at least you are saying investing, not trading or, horror, speculating...Im a newbie into investing...
Yes, true; over the short term (in fact, with Dividend Imputation, I'd reckon the drop is more pronounced than the actual divi. The advent of "so-called Income Funds" such as ETFs and PL8, Plato, etc has exacerbated dividend scalping. The 45 day rule did trim that practice back a bit.Everyone has raised some good points about caution but nobody has raised the most important and obvious points of all:
9 times out of 10, when your investment pays out the dividend, the share price declines by a commensurate amount! ............ You can't invest in long duration assets with an expectation of short term returns.
Yes I can, it doesn't affect me because mine is all in my super fund and I am in pension mode, so no tax.Since you hold VHY, can you shed some light on CG on dividend payouts as Belli has called out. Thanks!
Nick Radge has a system of buying X number of months before expiry and selling just before to gain the price move leading up to the dividend payout. (stocks paying dividends though)Yes, true; over the short term (in fact, with Dividend Imputation, I'd reckon the drop is more pronounced than the actual divi. The advent of "so-called Income Funds" such as ETFs and PL8, Plato, etc has exacerbated dividend scalping. The 45 day rule did trim that practice back a bit.
But over the longer term, investing is for income or gain. As Dr John Hussman states: "Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time." He goes on to say, "For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time."
Hi
DD is Draw Down and I see you are prepared to tolerate 20%.
What strategy will you use if you see 20%?
eg trailing stop to close position at 20%
or is it buy and hold for 12 months?
Here's the rolling 21 day volatility of VHY, as you can see over any given 21 business day period, very often the asset has fluctuated by more than the total annual dividend including franking credits:
View attachment 99409
This is were fear steps in and we don't pull the trigger to get out, then watch it drop another 20 to 30%At this stage (beginner), I would probably cut my losses and stop to close.
Depends on how bad the market looks though, I dont see a urgent need for the invested amount so depending on the situation may buy and hold for a bit longer, ...unlikely as it may sound.
You need to know what you will do, now, before any problem and put that maybe in writting so that you can refer to it later: if you go with the flow and join any panic sell or panic keep(it will come back, sure, it can not...) you will most probably do huge mistake and be very bitter about it;This is were fear steps in and we don't pull the trigger to get out, then watch it drop another 20 to 30%
I agree , know were your wrong and get out . No if, buts or maybe'sYou need to know what you will do, now, before any problem and put that maybe in writting so that you can refer to it later: if you go with the flow and join any panic sell or panic keep(it will come back, sure, it can not...) you will most probably do huge mistake and be very bitter about it;
Know how you get out before going in would be my advice
Given that the share market is on a possible high, it's probably better to go for a split between Stock ETF's and Bonds as it will smooth any sell off or DD. % is up to you but generally speaking the higher the Bond %, the smoother and shallower the drop or DD.Been reading about a 60/40 split in ETFs/Bonds to buffer the downfall. Would love to hear thoughts on a similar strategy that members here have used with BONDS combination, national or international?
So why not go all in on the Bonds and have the lowest volatility rather than being recommended the split? That's because the Bonds generally yield a much lower rate of return than the stock market. In ball park figures Bond returns are below 3% and stock returns are around 5% and could be higher with franking credits to dividends added. So it's a question of risk vs reward to work out the % you wish to split between the two asset classes.
if you buy OTC Bonds through, say, FIIG, as a retail client, the spreads will cruel your returns, if held for a short term (< a year or so)..... HSBC are offering 2.35% for balances up to 1mil and I'm going for that at the moment. I'll do some research on BONDS but wanted to check any specific picks by members here.
Hi ,Everyone has raised some good points about caution but nobody has raised the most important and obvious points of all:
Firstly:
9 times out of 10, when your investment pays out the dividend, the share price declines by a commensurate amount!
As soon as the business returns some capital to you in the form of a dividend, the share in that business is immediately worth less by the same amount.
The dividend is not your "return" per se, the return was already generated (hopefully) by earnings. The dividend is simply a transfer of cash on the business balance sheet, to your own balance sheet as a partial owner of the business.
Secondly:
Over the course of 1 year, the volatility of the asset will fluctuate by a lot more than the dividend amount. You could invest on Day 1 and see the asset price down by the entire expected annual dividend by Day 2, in a relatively normal market.
You can't invest in long duration assets with an expectation of short term returns.
I think that has a lot of merit, especially if you aren't interested in the franking credit, the price post dividend on a lot of occasions falls further than the dividend.Hi ,
how about a system were you took profit equal to expected dividend plus trading expenses when price moves by that much?.
Then buy again X-div after price drop to do it all again.
Yes, that's good advice and I have considered that. To add to this HSBC are offering 2.35% for balances upto 1mil and Im going for that at the moment. I'll do some research on BONDS but wanted to check any specific picks by members here.
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