Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.
It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.
Sounds awfully like a bubble to me particularly in the context of overseas markets (USA especially). Easy money - just buy the index and never sell. What could go wrong?
Oh wait, central banks are in the process of taking away the punch bowl.....
Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.
It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.
Sounds awfully like a bubble to me particularly in the context of overseas markets (USA especially). Easy money - just buy the index and never sell. What could go wrong?
Oh wait, central banks are in the process of taking away the punch bowl.....
I'm not an index fanatic like the Boglehead fraternity but index product can be useful at times. As you said CBA and TLS are major holdings in the older LICs and the index. In reality these older LICs are really somewhat of an index proxy nowadays. So CBA and TLS get hammered resulting in a decent correction in the index. But alas the damn LICs didn't barely change or rediculously they actually went up in price. This is where owning an index ETF such as VAS can be useful. You are guaranteed that the likes of VAS will closely follow the index allowing you to take FULL advantage of a market correction.I'm learning, for me [not necessarily others] that LICs [and perhaps VAS] may have a bigger argument than I had realised.
For example a significant part of our SMSF was in CBA, also held by ARG and AFI for example. When the bank SP got smashed ARG and AFI barely blinked.....
So my current considerations are around holding some individual stocks but allocating a greater proportion to LICs - and they are not all clones of one another.
Thanks austini and VH.
....
"... I think it's a very sensible advise for those that have no interest, or not enough knowledge/experience yet, to study individual companies to invest in......."
I gave up analysing direct stocks years ago. The portfolio once consisted of around 30 to 40 direct stocks with a additional core of LICs. There are only a few direct stocks remaining, the rest is mostly LICs and a couple of ETFs.Rather a "knowing", generalist and paternalistic comment perhaps? NO interest = Zero interest.
Advice or advise? Could there not be more knowledgeable or experienced investors that choose an alternate path?
Rather a "knowing", generalist and paternalistic comment perhaps? NO interest = Zero interest.
Advice or advise? Could there not be more knowledgeable or experienced investors that choose an alternate path?
Pick any random non-investment forum and have a look at their "off topic" section for anything about investing. You'll find one consistent recommendation - index funds.
It seems that everyone from mechanics to hairdressers is, to the extent they're investing in anything at all, piling into this one. Take a look at your superannuation and where it's really invested - you'll find a pretty big chunk is simply tracking various stock market indexes.
Sounds awfully like a bubble to me particularly in the context of overseas markets (USA especially). Easy money - just buy the index and never sell. What could go wrong?
Oh wait, central banks are in the process of taking away the punch bowl.....
Thought I'd pop over from Property chat. Forgot I was a member here. Muschu will know who I am.
In relation to BRK vs ASX LICs you may find this of interest:
https://cuffelinks.com.au/lics-vs-berkshire-imputation/
You may well be correct. I'll check with Peter Thornhill again but from memory I think he had Gluskie from WHF create the charts and that was the only accurate data they had on hand.I actually think they cherry picked that data there, they picked a high point from which to measure berkshires performance,
In the 12 months prior to the date they chose Berkshire had doubled in value, and was due for a period of consolidation.
I must have a talent for insulting people or something.................................
Anyway, I too have better things to do.
Or judging and assuming.
Free advice [advise?]... when someone take their time to answer you, it's a bit rude to slap them mate. Even if they're someone who need a good slapping, you shouldn't do it because others who might want to help answer you wouldn't want to risk it.
Was that preachy? So in addition to blah blah, I'm also blah blah.
Good luck.
As a retiree I favour dividend paying assets especially in the tax free Super pension environment. But BRK is an outstanding investment for someone who is wanting to delay tax until retirement.
Yes I'm fully aware of the live off capital vs dividend argument. For over thirty years I've seen this debated so many times I generally avoid the topic nowadays. But one particular piece of history has always stuck in my mind. Unless you're prepared to load up on longer term bonds then given a Great Depression scenario where sharemarket capital value was down 90% it gets pretty scary if needing to convert capital to income. Dividends on the other hand were down much less at 50% and from memory recovered noticeably quicker.Remember a stock doesn't have to be a dividend payer to be a good "Income" stock. look at Berkshire Hathaway, it hasn't paid a dividend in over 50 years, but has funded thousands of retirement accounts.
If you want a 6% dividend, just sell 6% of your shares each year, you want a 10% dividend, just sell 10% etc etc
If a company has good ways of investing retained earnings, and can turn $1 of retained earnings into $2 of capital gain, it's silly for it to pay out the $1 as a dividend, you are better off receiving no dividend and just selling some of your shares each year.
Take Berkshire as an example, for years its grown at a rate faster than 10%, so you could have sold 10% of your shares every year for 50 years, and still grown your wealth, living off capital doesn't mean you will run out of funds.
Yes I'm fully aware of the live off capital vs dividend argument. For over thirty years I've seen this debated so many times I generally avoid the topic nowadays. But one particular piece of history has always stuck in my mind. Unless you're prepared to load up on longer term bonds then given a Great Depression scenario where sharemarket capital value was down 90% it gets pretty scary if needing to convert capital to income. Dividends on the other hand were down much less at 50% and from memory recovered noticeably quicker.
Whether it's Bogle, Bernstein or numerous others I think most tend to suggest that the safest path to drawing on income in retirement is from the natural yield of the portfolio. Very few companies unfortunately allocate capital as well as Buffet. Only problem is of course it requires a lot of capital to generate sufficient dividend income which can delay getting to retirement. And the other issue is that it often requires a high allocation to equities which can be a huge challenge psychologically to many investors during market crashes.
But really it just depends on the nature of each individual and their level of wealth as to which approach is the best fit. Fortunately we're in a position where even in a Great Depression scenario we would still live quite well.
This is probably why there never seems to be a winner in the never ending living off capital vs dividend debate. It depends on so factors, financially and psychologically, for a given investor that there is no right or wrong answer.
Hopefully I'm not coming across as being argumentative. I'm newer here and don't want to come across the wrong way.
All valid comments thanks.I don't think it has to be a choice of either, you can do both.
e.g. have a portfolio of some companies that pay out a high ratio of earnings as dividends, while also not avoiding some companies that pay a smaller pay out ratio, but where larger capital gains are expected.
You can shield your self from market volatility, but holding a years wages as cash, during a big down turn, this cash pool will still get topped up a bit by dividends, so you might not have to make any sales for 18months.
Also, Big down turns normally come after big up ticks, so big gains made on sales during the big up tick offset the poor returns on the sales made during the down turn
Not mention that in my portfolio the companies that I have bought because of their growth prospects have since become my biggest dividend earners, while also seeing significant capital gains.
two of them paying more than 25% dividend based on my entry price.
I don't think it has to be a choice of either, you can do both.
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