Anyone care to check my math?

[waimate01]

Hypothetically: $1mil after tax paid cash to use for a share portfolio.
[...]
If margin lending, you can include margin call, and payment of interest.

If you've got $1m after tax, then no margin call or interest. Are these the same scenario?

Short answer, yes $1m clear =~ $70k pre-tax recurrent. Then pay tax at whatever the marginal rate is for $70k (I have no idea). It'll be more than $50k after tax, if that's your first mil.

Even better, if done even slightly properly, your $70k will be "inflation immune" (your other risk assessments are spot on).

Well done to be in this position at that age !

But, please consider: is $70 k/pa enough? If you are 60 years old and keep yourself happy by snipping discount coupons from the NRMA magazine, then perhaps so. But at 30, you're gonna want to have a boat, travel, have fun, etc. You'll need way more than $70k unless you're happy to be the king of the caravan park and dedicate your life to relish in the avoidance of further work. I would suggest you sock that mil away in appropriate investments, and get to work on the second one. Retire when you're 40, with 3 mil and $150k/pa inflation immune. Much better. Don't forget to buy a place to live somewhere along the way.

 

[pixel]

I wonder if Wesfarmers or Woolworths will pay me in shares instead of cash?

pinkboy

Hi pinkboy;
please check your Private Messages (click on Quick Links and follow the lead)
Cheers, Pixel.

 

[pinkboy]

If you've got $1m after tax, then no margin call or interest. Are these the same scenario?

I was asking if there were any benefit to gearing up, but realistically not.

Short answer, yes $1m clear =~ $70k pre-tax recurrent. Then pay tax at whatever the marginal rate is for $70k (I have no idea). It'll be more than $50k after tax, if that's your first mil.

Even better, if done even slightly properly, your $70k will be "inflation immune" (your other risk assessments are spot on).

I would structure it appropriately and tax effectively, most likely with a DFT or a trading Pty/Ltd.

Well done to be in this position at that age !

It has taken a bit of work, don't worry. Thanks.

But, please consider: is $70 k/pa enough? If you are 60 years old and keep yourself happy by snipping discount coupons from the NRMA magazine, then perhaps so. But at 30, you're gonna want to have a boat, travel, have fun, etc. You'll need way more than $70k unless you're happy to be the king of the caravan park and dedicate your life to relish in the avoidance of further work. I would suggest you sock that mil away in appropriate investments, and get to work on the second one. Retire when you're 40, with 3 mil and $150k/pa inflation immune. Much better. Don't forget to buy a place to live somewhere along the way.

I used the $1mil in my hypothetical as a yardstick for grasping the concept. $70k wont be my end figure.

I have done a lot in my 30 years so far. Married, we have a Miss 9, already paid off PPOR, travelled to a few countries (and looking at more travel), owned and still run business, done the Hawaii Ironman, continue to do Triathlons and Cycling races (riding Sydney to Melbourne for 'something to do' unassisted and only with our credit cards at the end of March), fish, run Miss 9 to Netball/Swimming/Gymnastics/Touch Football - so pretty full on life so far.

It seems work is getting in the way of all the good!

Thanks all for the input. Now to put into practice.


pinkboy

 

[dave39]

in theory OK, in practice too risky with individual shares.
1. to cover market downturns such as the GFC where some companies dropped their dividends or stopped paying dividends you need ~2 yrs pension draw down in cash so you don't have to sell assets at knock down prices. Dividends are paid mainly in Dec and July although CBA is different so the cash account covers the period waiting for dividends.
2. you have to monitor all your shares on a weekly/monthly quarterly basis - even good companies e.g. FGE can go belly up.
3. most people reckon tracking ~ 16 shares is hard work, if you've been investing for years maybe upto 25 is OK.
4. my strategy now is to have a basic portfolio of LICs or ETFs such as ARG, AFI, MLT, AUI, DUI and ETFs SFY, STW and perhaps some others with different strategies such as YMAX. These will never go belly up and if one or 2 stocks in their portfolio go belly up it has little effect on their performance. Then I have the 4 banks and some International ETFs. The International ETFs don't pay much dividend and now the A$ has fallen to 93cents are probably not worth buying now. I bought them when the A$ was US$1.07 and expected to fall and therefore you make profit from the falling A$ and the rising US markets. At 93cents you are relying solely on the US markets going up.
5. so my portfolio is about 14 stocks - 8 Australian LICS/ETFs, 4 banks and 2 International ETFs and 15% cash for pension drawdown.
6. I used to have 25 individual stocks but got burnt out monitoring them and worrying about quite large swings in price which was worrying so I had stop losses set and often they got taken out only to find a month later they were back higher and I should have bought back in. I needed to sleep at night so the LIC portfolio has done that.

Dave