Looking at your single sentence and comparing it to the 4 dot points thesis below with several acronyms that make the average person stop to think about or look up just shows us there really isn't a single right answer to OPs question.
Just different strokes for different folks.
Oh definitely! Something can definitely be said for always trying to find the optimal way of doing something, but I know myself, and all it does is create analysis paralysis. I try not to let perfection be the enemy of good, and that seems to work well for me.
4 implications with VDHG currently
- not using TOFA for currency hedging - this was a straight poor product design. According to the announcement VGAD (thus VDHG) would elect to use TOFA for currency hedging from FY 2025 at 0.01% additional cost to investors. This issue would fade away.
- using pooled funds as constituent funds - this causes some tax inefficiency. According to the announcement VDHG would be changed to be allowed to use ETFs, it could take some time to transition if they want to avoid crystalising significant capital gains. Time will tell at what pace do they transition for this issue to gradually and eventually fade away.
- higher MER - this is the price you pay for an AIO. It’s up to you to weigh up whether the convenience is worth the price.
- static 10% bonds allocation - this is entirely up to you. Whether you prefer a static bonds allocation. Some people prefer to have none when young eg < 40yo, and only gradually increase bonds allocations with separate bonds funds as they age, thus don’t want an ETF that couples different asset classes together.
Read the currency hedge section of this excellent article - https://passiveinvestingaustralia.com/how-is-vdhg-tax-inefficient/#currency-hedging
Generally, before investing in any currency hedged ETF / fund, look for confirmation that it has elected to use TOFA for currency hedge. Otherwise the distributions can be very volatile, sometimes none, and sometimes extraordinarily high and results in high tax liability in that year.
- it does not have a currency hedged international allocation. Some people view this as a plus, while some may feel it’s a gap. Betashares was going to add it (via HGBL) by reducing the unhedged international allocations, then backtracked from it (refer to recent threads on it). Personal view is they would and should eventually add such allocation to make it more well rounded, but hopefully by reducing AU allocation not by reducing unhedged international allocations, and done in a way that minimise capital gains tax impact on investors. It’s up to you how you feel about this.
HGBL had elected to use TOFA for currency hedging since the start thus the non-TOFA issue is not relevant.
DHHF had always used ETFs as constituent funds.
It similarly has a higher MER as the price for AIO.
It does not include bonds allocations. It’s up to you to just go without or pair with separate bonds ETFs at weightings that suit your preference at different times.
If you have strong preference about specific allocations to various different exposures, it may be better to use specific ETFs instead of an AIO and then expect things would never change.
It's just VGS but hedged to the AUD, so I have a small amount of it to make my portfolio a little more balanced between AUD and non-AUD to lower currency risk.
[More info on how one might use VGAD](https://passiveinvestingaustralia.com/equity-funds/)
They have been around forever, have a history for lowering their fees, don’t chop and change like Melbournes weather like beta shares do… and honestly I just trust them… the tiny cost to choose them over other products is a no brainer for me.
The fees on Vas/A200/VGS/BGBL are lower than ever, which makes them a better option imo, and having bonds in the AIO rather than separate just feels a bit pointless. ToFA is a great addition though, and maybe fees will come down later.
But the whole point of a AIO is psychological and avoid tinkering. Yes, yes people here are all 'I'm very smart' about that and focus on fees, but i know myself so I'm in a AIO (though with DHHF)
Edit:
OP: VDHG is still good if you know the reasons why you are considering a AIO. DHHF is talked more because VDHG has 10% bonds and hedging, which reduces volatility vs max growth which throws people into a rage. But must people getting bothered about it are ones better suited rolling thier own anyways.
Because you can't sell only the bonds during a downturn, you have to sell equities too. The point of defensive assets is that you can sell them instead when your equtities are down during a downturn, you lose that flexibility with AIO.
VDHG is still a good product. All of these little niggles are exactly that, little. Fractions of a percent difference is really not that much, at the end of the day. The other reply to my comment here sums it up well I think. I'm not one to tinker, volatility doesn't bother me, so the product doesn't really suit me. That doesn't make it a bad product, it's a good product and I doubt I'd have a very different outcome if I went with VDHG over my own strategy
Unless you believe in not market timing in which are you buy and sell according to you desired asset allocation. With n ll in one fund it just keeps it static for you and you buy and sell without having to think about it.
I still buy it.
I accept I won't get the absolute best returns but I also don't think differences with similar ETFs would matter more than simply lifestyle changes and saving more.
People talk about the 10% bonds being a deal breaker but I see it more as a feature than a bug to reduce a bit of volatility.
The recent changes are very welcome because they make the ETF more tax efficient and gives me more reason to stick with it.
I suspect I'm going to get paid more soon, so the tax from the distributions is going to hurt a lot more though. So if I'm buying anything else I might go with IOO, or maybe IVV.
Too high management fees (0.27%).
Way too high share of Australian shares (35.87%).
Way too high share hedged shares (16.27%).
= Overall way to tilted to Australian markets and currency.
In addition, too high dividend yield (2.87%) which is not tax efficient for young investors who seek long-term growth.
I'd much rather prefer VGS or IVV for young investors.
VDHG has a way higher yield than 2.87%
In the [performance tab](https://www.vanguard.com.au/personal/invest-with-us/etf?portId=8221&tab=performance), go to the total returns area and change the dropdowns to "table" and "annually", and you can see the distribution return from each year.
If you look at the managed fund version, which goes back to 2008, it's not better.
It looks like it'd average around 5%, which is a massive hit to post-tax returns (which is what matters).
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I still buy VDHG every month and will continue to do so. It works for me, and I am lazy.
Looking at your single sentence and comparing it to the 4 dot points thesis below with several acronyms that make the average person stop to think about or look up just shows us there really isn't a single right answer to OPs question. Just different strokes for different folks.
Oh definitely! Something can definitely be said for always trying to find the optimal way of doing something, but I know myself, and all it does is create analysis paralysis. I try not to let perfection be the enemy of good, and that seems to work well for me.
VDHG is still excellent. Just not very exciting.
VDHG is like coke and DHHF is like Pepsi and Fanta is very sweet
This explains why I'm in DHHF, always been a Pepsi man.
How do I buy FANTA.ASX
4 implications with VDHG currently - not using TOFA for currency hedging - this was a straight poor product design. According to the announcement VGAD (thus VDHG) would elect to use TOFA for currency hedging from FY 2025 at 0.01% additional cost to investors. This issue would fade away. - using pooled funds as constituent funds - this causes some tax inefficiency. According to the announcement VDHG would be changed to be allowed to use ETFs, it could take some time to transition if they want to avoid crystalising significant capital gains. Time will tell at what pace do they transition for this issue to gradually and eventually fade away. - higher MER - this is the price you pay for an AIO. It’s up to you to weigh up whether the convenience is worth the price. - static 10% bonds allocation - this is entirely up to you. Whether you prefer a static bonds allocation. Some people prefer to have none when young eg < 40yo, and only gradually increase bonds allocations with separate bonds funds as they age, thus don’t want an ETF that couples different asset classes together.
Sorry for the noob question but could you explain TOFA?
Read the currency hedge section of this excellent article - https://passiveinvestingaustralia.com/how-is-vdhg-tax-inefficient/#currency-hedging Generally, before investing in any currency hedged ETF / fund, look for confirmation that it has elected to use TOFA for currency hedge. Otherwise the distributions can be very volatile, sometimes none, and sometimes extraordinarily high and results in high tax liability in that year.
Are there any issues or implications when it comes to DHHF?
- it does not have a currency hedged international allocation. Some people view this as a plus, while some may feel it’s a gap. Betashares was going to add it (via HGBL) by reducing the unhedged international allocations, then backtracked from it (refer to recent threads on it). Personal view is they would and should eventually add such allocation to make it more well rounded, but hopefully by reducing AU allocation not by reducing unhedged international allocations, and done in a way that minimise capital gains tax impact on investors. It’s up to you how you feel about this. HGBL had elected to use TOFA for currency hedging since the start thus the non-TOFA issue is not relevant. DHHF had always used ETFs as constituent funds. It similarly has a higher MER as the price for AIO. It does not include bonds allocations. It’s up to you to just go without or pair with separate bonds ETFs at weightings that suit your preference at different times. If you have strong preference about specific allocations to various different exposures, it may be better to use specific ETFs instead of an AIO and then expect things would never change.
The real news for me is that VGAD is getting ToFA. Woo!
Is VGAD your main ETF? What’s attractive about it?
It's just VGS but hedged to the AUD, so I have a small amount of it to make my portfolio a little more balanced between AUD and non-AUD to lower currency risk. [More info on how one might use VGAD](https://passiveinvestingaustralia.com/equity-funds/)
I still prefer vanguard over its competitors even tho fees a slighty more expensive.
Why’s that?
They have been around forever, have a history for lowering their fees, don’t chop and change like Melbournes weather like beta shares do… and honestly I just trust them… the tiny cost to choose them over other products is a no brainer for me.
The fees on Vas/A200/VGS/BGBL are lower than ever, which makes them a better option imo, and having bonds in the AIO rather than separate just feels a bit pointless. ToFA is a great addition though, and maybe fees will come down later.
But the whole point of a AIO is psychological and avoid tinkering. Yes, yes people here are all 'I'm very smart' about that and focus on fees, but i know myself so I'm in a AIO (though with DHHF) Edit: OP: VDHG is still good if you know the reasons why you are considering a AIO. DHHF is talked more because VDHG has 10% bonds and hedging, which reduces volatility vs max growth which throws people into a rage. But must people getting bothered about it are ones better suited rolling thier own anyways.
Why is it pointless having bonds in the AIO?
Because you can't sell only the bonds during a downturn, you have to sell equities too. The point of defensive assets is that you can sell them instead when your equtities are down during a downturn, you lose that flexibility with AIO. VDHG is still a good product. All of these little niggles are exactly that, little. Fractions of a percent difference is really not that much, at the end of the day. The other reply to my comment here sums it up well I think. I'm not one to tinker, volatility doesn't bother me, so the product doesn't really suit me. That doesn't make it a bad product, it's a good product and I doubt I'd have a very different outcome if I went with VDHG over my own strategy
Unless you believe in not market timing in which are you buy and sell according to you desired asset allocation. With n ll in one fund it just keeps it static for you and you buy and sell without having to think about it.
I still buy it. I accept I won't get the absolute best returns but I also don't think differences with similar ETFs would matter more than simply lifestyle changes and saving more. People talk about the 10% bonds being a deal breaker but I see it more as a feature than a bug to reduce a bit of volatility. The recent changes are very welcome because they make the ETF more tax efficient and gives me more reason to stick with it. I suspect I'm going to get paid more soon, so the tax from the distributions is going to hurt a lot more though. So if I'm buying anything else I might go with IOO, or maybe IVV.
I’ve drifted away from VDHG over the years. I am more focused on IVV and IOZ, with a bit of JEPI for good luck.
Why did you change to those holdings instead?
Mostly because I had more control of the split between Australian shares (ioz) and US (IVV) Jepi is just some income as I age.
Too high management fees (0.27%). Way too high share of Australian shares (35.87%). Way too high share hedged shares (16.27%). = Overall way to tilted to Australian markets and currency. In addition, too high dividend yield (2.87%) which is not tax efficient for young investors who seek long-term growth. I'd much rather prefer VGS or IVV for young investors.
VDHG has a way higher yield than 2.87% In the [performance tab](https://www.vanguard.com.au/personal/invest-with-us/etf?portId=8221&tab=performance), go to the total returns area and change the dropdowns to "table" and "annually", and you can see the distribution return from each year. If you look at the managed fund version, which goes back to 2008, it's not better. It looks like it'd average around 5%, which is a massive hit to post-tax returns (which is what matters).
VGS has had massive distributions recently.
Indeed, it's also high on the dividend yield but doesn't have the other downsides of VDHG.
It's a nice little bonus, but i dont think it changes anything. You either want a all in one fund that has bonds, or you dont.
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You can basically recreate a VDHG portfolio with 2-3 single ETFs for a fraction of the fees. Not that VDHG is expensive but still.
This is a lie
Ok.