u/emboon

Have some debt recycled etfs in an individual broker account and want to swap it over to a joint broker account.

Is the below the best way to deal with this if we want to buy the same ETF allocation?

Found this in an old post from user @snrubovic

• If you have cash available (for example, an emergency fund), pay down the loan and debt recycle into investments and then sell your shares and replace your cash. This breaks the link between selling existing shares and debt recycling into the same shares.

Held the shares less than a year and have no issue paying CGT.

Just want to avoid wash sale issue.

Planning DR to the following portfolio after much research..

50 GHHF 30 DGCE 10 DGSM 10 EMKT

or

50 GHHF 25 DGVA 15 DGSM 10 EMKT

I want to limit leverage to 50% of portfolio and AU exposure to 20% then other half would have some factor tilt.

DGCE would have small caps so DGSM at 10% would give me approx market cap weight

Same with EMKT 10% since GHHF already have it.

Other option with DGVA which dont have small cap so increasing DGSM to 15%

Thoughts about DGCE vs DGVA?

I read that factor tilt can give you about 0.2-0.3% outperformance but based on MER 0.30% vs 0.08% - does that mean this outperformance will just be eaten by the fees?

How much does your share need to grow to breakeven if capital stayed in offset?

I tried to compute how much does your investment need to grow to break even with offset and the number I come to is "exactly the same rate as your mortgage"

For instance if mortgage rate is 6% and loan recycled is 100k and 39% MTR.

If money stayed in offset you will earn

6% * 100k = $6000 after tax

or

6000 / .61 = $9836.07 before tax

If debt recycled you will get tax refund of

$6000 * 39% = $2340 after tax

Subtracting this from the after tax earnings if your money stayed in offset

$6000 - $2340 = $3660 after tax

This figure $3660 is what your investments need to earn after tax

(Lets assume you sell shares while on your current MTR)

To get the before tax figures

3660 / .61 = $6000 before tax

6000 / 100000 = 6% -> The growth your investment needs to break even with offset

(Lets assume you sell shares during retirement with the minimum 30% CGT introduced by labor budget + 2% medicare levy applies)

To get the before tax figures

3660 / .68 = $5382.35 before tax

5382.35 / 100000 = 5.38% -> The growth your investment needs to break even with offset

TLDR: Your shares should grow at the same pace as your Home Loan rate to break even with keeping funds in offset. If selling shares during low income years then 30% minimum CGT + 2% medicare levy applies which is a 10.33% drop from your current mortgage rate.

For simplicity sake I didn't factor the computation for inflation based discount so this rate should be much lower.

This just piqued my curiosity hence the post but happy to be corrected if I miscalculated or misunderstood something. :)

What would be the best diversifier between DGCE , DGVA or VVLU to add to my portfolio?

I am aiming to have 50% leveraged and 50% unleveraged with some factor tilt.

50% GHHF

20% DGCE/DGVA/VVLU

15% PGA1

15% EMKT

I really like GHHF but wanted to dilute the AU exposure so was thinking of below allocation. This gives around 20% home bias from GHHF.

60 GHHF

25 PGA1

15 EMKT

I wanted PGA1 to have a bit of active factor fund to complement my core of broadbased index in GHHF. Also so I am not 100% geared.

EMKT as I also want a bit more exposure to emerging markets than the usual 10%.

I was considering 50/30/20 GHHF/PGA1/EMKT but because there is also some EM already in GHHF hence I made it 55/30/15

Plan to hold for 20-25 years.

Thoughts?