Late to the party

Starting your investment journey at 40 with a focus on long-term growth is a commendable decision. With your plan to invest $2,000 initially and then continue with $1,000 monthly, you’re setting a solid foundation for building your portfolio.

Regarding your query about VDHG versus a ⁷⁰⁄₃₀ split of VGS/VAS, let’s address each of your questions:

1. Tax Issues: Both VDHG and a VGS/VAS split are subject to similar tax considerations as they are both Australian-domiciled ETFs. This means any dividends received will be subject to Australian tax laws, including franking credits where applicable. Capital gains tax would also apply to any profits made upon selling shares of either ETF.

2. Bond Inclusion: VDHG is an all-in-one diversified ETF that includes a mix of stocks and bonds, making it a convenient choice if you prefer a single investment that covers both asset classes. On the other hand, VGS (Vanguard MSCI Index International Shares ETF) and VAS (Vanguard Australian Shares ETF) are purely equity funds. VGS focuses on international shares, while VAS focuses on Australian shares. If you opt for a ⁷⁰⁄₃₀ split of VGS/VAS, you would need to purchase an additional bond ETF if you want bond exposure in your portfolio.

3. Performance Comparison: Comparing the performance of VDHG with a ⁷⁰⁄₃₀ split of VGS/VAS over time can be insightful. While specific performance data can fluctuate, generally, VDHG might have slightly lower returns due to its bond component, which typically has lower returns than stocks in the long run. However, it also potentially offers lower volatility due to this diversification. For detailed performance comparison, you might want to look at historical performance charts on financial news websites, investment platforms, or directly from Vanguard’s website.

Given your preference for a ‘set and forget’ approach with m

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Hi Tim.

Tax issues: No, VAS/VGS doesn’t have the same tax issues as both are ETFs, whereas VDHG has the ‘managed fund’ versions of indexes in its portfolio, and these are what are less tax efficient.

Bonds: No, VAS and VGS do not include bonds at all in thehir portfolios, stocks only.

Performance: I’m not sure of a way to do that easily without having a premium software plan like Navexa or Sharesight and doing backtests. I’d say this is far less useful than picking the option that will suit your investing style best, and VDHG hasn’t been around long enough for you to compare a two-fund portfolio against it accurately and fairly.

They’re both fantastic options at the end of the day so it’s unlikely you’ll have much trouble or annoyance either way :)

Cheers, Dave