Walking the Road to Riches

[Vixs]

Thanks for that excellent and detailed explanation. Just to clarify, given my situation, as long as I have a mortgage on my IP, it makes more sense to hold my bonds/fixed interest allocation in my offset account to avoid me paying more tax and because of the higher interest 'saved' for my money?

Yes. At the end of the day everything is just a tool used to build wealth. Fixed Interest/bonds is not the most effective use of your 'defensive' asset allocation from a total return perspective. You are going to get a greater return by keeping cash in the bank than by putting money in the bond market with the potential for capital losses in a rising interest rate market.

When the key elements are risk and return if you can get a better return with lower risk, that's a win. No point using a riskier asset for a lower return.

 

[skc]

Thanks for that excellent and detailed explanation. Just to clarify, given my situation, as long as I have a mortgage on my IP, it makes more sense to hold my bonds/fixed interest allocation in my offset account to avoid me paying more tax and because of the higher interest 'saved' for my money?

Yes. Don't borrow at 5% so you can earn a 2% return (unless you have really strong conviction that the 2% yielding asset will enjoy capital growth), is the long and short of what Vixs and McLovin are saying.

Incidentally, that's what most people are doing when it comes to investment properties... borrowing @ 5% while earning net yield ~2-3%, while hoping there'd be capital growth.

If your IP turn into your PPOR, then the equation is even more skewed.

 

[tech/a]

I've read through all these excellent replies.

At best the result is going to be ho hum and
and un inspiring.

At 32 take some calculated RISK.
It appears your too concerned about losing money than
having a real go at making it!

But if ho hum is ok------

 

[So_Cynical]

I've read through all these excellent replies.

At best the result is going to be ho hum and
and un inspiring.

Have to agree, tech said the same thing to me about an experiment of mine a little over 12 months ago and has now been proven correct, in my case it was the fact that my funds were spread too widely (to many stocks) and not exposed to enough risk...in your case the same is proposed to be happening except via index ETF's and bonds.

No Risk = No outperform.

I have just run a report on my IB account covering the first 12 months of operation and last FY, Aussie stocks and writing covered calls, account has grown by 19% meanwhile the ASX300 ETF went up 11% over the same time frame...i retire in 3 years.

 

[tech/a]

Have to agree, tech said the same thing to me about an experiment of mine a little over 12 months ago and has now been proven correct, in my case it was the fact that my funds were spread too widely (to many stocks) and not exposed to enough risk...in your case the same is proposed to be happening except via index ETF's and bonds.

No Risk = No outperform.

I have just run a report on my IB account covering the first 12 months of operation and last FY, Aussie stocks and writing covered calls, account has grown by 19% meanwhile the ASX300 ETF went up 11% over the same time frame...i retire in 3 years.

With a 19% return in less than ideal times---I doubt retirement will be too much of a financial burden!

Three ways to skin the cat.

Bulk Funds at the end of the day (Regardless of how you generate them/Business/Trading/Investing/Property)
OR
The capacity to turn a decent profit year in year out! (Regardless how you generate them/Business/Trading/Investing/Property)
OR
Both!

 

[Ryan C]

Thanks for all the great responses. Im learning from it all.

I've read through all these excellent replies.

At best the result is going to be ho hum and
and un inspiring.

At 32 take some calculated RISK.
It appears your too concerned about losing money than
having a real go at making it!

But if ho hum is ok------

Tech, I have to admit im fine with ho hum rather than a loss. I'm clearly not being very risky, limiting my stock exposure to an all market index at a max of only 80% allocation, is what works for me. Happy to just match the market and not beat it. I'll be risky with my 'gambling' fund and that's all.
My overall goal is to create another income stream in the long term. Can't do that if I lose all my money on a few highly probable incorrect stock picks. I know my limitations.

 

[tech/a]

Thanks for all the great responses. Im learning from it all.



Tech, I have to admit im fine with ho hum rather than a loss. I'm clearly not being very risky, limiting my stock exposure to an all market index at a max of only 80% allocation, is what works for me. Happy to just match the market and not beat it. I'll be risky with my 'gambling' fund and that's all.
My overall goal is to create another income stream in the long term. Can't do that if I lose all my money on a few highly probable incorrect stock picks. I know my limitations.

Fair enough.
You certainly are not alone!!

 

[Vixs]

I've read through all these excellent replies.

At best the result is going to be ho hum and
and un inspiring.

At 32 take some calculated RISK.
It appears your too concerned about losing money than
having a real go at making it!

But if ho hum is ok------

I'm with you tech/a, indexing and putting cash in an offset account isn't the most exciting move at this stage, but it's certainly a start and far from a bad decision. I'm not a big advocate for indexing, but I certainly see it as preferable to not being invested.

What Ryan has referred to now as 'gambling' would probably become more targeted 'investing' with a little more experience and exposure.

 

[TPI]

I've got a 60+ year time-frame so am opting for the Balls of Steel approach and forgetting about bonds for now.

 

[DeepState]

I've got a 60+ year time-frame so am opting for the Balls of Steel approach and forgetting about bonds for now.

What happens to you at airports?

 

[TPI]

What happens to you at airports?

Nothing... I don't follow?

 

[Vixs]

Nothing... I don't follow?

Balls of Steel. Metal detectors. Frisking. Airport security violation etc etc.

 

[DeepState]

Nothing... I don't follow?

Set up your mental TV screen....

TPI heads to the airport. Checks in. Puts his luggage on conveyer belt into XRAY machine. Walks through metal detector....."BZZZZZZ". Female guard says, would you mind walking through the gate again sir? BZZZZZZ....

https://www.youtube.com/watch?v=-IQkg21Qw1k

As per the above instructional video, except your version goes a few steps further. High risk investment strategies come with unanticipated risk....

 

[luutzu]

Please tone it down, ...

The OP and I are having trouble coping with this excess of brilliance!

he started it

 

[luutzu]

I feel I am keeping an open mind. Other things I haven't mentioned I take into considerations are my temperament, my current and changing situation, my bad habits and impulsiveness and more. I value your input luutzu however I think we have different approaches. That's not a bad thing.

If one of my funds is doing really really well while the bond is in decline, I'd follow my asset allocation, meaning I'd buy more of the declining bond/stock index. I wouldn't do this by selling the stock/bond index that was going up but by using my investing money to top up the declining allocation come Jan or July. It's being a contrarian long term investor.

I don't mean that you're not open minded or such.. meant to say, and it could just be from my own experience with trivial matters like learning some historical facts I thought makes sense until I heard another perspective that contradicts that belief, but either ignore the new contradicting evidence or be open minded about things and look it up to see what's the truth.

At 32 and having a daughter that's 10, it must have not been easy, financially... and to get to where you are now financially is quite an achievement. To look for safe investment options and do what you're doing, it's the way to go...

But since you have planned for some "gambling" account to take a punt here and there, just in case that get you interested in looking into investment options and take a more active approach towards your investments... and this could be 5 or 10 years from now... what i meant by being open minded is to see if the index has been doing OK, see if risks is actually minimised by spreading far and wide, see if perhaps you could do an OK job yourself.

Anyway, good luck.

 

[Ryan C]

I don't mean that you're not open minded or such.. meant to say, and it could just be from my own experience with trivial matters like learning some historical facts I thought makes sense until I heard another perspective that contradicts that belief, but either ignore the new contradicting evidence or be open minded about things and look it up to see what's the truth.

At 32 and having a daughter that's 10, it must have not been easy, financially... and to get to where you are now financially is quite an achievement. To look for safe investment options and do what you're doing, it's the way to go...

But since you have planned for some "gambling" account to take a punt here and there, just in case that get you interested in looking into investment options and take a more active approach towards your investments... and this could be 5 or 10 years from now... what i meant by being open minded is to see if the index has been doing OK, see if risks is actually minimised by spreading far and wide, see if perhaps you could do an OK job yourself.

Anyway, good luck.

No need to explain mate. You mean well and I haven't taken anything you've offered with offense or ridicule luutzu. It's great to have valuable input as it raises questions or concretes things for me. That's how I like to learn. I'll be watching my investments carefully and sharing my results, good or bad, for all to see.

 

[DJG]

opcorn: Also watching this one with interest

 

[DeepState]

Hi Ryan

Classic:



Source: Bernstein (2014)

But so true.

RBA Gov Glen Stevens made a speech at the Anika Foundation lunch. Here are two sets of highlights. They indicate that even the guys pulling the levers didn't know if we were headed for a Great Depression Mk II at the time. They did not know. I worked in a firm where Geithner would call our Chairman to ask him how markets would react to this or that initiatve - a lot. Everyone was flying by the seat of their pants and the fixed income markets essentially shuttered. It is consensus opinion that the US banking system was actually insolvent at the time. Apart from unprecedented liquidity release by the central banks, pulling the economy back from off the edge, a global pact had to be made to avoid mercantilism that marked to Depression era. The pledges the G7 ministers made crippled many economies when selfish alternatives were available which would be more populist. Consider how hard this was to pull off when you look at how hard it is to get anything done in the EZ. They did not know. Anyone trying to analyse the outcomes could not know...because they were analyzing people who did not know what action they would be taking 24 hours from now and what catastrophe awaited them at 4am.

1./


2./


Questions:

1./ Will you hold come hail and shine?

2./ Should you hold come hail or shine?

I do not have an answer guide and am interested in your and others' response.

 

[Julia]

Questions:

1./ Will you hold come hail and shine?

No. Protection of capital and profit will always be a priority for me, fwiw.

 

[Ryan C]

Questions:

1./ Will you hold come hail and shine?

2./ Should you hold come hail or shine?

I do not have an answer guide and am interested in your and others' response.

Great question.

1. Yes, for two reasons
- I wouldn't know if a crash had occurred. My plan when I put my first dollar in is not to watch financial news, listen to experts and their recommendation and I'd only look at my portfolio to buy each half year to rebalance. I'd hate to panic and not be able to sleep at night so I wouldn't fill my head with noise. Ignorance is bliss.
- I'm stubborn. Once I've set my mind to a goal I like to see it through. If I learn a better way regarding my specific situation I'd adjust (example: Vixs recommendations to hold my fixed interest in my offset account) but I'm really just tweaking my share investing game plan.

2. Yes.

Books I've read that has influenced my thinking about crashes and manias have noted that the markets has always recovered after a period of time. The most recent book I've read from Nicholas Nassim Taleb on the Black Swan theory has also influenced my thinking. Another recommendation To show I'm not all books knowledge, my only investment in shares during the crash of 2008 was in a high growth fund consisting of Australian and international market shares in a super fund I never looked at seems to have benefited so that's backed up what I've read.

I do not know the full context of your snippets however this stood out for me:
"Anyone trying to analyse the outcomes could not know...because they were analyzing people who did not know what action they would be taking 24 hours from now and what catastrophe awaited them at 4am."

If people in the know didn't know what to do in a Black Swan event I'd like to think I have as much chance as them to getting it right and the best chance I've got of that happening is following my plan that I set when I wasn't in a panic and was thinking rationally.