Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
But when making statements about whether an index beat inflation or not that comes down to facts, not personal history.
As we age, hold more shares?
- Thread starter Dona Ferentes
- Start date
-
- Tags
- longterm
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
I didn’t cherry pick the starting points, I put up a chart showing that 95% of starting points beat inflation, you cherry picked one of the 5% that didn’t beat inflation, and it only didn’t beat inflation because you are being silly and ignoring dividends.
the green circles are the entry points that beat inflation, only the red doesn’t and only when you ignore dividends.
so who is cherry picking?
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
They can leave an inheritance just spend the dividends and not the capital, and as I showed 95% of the time their capital would have continued growing at least by inflation, while their dividends continued to grow also.
But in life you can’t have your cake and eat it too, you can’t hit retirement with $100k and expect to live well and leave an inheritance, you have to choose.
The less you have at the start the less you can either spend on your self or leave To the kids, a simple strategy is to make your drawdowns last till you turn 100, most of the time you will die before that, and the residual can go to the kids, if you live longer than that live of the pension because you probably can’t do much by then anyway, and your kids are probably on their way out soon too.
you could always just spend all your super and leave the house to the kids If you owned one.
tech/a
No Ordinary Duck
- Joined
- 14 October 2004
- Posts
- 20,390
- Reactions
- 6,277
A small amount 100k is used as you say and is not part of my super
A larger sum is in a longer term system based around Techtrader and one other well known method .
Cash
A 7 figure sum is in cash as a cashflow necessity requiring drawings each year to satisfy law and for use in Super investments only a portion of the overall strategy
Even after retirement super and its holdings continue to grow well beyond our needs.
- Joined
- 24 February 2013
- Posts
- 670
- Reactions
- 982
Those green circles on the graph have you actually gone and checked the numbers?
Besides that graph only starts in 1995, its not a long enough sample size.
Since 1982 stocks have generally been in a secular bull market with interest rates on a declining long term trend for most of that period. There were plenty of decades where stocks returned zero or negative (in real terms) for a decade long period (great depression, 1970s stagflation, 1890s depression, etc)
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
1. Yep, I went through a bunch Of points in the graph, even the red circle beats inflation if you count the dividends.
2. you are only saying that because it goes against your theory.
3. “plenty of decades where stocks returned zero” really which ones,… but look if you own a farm sometime there is 7 year droughts it’s no big deal, we live in the real world, you just put your big boy pants on and deal with it, a broad based index would still be paying dividends, and if you invested over your life from say 20 to 90 that’s 70 years I sure you will see all sorts of down and up markets and a huge amount of dividends you just keep investing.
- Joined
- 24 February 2013
- Posts
- 670
- Reactions
- 982
1) Okay, since I cannot be bothered to double check at the moment I will take you at your word for now.
2) Its generally accepted that in the stock market any theories regarding market behavior or long term returns or safe withdrawal rates or back-testing of systems, etc should use an extremely long period of time. This is standard operating practice and also what most academic papers and fund managers, etc do.
3) That is a long term logarithmic chart of the Australian stock market. Plenty of flat periods on the chart.
Just to make things really simple for you and explain myself again I agree that its total return that matters and how its achieved (either dividends or capital growth) is not important (leaving taxes aside). However pre-retirement any return above inflation (and taxes) is a decent result. Post retirement you need a real return (after inflation) of 3 -5% to live otherwise you will deplete your capital. That is the crux of the argument I was getting at.
Flat periods: 1929 - 1943 is flat.
1913 - 1922 is flat
1937 - 1947 is flat
1967 - 1980 is flat (during a period of high inflation so real returns are negative), probably even still negative if you count dividends).
1987 - 1999 is flat
2007 - 2020 is flat
Sure if you invest over a lifetime assuming Australia doesn't become Japan (30 years of no returns) or worse Argentina (once upon a time a wealthy country turned into a banana republic) then yes you will receive a reasonable return. I am just trying to make the point that people need to be informed about the risks they are taking and have some knowledge of fundamentals, market history, economics, etc and not just have blind faith. But sure overall in most time periods Australian equities are a decent place to park your money as long as you aren't doing it blindly.
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
1. it’s pretty quick to check, with Some basic math, and a calculator.
2. either way, that is a side issue to you original claim that the market hasn’t kept pace with inflation, but I am growing tired of this discussion, will leave you to your thoughts.
4. as I said Before there is no real problem with depleting your capital, in fact it’s necessary if you haven’t saved enough over your life, but if you really don’t want to deplete capital there is always the pension and you can live on brand and rice, no one will force you to buy life’s little luxuries, so people have no savings at all and do just fine.
5. Saying japan had no return for 30 years is no different to cherry picking the GFC peak as you did. So just pull up the Japanese chart and rinse and repeat the same arguments I stated early its just a more extreme example, but you would have still done well if you dollar cost averaged in over your working life you would have bought some at highs and a lot at lows and then pulled out a pension over your retirement from it, benefiting from the strong recovery in the last 15 years.
saying Japan has not had any gains for the last 30 years if only true if you cherry pick the peak again, and ignore dividends again. But as I said I tired of this discussion, do what you will.
- Joined
- 24 February 2013
- Posts
- 670
- Reactions
- 982
What happened top the Japanese investors who retired in 1988 or 1989? They had to retire into a declining market that declined until 2003, they would not have had enough capital left by the time the market recovered.
- Joined
- 20 July 2021
- Posts
- 10,835
- Reactions
- 14,987
that might depend on it the shares paid dividends and if the investor had the opportunity to participate in a DRP
it doesn't happen often , but a smashed share still paying dividends can bulk up nicely despite the ( uncrystallized ) capital losses , of course most worried investors , don't hold on for the recovery ( and if over a decade can you really blame them )
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
If they retired in 1988, they would have been putting money away for 30 years before that speculative peak occurred, so on average even after the speculative bubble popped they would have had a capital base worth much more than what their actual contributions were, the index stayed quite high compared to the level prior to the bubble for most of the 1990's, plus dividend income. So they might not have been as wealthy as they believed they were right at the peak, but would have done just fine compared to the contributions they made.
Also, there is no rule that says investors can only invest in their own country, I actually invest my retirement savings in a mixture of Australian and international equites + Australian and International Property + Australian and International unlisted Infrastructure. So I don't rely on just one national index, Although I could quite comfortably do so.
———————————
In the chart the green line is the first 12 years of retirement, and the yellow is the second, you can both are at levels much higher than the pink circle where the bulk of their savings would have been contributed, going back further and lower than what is shown in the chart, plus as mentioned don’t forget dividends.
Garpal Gumnut
Ross Island Hotel
- Joined
- 2 January 2006
- Posts
- 13,172
- Reactions
- 9,062
Dona Ferentes
A little bit OC⚡DC
- Joined
- 11 January 2016
- Posts
- 14,674
- Reactions
- 19,844
exactly.... sell the rubbish, and enjoy the winners.
- Joined
- 24 February 2013
- Posts
- 670
- Reactions
- 982
There is a lot more that I could say on this topic but at this point I will just agree to disagree so as not to derail the thread.
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
why not start a conversation about which assets you believe would be suited to a retirement portfolio in your opinion, that both provide the same level of income as equities but also provide more capital growth over time.
- Joined
- 20 July 2021
- Posts
- 10,835
- Reactions
- 14,987
the capital growth is the hard bit , sure you could buy into a business ( effectively a partner/major share-holder( but then you have the liquidity issue and other related issues .
a brave investor might try high yield bonds( or debt notes ) buying them at a solid discount to face value and hope they mature as planned ( or redeem early ) but that may unacceptably high risk for most retirees ( who really can't afford a wipe-out )
if you have entrenched inflation only stocks give ( possible ) gains plus income and liquidity in a package suitable for retirees ( or someone near retirement ( the liquidity need puts other choices out of reach ( say investment properties , fine art , etc etc )
- Joined
- 3 July 2009
- Posts
- 26,979
- Reactions
- 23,446
That is one of the reasons baby boomers such as myself carry a high percentage of our retirement savings in term deposits, it might only earn 4_5%, but if one of those once in a lifetime events comes along of which I've lived through at least 4, there is enough cash to buy into the opportunity and also fund your retirement through the crisis.
For retirees capital growth is less important that capital preservation, a balanced assett base with eye on your age IMO, is the trick.
Anyone who asks me how much do you need in retirement, I say as much as you can get, while enjoying your life along the way.
Most retirees I know only get stressed when they see their capital going down, if it is treading water they seem happy, that's why they only pull the minimum pension usually.
Only my observations and thoughts.
Last edited:
Value Collector
Have courage, and be kind.
- Joined
- 13 January 2014
- Posts
- 11,943
- Reactions
- 8,205
But did you see my chart showing that even if you owned Japanese stocks, after they crashed they never actually went back to the pre bubble period.
So you are only at risk of a permanent capital loss if you purchased during the bubble, to get around this risk you can just dollar cost average into the market Over time.
if you were holding A large share portfolio that you had purchased before a bubble occurs you you can just go on drawing out your 5% a year and ignore the bubble, all that will happen is that the bubble will pop and return prices back to fair value that you purchased at, and some of you draw downs during the bubble will be windfall profits.
—————————
Imagine if the Japanese market followed the green line I just drew during your retirement, you would be happen with that plus dividends, but you would have missed out on a bunch of windfall draw downs for 15 years,
but the emotion of the high and low get to people, even though the volatility would have been their friend and could have just been ignored.
Dona Ferentes
A little bit OC⚡DC
- Joined
- 11 January 2016
- Posts
- 14,674
- Reactions
- 19,844
getting back to post #1 , I think it's an interesting postulation, important even. Of course, these topics have to contain generalisations , for timelines, investor needs and circumstances and specific investments held, etc. Outcomes will be at variance for nearly everyone.
.... and then somewhere deep in the bowels of the narrative, someone mentioned AFI (because index funds are a newish phenom)
In Sept 1992 , I bought 6000 AFI at $1.65 each + brokerage = $10k. Then I embarked on a hold and add process; viz
with DRP, SPP and Rights Issues, with a few buys along the way. Sometimes I took dividend payments. Additional shares were added by way of Bonus Issues, (a feature we no longer seem to enjoy).
Come early 2007, I had 6,000 + 21,286 AFI with a cost base of $10k + $62034. All but the initial purchase were transferred to a newly established SMSF, so now I hold the original 6000 in my own name (and have 25000 in SMSF).
My takeouts
1. Haven't sold down
2. I've outsourced admin of the AFI portfolio to professional management at 0.15 per cent pa.
3. received around 9 per cent pa , growth and distributions the over the decades. Sometimes higher, sometimes lower.
4. SMSF holdings is a low tax environment, and franking benefits
5. Original $10k is now throwing off dividends of $840 + $690 , which is more than 15 per cent yield (and an unrealised capital gain).
I think I'll continue to hold.
