Question of the Week

Questions of the Week

Co-founder of the Switzer Report
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1. What’s your view on switching my Commonwealth Bank (CBA) shares for Bendigo Bank (BEN)?

Maybe for a very quick trade, but otherwise, I wouldn’t recommend. I can’t readily think of any strategic advantage the minor banks have over the major banks. Stick with the strength. 

I acknowledge that I probably would have said the same 6 weeks ago. Since then (most recently the last few weeks), the minor banks such as Bendigo have bounced hard (up 50% from its post Covid-19 low), compared with 33% for the CBA. But, compared to its 52week high, the CBA is only off 21.4%, whilst Bendigo is down 32%. 

2. What are your thoughts on Templeton Global Growth (TGG), exposed tothe global economy, but a listed investment company paying franking dividendsThey seem to meet the global diversification strategy. 

Pass. The only positive I can find about Templeton Global Growth (TGG) is that it is trading at a discount to NTA (net tangible assets) of approximately 15%. I don’t understand why you think the dividends are franked. No LIC investing overseas can offer franked dividends. I can only find performance data on their website to 31 March, but it has underperformed compare to its benchmark over the last 3 months, 1 year, 3 years, 5 years and 10 years. 

I am biased and have a clear conflict (I am a Non-Executive Director), but if you want to consider a LIC investing overseas with a great manager and great performance, which also pays a modest dividend, have a look at WQG (WCM Global Growth). 

3. My wife and I have a corporate SMSF and are thinking about adding 17% Australian Super to our portfolio in our separate individual names. Our SMSF has 55% in cash & TDs, some of which we would use for the Australian Super investment to seek higher returns than current TD rates. We’re both retired and in pension phase. We understand that we would be increasing our annual fees but see that Aussie Super achieves much higher net returns than the cash we have in our SMSF portfolio. Additionally, we agree that there will be a point in the distant future as we age where all of our super will be with Aussie Super and we would like to start that relationship now. What pros and cons do you see in our plan? 

I think it is a reasonable strategy to invest some of your super monies with Australian Super if the primary objective is to commence the transition from “self-managed” to “externally managed” and wind up your SMSF. If it is just to run down your cash balances (I am a bit of a loss to understand why you would have 55% invested in cash and term deposits), there are many other investment alternatives your SMSF could access. 

Obviously, the main disadvantage is going to be extra fees (with indirect fees, you will be paying around 0.80% pa with Aussie Super), and there won’t be any commensurate saving on your accounting or admin fees for your SMSF. An upside could be access to life and TPD insurance. 

4. Last week, Charlie wrote about exposure to global markets and how he is going to make a case for Warren Buffett’s Berkshire Hathaway, a stock I couldn’t afford. I’ve previously thought about gaining direct exposure to US stocks but seems like a bit of a hassle. What are some of the best ETF/LICs that a small player could use to start gaining exposure to global stocks? 

You can of course buy Berkshire Hathaway Class B shares – they a 1,500th of a Class A share and trade at USS191.51 (the class A shares are each worth US$287,200). The code is BRK.B. Easy to purchase through CommSec or nabtrade 

More generally, if you are looking to invest offshore, the easiest way is through index tracking ETFs trading on the ASX such as IVV (which tracks the US S&P 500), or its currency hedged version IHVV. For broader exposure (all world markets), consider IWLD/IHWL or VGS/VGAD. 

You may also want some active managers. Try Magellan, WCM and Platinum through MGE, WQG and PIXX. These all trade on the ASX. 

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Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances. 

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