Smart Investing
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The Chinese calendar says this is the year of the dragon. Less auspicious perhaps but for Australian investors this is shaping up as the year of fixed income.
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By taking a few simple steps, super fund members can both boost their retirement savings and legally minimise tax on their super – for themselves and their beneficiaries.
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Self-managed super funds seem set to remain by far the preferred superannuation choice among higher-balance members – particularly those in retirement.
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This is a question that many investors are, not surprisingly, asking themselves. But what might surprise some investors is that the answer is not as elusive as it may at first seem.
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Changes to the ASX operating rules to allow fixed income Exchange Traded Funds (ETFs) to trade on the Australian market will open a new means for investors to efficiently, conveniently and inexpensively diversify their investment portfolios.
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News & Commentary
Crossing savings: Vanguard 'spreads' the benefits 11 Sep 08
Investors in Vanguard's index funds and pooled superannuation trusts (PSTs) saved over $5 million through 'crossing savings', or reduced transaction costs, over the year to 30 June 2008 and the benefits will continue into the current financial year.
A 'crossing' or 'special spread' saving occurs when monies to be invested in a Vanguard fund are used to meet client withdrawals received on the same day.
Vanguard investors benefit directly from the savings. Each investor who buys or sells
Vanguard units on the day a crossing occurs receives a saving via a reduction in the normal buy and sell spreads. Buyers get more units for their investment monies and sellers get more dollars for the units they withdraw.
Buy/sell spreads represent the costs Vanguard experiences when transacting such as brokerage, custody and market impact. The buy/sell spreads protect existing investors from the costs associated with transaction activity of other investors.
'Vanguard believes that the cost savings from crossings should be passed on to those investors who generate the crossing opportunities,' said Mr Ian Alcock, Head of Vanguard Australia.
'We reduce the spreads on days where there are applications and withdrawals of
$500,000 or more for a wholesale index fund or PST rather than allowing the cost savings to flow to all investors in those funds.'
The saving is achieved because Vanguard doesn't need to buy or sell securities on-market to the extent that a crossing occurs between Vanguard clients. Thus, the trading costs of buying and selling securities are lower than normal given the overlap between the securities Vanguard clients want to buy and sell.
While normal crossings will continue to occur on other business days, clients may use the monthly crossing days (scheduled for this year on September 16, October 20, November 17 and December 15) to try and increase the possibility of benefiting from a crossing saving by timing their transactions to occur on that day.
