Generations – Vanguard Report

Posted on June 21, 2024 by Arrowroad

From our friends over at Vanguard, this article explores how parents and advisers can work together to manage intergenerational wealth transfers.

How to Build Financial Trust Across Generations

How parents and advisers can work together to manage intergenerational wealth transfers.

We’re told our time horizon shrinks as we age. This makes sense, because the closer we get to retirement, the less time we have left to accumulate wealth. And the nearer we come to having to eventually draw down on that wealth.

But retirement often throws up a whole new set of priorities. Instead of our own time horizon, we’re now thinking about our children’s time horizon; and, as they may have their own families, even their children’s time horizon.

Suddenly, the priority is not just to make your wealth last, but to preserve it for the next generation. And that’s where the real power of advice lies: its ability to transform families by building intergenerational wealth.

The Intergenerational Wealth Opportunity

Australia is nearing the crest of a retirement wave. As the baby boomer generation looks to pass on wealth, those in receipt of it will likely need guidance.

For the emerging generation of wealth builders, what were once reasonably straightforward considerations around saving and budgeting may suddenly become more substantial.

And for both the younger and older generations, conversations around estate planning, inheritance, business succession, the family home, tax issues, and aged care can open an emotional can of worms.

Building trust with both cohorts is essential before these conversations can take place. Putting the time in now is worth it given the potential size of the opportunity.

Estimating wealth in aggregate is notoriously difficult, especially when you factor in businesses, home contents, non-superannuation investments and non-financial assets. But with some modelling, we can get a reasonable idea of the wealth set to change hands.

According to CoreData Research, the baby boomer generation holds around $4.9 trillion in total assets. This wealth is held by over 4 million baby boomers, including a small group of wealthy “baby boomers” with $1.3 trillion in assets.

How this wealth gets passed on could be the biggest financial change in Australia’s history. It could also be the biggest opportunity in advice that has ever existed.

Building Trust Across Generations

We know it’s critical for advisers to reach Australians at a younger stage of life. But there’s a lot of groundwork that needs to be done before an adviser can start advising your children.

Talking to other people’s children about money is a delicate matter. Wealth transfers and inheritance planning are not regular topics of conversation at the family level. Understandably, many families find subjects such as death and the future division of wealth as unpleasant and potentially sensitive, especially when multiple heirs are involved.

Building trust across generations helps facilitate open discussions about the intended treatment of assets, as well as the ‘who’, ‘how’ and ‘when’ of transferring wealth. This requires talking to both generations, not just the older one.

Key Considerations for Advisers

Advisers may have a strong, long-standing relationship with you, but that doesn’t mean they can automatically win trust from your children.

Here are some important considerations for advisers when engaging clients across the generational divide:

Younger Clients Describe Themselves Through Their Investments: Younger generations want to invest in things they feel good about. They’re looking for advice to ensure their investments align with their values.

Building a Client Value Proposition: The value advisers provide to you doesn’t necessarily matter to your children. Advisers need to demonstrate the value and utility of their advice to your children.

Focus on the Tech Stack: Millennials and zoomers are technology-first generations. Advisers should meet them where they are when it comes to harnessing technology in their interactions and advice delivery.

Technology is no substitute for real human connection, but in the right context it can help advisers engage on a deeper level, communicate the full value of their advice, and make certain tasks quicker and easier.

When it comes to ensuring investments are sufficiently diversified, staying informed about the markets, modelling different scenarios, and monitoring investments, a significant proportion of clients prefer technology to be involved.

For trust and confidence, feeling listened to, and knowing their goals are understood, clients overwhelmingly prefer human delivery.

Conclusion

The key to successful intergenerational wealth transfers lies in building trust, open communication, and leveraging the right mix of technology and personal connection. By understanding the unique needs and preferences of both older and younger generations, advisers can help families navigate the complexities of wealth transfer and ensure a smoother transition of assets.

General Advice Warning

Posted in Estate Planning, Financial Planning, May Vanguard, Personal Finance, Uncategorized, Vanguard Insights, Wealth Management | Tagged Baby Boomers, Estate Planning, Family Finances, Financial Advice, Financial Planning, Financial Trust, Inheritance Planning, Intergenerational Wealth, Millennials, Wealth Management | Comments Off

Why It’s Important to Have a Will – Vanguard Report

Posted on June 21, 2024 by Arrowroad

From our friends over at Vanguard, this article explores the significance of having a legally valid will and how it can help avoid disputes over the division of your assets.

Having a legally valid will can go a long way to avoiding disputes over the division of your assets.

What did the artist Picasso, musicians Bob Marley and Aretha Franklin, and billionaire entrepreneur Howard Hughes have in common?

If you’re thinking they had amassed large fortunes before their deaths, you would be correct. But another key fact is that they all died without a valid will.

Picasso died in 1973 with an estate, including an extensive collection of artworks, later appraised at US$250 million. The eccentric Hughes passed away in 1976, leaving an estimated US$1.5 billion. His fortune was eventually split between hundreds of people after years of legal battles. The estates of the musicians were lower, but still sizeable: Marley (US$30 million) and Franklin (US$18 million). In each case, their estates needed to be settled in court after challenges by family members, former spouses, and other parties.

The Importance of Inheritance Planning

Inheritance planning, unlike business succession planning, is an area that’s rarely discussed at the family level. Most families regard subjects such as death and the future division of wealth as unpleasant, and potentially sensitive when multiple heirs are involved. But there’s a lot to be said for having open discussions within your family about the intended treatment of assets and future inheritances.

Beyond accumulating wealth over time, one of the most important aspects of estate planning is determining in a legally valid will how you intend to have your accumulated wealth distributed after your death. Dying without a will can potentially be treacherous, and costly, if your intended beneficiaries need to contest how your assets are divided.

And consider that the next 20 to 30 years will see the biggest transfer of family assets in history as many members of the so-called “Baby Boomer” generation (people born just after the end of World War II through to 1964) die, in most cases with the intention of leaving their accumulated wealth to their children and other heirs. Assets will include homes, investment properties, unspent superannuation money, direct shares, life insurance payouts, and a wide range of other financial and non-financial assets.

Why You Need a Will

Creating a valid will, and specifically documenting how you want your assets to be managed and divided between your nominated beneficiaries after your death, should be a key step in the inheritance planning process. Dying without a will (intestate) will invariably create complications, because your estate will be passed over to the state or territory in which you live to administer. This can result in your assets not being distributed to your surviving family members in the way you would have preferred.

Residential real estate and superannuation, which combined make up more than three-quarters of total household assets, are the largest components of most financial legacies. Federal Treasury estimates that assuming there’s no change in how most retirees draw down their superannuation balances, superannuation death benefit payouts will increase from around $17 billion to just under $130 billion by 2059. Ensuring that any super you have left over at the time of your death is distributed according to your wishes requires you to complete a binding death benefit nomination form provided by your super fund.

It’s important to be aware of any potential tax implications. For example, while superannuation distributed to a surviving spouse or dependent children as a lump sum is generally tax-free, non-dependents (including adult children) may be required to pay tax on amounts they receive. That comes down to how much of your super is made up from pre-tax and after-tax contributions.

Capital gains tax does not apply if someone inherits direct shares or other financial securities, but tax may apply if they later dispose of them. Any unapplied capital losses that could be used to offset capital gains tax cannot be transferred to beneficiaries.

Estate planning can be complex. Consulting a licensed financial adviser to help you and your intended beneficiaries map out an inheritance framework that also identifies issues such as potential tax liabilities is a prudent step.

General Advice Warning

Vanguard is the product issuer and the Operator of Vanguard Personal Investor. Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270 is the trustee of Vanguard Super (ABN 27 923 449 966) and the issuer of Vanguard Super products. We have not taken your objectives, financial situation or needs into account when preparing this report so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs and the disclosure documents of any relevant Vanguard financial product before making any investment decision. Before you make any financial decision regarding a Vanguard financial product, you should seek professional advice from a suitably qualified adviser. A copy of the Target Market Determinations (TMD) for Vanguard’s financial products can be obtained at vanguard.com.au free of charge and include a description of who the financial product is appropriate for. You should refer to the TMD of a Vanguard financial product before making any investment decisions. You can access our IDPS Guide, Product Disclosure Statements, Prospectus and TMD at vanguard.com.au or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This report was prepared in good faith and we accept no liability for any errors or omissions.

Posted in Estate Planning, Financial Planning, May Vanguard, Retirement Planning, Vanguard Insights, Wealth Management | Tagged #LegacyPlanning, #WillPreparation, AssetManagement, EstatePlanning, FinancialPlanning, FinancialSecurity, Inheritance, RetirementPlanning, Superannuation, WealthManagement | Comments Off

How much do you need to earn in retirement? -Vanguard Report

Posted on June 21, 2024 by Arrowroad

From our friends over at Vanguard, this article explores the necessary earnings for a comfortable retirement and the impact of recent pension increases on retirees.

The latest rise in the Age Pension rate still falls short of what many people may need to have a modest lifestyle in retirement.

Around 2.58 million Australians received a 1.78% government Age Pension payment boost on March 20 as part of Centrelink’s twice-yearly indexation review.

They included the 1.76 million people who receive a full Age Pension, according to Department of Social Services December 2023 quarterly data, and a further 806,670 who qualify for part pension payments based on them having passed either Centrelink’s “income” or “assets” pension means tests, or both.

The raise means the full Age Pension rate for singles has risen by $19.60 to $1,116.30 per fortnight, and for couples by $14.70 to $841.40 per fortnight each. These amounts equate to $29,023.80 and $43,752.80 per year, respectively.

Yet, with cost-of-living pressures continuing to mount, receiving only the full Age Pension without the benefit of other sources of regular income means that even having a modest lifestyle in retirement may be out of reach for many Australians.

Retirement costs have spiked

December 2023 quarterly data released by the Association of Superannuation Funds of Australia (ASFA) shows that rises in everyday living expenses had pushed up the amounts needed to fund a good standard of living in retirement to record levels. Falling inflation levels should help to reduce some of these living costs, but certainly not all of them.

Household	Single Modest	Couple Modest	Single Comfortable	Couple Comfortable
Housing – ongoing only	$118.48	$133.61	$139.37	$145.49
Energy	$40.68	$54.64	$51.54	$63.92
Food	$109.64	$203.27	$141.76	$246.38
Clothing	$21.16	$40.21	$28.26	$52.63
Household goods and services	$39.40	$46.25	$85.24	$105.69
Health	$55.53	$107.50	$112.94	$211.63
Transport	$109.57	$116.71	$179.02	$193.91
Leisure	$113.03	$117.47	$221.33	$332.71
Communications	$18.29	$20.61	$22.88	$29.78
Total per week	$625.78	$900.27	$982.34	$1,382.15
Total per year	$32,666	$46,994	$51,278	$72,148

Source: ASFA

The annual cost for a single person aged between 65 and 84 to have a modest lifestyle in retirement was $32,665.66. This is about 12.5% above the new full Age Pension rate. ASFA defines a modest retirement lifestyle income as one that enables retirees to afford basic health insurance and infrequent exercise, leisure, and social activities with family and friends.

For couples, ASFA found that $46,994.28 per year was needed to have a modest retirement. This level is only about 7.4% above the new full Age Pension rate for couples.

The benefits of good retirement planning

The 2023 thematic review of the retirement income covenant by the Australian Prudential Regulation Authority (APRA) and the Australian Securities & Investments Commission (ASIC) into how super trustees are helping members enhance retirement outcomes concluded that more needs to be done to improve superannuation member outcomes in retirement.

Longevity risk – the risk of outliving savings – is a key concern for retirees in deciding how to draw down their superannuation during retirement.

“Most people rely on the Government for protection against longevity risk through the Age Pension, which provides a safety net for retirees who outlive their savings,” according to the Intergenerational Report 2023.

“Well-designed superannuation retirement products can assist retirees to make decisions to help smooth consumption over retirement – aligning income needs with expenditure needs – and draw down on their balances efficiently. This would also enable decision making early in retirement.”

Preparing well ahead for life in retirement is key. A good starting point for many Australians should be to seek out professional financial advice, especially in the context of retirement spending and understanding how the Age Pension may play an important role.

General advice warning

Posted in Economic Insights, Financial Planning, Financial Wellness, Investment Strartegies, Lifestyle & Well-being, May Vanguard, Retirement Planning, Superannuation, Vanguard Insights | Tagged Age Pension, Cost of Living, Financial Advice, Financial Planning, Retirement Lifestyle, Retirement Planning, Superannuation, Vanguard Insights | Comments Off

Australian Investors are Flocking to International ETFs – Vanguard Report

Posted on June 21, 2024 by Arrowroad

From our friends over at Vanguard, this article discusses the recent trends among Australian investors who are increasingly flocking to international equity ETFs.

Australian investors have been lifting their exposure to international equity ETFs. Strong offshore equity market gains, particularly in the United States, continued to lure many Australian investors to international exchange traded funds (ETFs) over the first three months of 2024.

Inflows into ETFs providing broad exposure to the Australian share market remained strong, while inflows into bond ETFs returned to longer-term averages.

The Australian ETF industry’s total assets under management (AUM) increased by $19 billion over Q1 to $191.87 billion, according to data released by the Australian Securities Exchange (ASX) and Vanguard.

This was over $53 billion more than at the end of the 2023 March quarter and reflected a combination of market gains and continuing inflows.

Lured by Offshore Markets

Australian investors added $2.65 billion into ETFs that invest on international equity markets over the three months to 31 March 2024. The inflows into international equity ETFs represented 50% of the total inflows into the Australian ETFs industry over the first quarter.

“Australian investors have steadily been lifting their exposure to international equity ETFs listed on the ASX in a bid to capture the strong returns we’ve seen on offshore markets,” said Adam DeSanctis, Vanguard’s Head of ETF Capital Markets, Asia-Pacific.

“US share markets surged around 24% last year and continued to gain ground over the first quarter, reaching record highs, mainly thanks to the impressive returns from some of the big US technology stocks. It’s no surprise that many Australian investors have been using international ETFs that are listed on the ASX to get a slice of that action.

“As well as investing in ETFs that purely focus on US equities, a large amount of Australian investors’ capital has also been channelled into ETFs that have broader international equity exposures incorporating stocks in the US, Europe, Asia and other regions.”

“This shift in mindset to international equity ETFs saw lower inflows into Australian equity ETFs over the March quarter compared with the last three months of 2023. But, to put that into perspective, keep in mind that Australian equity ETFs still attracted $5.30 billion of inflows in 2023, more than double the $2.20 billion invested into international equity ETFs.”

Meanwhile, Australian equity ETFs attracted just under $1.5 billion of investor capital over the quarter, representing 28% of total ETF inflows.

In a major milestone, the Vanguard Australian Shares Index ETF (VAS) became the first Australian ETF to have over $15 billion in AUM, cementing its long-standing position as Australia’s largest and most popular ETF*.

Vanguard continues to maintain the top spot in the Australian ETF industry as the largest ETF issuer by AUM, with $55.42 billion (29% market share).

Bond ETF Inflows Recede

After record investment inflows into bond ETFs in 2023, total inflows into the fixed interest ETF category declined over the March quarter from the levels recorded in Q4 2023.

Australian fixed interest ETFs recorded inflows of $694 million compared with $764 million in the three months to 31 December 2023, while international fixed income ETFs received inflows of $108 million compared with $401 million over the previous quarter.

“The strong inflows into fixed interest ETFs that we witnessed last year reflected global expectations for higher bond returns over the longer term,” said Mr DeSanctis. “Those expectations haven’t changed, but it’s evident from the latest quarterly inflows that there is a strong focus on equity markets, particularly international markets.”

*Based on assets under management as at 31 March 2024.

Australian ETF Market Net Cash Flow by Asset Class (Q1 2024 v Q4 2023)

Asset Class	Q1 2024 Cash Flow ($m)	Q4 2023 Cash Flow ($m)
International equity	2,647	1,930
Australian equity	1,484	1,899
Australian Fixed Income	694	764
Commodity	-112	32
International fixed income	108	401
Cash	-21	191
Multi asset	75	-5
Infrastructure	308	-50
Australian property	-27	66
International property	134	106
Currency	-6	-19
Total	5,284	5,313

Source: Monthly ASX Investment Products data aggregated by quarter and by year.

Top 5 Vanguard Australia ETFs by Cash Flow (Q1 2024)

Product	ASX Code	Cash Flow ($m)
Vanguard MSCI Index International Shares ETF	VGS	339
Vanguard Australian Shares Index ETF	VAS	283
Vanguard Australian Shares High Yield ETF	VHY	93
Vanguard All-World ex US Shares Index ETF	VEU	92
Vanguard Global Aggregate Bond Index (Hedged) ETF	VBND	81

Source: Monthly ASX Investment Products data aggregated by quarter.

Important Information

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (“Vanguard”) is the issuer of the Vanguard® Australian ETFs. Vanguard ETFs will only be issued to Authorised Participants. That is, persons who have entered into an Authorised Participant Agreement with Vanguard (“Eligible Investors”). Retail investors can transact in Vanguard ETFs through Vanguard Personal Investor, a stockbroker or financial adviser on the secondary market.

We have not taken your objectives, financial situation or needs into account when preparing this publication so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for Vanguard’s products before making any investment decision. Before you make any financial decision regarding Vanguard’s products you should seek professional advice from a suitably qualified adviser. The Target Market Determination (TMD) for Vanguard’s ETFs includes a description of who the ETF is appropriate for. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. You can access our IDPS Guide, PDSs Prospectus and TMD at vanguard.com.au or by calling 1300 655 101.

You may not be in the target market for the above products. Please consider your risk appetite and the target market determination before investing.

Any investment is subject to investment and other known and unknown risks, some of which are beyond the control of VIA, including possible delays in repayment and loss of income and principal invested. Please see the risks section of the PDS for the relevant VIA product for further details. No Vanguard company, nor their directors or officers give any guarantee as to the performance or rate of return of any Vanguard product, amount or timing of distributions, capital growth or taxation consequences of investing in the relevant product. The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities. The prospectus or the Statement of Additional Information contains a more detailed description of the limited relationship MSCI has with Vanguard and any related funds.

Posted in Diversification, Economic Insights, Financial Planning, Investment Strartegies, Market Trends, May Vanguard, Vanguard Insights | Tagged Australian ETF Market, ETFs, Financial Planning, International Equity ETFs, Investment Trends, Market Insights, Vanguard Investments | Comments Off

Surviving the Chilly Melbourne Winter

Posted on June 20, 2024 by Arrowroad

The arrival of winter in Melbourne brings a distinct chill in the air, shorter days, and a need to adjust to the cold. While the season has its own charm, it can also be a challenging time, leaving many feeling a bit down. Here are some tips to help you thrive during the chilly Melbourne winter.

Embrace the Winter Blues

It’s not uncommon to feel a bit low during the winter months. The shorter days and colder temperatures can contribute to feelings of lethargy and sadness. Here are some ways to combat these winter blues:

Exercise Regularly Daily exercise, even a brisk walk around the block, can work wonders for your mood and energy levels. If the weather is too harsh, consider indoor activities like yoga or joining a local gym. Regular physical activity can help boost your spirits and keep you active.

Get Plenty of Sleep Maintain a consistent sleep routine. With the days being shorter, it’s important to ensure you get enough rest to avoid feeling fatigued. Create a cozy bedtime routine that promotes relaxation and a good night’s sleep.

Eat and Drink in Moderation Winter often brings cravings for comfort food and hot drinks. Enjoy these treats in moderation to avoid feeling sluggish. Opt for balanced meals that include plenty of vegetables and fruits. Warm soups and stews can be both nutritious and comforting.

Plan Ahead for Winter Activities

The winter months can feel long if you don’t have something to look forward to. Planning ahead can make a big difference in your overall mood and enjoyment of the season.

Create a Winter Bucket List List out activities you’d like to do during the winter months. This could include visiting winter markets, trying out new recipes, or taking a weekend getaway to a cozy cabin.

Engage in Indoor Hobbies Winter is the perfect time to pick up a new hobby or rekindle an old one. Whether it’s knitting, reading, or painting, having an indoor activity can keep you entertained and mentally stimulated.

Stay Connected Socializing can help lift your spirits during the colder months. Plan regular catch-ups with friends and family, whether it’s a coffee date or a movie night. Staying connected can make a big difference in your mood.

Manage Winter Expenses

Winter can bring additional expenses, from heating bills to winter clothing. Here are some tips to manage your finances during this time:

Budget for Heating Costs Plan ahead for higher heating bills. Consider setting a budget for your energy use and look into ways to make your home more energy-efficient, such as using draft stoppers and heavy curtains.

Shop Smart for Winter Gear Invest in quality winter clothing that will keep you warm. Look for sales and discounts, and consider second-hand stores for good deals on winter wear.

Avoid Unnecessary Spending It’s easy to indulge in online shopping during the colder months. Stick to your budget and avoid impulse purchases. Make a list of necessary items and prioritize those over wants.

Seek Support When Needed

Winter can be tough, and it’s important to seek help if you’re struggling emotionally or financially.

Reach Out for Help If you’re feeling overwhelmed, don’t hesitate to reach out for support. Organizations like Lifeline Australia (13 11 14) and Beyond Blue (1300 22 46 36) are available to help. Sometimes, just talking to a friend over coffee can make a big difference.

Financial Advice If winter expenses have put a strain on your budget, consider speaking to a financial adviser or counselor. They can help you create a plan to manage your finances effectively.

By taking proactive steps, you can not only survive but thrive during the Melbourne winter. Stay warm, stay active, and stay connected.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice, or invitation to purchase, sell, or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

Posted in Community & Engagement, Healthy Living, Lifestyle, Lifestyle & Well-being, Mental Health | Tagged Cold Weather, Emotional Well-being, Healthy Living, Melbourne Winter, Mental Health, Seasonal Affective Disorder, Seasonal Blues, Self-Care, Staying Warm, Winter Activities, Winter Tips, Winter Wellness | Comments Off

Work, life, travel – you can do it all!

Posted on June 20, 2024 by Arrowroad

Michael was twenty-something and eager for adventure when he spotted the advertisement. It read, “Japanese schools seeking English teachers. No experience necessary – we train you.” What followed changed Michael’s life forever as he successfully completed the organiser’s training program and embarked on a year of living and working in Japan.

Recent events have caused many to re-evaluate their life priorities and many dream of experiencing another country’s culture while earning a living.

In this age of internet connectivity, the work, life, travel proposition is very doable. In fact, most of us are now used to working effectively from home. Why can’t that home be in another country?

Maria is Greek and was living in Sydney with her Australian husband Peter when her elderly mother became ill. The couple visited Greece to care for Maria’s mum, and Peter was able to continue his Australian job online.

As we’ve discovered, working remotely isn’t possible for everyone so we’ve rounded-up a few alternative jobs you can do while travelling the world.

Travel writing: Good with words? Write travel articles or blogs and get paid for sightseeing and exploring new places.

Considerations: This highly competitive industry can be difficult to break into so have some cash behind you until you establish yourself. Stick to unusual or quirky locations; nobody needs another story about Rome’s Colosseum. Further, people rely on travel articles for their own holidays so write honestly. Provide insider tips and discuss risks.

Travel photography/video: Social media is a terrific showcase for your travel pics and videos. Team up with a writer, or write your own copy, to create travel blogs or narrated vlogs (video blogs).

Considerations: Photography and video tourism may be slow to start but opportunities include YouTube or Vimeo to present work. You might also think about publishing a coffee-table book once you’ve established a portfolio.

Housesitting: Get paid to mind peoples’ homes and care for their pets while they’re away.

Considerations: Housesitting opportunities are located via dedicated organisations like trustedhousesitters.com. You must provide a police check and references and pay a membership fee but you’ll be supported by the organisation as you travel the world. Housesitting doesn’t pay well but you’ll have no accommodation costs.

Hospitality: See the world through its hotels, restaurants, and bars. Opportunities exist worldwide, particularly if you have food and beverage experience.

Considerations: Traditionally a rite-of-passage for school leavers, these days, chefs, baristas, and hoteliers are gaining creditable experience in international establishments.

Other considerations

Research and plan carefully before jetting off. For example:

Contact the consulate of your intended country to understand what Visas are required and their terms and conditions.
Many countries impose age restrictions for those taking a working holiday.
Even if you’re not a resident or citizen, income may be subject to tax in the country in which it’s earned. You should also speak to your accountant about your Australian tax and superannuation obligations, particularly if you’re working remotely on your Australian job.
Take out travel insurance. Earning money doesn’t automatically grant you access to a country’s medical scheme.
Update your will and consider nominating a power of attorney to manage your affairs back home.
Notify your bank, you’ll need some savings to get started, and keep a cash back-up for emergencies. Holiday jobs can be low-paying so make sure you have an emergency fund handy as you may be living pay-to-pay.
Check out overseas job sites; websites like Seek and Indeed list jobs worldwide.

Australians are an intrepid lot and we live in an age of endless opportunities to explore the world and live the work-life-travel dream.

Do your homework and plan carefully; your new adventure could be just over the horizon.

The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.

Posted in Career Development, Financial Planning, Lifestyle, Lifestyle & Well-being, Travel Tips | Tagged Cultural experiences, Digital nomads, International job opportunities, Living abroad, Remote job tips, Remote Work, Travel and work, Travel jobs, Work-life balance, Working holiday | Comments Off

Fin-fluencer or financial adviser

Posted on June 20, 2024 by Arrowroad

While Kim Kardashian attracts attention everywhere she goes, she recently caught the eye of the US Securities and Exchange Commission and was fined over $2 million for making one of her popular posts.

Her offence? Encouraging followers to invest in cryptocurrency without disclosing she had been paid almost $400,000 for doing so.

The case highlights the problem for people trying to make their own investment decisions and possibly being influenced by a raft of newly emerging so-called ‘fin-fluencers’. People who post investment advice online without a licence.

While it’s tempting to go it alone and not seek out professional advice, research suggests do-it-yourself investors are significantly worse off than those who do take the time to obtain quality advice, tailored to their particular situation.

According to a study conducted in 2016 by the US-based Vanguard Investments, financial planners have the potential to add up to three percent to the net returns they achieve for their clients. This compounded over your lifetime of investment can make a huge difference to your lifestyle.

The study found they did this by embracing various complex strategies including locating lower-cost investments, better managing the investments, and assisting clients in developing and sticking to financial plans.

These findings were also supported by research from the Queensland University of Technology. Clients of financial planners were surveyed twice, 15 months apart, to assess the impact of financial advice over time. It found clients’ satisfaction with their financial situation grew 12 per cent on average during this period. Additionally, clients who had been using a financial planning service for longer than this, believed they were in a much better financial position as a result of this advice.

So, what are the key advantages of using a financial adviser as opposed to trying to go it alone?

As financial planners, we are highly qualified and experienced professionals who spend their professional lives working in and around financial markets.

We are not influenced by Kim Kardashian or other would-be influencers, who may or may not know what they are talking about and who certainly don’t know if a certain investment is suitable let alone the most appropriate option for each individual investor.

Importantly, as a financial planner, we spend time determining exactly what clients are hoping to achieve in managing their finances and their life goals, and we work to develop a strategy that is tailored to each client’s specific needs.

We understand your attitude to risk and how much risk you are comfortable with, in addition to determining which investments are most appropriate given your risk tolerance.

We bring a thorough understanding of how financial markets work and strategies suited to meeting short-, medium- and long-term client outcomes, and so are able to better protect our client’s financial positions over time.

Advisers support their clients through challenging times when clients may not know exactly what they should be doing with their money or how they should be responding to one-off events, such as falling markets or a spike in interest rates. It’s during these times that unadvised investors are most likely to make decisions that will negatively impact their financial future.

We help give our clients the financial peace of mind to get on and enjoy their life.

So, while Kim Kardashian might be a great source of advice next time you want fashion or beauty tips, when it comes to investing your hard earnt savings, it’s best to rely on professionals who know what they are doing and have your best interests at heart.

Posted in Consumer Behavior, Economic Insights, Financial Literacy, Financial Planning, Financial Wellness, Investment Strartegies, Legal Advice, Personal Finance | Tagged Cryptocurrency, DIY Investing, Financial Goals, Financial Markets, Financial Peace of Mind, Financial Planning, Finfluencers, Investment Advice, Kim Kardashian, Long-term Strategy, Professional Advice, Queensland University of Technology, Risk Management, SEC, Vanguard Investments | Comments Off

Cybersecurity – Identity theft and prevention

Posted on June 20, 2024 by Arrowroad

The Scam Statistics continue to alarm us. The ACCC’s Scamwatch received more than 95 578 reports from January to April this year. Many of these individuals have fallen victim to identity theft.

Identity theft is when someone gains access to your personal information to steal money or gain other benefits. They can create fake identity documents in your name, get loans and benefits or apply for real identity documents in your name, but with another person’s photograph².

Once your identity has been stolen it can be difficult to recover and the financial and emotional consequences can be devastating for victims.

What type of information do cybercriminals try to steal?

A cybercriminal may look to steal a range of personal information including:

Name.	Date of birth.
Driver’s licence number.	Address.
Mother’s maiden name.	Place of birth.
Credit card details.	Tax file number.
Medicare card details.	Passport information.
Personal Identification Number (PIN).	Online account username and login details.

How do you know if your identity has been stolen?

Look out for these common warning signs:

Your bank statements show purchases or withdrawals you have not made.
You stop receiving mail you may be expecting (e.g., electricity bills) or receive no mail.
You receive bills or receipts for things you haven’t purchased or statements for loans or credit cards you haven’t applied for.
A government agency may inform you that you are receiving a government benefit that you never applied for.
You have been refused credit because of a poor credit history due to debts you have not incurred.
You may be contacted by debt collectors.

How you can help protect yourself and your family

Cybercriminals can learn a lot about you from your social media accounts. Here are some tips to help protect yourself and your family:

Limit what you share online. Reconsider sharing information on social media like your birthday, photos of a new house that include your address, photos that identify your children’s school, or details of schools you attended. These details are often used for security questions on financial and other important accounts.
Set your social media privacy settings to ‘private’. Ensure you’re only sharing your photos and posts with people you know and trust.
Don’t accept ‘friend’ requests from strangers.
Always manually verify official website addresses, and never use links from messages. Cybercriminals often impersonate well-known organisations and ask you to confirm your personal details via messages or websites. Because of this, many companies now state they will not ask you to update or confirm your details, like passwords, PINs, credit card information, or account details via links in messages.
Think twice before entering your personal details into a website you’re not familiar with.
Use strong, unique passwords (passphrases) for each online account. Cybercriminals crack weak passwords – there’s even software that guesses billions of passwords per second!
Keep your devices updated with the latest software, including antivirus software. Installing software updates will give you the latest security. You can even set updates to install automatically. Cybercriminals use bugs in software (known as malware) to gain access to devices.

Don’t use Wi-Fi hotspots or free Wi-Fi when you are doing something personal or sensitive on the internet as the Wi-Fi may not be secure. Learn more about using public Wi-Fi networks securely.
Regularly check your account statements including credit cards, bank statements, telephone and internet bills for possible fraudulent activity.
Check your credit report at least once a year to help you catch any unauthorised activity.
Be alert offline too. Always lock your mailbox and shred any sensitive documentation you no longer need. Be wary of phone calls that ask for your personal information. Be wary of people trying to view your PIN while you are using ATMs and making other purchases.

What to do if you think your identity has been stolen

If you suspect any fraudulent use of your identity, there are some steps you should take:

Immediately report it to your bank, local police, social media account’s website, or other online accounts that you may be concerned have been hacked into (these sites usually have a ‘Help’ section where you can report fraudulent activity to and seek help).
Lodge a report with the Australian Cyber Security Centre’s ReportCyber.
Change the passwords on your accounts and close any unauthorised accounts.
Request a credit report from a reputable credit reference bureau. A credit reporting body must give you access to your consumer credit report for free, once every 3 months.

Learn more and get help

IDCare is Australia and New Zealand’s national identity support service. IDCare offers personalised support to individuals who are concerned about their personal information. Find out more about IDCare by visiting www.idcare.org.

The Australian Cyber Security Centre, www.cyber.gov.au/acsc, is a government initiative with some great resources to help protect yourself and your business online.

Posted in Consumer Behavior, Cyber Security, Financial Health, Financial Wellness, Personal Finance, Support Services | Tagged Cybersecurity, Data Breach, Financial Security, Fraud Prevention, Identity Theft, Internet Safety, Online Privacy, Online Safety, Personal Information Protection, Scams | Comments Off

Why You Should Mind Your ETPs and Other Investing Acronyms

ASX: (Australian Securities Exchange)

ETPs: (Exchange Traded Products)

ETFs: (Exchange Traded Funds)

MFs: (Managed Funds)

Other Fund Acronyms

General Advice Warning

The Advantages of Investing Early

Investing: Risky Business?

Time is on Your Side

The More Time You Have, the More You Benefit from Compounding

A Caveat: Reinvesting is Key

General Advice Warning

How to Build Financial Trust Across Generations

The Intergenerational Wealth Opportunity

Building Trust Across Generations

Key Considerations for Advisers

Conclusion

General Advice Warning

The Importance of Inheritance Planning

Why You Need a Will

General Advice Warning

Retirement costs have spiked

The benefits of good retirement planning

General advice warning

Embrace the Winter Blues

Plan Ahead for Winter Activities

Manage Winter Expenses

Seek Support When Needed

Categories

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