Question 1: I plan to buy both IHVV and HNDQ on a pullback, should it materialise over the next few weeks. I would appreciate your advice and foresight on whether I should buy these two ‘currency hedged’ ETFs or buy the unhedged versions of both funds. Prefer to play it safe.
Answer: I would certainly buy the currency hedged versions of the product. IHVV, which tracks the US S&P 500 index, or HNDQ, which tracks the NASDAQ 100. The non-currency hedged versions are IVV and NDQ respectively. The only downside with the currency hedged version is that the management fee is marginally more expensive.
Of course, if you’re expecting the Australian dollar to depreciate, then don’t worry about currency hedging and stick with IVV or NDQ, But I think the risk is the other way, that is, the Australian dollar should appreciate over the medium term because:
- The $A is way below the long term “run-rate”/ trade weighted fair value of about 0.75;
- The gap between US interest rates and Australian interest rates should narrow; and
- Over the medium term, the US fiscal outlook is considerably poorer than Australia.
If you want to play it safe (noting that you will forgo any upside if the $A weakens), go with the currency hedged versions.
Question 2: In his 2GB segment, Peter was promoting the virtues of investing in the share market. I realise there can be dividend income that results from doing this, but I question the capital gains. In November 2007, the All Ords was 6870. Today it is about 7420. Not a great deal of capital gain over a 16-year period?
Answer: With respect, I think you’re being a bit selective…taking the pre 2007 crash high to compare to today. I could also be “selective” and take the Covid 19 low of 4854 on 20 March 2020 to today of 7420 – that looks like a pretty decent return, 53%! More importantly, you can’t ignore dividends because they are worth more than 4% in a total return sense (and with franking credits), another 1.5%. For the record, here are the returns over the last 1, 3, 5 and 10 years (to 31 August 2023) including dividends: 1 year: 9.56%; 3 years: 10.68% pa; 5 years: 7.01% pa and 10 years: 7.77% pa.
Question 3: I have had a holding of 500 Newcrest shares. I’m aware that as of Oct 27 they will most likely be taken over by Newmont. As part of the takeover, I will receive a fully franked dividend of US$1.10 per share. My question is that if I was to double up prior to that date (extra 500 shares), would those extra shares be entitled to the same US$1.10 dividend?
Answer: Yes. It is a strategy, but you should note that the ASX price of Newcrest is professionally traded, meaning that most of these factors are priced in. The franking credits are potentially not fully valued. Newcrest will trade ‘ex’ the special dividend on Thursday 18 October, so you would need to buy the shares on or before Wednesday 17 October.
Question 4: I have a son-in-law who works 60 -70 hours a week as a sub- contractor. The project manager is an ASX listed company who subs work to another company who then subs work to my son in law and others. The ASX company is not liable legally but their contractor refuses to pay their sub-contractors and makes empty promises if you are able to contact them. He is owed $48,000, while another is owed $120,000. To my son-in-law, this is half his yearly money it is causing money problems etc. to the family. Is there anything I can do?
Answer: Clearly, appalling conduct on behalf of the Contractor and the ASX listed company.
If you have the time and energy, make some noise and “name and shame” the ASX listed company. For a start, write to the Chair and each of the Directors and share your son-in-law’s personal experience. Review the company’s Sustainability Report and other ESG pontifications on their website – and point out that the Contractor’s behaviour is wholly inconsistent with these statements.