VDHG vs VAS-VEU-VTS

Hey Sarah!

Sorry for my delay. I wanted to take time to think about this great question.

Two things:
1) Be sure to see a financial adviser if you’re stuck or want to get personal advice. I can only offer general financial information. For example, my answer relates to the question ‘Is VDHG good or is it smarter to create my own combination?’ My advice is general only.

2) You should know I run a membership service that handles these questions all the time. It’s currently called Rask ETFs and it can be found here: https://www.rask.com.au/subscriptions

My response

Okay, first up, VDHG. If we assume there are 20 million Australians over 18 and only 15,000 financial advisers (and each one has, say, ~300 clients), that means there are 15 million adults who go without financial advice every year. With the cost of advice typically at least $3,000 – $5,000 there’s a HUGE audience for lower cost investment solutions…

Step up, Vanguard VDHG.

While investing is only one part of wealth creation it could just be the most important. While VDHG is the ‘high risk’ version of Vanguard’s diversified funds, the reason it’s the biggest of Vanguard’s diversified funds is that it is probably the most suitable option for investors with a long-term horizon (10+ years), given it has 90% growth assets and 10% defensive assets (e.g. bonds).

From where I sit, VDHG it probably the #1 ETF on the Australian market for this reason. It fills a huge need and, if I know Vanguard, will likely keep lowering its fees over the next 10-20 years. As Dave said in his comment, fees are a big deal. However, if an investor sells an ETF for a profit in the future, taxes will be paid. So even if VDHG isn’t the cheapest right now, it might be in 10 or 20 years. In that long-term case, it may make sense to consider VDHG now.

A very valid alternative to VDHG is BetaShares’ DZZF ETF. It’s also a diversified ETF (usin

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Hey Sarah. There are basically pros and cons to both options.

With the individual ETFs, it’s possible to save quite a bit on fees, which can become a lot with a big portfolio. But the downside is, there are more holdings to manage, the tax form, and even some tax drag/possible estate tax risks in the case of VEU/VTS. More info in this article, though it is a little technical: https://passiveinvestingaustralia.com/fund-do...

Another thing to consider is possible capital gains tax by selling out of current holdings if you decided to switch from one to the other.

In my opinion, there isn’t really a ‘best’ option. We each have to decide which approach makes the most sense based on the factors that matter the most to us. So have a think about it and see what you come up with.

Sorry for the ‘non-answer’ but I trust you understand :)

Hi Tamila,

Australian investors who buy ETFs domiciled in the United States (including ones listed on the ASX) will incur a 30% withholding US tax on any distributions.

Australian investors are generally eligible to reclaim some of this back as a foreign tax credit, but will need to complete a W8BEN form to reclaim a 15% foreign tax credit.

You will need to file and submit the W8-BEN via the responsible share registry. Check out this helpful blog to help with the process :)

So VTS is US domiciled even though I bought it on ASX, and I need the W8BEN form??