# Retirement Stocks 2019



## Muschu (9 October 2019)

Hi
Thought I'd see if there is any interest among retirees exchanging thoughts on stocks to hold for dividends and (usually) franking credits for income purposes.
This could be a very boring topic for many investors, and I am more interested in the views of those who have retired.
I'm 74 and my wife and I have a SMSF.  30% of this is in cash and earning very little of course.
The other 70% is in the ASX and generally very conservative.  We have a small portfolio of other stocks but these probably make up only 5% of the total.
I'm thinking of placing more of the 30% into the market, over time, and would like to expand our conservative portfolio but am not sure where to head.
Currently our 3 largest holds are Listed Investment Companies.  In order of investment allocation these are ARG, MLT and WHF.
The next 2 are WBC and WES.
And that's it.
Any other retirees out there who would care to share what they're up to?
Many thanks


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## sptrawler (9 October 2019)

My wife and I are in a similar situation and have the same dilemma, unfortunately IMO there are no easy answers, the market is very high and all other returns are very low. I have started buying and selling battery related mining stocks(nickel), with the hope of making some capital gains. 
The backbone of my portfolio is NAB,WBC,WES,AFI and MLT, so in reality very similar to yours, I hold about 40% cash I'm very reluctant to put it in the market at this stage.
The other problem is as you age the drawdown requirement from your SMSF increases, so property in reality isn't an option as it limits the cashflow and takes a big chunk of money.
I am seriously considering pulling some of the shares out of the SMSF, then holding them in my wife and my personal names, this will give us the $36,000 tax free limits and also I would think qualify us for the low income offset. It is just a thought at the moment, but I will look into it over the coming financial year. I guess we just have to be grateful labor didn't get in, or we would be running down the capital very quickly with the current returns.
If worse comes to worse, the pension is always there, as long as you own your house it appears to be adequate, talking to friends who are on it.


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## macca (9 October 2019)

I sincerely believe that the best investment for any person is to buy there own house somewhere that they can retire to.

I am also retired, I have some super but I also live in a big house which suits the land.

When we are old and feeble we will downsize to a nice 3/4 bedroom house on a normal, easy managed block nearby and get a nice piece of tax free CG. Once we have spent that we can easily live on the pension if we had to.

I always thought that we would never qualify or need the pension but the breathtaking incompetence of the RBA and other federal money managers has put that in doubt.

It seems that the only thing on this planet that does not have cycles is the western economies. 
Instead of having good times and the occasional bad times we now have to party on all the time.

The BB's had to struggle through 17.5% on housing loans and 25% OD rates when trying to get ahead and those of us who survived all that now have to cope with 0% interest rates on our old age nest eggs.


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## Muschu (9 October 2019)

Thanks for the replies.  We are also fortunate that we own our house in Perth.  However we're close to the point where it is simply too large. At the same time there are impediments to selling.  To downsize we have to pay all of the usual costs, with stamp duty on a new purchase being a major outlay.  In our area there are few downsize options [and we have no interest in building].  Because of a lack of supply, and the fact that we'd like to stay in this vicinity, we would be lucky to break even if we moved to a smaller home.
Our current location is not opulent but it's not far from the coast, which I enjoy.  We've been in this house for 5.5years and, the property market being how it is, we would not expect a capital gain.
I've kept 30% of our super in cash for several reasons, not just market volatility.  Sometimes there's a need to help other family members for example.  But there's also reasonable stability to shares such as ARG and MLT.  And the annual franking credit refunds go a long way towards private health care, council rates and the like - and also help to keep us off the pension.
Any other thoughts on shares would be welcome, but it seems the options are limited.
Health is another consideration of course.  At the moment we're relatively OK but have some issues.
Being as prepared as is reasonably possible for whatever the future may bring is an interesting journey.


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## IFocus (9 October 2019)

Muschu great idea for a thread I am newly retired and just going through the down sizing process from 5 acres to a normal house.

I intend to keep my super simple-ish when I finally assemble all the funds from property etc currently just holding CBA, ANZ, WPL SPK and WES (30% of funds) mainly because I got them cheap some time ago.

Will get a bit more serious once I am fully funded will likely hold some cash on the side lines for any major market retracements.

Will likely hold cash outside of super for trading depending on time which currently is in short supply.


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## Value Collector (10 October 2019)

FMG, SYD are two that I like .


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## Iggy_Pop (10 October 2019)

I have been retired for just over one year and with experience have built a portfolio of -

ANZ, CBA, NAB, WBC - steady dividends  about 30% of portfolio
A bunch of REITs - CMW, CMA, AVN, CIP steady dividends and capital gain - about 25% of portfolio, and most pay quarterly
Some LICs -  WAM, PL8 - about 15% of portfolio.  PL8 pays monthly
Some ETFs - IVV, VHY, VEU -  about 20%, gives some international exposure and capital growth
I do have a few other individual shares which I do plan to move on and reinvest in either LICs or ETFs.

And also ANZPG - due to interest rates being low. I did notice CBA are listing a new hybrid share and this is an option in lieu of a term deposit which is worth considering

With these most months some dividends are received, and I find this handy  tp pay the bills

Iggy


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## Muschu (10 October 2019)

Some good thoughts emerging here.  Thanks team.
More from me soon.


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## sptrawler (10 October 2019)

Another thought I have toyed with as it seems like a "safe" option, is to use some of the 40% cash to add to the AFI holding and convert the AFI from dividend to dividend re investment.
My reasoning being the return will be much better, there is still a possibility of capital gain and they can be changed back to dividend if I need the cash income. If I don't need the income the capital is at least holding up.
By the way Muschu great idea for a thread, gets us old farts thinking.


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## Muschu (10 October 2019)

Iggy - thanks.
REITs I have never been into largely because of the lack of franking credits.  However the dividends can be good.  There seems to be a huge number of REITs on the ASX and many seem to have done well this year.  How on earth do you choose among them?
I used to have several more LICs but disposed of them for several reasons.  One was WAM which was not performing well and which has a high management fee [and a rewards fee if I remember correctly].
EFTs I don't understand although I know they are popular.  Some seem to have some franking and the ones you have listed are not known to me.  I will need to do some more checking.
And ANZPG is a complete mystery. Commsec doesn't show a dividend history from what I can gather.


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## kahuna1 (10 October 2019)

Not retired ...

but conservative is my universe ...
MFF only listed fund ...
ANZ NAB WBC .... then a few BHP and WPL .... APA and SKI .... SGR ... TAH TCL COL WES .... CSL ... a lot more ... hmmm ... BEN a few ... same sort of spec holding at under 5% ... but not many right here, so under 2% total hold.

Some too high here ... a lot held for years like CSL and .... JBH ... a few of them ...
all large ... all have been around for ages, all pay decent sorts of dividends or make up with Share price going up reflecting assets. Not expecting too much capital appreciation but with a dividend of say 6% plus mostly franked so 8% ... it makes up for unlikely massive cap gains.

Tend to reduce into massive rallies as we have and and hold about 25% of the banks I once did 12 months ago, they are just coming back to some value as they shed 5-6% of late.

Have fun


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## Country Lad (10 October 2019)

Muschu said:


> Any other retirees out there who would care to share what they're up to?
> Many thanks




My comments are more aimed at those people not yet retired and even a long way from retirement. 
My message would be if the finances allow, start the investments as early as possible. That may not necessarily be shares. In my case it is shares but another noteworthy case is Tech/a’s property investing.

I started investing and share trading in the early 80’s – in the days when charting was done on a sheet of graph paper from the share prices in the AFR or Courier Mail.

I was fortunate to have a friend who was also my broker and we discussed and exchanged views on all things trading and investing on a daily basis.  I treated the share trading totally separately from the investing and most of those investments I still have today giving me a good dividend income and on the rare occasions I divest a small portion, good profits.

One of the big advantages in those early days was actually talking to one another, whether it be other investors or people who had knowledge of companies I didn’t.  Some of you may remember doing what is now unusual - discussing things with other investors face to face or on the telephone. The disadvantage then was that research was far more difficult than now with Dr Google always ready to help.

By exchanging views in this way I was able build up investments for the long term by buying into the Woodsides, CSLs, NCMs and many of the others I still hold.  Holding a few board positions in various industries helped, like buying Westpac at a bit over $1 during Tricontinental debacle because I knew it would not be allowed to fail. Or by getting to know the gas industry and gaining good knowledge of OSH, WPL and STO in their early days of low share prices.

All that may be difficult to do in today’s market but my suggestion is for like minded people to get together, share information, pool research, ignore all the brokers’ reports.  This was my success factor. Social media in my view may be the place to get hints but certainly not to find quality research.  This place may be the best in the sea of confusion out there in the internet world. 

Sorry, I have no message for those already retired or close to it, because in my 13 years of retirement so far, I am just playing with short term trading for the fun of it and to keep the mind active in my ever decreasing spare time.


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## jjbinks (10 October 2019)

Skate said:


> *30% in cash*
> Whether it's under the mattress, buried in the backyard or sitting idol in the bank it's an opportunity lost.




This is the first thing I was thinking about when I read the post. When Skate mentioned in his thread I thought I'd share my thoughts.
Firstly I am not a retiree.
Secondly, I do not have any experience or much knowledge about "asset allocation" which I guess what Cash vs Stocks comes down to.

But the fact is stocks are volatile. Although in the long run returns are >cash you occasionally have sometimes periods of negative return over consecutive years

So I would think that money you may use over the next 5 or so years should be kept in cash?


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## IFocus (10 October 2019)

Cash...I saw Skates post and agree but realise its not for everyone.

A important rule in investing, trading etc is the "sleep test"

That can change with education, knowledge, experience then there is age, circumstances, personal life issues, health issues etc.

No one rule will fit for everyone in regards to cash position but the "sleep test" should be a starting point closely followed by the "fun test" 

IMHO


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## Value Collector (10 October 2019)

FMG, SYD are two that I like .


kahuna1 said:


> Not retired ...
> 
> but conservative is my universe ...
> MFF only listed fund ...
> ...




Oh yeah, add Apa to my list too, I have owned them since 2001, and enlarged the position in 2008 when they were selling at a 10% dividend yield (madness).

They are a great little gem in my portfolio.


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## sptrawler (10 October 2019)

IFocus said:


> Cash...I saw Skates post and agree but realise its not for everyone.
> 
> A important rule in investing, trading etc is the "sleep test"
> 
> ...



That is so true, I'm 64 this month and have been retired for 8 years, as you say Ifocus you have to be able to sleep at night.
Also if you are married, you may well be responsible for the other persons retirement, so even if the market goes completely pair shaped you need to have enough to enjoy your retirement.
As I always say, allow for the worst and hope for the best, you will never be rich but you will sleep well.
I wish I had learnt to trade well earlier, I'm finding it hard to learn it now and also with the amount of travelling we are doing, it is difficult to give it the time it needs.


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## aus_trader (11 October 2019)

jjbinks said:


> This is the first thing I was thinking about when I read the post. When Skate mentioned in his thread I thought I'd share my thoughts.
> Firstly I am not a retiree.
> Secondly, I do not have any experience or much knowledge about "asset allocation" which I guess what Cash vs Stocks comes down to.
> 
> ...



Yes agree. Keep some cash. If recession or a deep correction hits then property, shares, LIC's, ETF's (except inverse ETF's such as BEAR) will get hit. In such a situation cash will be king.

Not retired, but approaching and I am weighted towards cash. Do a bit of short to medium term share trading and hope to be sufficiently skilled to continue it into retirement with a portion of funds that I have.

This thread has been quite informative and I may also park a portion of my cash into some of the conservative stocks/LIC's/ETF's for the long term.


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## So_Cynical (11 October 2019)

Good Topic.
I will retire early within the next couple of years and have been making some adjustments to the portfolio as i will be relying on dividends, credits and 
cap gains mostly, set a new all time high dividend yield last FY / 5.4% gross, switched out of 4 or 5 stocks that didn't pay divs into stocks that did, still 
hold 5 non div payers for the growth potential, hold all stocks in roughly equal position sizes.

I dont hold a single bank, BHP, RIO, CSL, FMG, SYD, WES or APA - none of them, i do hold one big LIC and 4 smallers ones that do things a little differently 
and a managed ETF, hold many stocks pretty much all mid small and micro caps, some big div yields to be had along with the volatility both price and yield.

In retirement i have decided to simply keep doing what i have been doing in the markets for the last 12 years, it works so no reason to change much other
than keep getting better at it and be a little more conservative, keep the dividend focus turned up but keep exposed to growth. With interest rates so low and
going even lower, global growth and inflation low, housing asset bubble, growth stocks are in demand and will remain so, PET, ATP, Z1P, WTC and others still 
going up, punters chasing growth, growth is rare in a low growth world.


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## Belli (11 October 2019)

One approach doesn't necessarily fit all I guess.  Each does it in their own way.

For me I have been retired for close on five years but have been investing in the share market since way before then since the early 1990's.  Have personal share holdings and a SMSF (a portion of which is in accumulation phase due to the 2016 budget .)  The holdings of each are in slightly different proportions but are the same holdings:

ARG, MLT, WHF, MIR, VAS, VGS.  VGS is about 20% of asset allocation both personally and in the SMSF.

Apart from swapping STW for VAS in 2010 I haven't sold anything since I cannot remember when.  Buying when cash comes in surplus to my needs.  Take up as much as I can of any SPPs the LICs may offer.  Any tax refund I throw back into the share market asap - got by the previous year without it so I reckon why spend it?

Personal income is around 35% of my total income, ie dividends plus account-based pension.


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## Belli (11 October 2019)

Forgot to mention I also hold SOL outside of the SMSF.  Not many only 7,000 but it does pay a dividend shortly before Christmas which does come in handy.


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## Ferret (11 October 2019)

Value Collector said:


> Oh yeah, add Apa to my list too,




How do people find the account keeping for trusts like APA, SYD, etc?  

I've found keeping track of deferred tax payments to be a pain in the bum, so I generally avoid buying trusts these days.


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## Belli (11 October 2019)

There is probably a similar issue with some ETFs for example VAS where there is a cost-base adjustment.  I don't keep paper records so I download the annual tax statement into the folder for the FY income and to the folder for the share holding.

I did notice when I was helping a friend who has been really, really slack (ATO not happy) and who holds STW the annual statements did at one stage include tax-deferred amounts but these seem to have disappeared once the ETF introduced the cost-base adjustments so I start to wonder if it's now included in that.

As to the OP's original issue, I did some back of the envelope numbers and my cash holdings in the SMSF is about 2% of total assets after allowing for provision of the account-based pension.  Not overly concerned with the "just in case" money approach.  Same attitude outside of the SMSF.  Keep as much as I need to pay for the overheads for my home/car/insurances for a year or so and what I need to eat and be merry.  The rest goes into the share market.  I don't do the timing thing.  Plonk it in when it's excess for my purposes.


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## Muschu (11 October 2019)

Lots of good discussion here and it can be worthwhile to reconsider the obvious at times:  the place of cash, volatility, the benefits of being conservative and getting the share portfolio / cash balance right.
We do hold one other LIC that I hadn't mentioned but a very small quantity - FGX.  Did have FGG but swapped it out some time back.
This thread has already caused me to take a deeper look at VAS and VGS [do many hold these?].  I gather both are XD right now and highly priced.  VAS has some credits but VGS does not.  "Distributions" rather than dividends so I am trying to work out the percentage return. 
Also considering one or two REITs, despite the lack of franking - perhaps CMW in particular. 
But not in any rush as there may be further headwinds ahead.


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## Belli (11 October 2019)

Well, the big difference in my view between LICs and ETFs is one is a company and have profit reserves due to the payout ratio whereas ETFs is required to pay all the income out after the manager takes its cut. Has some benefits should things get awkward as the LIC can maintain the dividend from profit reserves. ETF's cannot.

Don't know zilch about REITs. The LICs and ETFs I hold have got them so I don't have to care about holding them directly.

For fun go to sharedividends com au enter some ASX codes and look at the trends for dividends. That is what I'm interested in not yield itself which is nothing more than dividend/price and price just goes everywhere.

I'm a simple person so I try to keep everything that way.

Probably my last post for a while as I don't read or contribute to forums very much. White noise.


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## tech/a (11 October 2019)

I could retire as Im old enough but choose not to as I own my own Company and enjoy building it along with my staff.
There is a great deal of opportunity in our field and I want to be a part of it.

BUT

I started seriously building for retirement 30 years ago.

(1) Property Own 3 freehold collecting rent. (Sold 7).
1 is paying my super rent 1 is under construction and will be 
part of super and number 3 of 3 is not in super but is part of my earnings. 
(2) Own my business property and paying my super rent.
(3) I draw a salary and business pays all expenses. (part of my salary).
(4) Wife also works in the Company and has a salary.
(5) Run a longer term portfolio with the cash component of super based 
on Algo models developed in conjunction with some others.(Quants).

(6) Play money is on Short term stock trading not targeted as an income 
but more to keep my hand in Tech Analysis more than anything else.

So with a number of income streams (I never though about this when I 
decided to work for myself 44 years ago!). Freehold properties and a 
decent portfolio ---- retirement when and if I decide to is comfortable.

My suggestion to all who can is ---place them selves in a position of multiple
income streams---- find ways and* DO IT! 

You don't have to be like everyone else.
The earlier you think like this the better.
*


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## barney (11 October 2019)

Muschu said:


> Any other retirees out there who would care to share what they're up to?Many thanks




Howdy Muschu …. Do you pronounce that "Must chew?"  'cause at 74 years old that's not bad advice

I'm not retired as such but only go at 30% of full throttle now days … The mind is willing but the body is beat up.

Anyway, my ailments aside …. can I encourage you with regard to the Stocks etc you mentioned in your first post ……. Throw up a few posts with your thoughts on each one on their separate threads. Post on this thread as well, but you might get some more specific banter on an individual Stock thread. At 74 y.o. others will no doubt be interested in your involvement in the market and how its gone over the years .... eg. why you purchased the Stocks you did, why you still hold, decisions you have made along the way .... good or bad! etc etc.  

At 74 and I assume financially comfortable, avoiding risk would be firmly on the top of your list I assume, unless of course you are filthy rich … then I could be in the market for a cheap loan 

All the best with your Investing.


​


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## Muschu (11 October 2019)

Hi Barney
Muschu is a small island off the Sepik Coast in PNG.  I enjoyed visits there when i was living in mainland New Guinea between 1966-72.


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## aus_trader (11 October 2019)

So_Cynical said:


> growth stocks are in demand and will remain so, PET, ATP, Z1P, WTC



I think there must be a typo with regard to ATP, you must be referring to APT.


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## Value Collector (11 October 2019)

Ferret said:


> How do people find the account keeping for trusts like APA, SYD, etc?
> 
> I've found keeping track of deferred tax payments to be a pain in the bum, so I generally avoid buying trusts these days.




I just hand the end of year summary the accountant and he does it.


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## Country Lad (11 October 2019)

Value Collector said:


> I just hand the end of year summary the accountant and he does it.




Like you VC, I find it all very easy, I just hand it over to my wife.  That's why I married an accountant.


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## Knobby22 (11 October 2019)

That's why I married a good cook.[emoji16]


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## Country Lad (11 October 2019)

Knobby22 said:


> That's why I married a good cook.[emoji16]




To cook the books?


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## barney (12 October 2019)

Muschu said:


> Hi Barney
> Muschu is a small island off the Sepik Coast in PNG.  I enjoyed visits there when i was living in mainland New Guinea between 1966-72.




Thanks Muschu. 

So between your early and mid 20 years of age!  … 

You frequented a small island that basically few here knew even existed (me included).

At 74 yo. I'd suggest you may have more than just* the odd story* to tell about your life, both trading and otherwise 

Please feel free to elaborate! ….  ASF may well be the richer for your input


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## barney (12 October 2019)

Value Collector said:


> I just hand the end of year summary the accountant and he does it.




Yeah … I do similar … 

I spend 8+ hours doing the summary ..

I hand it to my Accountant ...

He takes about 1.5 hours filling in the details ...

And Charges me $500+ dollars to do so

For some reason I'm happy with that


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## Ferret (12 October 2019)

Value Collector said:


> I just hand the end of year summary the accountant and he does it.



Sounds like the way to do it. 

My father held APA for many years and participated in the dividend reinvestment scheme. He ended up with dozens of parcels and each had to have it's cost base reduced each year for the deferred tax components of distributions. 

Of course the annual statement only gave the deferred tax for the total holding. It was an absolute nightmare!


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## Value Collector (12 October 2019)

barney said:


> Yeah … I do similar …
> 
> I spend 8+ hours doing the summary ..
> 
> ...




Hahaha, yes I do the same, I put all the pieces of the puzzle in order, and he puts the finishing touches on it. 

Although he does have a few good ideas every now and then.


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## Value Collector (12 October 2019)

Ferret said:


> Sounds like the way to do it.
> 
> My father held APA for many years and participated in the dividend reinvestment scheme. He ended up with dozens of parcels and each had to have it's cost base reduced each year for the deferred tax components of distributions.
> 
> Of course the annual statement only gave the deferred tax for the total holding. It was an absolute nightmare!




Yeah, but there is a benefit to it, it reduces your over all tax burden.

You could just ignore the deferred taxes side of things and just pay the full taxes each year as if it were a regular share.

Ofcourse you would end up paying more tax than you have to, but it would make it simpler and would just make it on par with normal shares.


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## Belli (13 October 2019)

Ferret said:


> How do people find the account keeping for trusts like APA, SYD, etc?
> 
> I've found keeping track of deferred tax payments to be a pain in the bum, so I generally avoid buying trusts these days.




Back just to say I found a possible solution as a result of going through all the records my had.  Entered all the STW buys, etc for 12 years into Sharesight.  I then saw it also showed cost-base adjustments including any tax-deferred amounts for each distribution.  Maybe this could work for other Trusts.

Real pain entering all the historical info though.

And the ATO now collects the data and I understand personal tax returns largely are auto-filled including LIC Capital Gain Discount so I'm guessing that may also included any tax-deferred amounts.


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## Ferret (13 October 2019)

Interesting, Belli.  I hadn't heard of Sharesight.  I might try out their free version.

I noticed that this year the ATO had auto filled shares I'd sold in the Capital Gains section.  It didn't know the details of when they were bought and the cost base though.  I will still need to put this info in manually.  

Maybe they will add this in the future.  It would be fairly simple if you sold an entire holding that you had bought in one purchase.  Some manual input would be required if you sold part of a holding that had been built up through multiple purchases.  You need to be able to nominate which shares you have sold to minimise the CGT.


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## Belli (13 October 2019)

Ferret said:


> I noticed that this year the ATO had auto filled shares I'd sold in the Capital Gains section




Yeah.  It's an alert.  I understand where people have sold their PPOR it can appear as CG alert via the ATO data collection arrangements just in case they have used it to produce accessible income.

The ATO has also issued a S264 notice to Airbnb to supply information covering the last few FYs I believe.


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## Muschu (13 October 2019)

barney said:


> Thanks Muschu.
> 
> So between your early and mid 20 years of age!  …
> 
> ...




Not all that interesting Barney.  Very briefly:
I was conscripted into the Army in 1966 after my first year of teaching.  They posted me, and six others, to Wewak and Vanimo on the north coast of PNG near the Irian Jaya border.  We taught English and a few other things to the soldiers while also going on patrols in the Sepik hinterland and along the border.
I wasn't mad keen on the Army but  loved the country.  After discharge I returned to Uni and did further psychology studies.  I married while studying and later returned to PNG [with wife and baby son] and worked as a Regional Psychologist, and then Clinical Guidance Officer with the public service board and then education department - being based in Madang and Lae.  i was fortunate to see a great deal of a then very pleasant country and surrounding islands [including Manus].
Several years later, and with an extra son, we returned home and i spent the rest of my career as an educational psychologist, deputy principal and principal.  Even now I spend a little time working as a consultant in certain areas.
That's the short story - leaving out 26 years of voluntary work around cult issues


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## barney (14 October 2019)

Muschu said:


> i spent the rest of my career as an educational psychologist, deputy principal and principal.  Even now I spend a little time working as a consultant in certain areas.




You are far too intelligent to be hanging around here  ... kidding of course … ASF are the most intelligent Forum members in the world 

There is plenty of time to fill in some of the other 26 years as well


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## aus_trader (14 October 2019)

barney said:


> You are far too intelligent to be hanging around here  ... kidding of course … ASF are the most intelligent Forum members in the world
> 
> There is plenty of time to fill in some of the other 26 years as well



Have to agree that ASF is one of the forums that I have had some of my best online conversations with. It's a great community of investors, traders and even the odd punters helping each other.


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## Muschu (14 October 2019)

Although I'm not here very often, I have been around ASF for a long time and find it a very good point of call when I want to check in.

Barney - those 26 years would really belong to another forum and I can't give cultic issues as much time as previously.
If the topic interests you then you might like to google the International Cultic Studies Association [based in the USA] or Cult Information and Family Support [Oz].


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## barney (15 October 2019)

Muschu said:


> If the topic interests you then you might like to google the International Cultic Studies Association [based in the USA] or Cult Information and Family Support [Oz].




All good. I was thinking more generally regarding your other 26 years etc, although, the psychology of those involved in any type of cult would certainly be an interesting topic 

I have a close friend who has also worked in the field of psychology his whole life.  No doubt you and he could chew some serious fat over what makes people like Charlie Manson tick.

Anyway I digress … I will let the thread get back to its intended topic of retirement Stocks


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## aus_trader (20 October 2019)

Ferret said:


> My father held APA for many years and participated in the dividend reinvestment scheme. He ended up with dozens of parcels and each had to have it's cost base reduced each year for the deferred tax components of distributions.






Value Collector said:


> Yeah, but there is a benefit to it, it reduces your over all tax burden.
> 
> You could just ignore the deferred taxes side of things and just pay the full taxes each year as if it were a regular share.
> 
> Ofcourse you would end up paying more tax than you have to, but it would make it simpler and would just make it on par with normal shares.




With regards to above discussion, was there any taxes paid at the time of the DRP parcel allocation each time. My understanding is the company would have paid taxes on the dividends prior (such as with Franked dividends) ? If so wouldn't those be taxed twice i.e. at the time of allocation and when they are eventually sold in future years ?

DRP's are so complicated and seems to be double-taxed if I understand correctly. I have been opting for the dividend to be paid out to me to avoid these complications. I wish there was a simpler system with DRP's because the way I see it, that's money that you would've received as dividends already taxed, so why they need to tax the darn thing again as a Capital Gains later ?


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## Belli (20 October 2019)

aus_trader said:


> DRP's are so complicated and seems to be double-taxed if I understand correctly.




I don't believe that is correct.

Say you hold 700 shares in XYZ which pays a fully franked dividend of $0.10.  Dividend is $70 with $30 in franking.  In your income tax return you declare  - $100 income total, taxed at marginal rates then $30 credit allowed.

If you participate in the company's DRP and the reinvestment price is $2.00 per share you are allocated an additional 35 shares.  The cost-base of those shares allocated is $2.00 and if/when you sell them, Capital Gains tax applies.  So, say, bought at $2.00, held for 12 months, sold at $4.00.  CG on those 35 shares is $70.  CG is $35 and, with 50% rule, taxed at your marginal rate on $17.50

There is no double taxation involved.  The issue is multiple purchases under the DRP.  Each is really a purchase and each has its own cost-base.  Was a problem in the past but now with soft-ware and accountancy firm does it in a breeze I reckon.

The issue really is record keeping so you could have a lot of fading paper hanging around especially if participating in a company's DRP for many years..  If pps go for DRPs best do all record keeping electronically, buy a scanner and get all notices sent electronically.

Bonus Share Plans are another beast altogether.


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## Belli (20 October 2019)

Couldn't edit post as I was out of time.

So, if anyone is bored beyond belief, have a look at the dividend history of a few companies on sharedividends com au

It will give an indication why some, such as myself, prefer to invest through LICs/ETFs with the steady increase in dividends over time.

And I foolishly mention Bonus Share Plans which could lead to further questions so here is the link to two companies I know of which have them.  I don't and never have participated in them.

http://whitefield.com.au/shareholder-info/bonus-share-plan

https://www.afi.com.au/shareholders#Dividendsubstitutionshareplan


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## Value Collector (20 October 2019)

aus_trader said:


> With regards to above discussion, was there any taxes paid at the time of the DRP parcel allocation each time. My understanding is the company would have paid taxes on the dividends prior (such as with Franked dividends) ? If so wouldn't those be taxed twice i.e. at the time of allocation and when they are eventually sold in future years ?
> 
> DRP's are so complicated and seems to be double-taxed if I understand correctly. I have been opting for the dividend to be paid out to me to avoid these complications. I wish there was a simpler system with DRP's because the way I see it, that's money that you would've received as dividends already taxed, so why they need to tax the darn thing again as a Capital Gains later ?




Let’s say you get a $5 dividend in the Dividend reinvestment plan, and this is used to buy 1 new $5 share.

In year 1 you pay tax on the $5 dividend just as you would if you had received it in cash.

But then in year 10 you sell the share for $20, as long as you have keep the record stating you purchased the share for $5 through the DRP a $15 capital gain will be recorded, and you will pay tax on that gain just as if you had bought the share for $5 cash.


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## aus_trader (20 October 2019)

OK guys, bit more clear now with regards to DRP's. Thanks.


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## kahuna1 (20 October 2019)

I am not sure any of this is correct.

If your retired .... in the pension phase of your super ... the tax treatment is different than CGT ...

That is my understanding all be it from a few years ago. Ask a tax accountant or registered financial planner to minimize if not totally reduce your tax bill.

It of course depends on where and how you have things set up.

Tax on a capital gain in super is 15% flat in accumulation phase ... but if your over age 65 ... it was different. Maybe the shares are NOT in a super account, then one plays with the income being paid out of the pension phase of super verses the tax brackets. CGT discount is 50% of it so even at th etop end with Medicare its half of 47% so 23.5% .... but that's 180 k plus per annum.

Have fun


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## kahuna1 (20 October 2019)

On this ...

Super funds are transferred into the *retirement phase* when a member commences a super income stream (or *pension*). ... Fund earnings on assets transferred into the *retirement phase* to support the *pension* income stream are *tax*-free (and are known as exempt current *pension* income) ...

Of course not sure how you are set up.


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## aus_trader (20 October 2019)

Thanks all, So excluding super/SMSF's is there a good tax effective way or stock/index instrument to accumulate money/wealth via regular contributions and/or dividends(DRP's) that would compound over time?
I just thought to put the question out there because without taking a fair bit of risk it just seems near impossible to compound money over time and snow-ball with current interest rates. At current rates it would take more than half a lifetime just to double your savings, so you'll be dead before any exponential part of the compounding curve kicks in !


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## Muschu (20 October 2019)

I'm trying to get my head around ETFs in comparison to LICs.
As mentioned above we hold several LICs but have not ventured into ETFs, largely because I don't understand them.
Is it accurate to observe that the share price growth of major ETFs such as VGS and VAS has exceeded the growth of major LICs such as ARG and MLT over say a 10 year period?
But what happens to the comparison when dividends, distributions and franking [or lack thereof] are taken into account?  And are the distributions of ETFs as reliable as the dividends of LICs?
This is where I get lost.
Anyone in retirement-land holding both ETFs and LICs care to comment?  Or anyone else, just to be liberal?
Thanks.


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## Ferret (20 October 2019)

Good questions Muschu. I too hold LICs but no ETFs and I'd like to hear from someone who owns both.


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## sptrawler (20 October 2019)

What happened to the first 26 posts in this thread? When I go to the oldest post only #27 and newer come up.


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## rnr (21 October 2019)

sptrawler said:


> What happened to the first 26 posts in this thread? When I go to the oldest post only #27 and newer come up.




Changing your preference to "Older post first" will solve that problem, but then you need to switch back to "Newest post first" to preserve your patience!


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## Value Collector (21 October 2019)

aus_trader said:


> Thanks all, So excluding super/SMSF's is there a good tax effective way or stock/index instrument to accumulate money/wealth via regular contributions and/or dividends(DRP's) that would compound over time?
> I just thought to put the question out there because without taking a fair bit of risk it just seems near impossible to compound money over time and snow-ball with current interest rates. At current rates it would take more than half a lifetime just to double your savings, so you'll be dead before any exponential part of the compounding curve kicks in !




The best way I know of to compound money is to invest in a portfolio of great companies and reinvest the dividends back into the portfolio (you don’t need to use DRP).

So if own a decent portfolio of companies that are growing internally and you are consistently reinvesting your dividends back into buying more, you will be compounding your money.

I personally own a portfolio of shares,  real estate, loans (rate setter) and an options portfolio.

I take 50% of the income this portfolio produces each year and reinvest it into growing the portfolio, the other 50% I use to live off.

Doing this means I achieve a compounding growth in capital value, as well as steadily growing income over time.


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## Value Hunter (21 October 2019)

Value Collector, either your approach is ultra conservative or you have a huge capital base. The fact that you only spend half of your income in retirement. In terms of real estate as we know rents tend to rise over the long-term and in terms of shares if you pick growing companies as you seem to do they increase their earnings and dividends over time. Why do you then feel the need to reinvest half of your income also? Does your portfolio generate so much income that you have no possible need to or want to spend it? Or is it just a leftover habit from when you were younger and poorer?


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## Belli (21 October 2019)

The other slight twist with current tax law is if, outside of super, you sell some shares, say, $40k, and you're below the taxable threshold, zero tax is paid on that transaction.  I think that is why some may have chosen to participate in the Bonus Share Plans offered by a couple of LICs.

As I have previously posted I hold VAS (index based on ASX 300) and VGS (international reflecting top 1500- to 1600 companies but ex-Australia) and LICs.  I once held STW (ASX 200) from 2002 to 2010.

During the slight hiccup around 2008/09 STW made distributions totalling $3.60.  The next year the distributions totaled $1.40.  The following year the distributions totaled $1.48 (a 5.7% increase over the preceding year) and slowly grew from there (basically company earnings need to increase before dividends can - in the long term)

With ARG the dividend history for the same time frame was $0.30 per share then $0.25 then $0.26 (a 4% increase over the preceding year.)  Not such a dramatic fall but not the same % increase at that stage.  Last year ARG paid $0.32 dividend.  I know from assisting a friend who had been slack with ATO requirements STW paid $2.56 in distributions.

Personally, I don't take much account of economic conditions, politics, civil disruptions and all that.  A large portion (about $50k) of my account-based pension is placed in the share market and still leaves me with a goodly amount to enjoy myself and do what I wish.  Personal tax-refunds are also reinvested.  However, I am single, own my own home, have no debts and have modest material needs.

I attempt to keep my preferred asset allocation (80% Australia v 20% International) around that but it can fluctuate slightly depending on when I put funds it but it gets back to balance eventually.

One aspect of ETF v LICs is off-market buy backs.  LICs can participate as it requires an elective decision.  ETFs such as VAS don't participate by their very nature as an indexer.

For my peace of mind I don't involve myself with any ETF which is not Australian domiciled, any esoteric on such as inverse animals or the active ETFs on offer.  By the same token I do not take any heed of the "expert" commentaries in either mainstream media or financial ones.  I do what suits me and no one else

So far it has worked.  While I haven't done any performance calculations on my personal holdings (I've no expertise in that) the financial firm I use for the SMSF has advised me the funds total return (CG plus dividends) since 2002 has been 14.6% pa.  Not shooting the lights out but I'm OK with the result.


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## Value Collector (21 October 2019)

Value Hunter said:


> Value Collector, either your approach is ultra conservative or you have a huge capital base. The fact that you only spend half of your income in retirement. In terms of real estate as we know rents tend to rise over the long-term and in terms of shares if you pick growing companies as you seem to do they increase their earnings and dividends over time. Why do you then feel the need to reinvest half of your income also? Does your portfolio generate so much income that you have no possible need to or want to spend it? Or is it just a leftover habit from when you were younger and poorer?




Interesting questions, with some complex answers.

Yes, my portfolio does generate more income than I need or want to spend, this is for a number of reasons

1, I have always been frugal in an effort to build the capital base, and although I have loosened the purse strings quite a bit and now enjoy some luxury things like travel (currently writing this from a hotel room in London), eating out, new car etc. I still hate waste, and am pretty minimalistic.

2, I enjoy the process of building wealth, “getting richer” is kinda of game for me, my favorite game since I was 14 and finding and making new investments is more fun for me than wasting the income on things I don’t really need or want.

3, I am only 37, and hopefully will live a good many more years, So I didn’t want to come close to having to draw down capital, if I became accustomed to spending 100% of my income, eventually some years will come where that income drops, and then I have to either reduce our lifestyle dramatically which can be embarrassing to explain to the wife, or spend capital. I thought sticking to a cheaper lifestyle that grows steadily  over time and is maintained in bad years is better, eg in a bad year my income could halve, but all I have to do to maintain life style is spend 100% that year, and the wife doesn’t need to feel any pain.

4, I want to build a big capital base to donate to charities upon my death, spending 50% and reinvesting 50% should help grow a huge capital base by the time I pass away, so reducing my consumption to 50% will eventually mean more of my earnings go back to parts of society that need help.


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## SirRumpole (21 October 2019)

Value Collector said:


> 4, I want to build a big capital base to donate to charities upon my death, spending 50% and reinvesting 50% should help grow a huge capital base by the time I pass away, so reducing my consumption to 50% will eventually mean more of my earnings go back to parts of society that need help.




I'm impressed.

I was starting to think you were a materialistic, capitalistic bastard. 

There is a heart of gold beating away while you count your capital.


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## Value Collector (21 October 2019)

SirRumpole said:


> I was starting to think you were a materialistic, capitalistic bastard.




I do like to give that impression, hahaha.

But capitalistic I plead guilty, Materialistic not at all.


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## barney (21 October 2019)

Value Collector said:


> 1, I have always been frugal in an effort to build the capital base.




VC ….. without divulging all the secrets of your holy grail ... Myself and likely many others would be keen to hear how you "got started"  

ie What was the secret to building that capital base at a very young age?  eg. High paying job; Bank robber perhaps


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## qldfrog (21 October 2019)

I would ask the same, 


barney said:


> VC ….. without divulging all the secrets of your holy grail ... Myself and likely many others would be keen to hear how you "got started"
> 
> ie What was the secret to building that capital base at a very young age?  eg. High paying job; Bank robber perhaps



I did not make too bad decisions investment wise, had a quite good income,very frugal and could only retire this year at 52
A far cry from 37, not even sure if my portfolio income will cover my expense this year
You need either an initial win aka inheritance or lotto
Otherwise it will take longer to reach that stage
Money makes money
What was you windfall VC..8f you can say only of course


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## SirRumpole (21 October 2019)

qldfrog said:


> I would ask the same,
> 
> I did not make too bad decisions investment wise, had a quite good income,very frugal and could only retire this year at 52
> A far cry from 37, not even sure if my portfolio income will cover my expense this year
> ...




One idea might be to join the Armed Services at a young age get a good salary, have all your housing food, transport and living expenses paid for , save all you can then leave after 8 years and then invest all you have saved.


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## Value Collector (21 October 2019)

barney said:


> VC ….. without divulging all the secrets of your holy grail ... Myself and likely many others would be keen to hear how you "got started"
> 
> ie What was the secret to building that capital base at a very young age?  eg. High paying job; Bank robber perhaps




I have mentioned it on a few threads,

But basically there is no secret, I just started my saving and investment journey young (14), I always earned a decent wage, but saved half of it, and managed to make some really good investments along the way (the gfc was a big help).

It also helped that my girlfriend/wife of 16 years has also been onboard with the frugal living and saving life since we met (she was 18 I was 21).

In the early years we lived super cheap, still had heaps of fun (the best things in life are free) but we saved heavily, no over seas holidays till I was 32 (except for and reunion and funeral in NZ), No new cars till I recently got the Tesla, No big houses etc etc.


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## Value Collector (21 October 2019)

SirRumpole said:


> One idea might be to join the Armed Services at a young age get a good salary, have all your housing food, transport and living expenses paid for , save all you can then leave after 8 years and then invest all you have saved.




Hahaha, you know me to well.


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## sptrawler (21 October 2019)

Value Collector said:


> I have mentioned it on a few threads,
> 
> But basically there is no secret, I just started my saving and investment journey young (14), I always earned a decent wage, but saved half of it, and managed to make some really good investments along the way (the gfc was a big help).
> 
> ...



Sounds a bit like my story, always saved, wife was onboard with frugal living married at 21 she was 19.
The only big difference I can see is I had four kids by the time I was 30, that didn't change the saving ethos, just the amount. 
Still I retired at 55 and am enjoying the babysitting.


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## Value Collector (21 October 2019)

qldfrog said:


> What was you windfall VC..8f you can say only of course




As I said I have had quite a few investments work out very well for me over time, some of which we have spoken about here recently.

The early ones before and during the GFC were fantastic, but I was working with a smaller capital base, so they didn’t “set me up” to retire, but they set me up to be ready to make larger investments that later turned out well.

The two biggest investments I have made that did very well and where I had been able to allocate a large amount of capital were the following two.

 Capilano (czz) - between 2013 and 2018 it went from $2.25 per share to $21.00 when I exited, and paid some decent dividends, my initial investment grew to a bit over $1 Million not including dividends.

FMG - from 2013 to present I allocated about $100k of capital to get a put option operation started where I was selling a lot of deep out of the money and a few at the money puts and using the premiums and dividends to buy more and more Fmg as option got exercised periodically, so far with dividends reinvested, options premiums and capital gains my Fmg holding is worth about $1.3 Million today.

Lots of other smaller investments and option operations worked out well too probably to many to name.


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## SirRumpole (21 October 2019)

Value Collector said:


> Lots of other smaller investments and option operations worked out well too probably to many to name.




Any duds ?


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## Value Collector (21 October 2019)

qldfrog said:


> I did not make too bad decisions investment wise,




One of your bad decisions might have been caught in the Capilano thread.

https://www.aussiestockforums.com/threads/czz-capilano-honey.25082/

Back in 2014 you were trying to talk me out of my Capilano investment, which as I said ended up being a big win for me.

Sometimes the worst investment decisions are not the things you did that show up in your investment record, but it’s the things you avoided.

If you followed me into the investment maybe our capital bases would look more similar  now


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## Value Collector (21 October 2019)

SirRumpole said:


> Any duds ?




Yeah, a couple of early ones which in the grand scheme of things were insignificant, although at the time they hurt.

But you just have to learn from your mistakes and get back on the horse.


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## qldfrog (21 October 2019)

sptrawler said:


> Sounds a bit like my story, always saved, wife was onboard with frugal living married at 21 she was 19.
> The only big difference I can see is I had four kids by the time I was 30, that didn't change the saving ethos, just the amount.
> Still I retired at 55 and am enjoying the babysitting.



one kid only but arrived with a backpack and a degree aged 27 knowing no one so initial pay was low and going up the ladder not that easy
was thinking about the army idea: how much can you save max a year after tax 30k to 40k max ?
And your income is kind of fix, can not get second job or do extra on week end?
so 300k saving after 8 years when you are 30, if compounded maybe 500k?  still short to retire 7 years later
VC must have had a 10 fold share luck or another big win.
Good on him anyway to retire by37;
I wanted to retire at 40, I was nearly there at 45 and took it easy working a few days a week till this year.No kid would help if you are so minded
And we all agree retire has different meaning for everyone, but basically I summaries as:
the freedom to not work for money if so you wish
After reading a few of these threads I just decided to put 15k on ratesetters.
That will be all,  no need to risk more but an interesting variation in term of investment


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## barney (21 October 2019)

Value Collector said:


> As I said I have had quite a few investments work out very well for me over time, some of which we have spoken about here recently.




Thanks VC …… Using Options to create value was probably the main thing that got me interested in the Stock market before I joined ASF … 

Unfortunately Commsec assessed I did not qualify for an "Options account" back then, so I started trading speculative stocks instead  ….. 

That cost me a couple of shirts back then (it could have easily cost me my marriage given the extent of the losses) but I stuck at it and now days have recovered to the point of "going ok" … go me!  lol.  

The obvious next question is .... What was your criteria for choosing Capillano and Fortescue at the time you did?  (ie. how did you assess the future value of those companies to give you the confidence to go in hard? …  ie Fundamental analysis/buy when a Stock is undervalued?)

If I may also ask …. How much do you now consider (in hindsight) was "luck" a factor in your "wins?"

That is certainly not meant to be a derogatory question in any way … rather a personal observation over the years, that getting outlier results on the S/market can sometimes be a bit random.

Bottom line, you have been very successful …… and any "hints" for the rest of us will be graciously absorbed

Cheers.


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## qldfrog (21 October 2019)

Value Collector said:


> One of your bad decisions might have been caught in the Capilano thread.
> 
> https://www.aussiestockforums.com/threads/czz-capilano-honey.25082/
> 
> ...



VC, about Capilano, the reason was ethical, I have no regret:
as you know and this was the cause of tense debate at the time, I consider them as crooks, and would prefer investing in tobacco than in them, no one is forced to smoke crap whereas fake honey.
I actually went out after my initial entry and only in the last year has their wrongdoing been made more or less public/exposed but no one cares
You had a great investment good, but we each have our own limits .
I liked the honey business, searched it, and as a bee keeper was aware of too many wrong doings to stay in.
FMG:
yes I was *wrong  *and never believed they could handle the debts, now with negative interests, it shows how wrong I was...

If I may ask did you purchase a PPOR or rented..pure personal interest, and may not be a valuable question for younger persons as past may not be replicated


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## qldfrog (21 October 2019)

barney said:


> Bottom line, you have been very successful …… and any "hints" for the rest of us will be graciously absorbed



Same here, we know about CZZ, options, any other contributor in hindsight?


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## Zaxon (21 October 2019)

Muschu said:


> Hi
> Thought I'd see if there is any interest among retirees exchanging thoughts on stocks to hold for dividends and (usually) franking credits for income purposes.
> This could be a very boring topic for many investors, and I am more interested in the views of those who have retired.



As I'm not retired, I didn't think you were seeking the opinion of non retired people, but having read through the thread, that stopped nobody else 

Firstly, at 74, I'd hope you would have decent (perhaps the majority) of your investments in bonds.  If you're after a "regular income stream", that's where I'd go, particularly corporate bonds, as treasuries aren't paying much.

My concern about picking stocks primarily based on dividends, as per your question, is that it limits your choice of stocks to a rather small universe. It's like looking for a wife, but she must have blonde hair.  You can always sell down a small portion of a growth stock, and generate your own "dividend".

To me, the perfect "retirement" stock is one that has a low beta (so stable relative to the market), and has a great Total Return.  That might come from dividends, it might not.


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## barney (21 October 2019)

qldfrog said:


> I wanted to retire at 40, I was nearly there at 45 and took it easy working a few days a week till this year.




Retiring at 50 was one of my plans ..... Over a decade later, I now dream of retiring  ..... at all

Much respect and admiration for you chaps who have done well, so well done 

I still battle, but never go hungry … plus I have a  great family, so am probably better off than many … 

In the end it's all about the journey

ps  I still intend to be filthy rich one day …. I'm just not sure that I'll be able to enjoy it lol


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## Value Collector (21 October 2019)

qldfrog said:


> one kid only but arrived with a backpack and a degree aged 27 knowing no one so initial pay was low and going up the ladder not that easy
> was thinking about the army idea: how much can you save max a year after tax 30k to 40k max ?
> And your income is kind of fix, can not get second job or do extra on week end?
> so 300k saving after 8 years when you are 30, if compounded maybe 500k?  still short to retire 7 years later
> ...




I wasn’t just saving cash while in the army, I was investing bought two properties while in the army before the boom, and built a decent share portfolio over time too.

I have averaged a 20%+ return for 20 years over my entire portfolio, I have lots of great investors particularly during and since the GFC, boosted by my options positions.


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## Zaxon (21 October 2019)

aus_trader said:


> Thanks all, So excluding super/SMSF's is there a good tax effective way or stock/index instrument to accumulate money/wealth via regular contributions and/or dividends(DRP's) that would compound over time?



Buy-and-hold capital growth can be super tax efficient.  If you put money into shares and don't sell them, particularly ones that pay little or no dividends, none of it is taxable so far.  Then when you retire, you can sell down an amount where the income places you below the tax free threshold.  For a retiree, that threshold is dramatically higher than for a younger person.

In theory, you could pay zero tax on money you've been investing over your whole life.


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## Value Hunter (21 October 2019)

Value Collector at what age did you actually retire?

I think not enough people noticed one of the most crucial factors in your success. Having a good and supportive wife. If you had a wife who wasn't on board with your savings program or if you had a wife that divorced you it would be a very different story. I have met some men that have been divorced twice and they were all broke.


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## qldfrog (21 October 2019)

VH,
You have a point:
A divorce is a certain wealth destroyer and wife and i worked as a team 
Her regular income allowed me to take risk into contracting then own business
Without that, i would still be an 8 to 5 slave 
Very good point


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## SirRumpole (21 October 2019)

Children are certainly wealth destroyers.


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## sptrawler (21 October 2019)

The other point that has a huge bearing on retirement, is what someone expects from it, in my case my wife and I love travelling therefore that requires a certain amount of income.
On the other hand a really good friend of mine, isn't interested in travelling and just loves photography, reading and music so the amount he requires is far less.
In reality, there are a lot of costs associated with working and after 8 years I'm quite surprised how much less you actually spend when retired, as opposed to when working.
Just my opinion


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## Muschu (21 October 2019)

Hi
Zaxon - I think I mentioned earlier than we're about 30% in cash and the rest is largely in LICs.

There seems to be some interest here in "retiring young"... Is this an ambition for many?  I am curious, if so, as to why.... Genuine question.

We have a son, aged 50, who has done well enough financially to "retire" but his intention is to find a position, next year, in the non-profit sector in order to give back.  He already does this voluntarily but out of hours at the moment.

I also have a close acquaintance of enormous wealth.  Yes, his money has made more money.  But there never seems to be enough and giving some money to those in need is an exercise taken on in a very business-like manner.  I don't think he finds it "joyful".

We're comfortable and I'm happy with that.  51 years of marriage; own our home and can attend to most needs.

I get the impression that there are some very generous and successful younger people on this thread.  I do wonder what some of you do with your time.  I'm certainly not critical, just curious.


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## sptrawler (22 October 2019)

Value Collector said:


> In the early years we lived super cheap, still had heaps of fun (the best things in life are free) but we saved heavily, no over seas holidays till I was 32 (except for and reunion and funeral in NZ), No new cars till I recently got the Tesla, No big houses etc etc.




VC you obviously still operate on a fairly lean budget, if your first new car was the Tesla and you don't have a big house. So your actual operating costs, I assume are far less than your earnings.
Will you add to your property portfolio, or build on equities.


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## aus_trader (22 October 2019)

Zaxon said:


> Buy-and-hold capital growth can be super tax efficient.  If you put money into shares and don't sell them, particularly ones that pay little or no dividends, none of it is taxable so far.  Then when you retire, you can sell down an amount where the income places you below the tax free threshold.  For a retiree, that threshold is dramatically higher than for a younger person.
> 
> In theory, you could pay zero tax on money you've been investing over your whole life.




That could be an idea Zaxon, I didn't look at the whole picture from a retired point of view as I am not retired yet. Could the retired members reading this confirm Zaxon's findings that you are eligible to a larger than the 18k tax free threshold when you are retired ? If so by how much (roughly) or does it come in the form of other concessions ?

I have been doing medium term trading etc for trying to increase what I make, but reading all this information motivates me to also build up a portfolio of stocks and ETF's/LIC's that generate income and possibly capital gains and hold them over the years till retirement. Hopefully then the dividend/distribution income from those or CGT from selling down those holdings won't be taxed as heavily as currently.


----------



## aus_trader (22 October 2019)

Muschu said:


> There seems to be some interest here in "retiring young"... Is this an ambition for many? I am curious, if so, as to why.... Genuine question.




Yes, I would like to be in a position to retire before the actual pension eligibility age which seems to be getting longer by the Government policy changes over the years. Would be happy to work part-time or on a casual basis if financially in a position to completely retire. I would probably get bored otherwise as I am not into fishing or golf.

If there was no requirement to earn money to live comfortably i.e. If what I have in cash and investments made a good annual income I'd also be quite happy to donate my time to charitable causes and to the community on a voluntary basis.


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## Zaxon (22 October 2019)

aus_trader said:


> That could be an idea Zaxon, I didn't look at the whole picture from a retired point of view as I am not retired yet. Could the retired members reading this confirm Zaxon's findings that you are eligible to a larger than the 18k tax free threshold when you are retired ? If so by how much (roughly) or does it come in the form of other concessions ?



Oh, if you wait for real retirees to answer you, they'll need to have their cup of Earl Grey, put in their false teeth, have all their pills labelled Tuesday, and have a potter in the garden before they'll get back to you.

See https://www.superguide.com.au/smsfs/no-tax-retirement-sapto

Firstly, what it's called:




And here's a table listing the offset:



It goes on, but you get the idea.


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## qldfrog (22 October 2019)

Zaxon said:


> Oh, if you wait for real retirees to answer you, they'll need to have their cup of Earl Grey, put in their false teeth, have all their pills labelled Tuesday, and have a potter in the garden before they'll get back to you.
> 
> See https://www.superguide.com.au/smsfs/no-tax-retirement-sapto
> 
> ...



As far as i know, it only applies to real retired people, past the age threshold, but would be very happy to be wrong, so in your 50s or earlier no such things
As a couple, we can live happily on around 60k a year so we only need to take 30k income each, obviously a bit more with dividends reinvested etc but income remains low so not much tax
Also seriously considering OS move part time to not remain australian resident for tax purpose
Quite complex and as far as i can see require a move to flexible assets so in a process to reduce real estate part of portfolio
We are a bit off the track in this thread as it turns into a more retirement focus than its title implies


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## Zaxon (22 October 2019)

qldfrog said:


> As far as i know, it only applies to real retired people, past the age threshold, but would be very happy to be wrong, so in your 50s or earlier no such things



Correct.  As the name implies, it's available for seniors:



If you retired early, the good news is you'll be a senior eventually


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## Value Collector (22 October 2019)

barney said:


> Thanks VC …… Using Options to create value was probably the main thing that got me interested in the Stock market before I joined ASF …
> 
> Unfortunately Commsec assessed I did not qualify for an "Options account" back then, so I started trading speculative stocks instead  …..
> 
> ...




If you read through the Capilano thread I go into detail of why I chose it, same with the Fmg thread.

Luck has played a part in my success, but it surely isn’t all luck.

Buying into property as a 19 year old first year soldier right before the boom was dumb luck,

Although if you read this little plan I hand wrote when I was 14, you can see I was just working the plan.

I never bought the donut king, but I did buy another business.


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## Value Collector (22 October 2019)

Value Hunter said:


> Value Collector at what age did you actually retire?
> 
> I think not enough people noticed one of the most crucial factors in your success. Having a good and supportive wife. If you had a wife who wasn't on board with your savings program or if you had a wife that divorced you it would be a very different story. I have met some men that have been divorced twice and they were all broke.




Yes, having a partner that is onboard with your plan is crucial, And that has probably been the luckiest part.

My wife gave up work first, about 5 years ago, and I sold my business about 13 months ago, however I wasn’t actually drawing a wage from the business, 100% of the businesses profits were being used to buy investments in my wife’s name to build her accounts up.

So I have been living off my investment portfolio using the 50% ratio I talked about for over 5 years or so, we actually lived in a small apartment on the business premises so no rent to pay, so it was super easy.

In hindsight I should have got rid of the business earlier, but I was a bit scared to make the leap, and not having to pay rent was a bonus.


----------



## Value Collector (22 October 2019)

sptrawler said:


> VC you obviously still operate on a fairly lean budget, if your first new car was the Tesla and you don't have a big house. So your actual operating costs, I assume are far less than your earnings.
> Will you add to your property portfolio, or build on equities.




Yeah My day to day life is pretty cheap, although since leaving full time work I have been spending a bit on travel, splashed out on the Tesla (but I had time to save up for that due to the long wait), and have been eating out more.

So I am spending more than ever, but still not overly much, I have set a budget of $117,500 (50% of this years cashflow) for next year, but I probably won’t use all that.


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## qldfrog (22 October 2019)

VC, that scan of your plan as a kid is gold
Schools should have it as part of their curriculum
Obviously, the government would not like it....
Kudos
We will agree to disagree on Capilano but investment wise, well done 
Do you have kids and did you manage to share that spirit?
Ok out of topic


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## Value Collector (22 October 2019)

qldfrog said:


> VC, that scan of your plan as a kid is gold
> Schools should have it as part of their curriculum
> Obviously, the government would not like it....
> Kudos
> ...




No kids yet.


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## Bill M (22 October 2019)

You are an amazing person Value collector. I am not so different to you and I retired early too. I got a hand written note too but at a much later stage of my life, back in the early 90's. I never won lotto, got a free handout or got an inheritance. Always worked simple jobs, mostly unskilled but I work every scrap of O/T while all my mates were drinking beer in the pub. They use to call me dollar Bill because I even went in for 4 hours O/T. Saved my money, bought a small business that doubled 3 years later and I sold it. Cashed in and bought a 1 br apartment in Sydney and gave myself an overseas trip. Since then I have bought and sold 11 properties mostly in Sydney.

If I had to I could go back to work and make more money and more investments but I do not have to and I live a very simple life. I believe that when you have enough, then stop and let others have a go. Seen too many of my mates die early and never enjoy life. I spend nearly 6 Months a year travelling.

These days I find people don't really want to take on any risk, not even younger ones. I mean for example people are happy to get 1.9% in an online savings and complain about the low interest rate. But mention high dividend yield shares or RateSetter and they won't do it. I did not mind risk when I was a young fella and at one stage even bought a apartment off the plan in a top notch suburb of Sydney. The business I bought also had risk involved. These days people just won't take on any risk even if there is a chance of making substantial gains.

Now, I still owns stocks and invest in RateSetter, the rental apartments are all gone. The stocks are long term holdings in my super. A very simple investment in the Vanguard ETF, VHY pays me around 6% income. I really could not care if the share market took a 50% dive, I am expecting it at some stage. But I am prepared for it because I have set aside a cash fund for injection into the sharemarket should this happen. You need to be ready for any eventuality. I am a strong believer of no risk = no reward. Good luck everyone.

Edit: I just noticed your no kids comment, same here too.


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## Value Collector (22 October 2019)

Bill M said:


> You are an amazing person Value collector. I am not so different to you and I retired early too. I got a hand written note too but at a much later stage of my life, back in the early 90's. I never won lotto, got a free handout or got an inheritance. Always worked simple jobs, mostly unskilled but I work every scrap of O/T while all my mates were drinking beer in the pub. They use to call me dollar Bill because I even went in for 4 hours O/T. Saved my money, bought a small business that doubled 3 years later and I sold it. Cashed in and bought a 1 br apartment in Sydney and gave myself an overseas trip. Since then I have bought and sold 11 properties mostly in Sydney.
> 
> If I had to I could go back to work and make more money and more investments but I do not have to and I live a very simple life. I believe that when you have enough, then stop and let others have a go. Seen too many of my mates die early and never enjoy life. I spend nearly 6 Months a year travelling.
> 
> ...




You are spot on with your thinking on risk, as investors it’s our job to intelligently put money out into assets where it is at risk, and get paid for doing so.

People complain that Term deposits have zero return after tax and inflation, but ofcourse they don’t, because there is zero risk, the banks shareholders, bond holders and the government are all taking the risk away from you, so they get their returns you get your cash stored free of charge.

Move up the risk profile to a bank bond holders or share holder and you will find your return improving.


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## Belli (22 October 2019)

aus_trader said:


> Could the retired members reading this confirm Zaxon's findings that you are eligible to a larger than the 18k tax free threshold when you are retired ? If so by how much (roughly) or does it come in the form of other concessions ?




Dividend income pa: $36,000 fully franked at 30%
Franking amount: $15,482
Total Taxable Income: $51,428
Tax on Taxable income: $7,981 including Medicare Levey, $228 low income offset and $1,080 Middle and Low Income Offset.

Subtract Franking.

Tax Refund: $7,447.



qldfrog said:


> Also seriously considering OS move part time to not remain australian resident for tax purpose




Just in general.  Care to ensure if one does do the OS thing and have an SMSF it does not become a Foreign Superannuation Fund which could then be subject to a 45% tax rate.


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## qldfrog (22 October 2019)

Belli said:


> Dividend income pa: $36,000 fully franked at 30%
> Franking amount: $15,482
> Total Taxable Income: $51,428
> Tax on Taxable income: $7,981 including Medicare Levey, $228 low income offset and $1,080 Middle and Low Income Offset.
> ...



The OS and non residency has some serious implication on real estate taxes, maybe even rates and stamp duties etc
Thanks for mentioning the smsf
I have none but it might have some implications on my super funds indeed.i will have to check that


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## Bill M (22 October 2019)

And to add to the theme of the thread title, here are a few of my long term holdings.

*Australian Enhanced Income Fund, AYF. (5%> Distributions)* 
At a net asset value (NAV) of a Unit of $6.00 the Fund's cash income yield is 4.66% per annum (assumes a $0.28 cents per annum distribution). The Responsible Entity estimates that the benefit of franking adds an additional 0.50% to the cash income yield on an annual basis.
Link: https://www.eiml.com.au/listed.php/53/212

*Vanguard Australian Shares High Yield ETF, VHY. (5%> Distributions)*
The ETF provides low-cost exposure to companies listed on the Australian Securities Exchange (ASX) that have higher forecast dividends relative to other ASX-listed companies. Security diversification is achieved by restricting the proportion invested in any one industry to 40% of the total ETF and 10% for any one company. Australian Real Estate Investment Trusts (A-REITS) are excluded from the index.
Link: https://www.vanguardinvestments.com...ct.html#/fundDetail/etf/portId=8210/?overview

*RateSetter, Peer to Peer Investing. (Earning 7.7% Currently on the 5 Year Loan)*
More info at the following link: https://www.ratesetter.com.au/investing/


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## barney (22 October 2019)

Value Collector said:


> if you read this little plan I hand wrote when I was 14, you can see I was just working the plan.




At 14 ...… Brilliant

Interesting and informative thread.


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## sptrawler (22 October 2019)

I think the replies that people are putting forward are priceless, you can't get better advice than from those who have already walked the path or are further down it than yourself.
I also started my accumulation early in life, my first son was born when I was a 22 year old electrician, i used my wife's finishing up pay as a deposit on a block of land.
By the time I was 25 we had three children, but we had moved to the bush to earn higher wages, at 26 I moved back and paid cash for a house to be transported and re stumped on the block. Best move I ever did, from then on it was invest any spare cash, in shares or in moving to upgrade the house or location.
I selected my first shares, by asking a couple of old blokes I worked with who were obviously investors, "if you were starting out right now, what share would you buy"? The answer was Franked income fund, it proved to be a real winner. They have since been bought out by Westfarmers.

With retirement, we travel about 4-5months of the year, usually involves a cruises and we spend $60-70k, that includes the running costs of 1 1/2 houses.


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## willy1111 (22 October 2019)

Muschu said:


> There seems to be some interest here in "retiring young"... Is this an ambition for many?  I am curious, if so, as to why.... Genuine question.
> 
> We have a son, aged 50, who has done well enough financially to "retire" but his intention is to find a position, next year, in the non-profit sector in order to give back.  He already does this voluntarily but out of hours at the moment.




Financial security creates 'free will' in a way which is alluring to most.

We all have different ideas of what to do with our time and money.


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## barney (22 October 2019)

Muschu said:


> There seems to be some interest here in "retiring young"... Is this an ambition for many?  I am curious, if so, as to why.... Genuine question.




Not sure about other's motives, but from my own point of view, the desire to retire early (which has already passed) was just another way of saying I want to be financially self sufficient so I can do more of the things I would like to rather than simply work all the time. 

After 40 years of being self employed I have come to the conclusion that work is over rated

ps What @willy1111 said  … only he said it more succinctly.


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## sptrawler (22 October 2019)

barney said:


> Not sure about other's motives, but from my own point of view, the desire to retire early (which has already passed) was just another way of saying I want to be financially self sufficient so I can do more of the things I would like to rather than simply work all the time.
> .



I must say, personally I think you have nailed it, retirement itself isn't all it is crapped up to be IMO.
It took me four years to come to terms with not working, I very much enjoyed it, so when it was removed from my life I became quite depressed.
Now after eight years, I have filled my time with other pursuits and pass times, so I no longer have that overpowering feeling of worthlessness but initially it was a real struggle.
I think the main thing that got me through it, was being in a financially secure position, where my wife and I could enjoy the rewards of our life's labour and scarifices.


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## Belli (22 October 2019)

qldfrog said:


> might have some implications on my super funds indeed.i will have to check tha




People may wish to start here:

https://www.ato.gov.au/law/view/document?Docid=TXR/TR20089/NAT/ATO/00001&PiT=99991231235958

Nevertheless it is probably best to get sound legal advice from a professional well versed in the taxation aspects rather then wing it with DIY.


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## Bill M (22 October 2019)

Muschu said:


> There seems to be some interest here in "retiring young"... Is this an ambition for many? I am curious, if so, as to why.....




For absolute and total freedom of your life. To be able to do anything, anytime you like without external pressures like work commanding you should be at a certain place at a certain time. I had some really different and exciting jobs in the past but I always felt that the job was stealing my time on this planet away from me. From an early age I was hell bent on studying as much as could about investing just so I could retire early, it helped me achieve my goals. I am retired 18 years now and love every moment of it.


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## aus_trader (22 October 2019)

Zaxon said:


> Oh, if you wait for real retirees to answer you, they'll need to have their cup of Earl Grey, put in their false teeth, have all their pills labelled Tuesday, and have a potter in the garden before they'll get back to you.
> 
> See https://www.superguide.com.au/smsfs/no-tax-retirement-sapto
> 
> ...



Thanks Zaxon, that's good to know there is this offset which will bring the overall tax for the retired couples. Have to plan now for retirement because as you mentioned there will be other important things that will take up the time and priority to do it at a later stage slowing you down


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## aus_trader (22 October 2019)

Belli said:


> Dividend income pa: $36,000 fully franked at 30%
> Franking amount: $15,482
> Total Taxable Income: $51,428
> Tax on Taxable income: $7,981 including Medicare Levey, $228 low income offset and $1,080 Middle and Low Income Offset.
> ...



Thanks Belli.


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## barney (22 October 2019)

Zaxon said:


> Oh, if you wait for real retirees to answer you, they'll need to have their *cup of Earl Grey*




I knew there was something I was doing wrong …. I drink Dilmah … I'm destined to have to work forever  .… nice tea though


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## qldfrog (22 October 2019)

barney said:


> I knew there was something I was doing wrong …. I drink Dilmah … I'm destined to have to work forever  .… nice tea though



I am already at earl grey at 52.....
Retirement is freedom, and freedom to work  crazy hours in a chinese start-up if you want to as you do not care if you get paid or not and the experience is unique, and get out when you want to to retreat in your hobby farm
But i have never drunk so much tea indeed and try to stick to a single coffee a day


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## Zaxon (22 October 2019)

barney said:


> I knew there was something I was doing wrong …. I drink Dilmah … I'm destined to have to work forever



I don't drink tea at all, and I certainly have no interest in gardening.  I fear, too, I'll never be accepted into the hallowed halls of the Grey Army.


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## Country Lad (22 October 2019)

This common theme is a critical issue for all people considering retirement, particularly those at a younger age.



sptrawler said:


> I must say, personally I think you have nailed it, retirement itself isn't all it is crapped up to be IMO.
> It took me four years to come to terms with not working






Muschu said:


> There seems to be some interest here in "retiring young"... Is this an ambition for many?  I am curious, if so, as to why.... Genuine question.






willy1111 said:


> Financial security creates 'free will' in a way which is alluring to most.
> We all have different ideas of what to do with our time and money.




In our case I had a very lucrative business which gave me welcome challenges, as well as directorships on a number of government and public boards over the last 25 working years and a high public profile.  My wife had a senior position which she enjoyed.

We are fortunate to have sufficient income/investments to be able to fund whatever we wanted to do, but even so, we were very careful about when we retired and particularly knowing how we were going to spend our time.

We travelled full time RVing throughout Australia and also travelling overseas for 9 years and now do it around 6 months of the year. We have never been bored or dissatisfied and thoroughly enjoyed things we never contemplated doing during our working lives with shoes under the board table, such as volunteering on outback properties, working with BlazeAid.

We have met numerous people who have retired early and became bored with it and many went back to work to retire later.

We had a plan how to spend our time, enjoyed executing the plan, and along the way have found other interests and enjoy being mostly busy. Camping out, cruising or socialising can be a tough hectic life you know.

To us that is how retirement should evolve – living life and finding things to enjoy.

Unless you have a definitive, well thought out plan of what you are going to do with your waking 16 hours per day for the rest of your life, my suggestion is don’t retire till you have that plan. The last thing you need is a boring unsatisfactory third age.


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## sptrawler (22 October 2019)

Country Lad said:


> This common theme is a critical issue for all people considering retirement, particularly those at a younger age.
> .



I agree with your comments, I also had a plan, but it was scuttled by a convergence of redundancy, family issues and ill health.


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## aus_trader (23 October 2019)

Zaxon said:


> I don't drink tea at all, and I certainly have no interest in gardening.  I fear, too, I'll never be accepted into the hallowed halls of the Grey Army.



"Grey Army" in Australia is actually a service provider of Handyman and Lawn mowing services. So if you are fit wouldn't be hard to get accepted there with $20-$30p/hr pay, not sure if you'll make the hall of fame though. You might need a cuppa tea for a pick me up after all 

Above is off track and just for a little fun, I knew Earl Grey was of UK origins.


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## aus_trader (23 October 2019)

sptrawler said:


> It took me four years to come to terms with not working, I very much enjoyed it, so when it was removed from my life I became quite depressed.



You have nailed it with the above comment with regards to work. I also wouldn't wish to give up work altogether for the sake of retirement. Even if I could retire I would like to have some involvement with the community in terms of charity/giving back or part-time or some casual work. Like you it's first hand experience where I am coming from due to a period of being out of work due to a retrenchment after which it took me around a year before re-training and getting back on a part-time basis. During those months when I didn't have any work, I did feel something was missing and it wasn't just financial as I had a savings buffer and a small payout from the retrenchment. I think it was the lack of involvement with other people that was hard since most of us tend to be social creatures. I also hadn't discovered ASF at that time or I would've had some comfort chatting to all you guys


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## Zaxon (23 October 2019)

aus_trader said:


> "Grey Army" in Australia is actually a service provider of Handyman and Lawn mowing services.



Oh right.  Then it's an appropriated term then.  Traditionally, the Grey Army is the name given to pensioner voters who vote you out if you try and mess with their pension and benefits.


aus_trader said:


> So if you are fit wouldn't be hard to get accepted there with $20-$30p/hr pay, not sure if you'll make the hall of fame though.



Actually, I'm quite handy.  I fully rebuilt our bathroom from scratch.  Looks like I'm OK after all.  Phew!


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## qldfrog (23 October 2019)

It also depends on how you see your work while working
Some people have no life outside work, the elevator army always too busy and finishing files on the week end
Retirement is death to them
I have never been like that
 life is too short to exchange some of yours for $
This is what work is
If it is not then that's not work and you are lucky but very seldom do i see people employed and enjoying every minutes of it
Self employed helps but then you have some customers... And then the ATO, etc
When money is out of the equation, it changes everything or it should IMHO
Ok let's go for bowling and a cup of weak tea


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## DocK (24 October 2019)

Husband and I are 58 & 55 and aiming to retire within the next few years.  I run our smsf portfolio actively, but have lately set aside funds for investing purely into etfs for income streams, without too much regard for capital returns.  My intention is for those holdings to be very long term and to provide a steady income - more or less what a term deposit used to do a decade ago.  I presently hold both STW and VTS within the actively managed portfolio, and have added YMAX as a long term income hold, and am considering adding HVST as a long term hold also.  I do wonder what effect a considerable market downturn would have on the income streams of both YMAX and HVST.  As we are presently in accumulation phase the primary focus of our actively managed portfolio is capital growth/preservation and I think I would find it difficult to simply sit on an ETF and watch its value diminish, but I guess if its purpose was to provide an income stream that is what I should do?  I do so wish I could just stash our liquid funds in a term deposit and watch it double in value over 7 years like my parents did...….


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## monkton (24 October 2019)

DocK said:


> Husband and I are 58 & 55 and aiming to retire within the next few years.  I run our smsf portfolio actively, but have lately set aside funds for investing purely into etfs for income streams, without too much regard for capital returns.  My intention is for those holdings to be very long term and to provide a steady income - more or less what a term deposit used to do a decade ago.  I presently hold both STW and VTS within the actively managed portfolio, and have added YMAX as a long term income hold, and am considering adding HVST as a long term hold also.  I do wonder what effect a considerable market downturn would have on the income streams of both YMAX and HVST.  As we are presently in accumulation phase the primary focus of our actively managed portfolio is capital growth/preservation and I think I would find it difficult to simply sit on an ETF and watch its value diminish, but I guess if its purpose was to provide an income stream that is what I should do?  I do so wish I could just stash our liquid funds in a term deposit and watch it double in value over 7 years like my parents did...….



If you look at the long term chart of YMAX & HVST it's price is down hill.HVST high a few yars ago of $26 now around $14-$15. I held HVST from listing & was glad to get rid of it, yes it pays monthly & pays well but there were articles a while ago that to get these returns capital was also being returned as div's., think even Betashares mentioned this.Beware yield trap,higher returns, higher risk. Some prefer PL8, don't know much about this. My preference now is for index tracking etf's & old school lic's ie. arg,mlt ,afic etc. Lower but steady returns & even during the GFC while share price was hammered, the div's only lowered marginally. These might be boring but I do like to sleep at night.


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## tinhat (24 October 2019)

DocK said:


> I do wonder what effect a considerable market downturn would have on the income streams of both YMAX and HVST.




I'm not giving advice here but crickey, YMAX and HVST don't seem like good investments to me. I owned YMAX for a while in the SMSF with the idea that it would be small hedge in the event of a bearish market. Lucky I got out after scalping some income without a loss to my capital.

IMHO, these funds are dividend traps. They attract you with the high yield, but what is the sense of gaining a high yield on an ever diminishing capital value? 100% of nothing is nothing. See charts below.

I follow an investment thesis that it is better to hold bank shares as a proxy to bank deposits. I believe this thesis has proven to be correct over the long term. All up across the three portfolios I manage for my family I have invested a decent amount of money into bank shares. One portfolio is 100% bank shares (it was bank and retail for many years). Another is about 20% bank shares and another zero percent bank shares.

YMAX



HVST


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## tinhat (24 October 2019)

As a reference point, here is a chart of the all ordinaries during the same period.



Spot the difference.


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## Zaxon (24 October 2019)

monkton said:


> If you look at the long term chart of YMAX & HVST it's price is down hill. but there were articles a while ago that to get these returns capital was also being returned as div's., think even Betashares mentioned this.



You said that eloquently.  So many people see dividends/distributions as free money.  The reality is, it all comes from an equivalent decrease in your share or ETF price.  Profit is the better thing to be chasing.


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## tinhat (24 October 2019)

Mia culpa. This is the HVST chart.


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## sptrawler (25 October 2019)

Dock I tend to agree with Monkton, I run my own SMSF and have only LICs, shares and cash, I have steered away from ETFs.
From my understanding, they distribute all income and in the event of a large market correction, they become very exposed to the loses. Only my understanding, but I'm sure I'll be corrected if I'm wrong.
But having said that, I'm sure over the last few years people have made a bomb on ETFs, so there is no right or wrong, just what a person is comfortable with.
We all hope our choices work out and everyone's ideas are welcomed here.


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## Belli (25 October 2019)

sptrawler said:


> ETFs....they distribute all income




As a Trust, ETFs are required to distribute income.  Also they are open ended and I understand units subject to redemption (or purchase) in the primary market - those listed on the ASX are in the secondary market.

Probably, depending on the type of ETF (inverse, sector, involved in options, etc) the vanilla ETFs are no more or less exposed to market correction than the market itself.

A number of those who were invested, mainly retail more than likely, went things went south around 2008 had a panic attack, especially when the distributions were reduced by some 50%.  However, there is one argument the distributions prior to that were abnormally high and the underlying distributions, using STW for arguments sake as it's been around the longest, taken from 2002 to current is upward.

As an aside, I thought that period was the best time ever and was filling my boots with as much as I could grab hold of.  Sold nothing bought what I could although I swapped STW for VAS in 2010 - no requirement to target smaller companies sector because VAS more than likely has them.

I don't hold any direct shares and take no great interest in the market.  The LICs I hold do that job and a relatively active while the ETFs are indifferent (in goes the good, out goes the bad.)

I avoid like the plague any which specialise (high yield, blah, blah, blah) as usually they have higher fees which have an impact longer term as well as being too narrow a focus which, in my view, increases the risk.


----------



## monkton (25 October 2019)

Zaxon said:


> You said that eloquently.  So many people see dividends/distributions as free money.  The reality is, it all comes from an equivalent decrease in your share or ETF price.  Profit is the better thing to be chasing.



Thanks Zaxon, though I do prefer the div's of Lic's, they don't have to payout 100% of income, but keep some to re-invest & some to smooth out div's in 'low times', also I'learned the hard way I'm no good at the 'profit' thing.


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## Belli (25 October 2019)

I'm old school so dividends come from free cash glow while capital comes from the shareholders equity account, is classed as Return of Capital and usually requires a Class Ruling from the ATO.

Any company or organisation which uses capital for supporting the divided I will not touch, AMIT aspects being the exception.  I have heard of those who do this but I don't know any specifically since I don't look for them.


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## Value Collector (25 October 2019)

DocK said:


> Husband and I are 58 & 55 and aiming to retire within the next few years.  I run our smsf portfolio actively, but have lately set aside funds for investing purely into etfs for income streams, without too much regard for capital returns.  My intention is for those holdings to be very long term and to provide a steady income - more or less what a term deposit used to do a decade ago.  I presently hold both STW and VTS within the actively managed portfolio, and have added YMAX as a long term income hold, and am considering adding HVST as a long term hold also.  I do wonder what effect a considerable market downturn would have on the income streams of both YMAX and HVST.  As we are presently in accumulation phase the primary focus of our actively managed portfolio is capital growth/preservation and I think I would find it difficult to simply sit on an ETF and watch its value diminish, but I guess if its purpose was to provide an income stream that is what I should do?  I do so wish I could just stash our liquid funds in a term deposit and watch it double in value over 7 years like my parents did...….




When you sit on a Term Deposit, you are guaranteed to watch its value diminish, no in actual dollar terms, but inflation will be eating away at your buying power steadily each year.

If you instead owned a the asx 200 index and the world index, you would be getting a cashflow return that was higher than the Term Deposit, and your capital value would “over time” see real growth in excess of inflation.

The question to ask your self is would you rather an average return of 2% per year that was steady or one of 8% but was volatile, eg 15% this year -2% next year etc.

—————
The way to manage your emotions during fluctuations is to stop thinking of your investment as being a price that is bouncing around, but think of the actual businesses you own, and don’t think short term.

If I gave you ownership of 1% of every business in the world, would you worry about the short term ups and Downs?

No you wouldn’t, you would just sit on it, collect the dividends and live life.

Consistently allocating funds into the world index is just really trying to buy yourself into the situation of owning a chunk of every business


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## monkton (25 October 2019)

sptrawler said:


> Dock I tend to agree with Monkton, I run my own SMSF and have only LICs, shares and cash, I have steered away from ETFs.
> From my understanding, they distribute all income and in the event of a large market correction, they become very exposed to the loses. Only my understanding, but I'm sure I'll be corrected if I'm wrong.
> But having said that, I'm sure over the last few years people have made a bomb on ETFs, so there is no right or wrong, just what a person is comfortable with.
> We all hope our choices work out and everyone's ideas are welcomed here.



Yes etf's have to distribute all income, lic's keep some to re-invest & some to smooth out div payment in low times.


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## Value Collector (25 October 2019)

sptrawler said:


> Dock I tend to agree with Monkton, I run my own SMSF and have only LICs, shares and cash, I have steered away from ETFs.
> From my understanding, they distribute all income and in the event of a large market correction, they become very exposed to the loses. Only my understanding, but I'm sure I'll be corrected if I'm wrong.
> But having said that, I'm sure over the last few years people have made a bomb on ETFs, so there is no right or wrong, just what a person is comfortable with.
> We all hope our choices work out and everyone's ideas are welcomed here.




To me, it’s not about whether something is an ETF or any other security.

it’s 100% about what underlying assets I own when I buy the security and how is it being managed.


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## Zaxon (25 October 2019)

sptrawler said:


> I run my own SMSF and have only LICs, shares and cash, I have steered away from ETFs.
> From my understanding, they distribute all income and in the event of a large market correction, they become very exposed to the loses. Only my understanding, but I'm sure I'll be corrected if I'm wrong.



lol.  OK.  I feel summoned.  The major differences between ETFs vs LICs is transparency, and active vs passive management.  ETF can mean any Exchange Traded Product, but let's focus on index funds, which is what most people think of when they hear ETF. 

Index ETFs

Are a passively held index

Very transparent about their holdings
If you want to own the pure index, you can!
Are incredibly cheap to own

They are a trust structure
All dividends are distributed to their holders in the same year

Are a more modern structure
LICs

Are an actively managed fund (not passive)

They may or maynot being trying to copy an index
Are more of a "black box". They may reveal their holdings.  They may not

Inherently have a lot more internal fees than an ETF, because somebody has to pay for all those active managers

They are a company structure

They may (or may not) smooth out distributions by retaining profits until later years. Eventually, it should all get paid out
In a sense, are more old fashioned than ETFs.
The decision should go like this: Do I want to hold an index: ASX200, S&P500 - choose an ETF.  Do I prefer an active manager, and believe this specific LIC can outperform the index - choose an LIC.

Because LICs hold shares in other listed companies, they're inherently exposed to the market in exactly the same way an ETF is.  If the market crashes, LICs crash along with it. They may smooth returns by withholding distributions.  That means they're deliberately witholding your dividends so they can give them to you in a future year.


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## qldfrog (25 October 2019)

Interesting article on why lics may not stack up to efthttps://blog.stockspot.com.au/compare-lic-vs-etf/
A problem now is that some eft are quite managed, a la LICand
 Plus you may need some management when markets are in free fall , so boom time may see different winners


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## Belli (25 October 2019)

qldfrog said:


> A problem now is that some eft are quite managed, a la LIC




Vanguard has had actively managed funds many years and now a few ETFs (VVLU, VGMF, VMIN) and is looking to expand that product range.  It has also closed some funds due to lack of FUM.  I was informed it also altered its fixed interest rate fund to include floating rates.

As for blogs possibly interesting but to me irrelevant same as etfwatch, Cuffelinks and the myriad of other "investment" sites which claim to provide profound wisdom.  For me there is only one wisdom.  Keep on investing through thick and thin.


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## DocK (25 October 2019)

Thank you everyone for your considered replies.  I was looking at YMAX/HVST as more or less "buying an income stream" and provided the capital value didn't deteriorate it would provide much the same function as a term deposit (where face value remains constant, but erodes over time) with far superior returns.  I would sleep better at night if more of my smsf liquid funds were invested out of the sharemarket, but with interest rates so low there's not a lot of options.  Our main smsf asset is commercial property which we'll probably hold until/unless liquidity issues force us to sell in distant future.  Our current share portfolio is varied and I'm happy to actively manage it for the present, but would prefer a more hands off approach once retired.  Hopefully I'll be too busy travelling.....  I don't intend to transfer all share funds into ETFs/LICs, but will probably concentrate funds to a few key holdings with low volatility such as banks and the like.

I have held STW and VTS for many years (in and out at times) and although the income is less than ymax/hvst the returns are far superior. Looking at 5 year charts for the various options STW has outperformed AFI, ARG & MLT although the distributions are not fully franked and a slightly lower return.  YMAX and HVST performance is flat to negative, HVST in particular not a sensible option.  I prefer the passive and lower cost style ETF over the LICs, so it seems that I'm best off to stick to what I've been doing and simply allocate more funds as they accumulate towards STW/VTS and perhaps AFI/VAS purely to spread management risk if not market risk.  This has been a great discussion to help me focus my priorities, which remain capital preservation/growth.  I think my personality will deal better with STW tracking the market (hopefully higher over the long term) and having to sell a small % of the holding to top up income if need be, rather than see the capital base severely underperform the market but return sufficient income.


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## BoNeZ (25 October 2019)

Zaxon said:


> So many people see dividends/distributions as free money. The reality is, it all comes from an equivalent decrease in your share or ETF price. Profit is the better thing to be chasing.




Lately I've been watching a few youtube clips by Ben Felix including the following titled "The Irrelevance of Dividends"



He's not saying dividends aren't important but rather by focusing on stocks that pay dividends you are ignoring high growth ones that pay no or little dividend.


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## Zaxon (25 October 2019)

BoNeZ said:


> Lately I've been watching a few youtube clips by Ben Felix
> He's not saying dividends aren't important but rather by focusing on stocks that pay dividends you are ignoring high growth ones that pay no or little dividend.



Exactly true.  Total Return (dividends + share price growth) is all that matters.  Dividends are only one part of the equation.

I'm watched many Ben Felix videos on the past.  Rarely have I found anything I disagree with him over, so he gets a big tick from me.


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## Value Collector (25 October 2019)

BoNeZ said:


> Lately I've been watching a few youtube clips by Ben Felix including the following titled "The Irrelevance of Dividends"
> 
> 
> 
> He's not saying dividends aren't important but rather by focusing on stocks that pay dividends you are ignoring high growth ones that pay no or little dividend.





Yep, it all just comes down to whether companies can deploy cash at high rates.

If a company is generating cash faster than they can intelligently invest it, they should pay dividends or buy back stock.

If they can deploy a lot of cash at high rates, they should retain earnings.


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## SirRumpole (25 October 2019)

Value Collector said:


> To me, it’s not about whether something is an ETF or any other security.
> 
> it’s 100% about what underlying assets I own when I buy the security and how is it being managed.




But it's also a matter of the price that you buy in at.

You're already in, but for a new investor is the market over priced at the moment ?

Share prices seem artificially supported by low cash rates in order to stimulate a slowing economy so is there a real profit backing for investments to increase in value ?


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## sptrawler (26 October 2019)

The other issue for retirement stocks is, if you buy stocks for capital growth, you have to sell them for income.
Then you have to use the money, you make from the sale to live on and have enough to buy another share that gives you the same capital growth.
It becomes a bit of a Ponzi or gambling game.
The scenario is completely different if you are working, because you just keep adding, with additional funds.
 That isn't possible when your capital is fixed and you have to draw down on it for living expenses, plus add to it from the earnings it generates, it becomes a much more precarious equation.
I hope that makes sense, it is a difficult issue to explain.


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## Value Collector (26 October 2019)

SirRumpole said:


> But it's also a matter of the price that you buy in at.
> 
> You're already in, but for a new investor is the market over priced at the moment ?
> 
> Share prices seem artificially supported by low cash rates in order to stimulate a slowing economy so is there a real profit backing for investments to increase in value ?




Yes of course price matters a lot.

But I personally don’t think the market is over priced, I am still actively writing puts against some things I think are under valued.

If anything I think the market is over all close to fairly valued, we some things under priced, so I wouldn’t be telling people to avoid starting a savings and investment program.

If some one asked me what they should do now, I would probably say “spend less than you earn, and dollar cost average into the Aussie and world index, and continue doing so regardless of whether we see falls or not”


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## Value Collector (26 October 2019)

sptrawler said:


> The other issue for retirement stocks is, if you buy stocks for capital growth, you have to sell them for income.
> Then you have to use the money, you make from the sale to live on and have enough to buy another share that gives you the same capital growth.
> It becomes a bit of a Ponzi or gambling game.
> The scenario is completely different if you are working, because you just keep adding, with additional funds.
> ...




Unless you buy a stock that continues to see capital growth for years and years.

Each year you just sell a few to fund life style, and the remaining ones keep on appreciating.

Think about Berkshire Hathaway for example, I know it’s an extreme example.

But if you purchased $10,000 of Berkshire back in the 1960’s, you would have gotten about 1500 shares, today each share is worth $316,000 each.

You could have sold 10% of your shares each year and continued getting richer and richer. 

You didn’t have to chop and change finding new investments, infact dong so would have been a disaster for you that you regret.


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## sptrawler (26 October 2019)

Value Collector said:


> Unless you buy a stock that continues to see capital growth for years and years.
> 
> Each year you just sell a few to fund life style, and the remaining ones keep on appreciating.
> 
> ...



The problem with that is, there are 100 failures, for every Berkshire and that underlines the gambling scenario.
When you are lucky enough, to have a large enough and diverse enough portfolio of investments that you are not dependent on any one of them, it all appears very simple.
It also enables humility, when considering the objectives of others.


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## Value Collector (26 October 2019)

sptrawler said:


> The problem with that is, there are 100 failures, for every Berkshire and that underlines the gambling scenario.
> When you are lucky enough, to have a large enough and diverse enough portfolio of investments that you are not dependent on any one of them, it all appears very simple.
> It also enables humility, when considering the objectives of others.



That’s why I recommend most people just hit up be index as I said above.

It will produce both capital growth and income, so you are hedged both ways, and you have diversification.

If you were 100% world and Aussie index, and simply spent your income + 2.5% of the capital value each year, you could plod along almost indefinitely.

On average over the years your portfolio would grow and replace the capital you draw out.

If you think you will be dead in 20 years, you can start spending 5% and your money will still out live you.


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## Zaxon (26 October 2019)

sptrawler said:


> The other issue for retirement stocks is, if you buy stocks for capital growth, you have to sell them for income.



Correct.


sptrawler said:


> Then you have to use the money, you make from the sale to live on and have enough to buy another share that gives you the same capital growth.



Yes to having to live off the money. No to buying other shares.  You only sell as many shares as you need to live on.  You don't sell specifically to buy others.  Once you've retired, hence drawing down on your shares, that's it for adding to your portfolio (excluding rebalancing etc)


sptrawler said:


> It becomes a bit of a Ponzi or gambling game.



Hmm.  I'll disagree with that assessment, but I'll explain why.  If we agree share numbers don't matter:  $1k worth of shares could be 1000 x $1 shares or 100 x $10 shares.  Nobody cares if you hold 1000 or 100 shares - they both equal $1k worth of invested capital, and that's all that matters.

Back to dividends vs selling shares.  Company A and company B's shares are both worth $10.  Company A pays a $2 dividend, company B doesn't.  You decide (by are not forced to) sell the same value of company B's shares, to exactly match the dividend.

Starting Point:
Company A:  1000 x $10 = $10k
Company B:  1000 x $10 = $10k

Dividend Time:
Company A: Pays $2 dividend per share.  Shares are now worth $8.  You have 1000 x $2 = $2k in cash, and own 1000 x $8 = $8k in shares.  The astute amongst you will notice that $2k + $8k = $10k, so paying the dividend was a zero sum game.

To be fair, let's sell down $2k worth of company B's shares:
Company B: You sell 200 shares @ $10 = $2k in cash. You now own 800 shares @ $10 = $8k.  So, $2k + $8k = $10k.  Selling off shares is a zero sum game.

Now we get to your specific point.  In company A, we now own 1000 shares.  Ya! For magical dividends.  But in company B, we now only own 800 shares.  Boo for having to sell down!

But in reality, we own $8k worth of company A stock (1000 x $8), and $8k worth of company B stock (800 x $10).  Comany B's shares are worth more.  That's why we don't need to own as many.

We've already stated (in my first paragraph) that share numbers don't matter, only the total share value.  Thus, dividend payment = selling down shares, when the dollar amounts are the same.

But (back to your point), come next dividend season, isn't company A going to pay me the same dividend, whereas I'm burning through company B's shares - hence Ponzi scheme?

We've overlooked one point.  Let's say company A and B both earned 100 million in profit, and company A has a payout ratio of 80%.  So company A gave away 80 million in cash!  Company B didn't - it kept it all, and reinvested it to further grow its business.  Hence, we would expect the earnings per share of company A to be less than the EPS of company B next time.  Why?  Because company A keeps giving away its earnings in dividends.  Company B retains its earnings, and grows its business.  Hence, the EPS of company B are likely to go up much quicker.  That's why you don't need to keep buying new company B shares: they self grow due to the lack of dividend payment.

Bottom line: receiving dividends or selling down the equivalent amount, works out the same in the long run.


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## Belli (26 October 2019)

Interesting stuff.

I suspect in my case selling may not be necessary but could eventuate long term.  Depends on the amount of income I receive - and need - from holdings outside of the SMSF plus the account-based pension.

For me the split is around 35% from personal holdings and 65% account-based pension and even after placing some $50k pa back into the market, I consider I live very comfortably. 

I once calculated a person in the workforce would need to earn around $110k pa to get the after-tax equivalent of an $80k tax-free account based pension.  Depending on your desired life-style someone who complains about how difficult to live off that should have a good look at themselves I reckon.  I have encounter a few in that bracket who whinge.  I've no time for them.


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## chris bartlett (26 October 2019)

Belli said:


> Interesting stuff.
> 
> I suspect in my case selling may not be necessary but could eventuate long term.  Depends on the amount of income I receive - and need - from holdings outside of the SMSF plus the account-based pension.
> 
> ...



So to all those contributors, what are your best 5 shares going into the next 5-10 years?


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## Belli (26 October 2019)

Not the faintest idea.  I invest only via  ETFs and LICs.  The management of the LICs do selection for me and ETFs couldn't give a rats about specific company prospects. 

Only slight exception is the small SOL holding I have outside the SMSF.  Some consider it as an LIC but it is actually classified as an energy company.


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## SirRumpole (26 October 2019)

Value Collector said:


> But I personally don’t think the market is over priced, I am still actively writing puts against some things I think are under valued.




What things in particular ?


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## Value Collector (27 October 2019)

SirRumpole said:


> What things in particular ?




A few things, as I have mentioned I am pretty fond of FMG, which I still think is under valued even though it’s had a big run, and some others things I don’t want to go into to much detail on because I will likely have people saying I am wrong, and I am not in the mood for a debate about it.

I will send you a pm


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## Value Hunter (3 November 2019)

Value Collector if you can send me a p.m. too I would appreciate it as I would be interested to hear what stocks you are interested in. Thanks.


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## Muschu (5 November 2019)

I've just come back to check this thread for the first time in some weeks.  I did not anticipate that it would have lasted as long as it has.
There has been some very interesting discussion which I have appreciated.
In particular I remain interested in the LIC / ETF discussion.
May I ask, from those of you who are currently retired [and perhaps in an older age bracket] just which ETFs you own and whether you have been satisfied with growth and/or distributions?


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## Belli (7 November 2019)

Muschu said:


> I've just come back to check this thread for the first time in some weeks.  I did not anticipate that it would have lasted as long as it has.
> There has been some very interesting discussion which I have appreciated.
> In particular I remain interested in the LIC / ETF discussion.
> May I ask, from those of you who are currently retired [and perhaps in an older age bracket] just which ETFs you own and whether you have been satisfied with growth and/or distributions?




As I posted earlier in this thread I hold ARG, MLT, WHF, MIR, *VAS*, *VGS*. VGS is about 20% of asset allocation both personally and in the SMSF.

I also hold SOL outside of the SMSF.

Income outside of the SMSF is around 35% of my total income, i.e. dividends plus account-based pension.

As I don't trade at all I'm not up with the performance aspect for personal holdings.  The ATO only requires me to accurately report my income and not to track performance so I don't.  Yeah, I know but merely because others go "Ya gotta do..." doesn't mean I have to.

The accountancy firm does the SMSF stuff to meet any legislative requirements but I don't take much notice of the ins and outs of it.  Keep sufficient cash to pay account-based pension for two years and the rest goes back into the market pronto.

I haven't added to any of the LICs for a while the only action being taking up WHF's SPP last year.  I'm increasing the funds in VAS and VGS.  This applies to both my personal holdings and those in the SMSF.

On the personal side after hiving off an additional $1k or so to cover anticipated increased costs (rates, insurances, etc) for the following a year I put the funds I don't require plus approximately 50k of the account-based pension into the share market.  As I'm over 65 the mandated rate for the account-based pension is 5% of the portion of the fund which is in pension-phase.  A whack of the SMSF is in accumulation phase due to the 2016 Budget.  A weird outcome for something which was intended to be consumed in retirement but that's the way it is.


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## Bill M (7 November 2019)

Muschu said:


> May I ask, from those of you who are currently retired [and perhaps in an older age bracket] just which ETFs you own and whether you have been satisfied with growth and/or distributions?




Also posted previously. I am happy with the distributions and growth. However, the growth of this ETF has not been as good as others mostly because of the weighing towards the banks that have been getting hammered lately.

*Vanguard Australian Shares High Yield ETF, VHY. (5%> Distributions)*
The ETF provides low-cost exposure to companies listed on the Australian Securities Exchange (ASX) that have higher forecast dividends relative to other ASX-listed companies. Security diversification is achieved by restricting the proportion invested in any one industry to 40% of the total ETF and 10% for any one company. Australian Real Estate Investment Trusts (A-REITS) are excluded from the index.
Link: https://www.vanguardinvestments.com...ct.html#/fundDetail/etf/portId=8210/?overview


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## sptrawler (7 November 2019)

Muschu said:


> I've just come back to check this thread for the first time in some weeks.  I did not anticipate that it would have lasted as long as it has.
> There has been some very interesting discussion which I have appreciated.
> In particular I remain interested in the LIC / ETF discussion.
> May I ask, from those of you who are currently retired [and perhaps in an older age bracket] just which ETFs you own and whether you have been satisfied with growth and/or distributions?



I have MLT and AFI, the rest of my account is in individual stocks, or cash.
I am happy with both the LIC's, but I have only been in them for a relative short time in relation to the SMSF set up period. 
I can see the situation arising, where as I take profits on individual shares, I will be changing the bias more toward LIC's and ETF's.


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## Belli (7 November 2019)

Not overly fascinated by yield.  They go all over the place with variances in both dividends and price so they don't mean much to me.  My greater focus is on increasing income

No idea how to attach image and all that but one of my holdings (ARG) paid a dividend of $0.17 in 2003/2004.  In 2018/2019 it was $0.32.  This plus buying more - along with others I hold - have resulted in an increase in my income.  A small factor called time as well as continually buying no matter what has an impact on the income result.

In the SMSF the pension phase of it has increased beyond the cap which results in an increase in the account-based pension for this year.  Funny how most take the $1.6M as a limit.  It's a starting point really and there is nothing in the legislation to prevent it growing while in pension-phase.


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## Muschu (7 November 2019)

Thanks Bill, Belli and sptrawler for your collective wisdom.
VAS, VGS and VHY are ETFs I knew a little of, but have researched a little further today.
This I think would make some welcome diversity in our portfolio.


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## So_Cynical (8 November 2019)

In general i dont like ETF's much however i was thinking the other day that a big diversified portfolio made up of just ETF,s would have a few advantages.

Firstly set and forget, you just wouldn't have to worry about anything investment related, Secondly unlike individual stocks they cannot fail, so no 100% losers, thirdly a 
big portfolio of 20 diverse ETF's would capture almost very outlier event, i mean like the best performing ETF last year was the Palladium (metal) ETF, went up like 80% 
or so and has already gone up another 80% this year...who the hell is deliberately going to buy that?

With say 20 deliberately very diverse ETF,s you could have the world covered, all the commodities and currencies and indexes, equal weight, and a div yield of maybe 3%


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## Belli (8 November 2019)

Probably but more than I already hold is too much for me.

VAS holds the top 300 companies on the ASX so it has most bases covered in that regard.  And if a tiddler makes it, it'll get into the ASX 300.  Those which fail are dropped.

As for VGS it's essentially the same concept.  Has something like the top 1,600 companies ex-Australia and those companies use the production of other enterprises so I don't feel a need to target those enterprises.  Some may find this interesting (providing the link works.)

https://www.vanguardinvestments.com...t.html#/fundDetail/etf/portId=8212/?portfolio

I attempt to keep my investment matters as simple as possible.  For me, adding a holding which overall comprises, say, 1% of the holdings doesn't do much as far as I'm concerned.

I stay well away from ETFs which are concentrated, eg VHY as it could be subject to turnover which has CG impacts.  OK if it's in super but not so OK if it isn't.  Same avoidance issue with those ETFs which involve derivatives and the like.  Keep it simple and keep placing funds irrespective of market mood.

Mind you there is a case for holding stuff outside super as it is possible to sell some shares with a profit of $30k and still not be subject to any personal tax ( $30k x 50% = $15k which is below the tax-free threshold.)  Assumes no other personal income of course.


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## Belli (8 November 2019)

And completely off tangent but what the heck.  My late wife and I considered it better to hold shares separately.  Made estate planning better from a tax viewpoint for beneficiaries.  Some may also wish to consider separate holdings. Imagine all the mess you may have to go through to get joint holdings of shares into one name.

And an oddity of tax.  A household with a single income is financially worse of than a household of two separate incomes totaling that of the single income household.  Application of two tax-free thresholds as opposed to one.  Go figure.


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## aus_trader (8 November 2019)

So_Cynical said:


> In general i dont like ETF's much however i was thinking the other day that a big diversified portfolio made up of just ETF,s would have a few advantages.
> 
> Firstly set and forget, you just wouldn't have to worry about anything investment related, Secondly unlike individual stocks they cannot fail, so no 100% losers, thirdly a
> big portfolio of 20 diverse ETF's would capture almost very outlier event, i mean like the best performing ETF last year was the Palladium (metal) ETF, went up like 80%
> ...




Good thinking So_Cynical I also like to build a diversified set-and-forget portfolio. If there was an ETF or two that had the level of diversification that you mentioned that would be even better, rather than buying a whole basket of different ETFs.


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## sptrawler (8 November 2019)

Belli said:


> And completely off tangent but what the heck.  My late wife and I considered it better to hold shares separately.  Made estate planning better from a tax viewpoint for beneficiaries.  Some may also wish to consider separate holdings. Imagine all the mess you may have to go through to get joint holdings of shares into one name.
> 
> And an oddity of tax.  A household with a single income is financially worse of than a household of two separate incomes totaling that of the single income household.  Application of two tax-free thresholds as opposed to one.  Go figure.



That is my goal eventually, I have enough outside super in shares in my wife's name, for her to keep under the tax free threshold. The investments in super are split between my wife and myself approx 30%/60%, hers in accumulation mine in pension, with 4% drawdown.
When mine goes from 5% to 6% drawdown, I will withdraw enough to hold outside super, to keep me under the tax free threshold.
Just my thinking, but I feel it gives me the greatest degree of flexibility, with regard controlling the money flow into and out of super.
The problem with super is the rules can and do change and usually you don't have any say in it.
Just my plan and it is open to change and criticism.


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## Belli (8 November 2019)

sptrawler said:


> The problem with super is the rules can and do change and usually you don't have any say in it.




The problem ...........… is the rules can and do change and usually you don't have any say in it.

CGT, GST, variation to thresholds, corporate tax rates, elimination of deductions for travel and so on.  Just as many, or possibly more, variations outside of super.  While the changes are, er, annoying, I'm not fussed about them really as it's part of the investing landscape and we simply have to deal with what comes.  Wouldn't deter me from contributing to super if the legislation permitted but it don't.  Nor would it surprise me in the least if a future Government decided anyone over 65 yo, or pick some age, and not working should be allowed to have super funds in accumulation phase.


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## Muschu (12 November 2019)

Curious here.
I put in a buy order for VAS last evening.  My order shows as In Market but does not show on the VAS buy/sell page where there are only 5 buyers. My buy order is at a lower price.
Is this something peculiar to ETFs?  The order is not being “processed” but is active.


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## Muschu (12 November 2019)

I ended up phoning CommSec who are looking into my query.  I cancelled the order and the opened another, which still does not show.  My account is up to date and I haven’t experienced this before.
CommSec said they’d phone me back once it’s resolved.
No big deal, just unusual.


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## DocK (12 November 2019)

Muschu said:


> I ended up phoning CommSec who are looking into my query.  I cancelled the order and the opened another, which still does not show.  My account is up to date and I haven’t experienced this before.
> CommSec said they’d phone me back once it’s resolved.
> No big deal, just unusual.



I'm assuming it must be due to the ETF nature of the instrument as I also have two orders sitting under the present price for a couple of ETFs and they don't show in the depth of orders either.  I'd guess that the manager (Vanguard, iShares etc) place bulk orders instead or something along those lines??


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## Muschu (12 November 2019)

Don't know DocK.  There are 3 orders showing for VAS that are well below the price I have set.  And these are very small orders as well - between 5 and 24 shares. And yet mine, for a much greater quantity, does not show and Commsec have not yet called me back.


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## Muschu (12 November 2019)

OK.  I called Commsec back.  I haven't bought an ETF before.  It seems my order is active but does not show as ii is in the warrant exchange market - the AXW. If my order price gets into the top 5 prices then I gather [I think] that it will show.
Or something along those lines


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## qldfrog (12 November 2019)

Or is comsec bypassing the market thru its own pool of orders,possibly hitting you on the way
I found in the past that my sells on comsec at a minimum price get executed strangely at that price whereas on bell direct, they get executed as expected


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## Muschu (12 November 2019)

qldfrog said:


> Or is comsec bypassing the market thru its own pool of orders,possibly hitting you on the way
> I found in the past that my sells on comsec at a minimum price get executed strangely at that price whereas on bell direct, they get executed as expected




I have no idea but I’ve been using CommSec for years without any problems


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## Belli (7 March 2020)

An oldish thread but I'll use it rather than create a new one.

Have bought a few thousand of ARG last Thursday and yesterday but have been giving preference to VAS and VGS.  Mostly VGS though as I would prefer to increase the international exposure.

I'll know when the bottom has been reached when all share prices are $0.00 so until then I'll keep placing spare funds I have.


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## Muschu (7 March 2020)

Thanks Belli.
Tough times aren't they?  I decided we had too much in the market and too little in cash - So reduced my positions in a number of stocks early last week and the week before.  Including ARG 
Didn't have many VGS and VAS and only acquired them last year - and have held them, albeit at a loss for now.


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## Belli (8 March 2020)

Muschu said:


> Thanks Belli.
> Tough times aren't they?  I decided we had too much in the market and too little in cash - So reduced my positions in a number of stocks early last week and the week before.  Including ARG
> Didn't have many VGS and VAS and only acquired them last year - and have held them, albeit at a loss for now.




Maybe.  I haven't sold anything and keep fully invested apart from having sufficient funds to cover my needs and wants for 12 months.  I am simply buying more at a lesser price than they were previously.  Could certainly go down further but I've no idea when the bottom will be reached.  It's all a guess.

Mind you having cash is unlikely to assist if there is nothing to buy should companies cease producing goods.  You can have $1k in your hand and still not be able to buy toilet paper apparently.

Don't follow the prices of my holdings very much.  Usually see when I go to purchase more so I'm not aware of the day-to-day or month-to-month fluctuations.  Got better things to do.


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## Belli (10 March 2020)

Went in and bought MIR and more VGS.  That's it until next month when the ETFs provide distributions at which time I'll reassess the amount of spare funds I can afford.


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## fiftyeight (27 March 2020)

Value Collector said:


> FMG, SYD are two that I like .
> 
> 
> Oh yeah, add Apa to my list too, I have owned them since 2001, and enlarged the position in 2008 when they were selling at a 10% dividend yield (madness).
> ...




Have you used this time to buy more SYD?


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## Value Collector (27 March 2020)

fiftyeight said:


> Have you used this time to buy more SYD?




Yes, but I jumped in a bit early, they went lower after I bought (as usual hahaha)


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## sptrawler (28 March 2020)

Belli said:


> The problem ...........… is the rules can and do change and usually you don't have any say in it.
> 
> CGT, GST, variation to thresholds, corporate tax rates, elimination of deductions for travel and so on.  Just as many, or possibly more, variations outside of super.  While the changes are, er, annoying, I'm not fussed about them really as it's part of the investing landscape and we simply have to deal with what comes.  Wouldn't deter me from contributing to super if the legislation permitted but it don't.  *Nor would it surprise me in the least if a future Government decided anyone over 65 yo, or pick some age, and not working should be allowed to have super funds in accumulation phase.*



Thanks for re activating the thread Belli, funny how things change in a short period of time.


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## sptrawler (28 March 2020)

Belli said:


> Maybe.  I haven't sold anything and keep fully invested apart from having sufficient funds to cover my needs and wants for 12 months.  I am simply buying more at a lesser price than they were previously.  Could certainly go down further but I've no idea when the bottom will be reached.  It's all a guess.
> Don't follow the prices of my holdings very much.  Usually see when I go to purchase more so I'm not aware of the day-to-day or month-to-month fluctuations.  Got better things to do.



We are of a same mind, I haven't sold anything and am buying more, are you still sticking to the LIC's and ETF's 
Or have you decided to punt on some individual stocks, with the current wreckage.


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## Belli (28 March 2020)

sptrawler said:


> We are of a same mind, I haven't sold anything and am buying more, are you still sticking to the LIC's and ETF's
> Or have you decided to punt on some individual stocks, with the current wreckage.




I stick to LICs and ETFs.  I don't know anything about individual shares and have zero ability in that regard.

I cannot do any further purchases until VAS and VGS pake a distribution late next month.

I fully expect these distribution levels won't be repeated for quite a while and that also applies to the LICs I hold.  I notice SOL will give me some dosh in May so that will be handy.

Done a "What if" assuming an income reduction of 60% and worked out at that level I'll be OK.  That takes into account a reduction in the account-based pension as I am sure you know if $1.6m goes to $0.8m so does the amount of minimum draw down.  However, there is also a bloody big swag in accumulation phase and if push comes to shove I can take a tax free lump sum (make sure you check your Trust Deed to ensure this is permitted as some Deeds only allow payment of a pension) which I will do if necessary.

Many, many people both retirees and others are going to be seriously hurt financially including those who are primarily invested in property.  Have already seen one family near me who is on the edge.  Over committed and using home as a credit card for toys and holidays which comes with Keeping up with the Jones'.  Both out of work now.  I feel they won't survive.  When I have seen them they are looking shattered.

Those of us who get through this in a reasonable but not flash position should expect an increase in taxes and other charges.  It will have to be done I think and I for one won't be whining about it.


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## Belli (1 May 2020)

Been placing personal spare funds into MIR, WHF, VAS and VGS.  Majority of the money went into VGS which puts my international now at around 30%.  At that level I'm pretty much where I want my international exposure to be so I'll keep placing any additional money with that allocation in mind.

Yep, dividends will be crunched but I can cope with that.  I don't spend much on non-essentials.


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## Belli (17 January 2021)

Bumping this thread to provide an update on income for first half of this FY compared with the previous year.  This is relating to personal holdings and cash only not franking.

As I expected, the distribution from VAS was hammered.  That from VGS not so much.  Both ARG and MLT reduced their dividends while MIR and WHF remained substantially the same.  SOL was a slight increase.  ALI was a new addition to the holdings.

As there were further purchases during the second half of last FY as well as the first half of this FY those had the impact of mitigating the reduction of dividends and distributions.

There were no sales of any of my holdings.

End result is my cash income actually increased.  I have to acknowledge I am more fortunate than many others in that regard.


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## qldfrog (17 January 2021)

Belli said:


> Bumping this thread to provide an update on income for first half of this FY compared with the previous year.  This is relating to personal holdings and cash only not franking.
> 
> As I expected, the distribution from VAS was hammered.  That from VGS not so much.  Both ARG and MLT reduced their dividends while MIR and WHF remained substantially the same.  SOL was a slight increase.  ALI was a new addition to the holdings.
> 
> ...



May i ask: if happy with your mix, what is it currently in term of percentage?
Sol %
Vgs %
Etc
I am toying with the idea if creating a small passive portfolio for a purpose similar to yours


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## Belli (17 January 2021)

qldfrog said:


> May i ask: if happy with your mix, what is it currently in term of percentage?
> Sol %
> Vgs %
> Etc
> I am toying with the idea if creating a small passive portfolio for a purpose similar to yours




Yes, I am.  For my purposes and approach, the LICs are my relatively low-cost active management component and the ETFs the passive part.  As you know, as companies LICs have a profit reserve which can at times support a dividend, even a reduced one, while ETFs are not in that position.

In the Mirrabooka thread I mentioned it was about 7% of my holdings but I now believe that was overstated.  I took the number from a portfolio report for the end of last FY provided to me by the financial firm I use and it seems incorrect.  I'll probably take it up with the firm later in the week although it isn't an issue for me really as I'm not overly fussed about such matters.  I don't use spreadsheets or investment software. Purged all of that so long ago I've forgotten when. Found it tedious, boring and unnecessary.  

At a rough guess, I think my international exposure is somewhere in the vicinity of 30% but given the focus of ALI is international that guess could be out but probably not by much.  Or I could be out by a long way.  It doesn't matter really.

As for SOL, it isn't a large holding by any means: 2,000 @ $3.51 27 May 2000, 3,000 @ $4.49 28 January 2002 and 2,000 @ $6.08 15 September 2003 which will give you an indication of how absorbingly active I am.  It's a steady payer which is what I want but as I've not kept the dividend statements before 2007 (I recently scanned all paper documents I had hanging around to PDF on advice of an accountancy firm)  I couldn't tell you what the dividend was initially but $4,200 a year for doing SFA is easy money and comes in handy in my opinion.

Possibly one aspect some may overlook about establishing funds for retirement is their savings rate.  Someone who can save 50% of their income should be better off than someone who saves 5% assuming the same level of income during their working life.  All depends on the person and their wants as opposed to needs I guess.  Many variables are involved in both too.


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## So_Cynical (17 January 2021)

My dividends fell by about 28% ~ I have been selling a little but that would only account for maybe 10% of the total fall, the rest is COVID, i hold 35 stocks with 9 of them paying little or no dividend so held more for growth, no ETFs and only 2 LIC's.


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## Value Collector (17 January 2021)

Value Collector said:


> FMG, SYD are two that I like .



this recommendation from page 1 of this thread would have workout out well, you would be down 25% on SYD (I didn’t see COVID coming, but we will recover), but up 250% on your FMG.

not to mention your FMG will be paying a 25% dividend based on the price at time of recommendation, that would have given your retirement a nice upgrade.


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## Value Collector (17 January 2021)

So_Cynical said:


> I dont hold a single bank, BHP, RIO, CSL, FMG, SYD, WES or APA - none of them.




Damn, except for SYD that would have been a pretty decent portfolio, good growth and dividends, the stars in the list more than offset the couple of mediocre ones.


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## Belli (8 February 2021)

So far the income from shares has been pretty ordinary this past year to say the least.

However, over the weekend I did a quick review on where I stand regarding income versus expenses and it isn't bad at all.  In regard to income from my personal holdings it has reduced by 5% because of the hammering of distributions of VAS but that has been mitigated due to various buys - including some more VAS.  I haven't accounted for ARG, which reported today, or any future income from ALI, SOL, WHF, VAS or VGS.  I've calculated my expenses are covered for the rest of this financial year.

With the account-based pension from the SMSF, I have reduced it to 3% of assets (rather than 2.5%).  I still have to draw down a remaining portion of the pension.

I consider I've come out of the previous 12 months unscathed compared with others.  I cannot complain about my situation.

I think it helps if you can keep calm during the whirl of confusion.


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## Value Collector (8 February 2021)

Belli said:


> So far the income from shares has been pretty ordinary this past year to say the least.



Compared to what?

when you factor in franking credits, and the potential to offset inflation it’s hard to find many assets classes that can compete.


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## Belli (8 February 2021)

Value Collector said:


> Compared to what?
> 
> when you factor in franking credits, and the potential to offset inflation it’s hard to find many assets classes that can compete.




Compare to the pcp.  VAS distributions way down for me.

As to franking, I don't concern my self with those until tax time.  They are a tax credit and not part of my cash flow.  I like them for sure and in any case with any tax refund which may result, it goes straight back into the market so I don't view them as part of my income.  Got by easily without them in previous years as part of my cash spend so I can do so again.

As an aside, it'll be interesting in the future with the tax rates for smaller companies (<$50m turnover) being reduced from 27.5% last FY to 26% this FY and 25% next FY.  It's also Treasury's intention the lower rate will eventually apply to all companies.


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## Value Collector (8 February 2021)

Belli said:


> Compare to the pcp.  VAS distributions way down for me.
> 
> As to franking, I don't concern my self with those until tax time.  They are a tax credit and not part of my cash flow.  I like them for sure and in any case with any tax refund which may result, it goes straight back into the market so I don't view them as part of my income.  Got by easily without them in previous years as part of my cash spend so I can do so again.
> 
> As an aside, it'll be interesting in the future with the tax rates for smaller companies (<$50m turnover) being reduced from 27.5% last FY to 26% this FY and 25% next FY.  It's also Treasury's intention the lower rate will eventually apply to all companies.



The reason you have to think about franking credits when comparing different investments is that a 7% franked dividend is equal to a 10%  unfranked dividend, interest or rental return etc.

what I mean by that is, if you earn 10% interest on a bank account the government is going to take 30% of that as tax, reducing your actual income down to 7%.

So for fair comparisons across asset classes, you have to include the franking credits, an easy way to do this is to multiply the franked dividend by 1.43

So a 5% franked dividend x 1.43 = 7.15% actual dividend.

So a competing investment has to earn 7.15% to be equal to a franked dividend of 5%.

So yeah the best way to compare things is to always gross them up to their pretax amount so you can compare apples with apples.

—————————-
A reduction in tax rate means franking will be lower but the actual dividend will be higher, so the two will cancel them selves out on an after tax basis.


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## Belli (8 February 2021)

Fair enough but there is nothing which requires me to think the way others do.

And I wouldn't bet a reduction in company taxes automatically means an increase in dividends.  It didn't occur last time there was a reduction in company tax.


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## Belli (8 February 2021)

Belli said:


> And I wouldn't bet a reduction in company taxes automatically means an increase in dividends. It didn't occur last time there was a reduction in company tax.




Memory been jogged.  More recent history. MIR

Dividend paid 10 August 2017.  $0.65c (same as previous year) plus $0.04 from specials received.  Franking rate 27.5%
Dividend paid 15 February 2018. $0.35c (same as previous year). Franking 27.5%
Dividend paid 13 August 2018. $0.65c plus $0.02c from specials.  Franking 27.5%

So I don't rely on franking or, if franking reduced, the cash dividend being increased.  The last one really pissed me off though as subsequently the darn Government passed legislation in late August which reverted the franking to 30%. I'd already submitted the personal tax return based on the 27.5% rate.  It was a couple of hundred dollars involved but I couldn't be bother stuffing around amending the return. The time and effort involved just wasn't worth doing it.


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## Value Collector (8 February 2021)

Belli said:


> Fair enough but there is nothing which requires me to think the way others do.
> 
> And I wouldn't bet a reduction in company taxes automatically means an increase in dividends.  It didn't occur last time there was a reduction in company tax.




I am not trying to make you "think the way others do", just pointing out that the franking credit is just as important as the actual dividend, if you get a $7 dividend that is franked they add $10 to your taxable income, just the same as if you were paid that $10 in cash, and then they work out how much tax you owe based on that taxable income and then subtract the credit, so even they ATO are grossing up your dividend.

The reason I point this out is that some people compare the dividend yield of shares to other asset classes without taking the franking into consideration, which throws off their calculations by a lot, as I said another asset class would have to be earning 10% to match a 7% franked dividend.

You often here people say silly things like "a rental property can earn 4.5% rent, which beats a 4% dividend". that silly person obviously is making the mistake of not adding back they franking credit and all not deducting the costs which have to come out of that rental return.

--------------------------

If a company earns $100, they pay $30 in Tax leaving $70 from which they can pay dividends with $30 in franking credit meaning the full $100 will be passed along to you (depending on their payout ratio policy.)

If the Tax rates drop to 27.5%, that $100 will be charged $27.50 tax instead of $30 leaving $72.50 from which they can pay a dividend, and the dividend will come with a $27.50 franking credit, either way it still adds up to $100.

Ofcourse different companies have different pay out policy, but if they were paying out 80% or 50% or any other figure before they tax change they will probably on average continue they same pay out policy.


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## Belli (8 February 2021)

I fully understand what you're saying.  I was immersed in aspects of it at one stage of my life.

However, over the years having been involved with shares for more than three decades I've morphed into not really caring about the finer points.  Having had to deal with various changes to taxation law and financial aspects, when it happens I adjust accordingly.

Now I am only interested whether the cash income is greater or lesser than previously.  As long as my cash income is multiples of my yearly expenses (which it is) the franking aspect is a minor consideration to me.  I haven't the faintest idea on what the actual yields may be.

To be honest, I find the share market rather disinteresting and rarely look at anything to do with it apart from buying when I have cash and announcements relating to my holdings.  Even the latter is not necessary as they tend to send me an email with relevant links.


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## Value Collector (8 February 2021)

Belli said:


> However, over the years having been involved with shares for more than three decades I've morphed into not really caring about the finer points.



Your comment that I replied to was discussing the income from shares, and saying that it was "ordinary this past year" I was just pointing out that it is better than most other comparable asset classes when you factor in the franking credits.



> Now I am only interested whether the cash income is greater or lesser than previously.  As long as my cash income is multiples of my yearly expenses (which it is) the franking aspect is a minor consideration to me.  I haven't the faintest idea on what the actual yields may be.




If your income is multiples of your yearly expenses, why worry about even commenting on the year to year fluctuations in your dividends?



> To be honest, I find the share market rather disinteresting and rarely look at anything to do with it apart from buying when I have cash.




When you are deciding to buy you are going to want to take franking credits into consideration other wise how can you weigh up the return on the different options you have, the franking credits make a huge difference.

for example if you earn $100K in unfranked vs Franked dividends here is the after tax difference based on Australian tax rates.

$100,000 of unfranked dividends = $77,034 left in your pocket after Tax ( 22.9% effective tax rate)

$100,000 of Franked dividends = $105,023 left in your pocket after Tax ( 26.5% effective tax rate)


So the guy that gets $100K in franked dividends ends up getting $27,989 more "real dollars" in his hand than the guy that chose the unfranked $100K of income, thats 36% more, if that's trivial to you thats fine, all I am saying is that when comparing different sources of potential income just multiply the franked income by 1.43 so you can compare it to the non franked income, no need to argue against me on that point, its just the facts, some income sources are franked, others like bank interest etc aren't, when comparing the different types of income sources, you have to take franking credits into consideration, other wise you are falling into the trap of thinking $100K of dividends is going to be equal to $100K of interest etc.

----------------------------------

This becomes more important as you earn more, this year I will be getting about $540,000 of franked dividends, if they weren't franked I would owe the ATO $213,667 in tax, reducing my cash in hand from $540,000 to $326,333 after tax, however with the franking credit of $232,200 I only have to hand over $85,957 in Tax which only reduces my cash in hand to $454,043. Thats a $127,710 difference so yeah, franking credits matter.


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