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Top 3 BEST Australian Index Funds/ETFs 2022 | Low Cost Vanguard ETFs For Passive Long Term Investing - YouTube
Channel: Bryan Invest
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in this video i will discuss my top three聽
favorite index funds and etfs in australia聽聽
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and why i think most people should聽
just stick to these ones in particular聽聽
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i will also explain what is an index fund聽
and why warren buffett himself recommends聽聽
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them for most people by the end of the聽
video you'll have a clear understanding聽聽
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of what index funds are and why they are聽
so powerful in creating passive income and聽聽
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long-term wealth i would encourage you to聽
watch all the way through because it may聽聽
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just change the way you think about investing聽
so if that sounds good let's roll the intro
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what is going on future millionaires welcome聽
back to my channel it's your boy brian bringing聽聽
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you another straight up educational video if聽
you're new to the channel my name is brian i'm聽聽
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an investor from australia who loves to talk about聽
personal finance and investing my motto is if it聽聽
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could make us money then i'm gonna talk about it聽
so if you haven't already click that subscribe聽聽
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button and the notification bell so you don't miss聽
any of my future content which is aimed at helping聽聽
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you create a long-term portfolio the right way all聽
right so let's get straight into today's topic and聽聽
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today we are talking about index funds and etfs聽
now you may have heard these terms being thrown聽聽
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around maybe at work by the water caller or with聽
friends at a party the two are kind of the same聽聽
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things but different an index fund is typically a聽
low-cost low-risk investment portfolio of shares聽聽
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that tracks the components of a financial market聽
index like the s p 500 which tracks the top 500聽聽
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u.s companies an index fund allows you to invest聽
in a basket of companies all under one stock聽聽
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they are very popular because they maximize聽
diversification and reduce risk in fact warren聽聽
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buffett himself has recommended most people聽
to invest in index funds because it makes聽聽
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more sense for the average investor to buy all聽
of the s p 500 companies at a low cost than to聽聽
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try and pick out individual stocks now that you聽
know what an index fund is what about an etf聽聽
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etf stands for exchange traded fund and is a type聽
of security that tracks an index sector or other聽聽
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assets when most people mention etfs they are聽
generally talking about an index fund as that is聽聽
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the easiest way for a person to buy an index fund聽
so essentially an etf mimics an index fund to find聽聽
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out if index funds are a good fit for you you must聽
first ask yourself what kind of investor are you聽聽
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usually there are two types of investors active聽
investors and passive investors an active investor聽聽
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is someone who is willing to put time and energy聽
into researching stocks and try to outperform the聽聽
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market passive investor on the other hand wants to聽
use the least amount of energy to research and is聽聽
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happy to accept the performance of the general聽
market therefore they prefer to invest in index聽聽
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funds i'm a bit of both with half my portfolio聽
in index funds for the long term and the other聽聽
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half in individual stocks amongst other assets聽
like crypto which i'll make a future video about聽聽
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but back to index funds and here's the crazy part聽
there have been several research done in the past聽聽
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which concluded that majority of professional聽
active investors aka the big mutual funds聽聽
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that are paid to invest other people's money聽
failed to beat the market in the long term聽聽
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therefore funny enough the strategy with the聽
least amount of effort required is statistically聽聽
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the better strategy and that is why i agree with聽
warren buffett when he says most people should聽聽
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just stick to an index fund and now i'll talk聽
about my three favorite index funds or etfs by聽聽
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vanguard and why i think they are suitable for聽
most australians of course please note i am not聽聽
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a financial advisor and the comments i make today聽
are for entertainment purposes only so you should聽聽
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just use the information i provide as a guide聽
to do your own research if you are interested聽聽
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in investing the first etf on my list is vas which聽
is the vanguard australian shares index etf this聽聽
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is australia's most popular etf for tracking the聽
australian market and for good reason this etf聽聽
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tracks the top 300 companies on the asx including聽
commonwealth bhp and woolworths it charges the low聽聽
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management fee of 0.1 percent which works out聽
to be one dollar for every one thousand dollars聽聽
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invested which honestly is peanuts when you聽
look at the bigger picture the thing i like聽聽
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about this etf more than other asx etfs is that聽
it tracks the top 300 companies instead of top 200聽聽
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like most others which adds another 100 smaller聽
cap shares just increases diversification while聽聽
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reducing the heavy concentration towards asx banks聽
and miners which the asx is generally famous for聽聽
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this etf generally pays out dividends four times聽
a year and since it is domiciled in australia聽聽
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you can choose to automatically reinvest聽
dividends which saves you brokerage fees and time聽聽
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not all vanguard etfs allow automatic dividend聽
reinvestment which i will discuss later on聽聽
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in terms of performance it has averaged about 11聽
percent in the last five years and about 10 since聽聽
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its inception in 2009. please note that these聽
figures assume you reinvest your dividends i would聽聽
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strongly recommend you reinvest your dividends聽
because that will help you compound your wealth聽聽
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faster the performance is about the same as what聽
the s p 500 returns in the long term and i believe聽聽
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if you stay disciplined and continue to dollar聽
cost average into this fund then you'll grow your聽聽
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wealth significantly in the long term it should be聽
noted that this etf is made up of dividend heavy聽聽
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companies like our big australian banks miners聽
and supermarkets which could be a good thing if聽聽
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you're a dividend investor and like having extra聽
income hit your bank account several times a year聽聽
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however please note you have to pay tax on these聽
dividends whether you reinvest them or not so聽聽
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please keep these things in mind if you decide to聽
invest in vas the next etf on my list is vgs which聽聽
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is the vanguard international shares etf which聽
tracks the entire global stock market excluding聽聽
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australia it's called international shares etf but聽
it's more like the us plus the rest of the world聽聽
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because the us makes up 70 of the wedding with the聽
next five highest countries from japan uk canada聽聽
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and france it holds 1500 of the world's best聽
companies including apple amazon google and nestle聽聽
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even though it tracks the global stock market it聽
is still dominant styled in australia which allows聽聽
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for you to automatically reinvest your dividends聽
the management fee is point eighteen percent which聽聽
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is a little bit high but it's not that bad聽
you are paying a dollar eighty for every one聽聽
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thousand dollars invested i'm more than happy to聽
pay this given how diversified this is in terms of聽聽
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performance vgs has returned about 15 in the last聽
five years and about 14 since inception in 2014.聽聽
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this is mainly due to the rise and growth聽
of big tech in the us in the last decade聽聽
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since this etf excludes australia if you combine聽
vgs with vas then you can essentially track the聽聽
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entire global market like i mentioned before聽
both these etfs are domiciled in australia which聽聽
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means you can auto reinvest the dividends聽
which makes it even more passive by nature聽聽
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in fact the vas and vgs combo is very popular聽
in the fire community because you are able to聽聽
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automatically reinvest your dividends and create聽
both growth and income in a truly passive way聽聽
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and i couldn't agree more with them this聽
is the combo i would recommend for most聽聽
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beginners especially if you are young and have聽
decades upon decades to compound your wealth聽聽
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the dividends are also not as high because it聽
is heavily weighted to the u.s market which in聽聽
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general is more high growth so share price聽
appreciation is the way this etf will grow聽聽
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rather than reinvesting of dividends like with聽
bas just consistently dollar cost average into聽聽
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these two etfs and you'll outperform the聽
majority of professional active investors聽聽
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the third etf is vdhg which is the vanguard聽
diversified high growth index etf and this聽聽
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etf is as diversified as you can get this is聽
because it is basically an etf or vanguard etfs聽聽
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because it contains 36 vas 42.4 percent vgs 7聽
bonds 6.4 percent bism which tracks the global聽聽
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small cap index five point one percent of vge聽
which tracks emerging markets especially in asia聽聽
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and three percent fixed interest the management聽
fee is point two seven percent which isn't the聽聽
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cheapest but for the sheer convenience of having聽
one etf track everything it's probably worth the聽聽
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fee this etf was only introduced in 2017 so it聽
is still relatively new nevertheless has returned聽聽
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about 11 in the last three years which makes sense聽
since it's heavily weighted between vas and vgs聽聽
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this etf is also very popular with the fire聽
movement and the australian finance community if i聽聽
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was ever forced to buy just one etf then this one聽
will probably be it if you don't want the headache聽聽
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of having to track two etfs and rebalance then聽
vdhe would be a great option for you it's the type聽聽
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of stock that you just buy and continue buying聽
then live off the dividends a few decades later聽聽
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the reason i don't personally own this etf is聽
their 10 exposure to bonds and fixed interest聽聽
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i feel like bonds and fixed interest is better聽
suited if you already have a large portfolio聽聽
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or close to retirement and looking for a bit of聽
capital preservation i like my etfs to be a bit聽聽
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more aggressive while i'm relatively young plus聽
i like having the ability to rebalance if i am聽聽
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more or less bullish about australia or the us you聽
can't do that with vdhd because the wedding will聽聽
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always be about the same nevertheless if you do聽
your own research and decide on this etf then it聽聽
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is a great choice i now want to talk about another聽
popular etf from vanguard that didn't make my list聽聽
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and that etf is vts which聽
tracks the entire us market聽聽
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the reason bts didn't make my top聽
three is because it has a few minor聽聽
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inconveniences for australian investors compared聽
to similar etfs that provide similar things聽聽
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number one is dominant sold in the us which聽
means it's more complicated to work out the tax聽聽
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number two since it is dominant sold in the u.s聽
it means unlike the etfs i previously mentioned聽聽
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you cannot set it to auto reinvest which to me聽
is a pain because then you are forced to take聽聽
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the dividend in your bank account and will聽
have to pay additional brokerage to reinvest聽聽
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number three you have to fill in the wa ben form聽
every three years which isn't the end of the world聽聽
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but it just adds another thing to the list and聽
moves the stock further away from the word passive聽聽
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however this is just me being picky and vts is聽
a great stock if you are a owner but my thinking聽聽
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is why settle for these inconveniences when there聽
are other options out there that provide similar聽聽
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things if you would like to buy an etf that purely聽
tracks the us then i would suggest looking into聽聽
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ivv which tracks the famous s p 500. this is聽
not a vanguard etf but rather from blackrock聽聽
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who has structured this etf in a way that you can聽
reinvest dividends and not have to fill out the w8聽聽
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bend form in addition although studies have shown聽
that s p 500 performs very similar to the entire聽聽
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u.s market over the long term i still prefer the聽
s p 500 out of the two and this is literally the聽聽
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fun that warren buffett is recommending for聽
most people another etf i want to mention聽聽
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which is actually my favorite is the nasdaq聽
100 etf by betashares that tracks the top 100聽聽
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tech companies in the us these include companies聽
like google facebook and tesla although big tech聽聽
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has run up high the last 18 months i can't聽
see it slowing down for the next decade聽聽
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it will eventually pull back but there are so many聽
quality companies in there that as a tech nerd it聽聽
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gets me excited just looking at it i feel like聽
this whole situation in the last 18 months has聽聽
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accelerated the acceptance and growth of tech now聽
it's worth noting that if you have vgs vdhd or ivv聽聽
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that a lot of the big tech companies like聽
your apple google facebook amazon microsoft聽聽
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already make up a large chunk of the etf so聽
there are some overlapping with the nasdaq 100聽聽
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i view the nasdaq 100 as a higher risk聽
higher award stock which focuses on聽聽
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tech which historically trades on a much higher聽
multiples meaning the market expects their company聽聽
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performance to match their higher premium on聽
their share price valuation this is why i didn't聽聽
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include it as one of the top three in addition聽
the management fee is a bit higher at 0.48聽聽
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which is a little bit high again i see the nasdaq聽
100 as a higher risk higher reward etf and if聽聽
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you're still relatively young and want a more聽
aggressive etf then this could be a great option聽聽
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it is also australian dolmen sold so聽
you can auto reinvest the dividends聽聽
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personally i own vas vgs and nasdaq 100聽
because i want a bit more exposure into tech聽聽
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but again please keep in mind that tech is聽
currently trading at a very high valuation聽聽
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if you are interested in this nasdaq 100 etf i聽
would suggest using comstec pocket app to buy as聽聽
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it's one of the seven ets listed on their platform聽
and they charge a cheap two dollars brokerage per聽聽
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trade up to one thousand dollars and because you聽
stayed this far into the video i'm going to show聽聽
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you a bonus tip on how to reinvest your dividends聽
automatically it's actually pretty simple you just聽聽
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have to register to the shared registry after聽
buying their stock you can find this information聽聽
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by searching for your stock on the asx site聽
for example vanguard uses computer shares for聽聽
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the share registry so you can register there and聽
set up your address bank account and reinvestment聽聽
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plans it's that simple so to summarize everything聽
if you are a beginner to etf and want an idea of聽聽
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what to buy i would recommend looking at either聽
the vas and vgs combo or keep it simple and stick聽聽
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with bdhe if you're interested in purely the聽
us market then i would recommend looking into聽聽
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ivv and the nasdaq 100 look you don't have to make聽
investing complicated creating long-term wealth is聽聽
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actually quite easy the hard part is staying the聽
course and being disciplined so research these聽聽
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etfs and if you do decide to invest then dollar聽
cost average and stay consistent it may sound聽聽
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simple but if you stick to this consistently then聽
you will create long-term wealth i hope this video聽聽
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helped you out and please don't forget to like聽
comment and subscribe and turn on the notification聽聽
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button so you don't miss any future videos to come聽
i have so much more useful content planned and you聽聽
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don't want to miss them so until next time my聽
name is brian and i hope you make a lot of money
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