As we age, hold more shares?

[noirua]

Warren Buffett 93 in a conversation with Bill Gates was advised to buy Microsoft's most advanced computer to follow his investments. Buffett replied that he only holds one company's shares, Berkshire Hathaway. Between 1965 and 2021, Berkshire's market value has risen by 3,641,613%. Put another way, it's a compound annual gain of roughly 20.1%. During the same period, the S&P 500 has gained 30,209% including dividends, for an annual gain of 10.5%.

 

[colly601]

Warren Buffett 93 in a conversation with Bill Gates was advised to buy Microsoft's most advanced computer to follow his investments. Buffett replied that he only holds one company's shares, Berkshire Hathaway. Between 1965 and 2021, Berkshire's market value has risen by 3,641,613%. Put another way, it's a compound annual gain of roughly 20.1%. During the same period, the S&P 500 has gained 30,209% including dividends, for an annual gain of 10.5%.

quite a remarkable testament to Buffett's investment philosophy and Berkshire Hathaway's performance over the years. It's interesting how he's remained steadfast in his approach, focusing on a single company and reaping such returns. shows how important the long game is and sticking to what you know best

 

[Value Hunter]

Take Look at the chart I put up, you can see the ASX200 was below 2000 in 1995, it only had to be slightly under 6000 to beat your enlarged inflation rate of 3.9% but it’s now close to 8000, so since 1995 just the index price has beaten inflation.

But as you state you are ignoring dividends (god only knows why), but these dividends have been more than the value of the index over that time, and have been growing with inflation also.

Again I think you just have a screwed up way of looking at it.

The reason to put money into shares for your retirement is to get more cash back over time than you would just holding cash, the dividends are a huge part of that. Saying oh but they would just spend the dividends is not rational, because if they held cash they would have to spend the cash pile anyway.

You literally just ignore what I said originally. The reason I gave for ignoring dividends, is that I assume the retiree has spent all the dividends because they need money to live. Not everybody is as wealthy as you that their dividend income is more than triple their living expenses. Many retirees will even dip into their capital on top of spending the dividends. Most retirees would need to spend all of their dividends to live comfortably hence my posts were based on the assumption that a retiree is trying to live from their share portfolio and not spending the capital but spending only the dividends.

As for the starting point we already had this argument that either side can cherry pick a starting point to make things look more favorable to their own argument. I tried to pick starting points which were somewhat neutral.

Again you are making a straw man I never said cash was a superior option and I even said several times cash is a worse option. Just because cash is bad it doesn't automatically make Australian shares good. it is a false dichotomy. There are not only 2 options there are many other things you can invest in. Its tiring for me to keep having to counter your straw man arguments.

 

[Value Collector]

1. You literally just ignore what I said originally. The reason I gave for ignoring dividends, is that I assume the retiree has spent all the dividends because they need money to live. Not everybody is as wealthy as you that their dividend income is more than triple their living expenses. Many retirees will even dip into their capital on top of spending the dividends. Most retirees would need to spend all of their dividends to live comfortably hence my posts were based on the assumption that a retiree is trying to live from their share portfolio and not spending the capital but spending only the dividends.

2. As for the starting point we already had this argument that either side can cherry pick a starting point to make things look more favorable to their own argument. I tried to pick starting points which were somewhat neutral.

3. Again you are making a straw man I never said cash was a superior option and I even said several times cash is a worse option. Just because cash is bad it doesn't automatically make Australian shares good. it is a false dichotomy. There are not only 2 options there are many other things you can invest in. It’s tiring for me to keep having to counter your straw man arguments.

1. I understood the reason you are ignoring dividends I am just saying ignoring them is dumb and doesn’t make sense, because they are a large part of the return you get, and the dividend return pays out more to you over time than the cash you put in.
look, the reason you choose any investment should be because you believe that over time you will get more spending power than you would putting the cash under the mattress.
whether that spending power comes from capital growth or income is irrelevant. There is nothing wrong with spending down your capital during your retirement. But as I showed the asx beats inflation in most cases anyway, even if you ignore dividends (when ignoring dividends is dumb, imagine buying a farm and ignoring the annual crop, or buying a property and ignoring rent, or buying a McDonald’s franchise and ignoring the profits)

2. yes any side can cherry pick the starting point, but most starting points beat inflation, and as I stated no one really lumps all their money into one starting point anyway.

3. cash is the benchmark that we should be judging all other investments against, because you start with cash, and then have to decide will I be better off just holding this cash or deploying it into another asset Class.

 

[Value Hunter]

Again you are irrationally ignoring dividends, but no one invests all their retirement at once like that anyway, the recommendation is always to dollar cost average in over time, someone that retired in 2006 would have been putting in funds for many years before that, and someone that started saving in 2006 would have bought some through the peak but lots after it at lower levels.

Not true that nobody invests all at once. Their are many cases where people suddenly inherit a lump sum, sell a business for a considerable lump sum and retire, get a divorce settlement, get a legal compensation payout, etc and then are looking to invest the lump sum and retire.

 

[Value Hunter]

whether that spending power comes from capital growth or income is irrelevant. There is nothing wrong with spending down your capital during your retirement.

Most people ideally if possible would prefer not to spend down their capital during retirement (admittedly for many not a realistic option) for two reasons 1 is because of longevity risk, nobody knows how long they will live and 2 because most people want to pass an inheritance onto their children.

Given the above looking at the return including dividends reinvested is fine for a young investor in accumulation phase. Its a different story for a retiree. The question for a retiree then becomes "What investment can preserve my capital at the same time as providing me some modest income to live on?". And yes I would do the same thing for property if looking at it from a retiree's perspective that if they spend all of the rent they receive when they die will the house be worth as much as it was in real terms than the day they retired? Yes again I would do the same thing for a farm, etc. A McDonald's franchise would be a slightly different story because it would likely be generating 15%+ cash flow on your initial outlay so you could spend some to live on and still have a decent amount to reinvest into other things to preserve your capital base (in real terms).

Yes while its true that whether the return comes from dividends or capital growth (leaving aside for a minute the question of taxes) that its irrelevant. But either way you need a certain amount each year to live. Safe withdrawal rates for share portfolios generally are seen to be between 3 and 5% depending upon which assumptions you use and which research you refer to. The dividend yield on Australian shares coincidentally tends to be around 3 - 5% over the long term (lets not get into the whole tax situation and franking credits discussion here) so in a short hand way the dividend return would broadly equate to the amount you can safely spend for most people under most scenarios.

Which then leaves the questions of whether the capital has maintained its purchasing power. For example if you take the opposite capital growth approach you could buy Berkshire Hathaway shares and sell 3 - 5% per year of the shares to fund your retirement and it would be an equivalent question of if the remaining capital maintained its purchasing power or not (in that case obviously yes).

 

[divs4ever]

Not true that nobody invests all at once. Their are many cases where people suddenly inherit a lump sum, sell a business for a considerable lump sum and retire, get a divorce settlement, get a legal compensation payout, etc and then are looking to invest the lump sum and retire.

well after dealing with the banks and their term deposits on behalf of a relative , when i eventually inherited that estate , i was very reluctant to keep the cash component 'safe in the bank ' sure it took me a little over a year to park the majority the cash into stocks and corporate debt , but that was because i needed to run up the learning curve and look for good opportunities ( in a falling market )

 

[Belli]

It's interesting how he's remained steadfast in his approach, focusing on a single company

It's multiple companies within a company.

2023 Annual Report



Along with other companies in which BH has invested funds.

 

[divs4ever]

Most people ideally if possible would prefer not to spend down their capital during retirement (admittedly for many not a realistic option) for two reasons 1 is because of longevity risk, nobody knows how long they will live

yep , that was me , uncertain about how long and where i will end up ( it could be in one of those money-vacuuming nursing homes )

however i did resist party , party, party , cruise , new car , etc etc

 

[Chipp]

yep , that was me , uncertain about how long and where i will end up ( it could be in one of those money-vacuuming nursing homes )

however i did resist party , party, party , cruise , new car , etc etc

Replacing a couples $200k income needs a near enough to $2 mill super balance if you are relying on the average 8% return . Retirement should be the best times of your life where you enjoy life to the fullest . Maybe you dont need a new car when you are 80 but you should have one at 70 . Tick of that bucket list . The fear of retiring and having the worst quality of life for 20 years on retirement is what motivated me to get some alpha going in my SMSF . I am getting ahead of the game in preparation for retirement . Minimizing possessions , selling a lot of things , preparing to sell a house that is twice as large as we need . Planning where i am going in life , of course it has to be dynamic as things change . Once i sell my house i will rent for quite a while given the spread between interest rates and rental yield , doing this for a few years will give me the funds to do almost anything . 15 - 20% on $ 4-5 mill is living large and putting enough away to deal with inflation . You really need to start thinking like this 10 years before retirement and many don't .

 

[Value Collector]

Not true that nobody invests all at once. Their are many cases where people suddenly inherit a lump sum, sell a business for a considerable lump sum and retire, get a divorce settlement, get a legal compensation payout, etc and then are looking to invest the lump sum and retire.

even those people that are I those situations probably have super that’s been put in over a long period, so the lump sum represents just a portion of their over all funds.

And as you can see in the chart 95% of times even putting in a lump sum all at once still performs better than inflation, it’s just the 5% of situations you cherry pick that didn’t.

 

[Value Collector]

Most people ideally if possible would prefer not to spend down their capital during retirement (admittedly for many not a realistic option) for two reasons 1 is because of longevity risk, nobody knows how long they will live and 2 because most people want to pass an inheritance onto their children.

Given the above looking at the return including dividends reinvested is fine for a young investor in accumulation phase. Its a different story for a retiree. The question for a retiree then becomes "What investment can preserve my capital at the same time as providing me some modest income to live on?". And yes I would do the same thing for property if looking at it from a retiree's perspective that if they spend all of the rent they receive when they die will the house be worth as much as it was in real terms than the day they retired? Yes again I would do the same thing for a farm, etc. A McDonald's franchise would be a slightly different story because it would likely be generating 15%+ cash flow on your initial outlay so you could spend some to live on and still have a decent amount to reinvest into other things to preserve your capital base (in real terms).

Yes while its true that whether the return comes from dividends or capital growth (leaving aside for a minute the question of taxes) that its irrelevant. But either way you need a certain amount each year to live. Safe withdrawal rates for share portfolios generally are seen to be between 3 and 5% depending upon which assumptions you use and which research you refer to. The dividend yield on Australian shares coincidentally tends to be around 3 - 5% over the long term (lets not get into the whole tax situation and franking credits discussion here) so in a short hand way the dividend return would broadly equate to the amount you can safely spend for most people under most scenarios.

Which then leaves the questions of whether the capital has maintained its purchasing power. For example if you take the opposite capital growth approach you could buy Berkshire Hathaway shares and sell 3 - 5% per year of the shares to fund your retirement and it would be an equivalent question of if the remaining capital maintained its purchasing power or not (in that case obviously yes).

I really don’t get why you are banging on about the share market not keeping pace with inflation when

1, I have already showed you that it definitely does, and that even in the silly calculation of excluding its dividends it still does most of the time.

2. you understand that it’s the total return that matters.

If you can’t understand that what matters is putting in say $1 million of spending power today and being able to pull out $5 Million over the next 30 years in both dividends and capital is what matters then I don’t think I can help you.

if you want to limit yourself to only spending dividends then you can, but at that point it doesn’t really matter what the capital value of your shares is, because you aren’t planning on selling them anyway, only the dividend matters.

 

[divs4ever]

Replacing a couples $200k income needs a near enough to $2 mill super balance if you are relying on the average 8% return . Retirement should be the best times of your life where you enjoy life to the fullest . Maybe you dont need a new car when you are 80 but you should have one at 70 . Tick of that bucket list . The fear of retiring and having the worst quality of life for 20 years on retirement is what motivated me to get some alpha going in my SMSF . I am getting ahead of the game in preparation for retirement . Minimizing possessions , selling a lot of things , preparing to sell a house that is twice as large as we need . Planning where i am going in life , of course it has to be dynamic as things change . Once i sell my house i will rent for quite a while given the spread between interest rates and rental yield , doing this for a few years will give me the funds to do almost anything . 15 - 20% on $ 4-5 mill is living large and putting enough away to deal with inflation . You really need to start thinking like this 10 years before retirement and many don't .

i was penciling in $2 mill. target for just me ( i expect inflation to be vicious , in the longer haul ) and 5% return after tax

don't have a licence and the meds i am on probably makes driving unwise ( hang around the hospital half a day and they put me in the wheelchair ) easier to just get a cab for important trips further than ( my ) walking distance

the Government told me to retire and back-paid six months ( after only six days of consultation with their independent expert ) ( and upped the claim from sickness benefits to disability pension )

but if you are fit and mobile good for you , i had a LOT of fun and excitement earlier in my life

i did start planning this stuff 10 years before i expected to retire but the Government decided i should 'go home ,put your feet up and rest a spell ' three years early

sold the inherited house and moved to a bigger place but a low crime area ( not like those big cities )

you might say i am a relatively remote area but 50 metres from the house is suitable for a helipad in the event of a real emergency

thanks Rhino and crew for keeping the grass down

 

[divs4ever]

I really don’t get why you are banging on about the share market not keeping pace with inflation when

maybe via capital gains but the chart has survivor bias incorporated into it , but in pension phase income ( divs. ) is more important ( imo )

Dividend Yield Scan (ASX - Updated Daily)

UPDATED DAILY: Locate the highest Dividend Yield stocks listed on the ASX. Includes share price, gross yield, DRP status and 1-year return.

www.marketindex.com.au

there are several 'blue chips ' that miss the 5% hurdle , and even the displayed yields have their inaccuracies ( several will not repeat those returns this year )

now sure i am doing OK overall on my buying prices .. but what about the folks starting in 2016 to 2019 , did they grit their teeth and buy, buy,buy in 2020 ?

 

[Chipp]

Warren Buffett 93 in a conversation with Bill Gates was advised to buy Microsoft's most advanced computer to follow his investments. Buffett replied that he only holds one company's shares, Berkshire Hathaway. Between 1965 and 2021, Berkshire's market value has risen by 3,641,613%. Put another way, it's a compound annual gain of roughly 20.1%. During the same period, the S&P 500 has gained 30,209% including dividends, for an annual gain of 10.5%.

Warren has underperformed SPX since GFC secular low , not that exciting anymore .

 

[sptrawler]

You literally just ignore what I said originally. The reason I gave for ignoring dividends, is that I assume the retiree has spent all the dividends because they need money to live. Not everybody is as wealthy as you that their dividend income is more than triple their living expenses. Many retirees will even dip into their capital on top of spending the dividends. Most retirees would need to spend all of their dividends to live comfortably hence my posts were based on the assumption that a retiree is trying to live from their share portfolio and not spending the capital but spending only the dividends.

That is the situation that many don't understand.
IF we ignore the 'rich' people who really don't have an issue with retirement income, the vast majority of retirees fall into the bracket you mention above.
They have enough money to enjoy a comfortable retirement, because they were generally savers during their working lives, when they have to live off those savings the underlying fear of spending their capital which in turn will reduce their returns is hugely stressfull for them.
They aren't muppets they understand compounding that's why they have a comfortable retirement.
They also know about reverse compounding and the rules of diminishing returns, most know the rule of 72, whereas the kids today don't even know the times table.
You are spot on with your observation VH, not eveyone nails a massive 10, 20 or 30 bagger, many bag a dud and many companies go broke, many aren't in a financial position to take advantage of opportunity.
I took a very long slow and steady approach, yes I could have ended up richer, but I still retired early, am still married after 47 years, still get on with all my kids and grandkids.
But don't have a McMansion and still travel on a budget. Lol
Have I got more than when I retired? No.
Have I got about the same? Yes.
Has it devalued due to inflation? Very probably.
Do I care? No, because I have still achieved my goal of funding my own retirement and not having to join a Centrelink queue.
Does it upset me when people say I'm lucky and should have to pay out more? Flck yes, I see a lot of my mates who have gone through life the same as the wife and I did, but didn't sacrifice and go without and are now members of Centrelink, listening to them grissle in the pub on Sat happy hour, it isn't a club I want to join.

 

[Belli]

I see a lot of my mates who have gone through life the same as the wife and I did, but didn't sacrifice and go without and are now members of Centrelink, listening to them grissle in the pub on Sat happy hour, it isn't a club I want to join.

Over a period of time, a short one, my circle of acquaintances became very small and select as a result of that.

 

[Value Collector]

That is the situation that many don't understand.
IF we ignore the 'rich' people who really don't have an issue with retirement income, the vast majority of retirees fall into the bracket you mention above.
They have enough money to enjoy a comfortable retirement, because they were generally savers during their working lives, when they have to live off those savings the underlying fear of spending their capital which in turn will reduce their returns is hugely stressfull for them.
They aren't muppets they understand compounding that's why they have a comfortable retirement.
They also know about reverse compounding and the rules of diminishing returns, most know the rule of 72, whereas the kids today don't even know the times table.
You are spot on with your observation VH, not eveyone nails a massive 10, 20 or 30 bagger, many bag a dud and many companies go broke, many aren't in a financial position to take advantage of opportunity.
I took a very long slow and steady approach, yes I could have ended up richer, but I still retired early, am still married after 47 years, still get on with all my kids and grandkids.
But don't have a McMansion and still travel on a budget. Lol
Have I got more than when I retired? No.
Have I got about the same? Yes.
Has it devalued due to inflation? Very probably.
Do I care? No, because I have still achieved my goal of funding my own retirement and not having to join a Centrelink queue.
Does it upset me when people say I'm lucky and should have to pay out more? Flck yes, I see a lot of my mates who have gone through life the same as the wife and I did, but didn't sacrifice and go without and are now members of Centrelink, listening to them grissle in the pub on Sat happy hour, it isn't a club I want to join.

It doesn’t really matter what level of savings you have, VH’s claim was that the stock market doesn’t keep pace with inflation, which ofcourse it has.

Regardless of how much savings you have for retirement, the best thing to do is put those savings is a broad based stock market index and draw a pension from it that will last 30 years or so, and if you need to supplement it with the pension.

that way you will have both decent income from your savings and capital growth, whether you are putting in $100k and pulling out $500k over 30 years or putting in $1 Million and pulling out $5 Million is irrelevant from an investment perspective.

 

[Chipp]

Does it upset me when people say I'm lucky and should have to pay out more? Flck yes, I see a lot of my mates who have gone through life the same as the wife and I did, but didn't sacrifice and go without and are now members of Centrelink, listening to them grissle in the pub on Sat happy hour, it isn't a club I want to join.

Over a period of time, a short one, my circle of acquaintances became very small and select as a result of that.

Ive had the exact same things happen to me . I have been labelled as lucky , i cannot talk about my finances but many of my friends bitch about theirs . Over the years I have tried to help many of my friends organize themselves financially and not one has listened . And yes i have lost a few friends over this . I had 2 friends that i started accounts to trade with that i 100% financed on a view i would educate them and then take my money back once i doubled the account . Both of them i went to put a trade on in these accounts and 50% had been drawn out on one and almost 100% on the other , all without informing me . Needless to say no longer my friends , this experience has made me vow to never help another again .

Edit .. One of these friends spent 100's dollars a week on booze and smokes and the other spent every saturday either at the TAB or the track . I should have known

 

[divs4ever]

Ive had the exact same things happen to me . I have been labelled as lucky , i cannot talk about my finances but many of my friends bitch about theirs . Over the years I have tried to help many of my friends organize themselves financially and not one has listened . And yes i have lost a few friends over this . I had 2 friends that i started accounts to trade with that i 100% financed on a view i would educate them and then take my money back once i doubled the account . Both of them i went to put a trade on in these accounts and 50% had been drawn out on one and almost 100% on the other , all without informing me . Needless to say no longer my friends , this experience has made me vow to never help another again .

Edit .. One of these friends spent 100's dollars a week on booze and smokes and the other spent every saturday either at the TAB or the track . I should have known

am nearly '70,friends move on ( to some place or another )

the upside is planning celebrations are cheap and easy , now



the other upside is i miss the other parties ( like an extra hole in the head )

there was the swearing , and crying and fighting , and screaming ... and that was just the men , when the females go at it bones get broken