Author Topic: Australian Investing Thread  (Read 2588797 times)

Ozlady

  • Handlebar Stache
  • *****
  • Posts: 2008
Re: Australian Investing Thread
« Reply #1550 on: December 17, 2015, 12:24:09 AM »
First and foremost, what is "bought at the bottom"?  It could be a bottom as Marty888 alluded to a few days ago BUT a new bottom could appear? who can tell?

What i can control is how much i want to pay for a share eg. i have a put position to buy NAB at 27.5...THIS IS THE MAX i am willing to pay as i want the near 10% dividend yield (incl FCredits)....i sell a put and pocket the premium...of course NAB went on a tear and i can't get the share; but shrug! i get to keep the premium and wait to fight another day or as Marty888 would say a new "bottom"...

Ozlady

  • Handlebar Stache
  • *****
  • Posts: 2008
Re: Australian Investing Thread
« Reply #1551 on: December 17, 2015, 12:34:48 AM »
And in the meantime, i have that nice premium sitting and warming my pockets atm...and still waiting for NAB at 27.5.....remember... it is a patience game?

(and incidentally it is only a game to me as it is only a small part of my portfolio....)

In contrast what does Marty888 have? Regrets?   

(sorry no offence to Marty!)

dungoofed

  • Pencil Stache
  • ****
  • Posts: 661
Re: Australian Investing Thread
« Reply #1552 on: December 17, 2015, 02:29:05 AM »
Hi Chris - do I remember you saying you have an account with Interactive Brokers? You can buy/sell options through their platform for about $2 (link below), and they let you know specifically what you need to do in the case you need to front cash or shares. I haven't bought options but I recall their training video, you can set it so that for American options it executes the moment the option goes into the money, manual setting, ask you at the time the option is due to expire, etc.

Australian options market is quite underdeveloped. Think: ASX20. If you are ok working within these confines then you can put together a decent strategy but I think a lot of people here would be more inclined to just put that cash to work in VGE/VAS/VGS/VEU/VTS/VSO/etc

https://www.interactivebrokers.com.au/en/index.php?f=commission&p=options3&ns=T

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1553 on: December 17, 2015, 02:39:33 AM »
understood ozlady, thanks, I didn't mean to offend you either so sorry if that went down the wrong way.... I do agree if you're buying at fixed price limits it makes a lot of sense, you get the income regardless. And if the level get's reached you get the shares too and it effectively lowers your procurement cost.

Ozlady

  • Handlebar Stache
  • *****
  • Posts: 2008
Re: Australian Investing Thread
« Reply #1554 on: December 17, 2015, 02:45:35 AM »
understood ozlady, thanks, I didn't mean to offend you either so sorry if that went down the wrong way.... I do agree if you're buying at fixed price limits it makes a lot of sense, you get the income regardless. And if the level get's reached you get the shares too and it effectively lowers your procurement cost.


Nah....what offence?!!!  It's fun trading ideas!!

Let's continue to learn from one another...okay?  keep the comments running!

marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #1555 on: December 17, 2015, 03:22:29 AM »
And in the meantime, i have that nice premium sitting and warming my pockets atm...and still waiting for NAB at 27.5.....remember... it is a patience game?

(and incidentally it is only a game to me as it is only a small part of my portfolio....)

In contrast what does Marty888 have? Regrets?   

(sorry no offence to Marty!)

Yeah.. because I knew the markets would bounce on the fed announcement. I just plain forgot when that announcement was going to be!!!!

Anytime the index has a 4 in front of it is a good time to buy in my humbly useless opinion.

marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #1556 on: December 17, 2015, 03:29:53 AM »
I also don't believe that the markets are going to stay shit for long.

At some point the rubber band will snap and nominal growth will pick up again, which then feeds into wage growth and consumer confidence. It's not going to stay low forever with monetary policy being so accommodative and the population continuing to grow as it is.

Confidence is a fickle thing, It's crap now but could just as quickly turn. Hate to quote Buffet but it seems everyone is just a little bit too fearful....

Ozlady

  • Handlebar Stache
  • *****
  • Posts: 2008
Re: Australian Investing Thread
« Reply #1557 on: December 17, 2015, 04:54:34 PM »
And in the meantime, i have that nice premium sitting and warming my pockets atm...and still waiting for NAB at 27.5.....remember... it is a patience game?

(and incidentally it is only a game to me as it is only a small part of my portfolio....)

In contrast what does Marty888 have? Regrets?   

(sorry no offence to Marty!)

Yeah.. because I knew the markets would bounce on the fed announcement. I just plain forgot when that announcement was going to be!!!!

Anytime the index has a 4 in front of it is a good time to buy in my humbly useless opinion.

Hi Marty888

The ASX 200 is having a 4 in front now as i am typing....over to you....

I will be watching you:)

AustralianMustachio

  • Stubble
  • **
  • Posts: 167
Re: Australian Investing Thread
« Reply #1558 on: December 18, 2015, 12:12:50 AM »
First and foremost, what is "bought at the bottom"?  It could be a bottom as Marty888 alluded to a few days ago BUT a new bottom could appear? who can tell?

What i can control is how much i want to pay for a share eg. i have a put position to buy NAB at 27.5...THIS IS THE MAX i am willing to pay as i want the near 10% dividend yield (incl FCredits)....i sell a put and pocket the premium...of course NAB went on a tear and i can't get the share; but shrug! i get to keep the premium and wait to fight another day or as Marty888 would say a new "bottom"...

So in other words, it works well if you think the market won't rise? Otherwise you're better off simply buying the shares?

marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #1559 on: December 18, 2015, 12:54:21 AM »
And in the meantime, i have that nice premium sitting and warming my pockets atm...and still waiting for NAB at 27.5.....remember... it is a patience game?

(and incidentally it is only a game to me as it is only a small part of my portfolio....)

In contrast what does Marty888 have? Regrets?   

(sorry no offence to Marty!)

Yeah.. because I knew the markets would bounce on the fed announcement. I just plain forgot when that announcement was going to be!!!!

Anytime the index has a 4 in front of it is a good time to buy in my humbly useless opinion.

Hi Marty888

The ASX 200 is having a 4 in front now as i am typing....over to you....

I will be watching you:)


Not the indices I'm looking at... unless the market moved by 100 points today....


ASX 200 closed at 5106.7 and the All Ords are 5156.5


Be patient, it'll drift down again .... (betting on that old 50:50 chance)

povertystrickenbastard

  • 5 O'Clock Shadow
  • *
  • Posts: 36
Re: Australian Investing Thread
« Reply #1560 on: December 18, 2015, 12:54:57 AM »
Nikkei what the... shot up like a rocket, then sunk like a rock.

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1561 on: December 18, 2015, 05:30:23 AM »
First and foremost, what is "bought at the bottom"?  It could be a bottom as Marty888 alluded to a few days ago BUT a new bottom could appear? who can tell?

What i can control is how much i want to pay for a share eg. i have a put position to buy NAB at 27.5...THIS IS THE MAX i am willing to pay as i want the near 10% dividend yield (incl FCredits)....i sell a put and pocket the premium...of course NAB went on a tear and i can't get the share; but shrug! i get to keep the premium and wait to fight another day or as Marty888 would say a new "bottom"...

So in other words, it works well if you think the market won't rise? Otherwise you're better off simply buying the shares?

I think it works well if your execution strategy is based on specific price limits. This could be based on technical analysis. e.g. you identify a support level and want to buy at that price. Or as per Ozlady's example if you have a target dividend yield that will be reached when the price drops to a certain level. So you are going to enter a GTC buy order anyway, e.g. buy NAB at $27.50 (when the current level is $29 say) and wait and see if you get filled. In that case, why not sell puts instead with a $27.50 strike price, let's assume you pocket a premium of $0.50. If the price never drops to the target then you keep the $0.50. If it does, then you effectively buy the shares at $27 (plus transaction costs).

However, if you are a price taker doing market orders / regular investing / dollar cost averaging in a long term buy and hold strategy, then personally I don't think it's very compatible.

It's certainly true that we could see VAS at $63.25 again in the near future. But then there's also a possibility the market gathers steam and you don't see $63.25 again for a long time. No-one really knows for sure... In the latter case, you would still pocket the put premium, but you may miss out on a much larger return, depending on what you did with the funds in the meanwhile.

AustralianMustachio

  • Stubble
  • **
  • Posts: 167
Re: Australian Investing Thread
« Reply #1562 on: December 18, 2015, 06:55:01 AM »
Thanks for that FFA

dungoofed

  • Pencil Stache
  • ****
  • Posts: 661
Re: Australian Investing Thread
« Reply #1563 on: December 18, 2015, 02:48:31 PM »
Quote
However, if you are a price taker doing market orders / regular investing / dollar cost averaging in a long term buy and hold strategy, then personally I don't think it's very compatible.

Just to add a couple more cases:

1) slowly gain more exposure to a single ASX20 company over a period of time (eg if you think BHP is best-of-breed and want more exposure you can sell a combination of OTM and ITM puts),

2) if you want to tilt your portfolio a little (not many examples on the ASX, but selling puts on IAG would be one way to get away from the ASX200's overweighting of banks and miners), or

3) if you feel certain companies in the ASX20 are overvalued and don't like the thought of purchasing them via VAS at these levels.

Note that 2) and 3) can be achieved with regular limit orders too.

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1564 on: December 21, 2015, 04:40:55 AM »

happy

  • Walrus Stache
  • *******
  • Posts: 9258
  • Location: NSW Australia
Re: Australian Investing Thread
« Reply #1565 on: December 21, 2015, 04:55:16 AM »
Yes the Tassie figure is interesting, considering housing prices, whilst cheaper than say Sydney, are still not that cheap.
Everyone else needs at least half a million to achieve "financial freedom" ( whatever that means). To be honest, if they are starting with debt or little or no net worth, they do need at least half a million.  What surprises me is that the average Joe can name a figure -  there is not much detail in what that figure is designed to provide: " financial freedom", so maybe the answers are also pretty loose.

deborah

  • Senior Mustachian
  • ********
  • Posts: 15892
  • Age: 14
  • Location: Australia or another awesome area
Re: Australian Investing Thread
« Reply #1566 on: December 21, 2015, 06:08:27 AM »
Well, my life couldn't significantly improve, no matter how much you gave me - so maybe they would put me down as needing $20M?

happy

  • Walrus Stache
  • *******
  • Posts: 9258
  • Location: NSW Australia
Re: Australian Investing Thread
« Reply #1567 on: December 21, 2015, 05:26:08 PM »
That's a really nice space to be in Deborah!

AustralianMustachio

  • Stubble
  • **
  • Posts: 167
Re: Australian Investing Thread
« Reply #1568 on: December 22, 2015, 05:28:45 PM »
The figures in that article are absurdly large, IMO. And I don't consider myself as frugal as the majority of people and articles I've come across on this site. The only reason they would be that high would be because Australian housing is so expensive and people are paying off large mortgages.

Say it was 300k, and you put it all into VAS, didn't touch the capital, and spent the growing income stream every year. Historically yielding a bit over 4% fully franked, which is around 6% gross. That's $18,000 a year starting point, and should grow over the long term.

I think $18,000 is above what people get from Centrelink to look for work. I would consider someone having their own private Centrelink payments as having a significant effect on their lives.

And this is being quite conservative and not even touching the capital base. If you had a long time till retirement, the capital would grow into a sizeable amount, enough to rival most people super annuation balances

bigchrisb

  • Handlebar Stache
  • *****
  • Posts: 1237
Re: Australian Investing Thread
« Reply #1569 on: December 22, 2015, 05:48:24 PM »
Is anyone considering floating rate notes as an asset class at the moment?  I've been adding some of the listed hybrids to my portfolio over the last few weeks, based on:

- Interest rates are super low, and in my view only likely to go up from here.
- Rising interest rates leave me exposed to rising interest costs on my mortgage.  They also expose traditional bonds to capital losses.
- Some of the hybrids are trading at very low values compared to face value - for example NABHA, MBLHB and SVWPA are all below $70 for a $100 note.  This puts them on current yields of ~5%, ~6% and ~11%, all higher than what I pay for debt (low 4's).  Their future rates will increase with the bank bill swap rate, at a multiple of 1.4-1.6 times (due to selling below face value
- There is a (remote) chance that these will be redeemed at some point in the future at face value, for a capital gain.

I see these as an easy way to get a hedge against interest rates rising on my mortgage, and getting paid the spread in the meantime.  There is some risk that they will defer payment, which means conversion (at face value) to ordinary shares (fine print differs between the products).  I'm an investor in the ordinary shares in NAB, MQG and SVW, and if I could acquire shares at a 30% discount today, I would, so the conversion risk doesn't bother me much.

However, when markets price something as too good to be true, it usually is.  What am I missing on these instruments?


AustralianMustachio

  • Stubble
  • **
  • Posts: 167
Re: Australian Investing Thread
« Reply #1570 on: December 22, 2015, 08:50:48 PM »
^ My guess would be that the market doesn't agree with your predictions on interest rates, and believes the RBA's next move will be a cut?

bigchrisb

  • Handlebar Stache
  • *****
  • Posts: 1237
Re: Australian Investing Thread
« Reply #1571 on: December 22, 2015, 09:23:40 PM »
The irony is that the bank bill swap market (which underlies these interest rates) has been climbing (about 0.2% in the last month, mostly after the US Fed raised rates), which is either suggesting that interest rates are going to climb, or that people are assigning more credit risk to prime banks.

marty998

  • Walrus Stache
  • *******
  • Posts: 7372
  • Location: Sydney, Oz
Re: Australian Investing Thread
« Reply #1572 on: December 23, 2015, 01:07:47 AM »
Next move won't be a cut. As long as the Fed keeps raising rates it will put downward pressure on the currency.

Having rates at 2% has already been proven not to induce inflation in this cycle, which itself is evidence contrary to conventional wisdom.

I don't know what you are missing bigchris. Those prices are very much tempting me too. SVWPA I can understand... there's a not insignificant risk that one of the TV networks will go bust (FWIW my bet is Seven... not Ten, because there are more billionaires with deeper pockets who own Ten).

NABHA and MBLHB I cannot understand. Can't see either of those failing. They might have the odd bad year but fail? No.

povertystrickenbastard

  • 5 O'Clock Shadow
  • *
  • Posts: 36
Re: Australian Investing Thread
« Reply #1573 on: December 24, 2015, 02:59:27 PM »
Merry Christmas mustachians!

Abundant life

  • Bristles
  • ***
  • Posts: 482
Re: Australian Investing Thread
« Reply #1574 on: December 26, 2015, 11:29:53 PM »
Merry Christmas everyone.

Checking my emails, Scott Pape, the Barefoot Investor has sent his usual offering: join the Barefoot Blueprint for $297 for the year instead of $397.

Admittedly he offers a full refund if you are unsatisfied, but, as I peruse his offer it occurs to me that he offers us locals a lot of basic stuff that is available from an online broker and other stuff we can get free from MMM or JL Collins (the only drawback with the latter being that it is slanted to US readers).

Has anyone tried the BB and what did you think of it?

Has anyone come across an Australian website on investing that they felt was worthwhile? Other than this worthwhile thread of course!
« Last Edit: December 26, 2015, 11:31:35 PM by Abundant life »

steveo

  • Handlebar Stache
  • *****
  • Posts: 1928
Re: Australian Investing Thread
« Reply #1575 on: December 26, 2015, 11:37:06 PM »
Abundant life - my opinion is that all you really need to do is a little bit of research yourself mainly because there are no secrets to investing well. Pick an asset allocation that you are comfortable with, invest in low cost index funds and stick to that plan for a long period of time and you will do well.

Anything that costs money reduces your returns.

Rob_S

  • Stubble
  • **
  • Posts: 144
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #1576 on: December 27, 2015, 03:37:05 AM »
Barefoots emails are always a decent read but I wouldn't pay for his blueprint. His books alright, if a bit for beginners as well as being dated now.

I enjoyed Forager Funds 'Bristlemouth blog' and its recent rip into Dick Smith, good on them for putting it out there early on that the whole private equity thing was suss.
https://foragerfunds.com/bristlemouth/dick-smith-response-to-the-heist/

Superannuation Freak and Financially Free Australia (FFA) are both good people and have worthy blogs:
http://superannuationfreak.blogspot.com.au/2014/10/everything-you-need-to-know-about.html
http://www.financiallyfreeaustralia.blogspot.com.au/2014/12/whats-this-blog-about.html

Aussiefirebug is a new blog with some good content. Seems like a nice guy. He's gone the property route which isnt my thing so much of his content isn't all that relevant to where I am going:
http://www.aussiefirebug.com/rent-or-buy/

There's reddit but its very new and moves a little slow and I haven't found much good stuff on it:
https://www.reddit.com/r/fiaustralia

The noise to signal ratio on Whirlpool finance forum is all over the shop but theres some good posters there and some good stuff in the forum archive. Just use the search function. This thread is a good one:
http://forums.whirlpool.net.au/forum-replies.cfm?t=2322459

There's some OK stuff on the passive investor but it hasn't been updated in a long time:
http://www.thepassiveinvestor.com.au/

The british blogs are worth a look. The Escape Artist and Monevator. Some folk reckon Canada and Aus share a lot in common, in which case the canadian couch potato blog could be worth a look.
http://canadiancouchpotato.com/

Other than that I get the best value from books, though there are far too many property empire books clogging up the personal finance section of the library. I just finished Peter Thonhills 'Motivated Money' for the second time; I think The Falcon recommended him earlier in the thread. A very easy read, if a little short, from a man that no longer has skin in the game and has nothing to 'sell'.

superannuationfreak

  • Stubble
  • **
  • Posts: 127
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #1577 on: December 27, 2015, 04:21:35 AM »
Merry Christmas everyone.

Checking my emails, Scott Pape, the Barefoot Investor has sent his usual offering: join the Barefoot Blueprint for $297 for the year instead of $397.

Admittedly he offers a full refund if you are unsatisfied, but, as I peruse his offer it occurs to me that he offers us locals a lot of basic stuff that is available from an online broker and other stuff we can get free from MMM or JL Collins (the only drawback with the latter being that it is slanted to US readers).

Has anyone tried the BB and what did you think of it?

Has anyone come across an Australian website on investing that they felt was worthwhile? Other than this worthwhile thread of course!

I tried the Blueprint to see what it had to offer.  I think they're well-intentioned people who have something to offer a subset of the population, I'm just not sure that subset includes many people here.  They are genuine about the full refund if you want to give them a try, though.

What did I think of it?  The strongest value it provides is the stuff that people probably wouldn't pay for in isolation: solid personal finance advice (live below your means, insure yourself, get a good mortgage deal, etc), and access to a relatively large community of other subscribers (some of whom provide their fellow members with useful advice and support via facebook group/forum).  The personal finance stuff I think I'm on top of (and after a one-year barefoot subscription, or some decent books, I think most people would have enough material regardless).  Paying $300p.a. for access to a facebook group where I found myself contributing but not learning very much was a bit rich for me.  But I saw many others get value from that community.

In terms of investments, what you're really paying for is one stock pick per month.  Overall I thought it was a useful outlet for individual investors who would otherwise be trading too frequently or stockpicking with weak rationale.  It's a way of giving them a bit more discipline, with regular behavioural reminders along the way.  For those already comfortable with index funds and low-cost super it seems like a backwards step.  There was also an ETF portfolio (the barefoot breakfree portfolio - google it if you want to see what it was at the start, I don't imagine it's changed all that much).  It was a not-unreasonable but relatively aggressive mostly equity portfolio, nothing special but perfectly adequate if one understands the risks (which were promoted as lower than I thought credible) and can stay the course over a couple of decades.  And there were special reports on things like investment bonds (which was actually pretty decent, highlighting the lower-cost products for those on high-enough tax brackets - not so useful for individuals who expect to be in a lower bracket in retirement).

What were my concerns?  Most of his suggestions I'd say are lower risk than the traditional Australian "buy property and a few dividend stocks", but still higher-risk than I think most people can handle behaviourally.  He hadn't given much portfolio construction advice though, other than to suggest 6 months (for accumulators) to 3 years cash (for retirees).  If this is in-line with your risk-appetite that's great.  But when I was a member we hadn't seen a long-lasting downturn in the economy or the share market since Blueprint started.  When we do (perhaps even in this year's decline) I suspect many will be uncomfortable with the risks they have been taking.  Other than the ETF portfolio, his investment advice was mostly about investing in a LIC or two (such as AFIC) and adding 10 or so individual ASX-listed stocks (emphasising quality and value, Buffet-style).  That will probably turn out OK, I certainly hope it does for those who follow such a strategy, but it's a hard strategy to be successful with behaviourally and doesn't take advantage of the substantial degree of global diversification now available cheaply.  It takes on large amounts of Australia-specific risk - it's entirely plausible for a single small country to underperform over an investing lifetime - and I fear his members will struggle behaviourally as much as anyone else with the inevitable downturns that come from time to time.

Other larger Australian forums I've come across have been focused on property or trading.  So that barefoot community does offer a critical mass of more investment-focused individuals we don't have yet.  However I really hope a larger (free) Australian financial community builds up with more evidence-based investing underlying it (along the lines of the Bogleheads or MMM community).

dungoofed

  • Pencil Stache
  • ****
  • Posts: 661
Re: Australian Investing Thread
« Reply #1578 on: December 27, 2015, 02:48:32 PM »
However I really hope a larger (free) Australian financial community builds up with more evidence-based investing underlying it (along the lines of the Bogleheads or MMM community).

I'd nominate FFA's blog to try and build a community like that.[1] FFA - any thoughts?

Otherwise, the technology to put together a blog/forum/wiki is already out there. Could be up and running with a basic site within a few hours.

(also, I've mentioned it many times already but I think an important first step is getting the Australia section of the Bogleheads wiki uploaded)

[1] Would also have suggested yours too @superannuationfreak, but you've got it on ice for the foreseeable future.

superannuationfreak

  • Stubble
  • **
  • Posts: 127
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #1579 on: December 27, 2015, 03:49:19 PM »
However I really hope a larger (free) Australian financial community builds up with more evidence-based investing underlying it (along the lines of the Bogleheads or MMM community).

Otherwise, the technology to put together a blog/forum/wiki is already out there. Could be up and running with a basic site within a few hours.


I agree, the technology is cheap or free.  Putting together fresh content is time-consuming but not that difficult in principle.  The real challenge is hitting a critical mass so that a forum becomes self-sustaining.  That's something I haven't worked out a formula to solve - maybe three parts luck, two parts existing content (such as a popular blog or radio show), one part marketing genius?

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1580 on: December 27, 2015, 04:41:09 PM »
Abundant life - my opinion is that all you really need to do is a little bit of research yourself mainly because there are no secrets to investing well. Pick an asset allocation that you are comfortable with, invest in low cost index funds and stick to that plan for a long period of time and you will do well.

Anything that costs money reduces your returns.
well said steveo, I agree with the proviso that it's easier said than done. For some reason we are always tempted to overcomplicate / fast-track the process !

Rob_S, thanks for the kind words and excellent summary of various info sources. I agree your comments re: barefoot, I've been a longtime subscriber to his newsletter but never went for the BB. I like his fresh / anti-establishment style and always get a good vibe from Scott Pape. Reminds me of Jamie Oliver, except only his feet are naked.

superannuationfreak - welcome back !

dungoofed - thanks for the nomination, I'm certainly willing to try/help. I wouldn't mind using my blog as the platform, or starting a fresh forum/wiki, whichever is desireable. My only criteria would be that it's free/non-commercial/no ad's/etc, and helps empower people to better self-manage their money.

I propose if we can make a small team to work on it during Jan, to give it some further thought/planning and decide if worthwhile to go ahead or not. dungoofed / s'freak - are you in ? Any other volunteers (preferably regular posters here) welcome too, although we might want to limit to 4-5 max. To avoid cluttering this thread, I suggest replies via PM and we will keep the thread updated on any progress from this initiative.

Lastly and most importantly - Merry Christmas and best wishes to all for 2016 !!
« Last Edit: December 27, 2015, 04:43:30 PM by FFA »

dungoofed

  • Pencil Stache
  • ****
  • Posts: 661
Re: Australian Investing Thread
« Reply #1581 on: December 27, 2015, 05:40:43 PM »
Ok yeah this could really derail the thread. Count me in  : )

happy

  • Walrus Stache
  • *******
  • Posts: 9258
  • Location: NSW Australia
Re: Australian Investing Thread
« Reply #1582 on: December 28, 2015, 12:37:52 AM »
I don't have any skills to offer, but cheering you on, sounds great.

slothman

  • 5 O'Clock Shadow
  • *
  • Posts: 59
Re: Australian Investing Thread
« Reply #1583 on: December 28, 2015, 12:53:53 AM »
There's some OK stuff on the passive investor but it hasn't been updated in a long time:
http://www.thepassiveinvestor.com.au/

Thank you for sharing this link! Just spent the last couple of hours going through the whole site. Didn't learn anything new but surprised that it completely mirrors my current investment goals and direction, i.e. property for capital growth then shares for income.

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1584 on: December 28, 2015, 01:17:13 AM »
bigchrisb, had meant to reply earlier re: hybrids. I don't have any. I think I did briefly consider it before but decided against for my situation. When you mention the yields they do look tasty, especially for someone like myself who's holding a lot in cash accounts earning average interest 3.4%. I also agree with your logic that floating rates are better than fixed in this environment.

What I find is they are quite complex instruments and that's a bit of a turn off. Also it depends how you characterise the hybrid (equity/bond mix). For sure as a yield enhancement to your defensive assets, it's a positive. But then there's the other alternative of just buying the equity. E.g. in my case with 65/35% growth/defensive. If I were to invest 10% hybrids, do you just include that in the defensive bucket? Or do you put some split e.g. 60/10/30%, whereby your hybrid is offsetting some equity return too.

Anyway, I think that's where I got to last time and basically decided to keep it simple and leave hybrids out. The mortgage hedge is a completely different angle, so maybe that gives some extra benefit in your situation.

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1585 on: December 28, 2015, 01:33:58 AM »
In terms of investments, what you're really paying for is one stock pick per month.  Overall I thought it was a useful outlet for individual investors who would otherwise be trading too frequently or stockpicking with weak rationale.  It's a way of giving them a bit more discipline, with regular behavioural reminders along the way.  For those already comfortable with index funds and low-cost super it seems like a backwards step. 

Regarding Australian long term investment forums, I've just started a Motley Fool subscription a month ago, and my early experience is very consistent with the above. Similar to Barefoot they have a money back guarantee, and the MF marketing can be rather aggressive/spammy. But if you can look past that, I get the impression they are a well meaning and transparent. MF has a range of services, I'm in the lowest cost Dividend Investor, which retails $199 and often on special at half the price. The forum is quite active. My reason for joining was to diversify my ASX exposure as I am concerned about VAS/IOZ concentration, e.g. in banks/miners/etc. I still intend to hold the majority (80+%) of my Oz share exposure in index etf's though.

nnls

  • Handlebar Stache
  • *****
  • Posts: 1132
  • Location: Perth, AU
Re: Australian Investing Thread
« Reply #1586 on: December 28, 2015, 01:42:58 AM »
hi

just wondering if anyone has any advice on which online brokerage to use in Australia. Looking around CMC seems to have the lowest fees that I can find, but was wondering if anyone had any tips/ advice?

Thanks in advance


Rob_S

  • Stubble
  • **
  • Posts: 144
  • Location: Melbourne, Australia
Re: Australian Investing Thread
« Reply #1587 on: December 28, 2015, 06:23:02 PM »
hi

just wondering if anyone has any advice on which online brokerage to use in Australia. Looking around CMC seems to have the lowest fees that I can find, but was wondering if anyone had any tips/ advice?

Thanks in advance

I use CMC, picked it because it was the lowest cost. It's working fine. The other platform I hear only good things about is CommSec. It's meant to be the more modern platform on offer from the banks and the ability to do a trade and transfer money across verse having the money sitting in your broking account is a big plus. From their website: Trade up to $25,000 worth of stock without an initial cash deposit.
This would have been handy as the market tanked just before the Santa rally. I had funds available just not in the CMC trading account.

ynotme

  • 5 O'Clock Shadow
  • *
  • Posts: 55
Re: Australian Investing Thread
« Reply #1588 on: December 28, 2015, 07:27:22 PM »
Does anyone know if the sharemarket is generally up the last couple of days of the year or if it's generally sold down? I'm reviewing my portfolio and want to sell a couple of companies. It's up today but I wondering whether to wait till 31/12. I hate selling and seeing prices rise!

Regarding Comsec, it's easy to use although parts of it is clunky like the company filters to research potential companies to buy. I haven't used any other platforms so I can't compare. The biggest advantage for me is that I have other accounts with CBA so I find it handy to transfer between my CBA accounts and Comsec instantly (no delays when I want to buy). I also get to see a consolidated view of my accounts, including shares, through CBA's netbank. However if you're with one of the other banks, it might be worth checking out their trading platform.

Also all the best for 2016 everyone! I am generally a lurker, posting occasionally, and have enjoyed the discussion on this thread throughout the year.
« Last Edit: December 28, 2015, 07:46:28 PM by ynotme »

deborah

  • Senior Mustachian
  • ********
  • Posts: 15892
  • Age: 14
  • Location: Australia or another awesome area
Re: Australian Investing Thread
« Reply #1589 on: December 28, 2015, 07:51:17 PM »
Generally it is up in the last week of the year according to my records of my investments. However, this year is definitely not general! It hasn't had a Santa rally, and it is all over the place compared to other years.

Abundant life

  • Bristles
  • ***
  • Posts: 482
Re: Australian Investing Thread
« Reply #1590 on: December 29, 2015, 06:10:18 PM »
Thank you all for your thoughtful responses. I'm sorry I haven't replied sooner as I'm packing up the house to shift.

Abundant life - my opinion is that all you really need to do is a little bit of research yourself mainly because there are no secrets to investing well. Pick an asset allocation that you are comfortable with, invest in low cost index funds and stick to that plan for a long period of time and you will do well.

Anything that costs money reduces your returns.
Steveo I agree on both counts, index funds are the way to go and costs always reduce returns.

Barefoots emails are always a decent read but I wouldn't pay for his blueprint. His books alright, if a bit for beginners as well as being dated now.

I enjoyed Forager Funds 'Bristlemouth blog' and its recent rip into Dick Smith, good on them for putting it out there early on that the whole private equity thing was suss.
https://foragerfunds.com/bristlemouth/dick-smith-response-to-the-heist/

Superannuation Freak and Financially Free Australia (FFA) are both good people and have worthy blogs:
http://superannuationfreak.blogspot.com.au/2014/10/everything-you-need-to-know-about.html
http://www.financiallyfreeaustralia.blogspot.com.au/2014/12/whats-this-blog-about.html

Aussiefirebug is a new blog with some good content. Seems like a nice guy. He's gone the property route which isnt my thing so much of his content isn't all that relevant to where I am going:
http://www.aussiefirebug.com/rent-or-buy/

There's reddit but its very new and moves a little slow and I haven't found much good stuff on it:
https://www.reddit.com/r/fiaustralia

The noise to signal ratio on Whirlpool finance forum is all over the shop but theres some good posters there and some good stuff in the forum archive. Just use the search function. This thread is a good one:
http://forums.whirlpool.net.au/forum-replies.cfm?t=2322459

There's some OK stuff on the passive investor but it hasn't been updated in a long time:
http://www.thepassiveinvestor.com.au/

The british blogs are worth a look. The Escape Artist and Monevator. Some folk reckon Canada and Aus share a lot in common, in which case the canadian couch potato blog could be worth a look.
http://canadiancouchpotato.com/

Other than that I get the best value from books, though there are far too many property empire books clogging up the personal finance section of the library. I just finished Peter Thonhills 'Motivated Money' for the second time; I think The Falcon recommended him earlier in the thread. A very easy read, if a little short, from a man that no longer has skin in the game and has nothing to 'sell'.
Thank you very much for this detailed response Rob_S, I can't get to investigating all these links at once, but I'll plough my way through them over the coming days/weeks.

Merry Christmas everyone.

Checking my emails, Scott Pape, the Barefoot Investor has sent his usual offering: join the Barefoot Blueprint for $297 for the year instead of $397.

Admittedly he offers a full refund if you are unsatisfied, but, as I peruse his offer it occurs to me that he offers us locals a lot of basic stuff that is available from an online broker and other stuff we can get free from MMM or JL Collins (the only drawback with the latter being that it is slanted to US readers).

Has anyone tried the BB and what did you think of it?

Has anyone come across an Australian website on investing that they felt was worthwhile? Other than this worthwhile thread of course!

I tried the Blueprint to see what it had to offer.  I think they're well-intentioned people who have something to offer a subset of the population, I'm just not sure that subset includes many people here.  They are genuine about the full refund if you want to give them a try, though.

What did I think of it?  The strongest value it provides is the stuff that people probably wouldn't pay for in isolation: solid personal finance advice (live below your means, insure yourself, get a good mortgage deal, etc), and access to a relatively large community of other subscribers (some of whom provide their fellow members with useful advice and support via facebook group/forum).  The personal finance stuff I think I'm on top of (and after a one-year barefoot subscription, or some decent books, I think most people would have enough material regardless).  Paying $300p.a. for access to a facebook group where I found myself contributing but not learning very much was a bit rich for me.  But I saw many others get value from that community.

In terms of investments, what you're really paying for is one stock pick per month.  Overall I thought it was a useful outlet for individual investors who would otherwise be trading too frequently or stockpicking with weak rationale.  It's a way of giving them a bit more discipline, with regular behavioural reminders along the way.  For those already comfortable with index funds and low-cost super it seems like a backwards step.  There was also an ETF portfolio (the barefoot breakfree portfolio - google it if you want to see what it was at the start, I don't imagine it's changed all that much).  It was a not-unreasonable but relatively aggressive mostly equity portfolio, nothing special but perfectly adequate if one understands the risks (which were promoted as lower than I thought credible) and can stay the course over a couple of decades.  And there were special reports on things like investment bonds (which was actually pretty decent, highlighting the lower-cost products for those on high-enough tax brackets - not so useful for individuals who expect to be in a lower bracket in retirement).

What were my concerns?  Most of his suggestions I'd say are lower risk than the traditional Australian "buy property and a few dividend stocks", but still higher-risk than I think most people can handle behaviourally.  He hadn't given much portfolio construction advice though, other than to suggest 6 months (for accumulators) to 3 years cash (for retirees).  If this is in-line with your risk-appetite that's great.  But when I was a member we hadn't seen a long-lasting downturn in the economy or the share market since Blueprint started.  When we do (perhaps even in this year's decline) I suspect many will be uncomfortable with the risks they have been taking.  Other than the ETF portfolio, his investment advice was mostly about investing in a LIC or two (such as AFIC) and adding 10 or so individual ASX-listed stocks (emphasising quality and value, Buffet-style).  That will probably turn out OK, I certainly hope it does for those who follow such a strategy, but it's a hard strategy to be successful with behaviourally and doesn't take advantage of the substantial degree of global diversification now available cheaply.  It takes on large amounts of Australia-specific risk - it's entirely plausible for a single small country to underperform over an investing lifetime - and I fear his members will struggle behaviourally as much as anyone else with the inevitable downturns that come from time to time.

Other larger Australian forums I've come across have been focused on property or trading.  So that barefoot community does offer a critical mass of more investment-focused individuals we don't have yet.  However I really hope a larger (free) Australian financial community builds up with more evidence-based investing underlying it (along the lines of the Bogleheads or MMM community).
Thanks superannuationfreak, (I have read your excellent blog in the past, but also read that you had suspended it for the time being due to conflict of interest). I don't know whether you didn't want feedback on your blog or didn't want to respond to questions, but I did ask a question at one stage and there was no response? However I digress ...

This was a really informative answer, thank you. I have been reading some of the links Scott Pape has sent as a taste of what he provides and have come to the same conclusion. I tend to agree that it is mostly for people who are getting their financial act together. I don't need the mortgage info nor the debt reduction strategies for starters.

I did take notes from a pod cast he had in the last couple of years, which recommended a portfolio of certain index funds and the percentages he would allot to each. I should re-visit them.

After reading Jim Collins, I think I'm getting a backbone and long term view to riding the roller coaster that is the stock market. I did use some of my cash buffer, as it was building up with only meagre returns, to buy AFIC. I figured that I could take advantage of the 100% franking credits, while the capital and dividend reinvestment churned over.

And thank you for your last suggestion that seems to have sparked the formation of a new Australian focused blog! I don't know that I could contribute much, but I would follow with great interest. So thank you in advance to all those who feel they could contribute in a meaningful and informed way.


 


nnls

  • Handlebar Stache
  • *****
  • Posts: 1132
  • Location: Perth, AU
Re: Australian Investing Thread
« Reply #1591 on: December 29, 2015, 07:54:52 PM »
hi

just wondering if anyone has any advice on which online brokerage to use in Australia. Looking around CMC seems to have the lowest fees that I can find, but was wondering if anyone had any tips/ advice?

Thanks in advance

I use CMC, picked it because it was the lowest cost. It's working fine. The other platform I hear only good things about is CommSec. It's meant to be the more modern platform on offer from the banks and the ability to do a trade and transfer money across verse having the money sitting in your broking account is a big plus. From their website: Trade up to $25,000 worth of stock without an initial cash deposit.
This would have been handy as the market tanked just before the Santa rally. I had funds available just not in the CMC trading account.

Thanks for the feedback Rob_s and ynotme, I currently have my banking with Westpac so maybe will go with CMC as they are lowest cost

The Traveller

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Re: Australian Investing Thread
« Reply #1592 on: December 29, 2015, 10:51:26 PM »
Newly post-divorce I now find myself with no job and no home, no debt but I am cashed up with cash of 450k, shares (CBA,NAB, Telstra) worth 230k and super of 240k.  I was retrenched from the resources industry last year and now at 60 seemingly unemployable.

After the last 12 months living off the smell of an oily rag while being bled by divorce legal bills, settlement is now through. Unless I find work I need to live off investments.

I am going around in circles trying to figure out a strategy for the next 7 years before I can apply for a pension. I would like to have a coherent idea before I go to a financial planner.

I’m not really tied by location other than my household effects being in storage in Brisbane. I could buy a house outright in outer Brisbane or country Victoria but randomly selecting a location with no job is a difficult decision. I could rent for a year then decide?

I like to travel and happy wandering cheaply around Asia or elsewhere and need to build that into my retirement plans.

So fellow mustachians your thoughts and opinions are welcome.

terrier56

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Australian Investing Thread
« Reply #1593 on: December 30, 2015, 12:21:58 AM »
welcome traveller,

You should be able to easily make that 7 years with 450k.

The issue is that when you come back (or maybe you wont have too) you would likely need a house and the pension could cover the rest. I guess there is always Tasmania :).

check out the website http://www.gocurrycracker.com/

This couple are travelling around Asia themselves and do detailed updates of monthly expenses.

happy

  • Walrus Stache
  • *******
  • Posts: 9258
  • Location: NSW Australia
Re: Australian Investing Thread
« Reply #1594 on: December 30, 2015, 01:26:28 AM »
Hi Traveller,
 You have a lot of options which are personal decisions. With 920k you can probably live forever on 36k/year including housing. You would not however be eligible for OAP with that many assets. If you were trying to utilise the pension, but maintain your asset base, then you could consider buying a PPOR  before you are 67  as this  is currently ( but may not be in the future)  not counted in the OAP means test.  Sounds like now is not the time to buy a house, if you want to freewheel/travel for a while. Retirement planning at 60 or above is complicated and I agree you should see a  fee for service planner, or attend free seminars etc from centreline or possibly your super fund.

Or, since this is the investing thread, were you asking about what to do with the 450k cash?

Astatine

  • Magnum Stache
  • ******
  • Posts: 3676
  • Location: Australia
  • Pronouns: they/them
Re: Australian Investing Thread
« Reply #1595 on: December 30, 2015, 02:32:54 AM »
Barefoots emails are always a decent read but I wouldn't pay for his blueprint. His books alright, if a bit for beginners as well as being dated now.

I enjoyed Forager Funds 'Bristlemouth blog' and its recent rip into Dick Smith, good on them for putting it out there early on that the whole private equity thing was suss.
https://foragerfunds.com/bristlemouth/dick-smith-response-to-the-heist/
<snip>

Fantastic, thank you for pulling together that list. I've put a copy in my journal to read later when my brain is functioning a bit better.

And I love the idea of an Australian-focused blog/wiki. I'm still such a n00b and barely follow the conversation in this thread (I can never remember what the acronyms stand for), and a handy Australian reference guide would be awesome.

dungoofed

  • Pencil Stache
  • ****
  • Posts: 661
Re: Australian Investing Thread
« Reply #1596 on: December 30, 2015, 05:56:49 AM »
Hi The Traveller - welcome to the forums/thread. I'm sorry for your predicament, but financially as happy and terrier56 mentioned you have a lot of options available to you.

I'll start by throwing out my suggestion of what I think you should do with the shares, the super and the $450K, then talk about the "other stuff" afterwards. The usual disclaimers apply, but this is my best-effort based on data I have seen.

Assumptions:
You rent instead of buying a house.

Summary: Put aside $50K cash, then aim for $435K in each of shares and defensive assets (in reality comes out at $430K/$440K respectively)

Regarding the $230K in shares, I'm not entirely happy with this. If you had $23K each across 10 blue chips I'd be fine, but three companies is a bit more risk than I think I'd be comfortable with in your situation. If you are able to sell down without incurring capital gains and buy some VAS instead then I'd look at doing that (unlikely with CBA, but maybe possible for TLS/NAB, depending on what price you bought at). Regardless, I'm going to assume you keep the full $230K in Australian equity.

Regarding the $240K super, I'd be trying to avoid accessing it (you do have options though!) and I'd try to make sure it was allocated about 50/50 between bonds and equity. Consider changing providers if you can find another that has lower fees, and make sure the insurance that comes with the super is relevant (life insurance is one that I'd be looking to ditch, assuming you have no kids still in school).

As for the $450K, I'd split it up as follows:

$50k set aside as cash for your first year getting settled in (hopefully you won't need this much). Then,
$40k as cash, in a high interest savings account or term deposit.
$80k PMGOLD call warrants.
$200K in bonds. Simple way is to just buy $200K of VGB. You can make this as complex as you like. Other options would include adding to the mix some VAF or some bond LICs trading below NAV, manually creating a ladder of bonds with maturities between 2-7 years (so that you have a guaranteed lump sum freed up at least once a year until your pension kicks in), some long term bonds to protect against interest rates dropping further, etc.
$40K in VAS (ASX300)
$40K in VGS (international shares)

All up this should yield about $25K/year in the first year (assuming you just reinvest the super) from the saver, shares and bonds. Because you're not touching the super, and because VAS and VGS operate like growth investments, I'd be comfortable with you spending that entire $25K each year. Also, you've set aside $50K in your first year, so the first $25K will become your emergency money going forward. I'd try and not spend more than was yielded in any 12 month period for the first seven years, and after that I'd be looking to reassess, maybe rebalance into shares, etc.

--
Positives about your situation:

1) You have some decent savings! There are a lot of people with a lot less at your age.
2) You've started to become used to living frugally. This is a skill that some people never master, but you've been practicing for the last 12 months already. If there are no major market gyrations over the next five years or so then you have a good chance of being significantly more wealthy than you are now thanks to your frugal ways.
3) You have a few options for accessing your super (personally I'd make sure it was invested sensibly then leave it alone for a few more years)
4) Australia still has a decent public health care system. This is something that Asia may not necessarily have.
5) Some Asian countries are currently involved in a kind of bidding war for retirees at the moment. Traditional destinations have been Indonesia (ie Bali), the Philippines and Thailand. However Indonesia and Thailand have odd laws starting with land ownership and property rights and there are a few other things I don't personally like about the way they view foreign retirees (ie as cows to be milked), and don't look like they're making efforts to improve. Meanwhile, Philippines is trying it's little heart out to attract retirees, and also Malaysia is a new player in this space (I imagine Vietnam would be too but haven't looked into it). If you were after the "frontier" experience you could try Cambodia or Laos but personally I'd be inclined to go for a place with slightly better expat infrastructure. Worst case you could set up something semi-permanent in a couple of these places and spend three months at a time in each indefinitely. (on a side note, I wish Japan had a suitable visa because you can easily find a place in the country for $350/month, and other ex-healthcare living costs are about half what they are in Australia if you're prepared to eat a bit of raw fish every now and then. And you could probably find work teaching English without much effort).


Other things to consider:

1) Definitely get that consultation with that fee-based financial planner.
2) Do you have an online brokerage account? My father still phones up his broker at $45 per trade. You won't pay half that at the most expensive online broker, usually between $11-16 per trade.
3) I'm not sure where you are looking for accommodation in "the outskirts of Brisbane" but I priced a couple of places, you seem to be able to get modest houses for around $250/week. Unfortunately this is about half of your $25,000/year
4) Any benefits available to you now? Unemployment benefits, etc.
5) Are you a pushbike rider?
6) Have you considered writing in to the Sydney Morning Herald "Ask an Expert" in the Money section?
7) What are the storage costs for the furniture? If you can sell some to the tune of $5000, that $5000 invested will theoretically give you an extra $15/month for the rest of your life.
8) I'd absolutely be looking to rent as opposed to buy, at least for the first year until things have settled down a bit. Even then, you want to be quite decided on an area as it's a big, illiquid investment.
« Last Edit: December 30, 2015, 05:59:57 AM by dungoofed »

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1597 on: December 30, 2015, 06:14:49 AM »
Newly post-divorce I now find myself with no job and no home, no debt but I am cashed up with cash of 450k, shares (CBA,NAB, Telstra) worth 230k and super of 240k.  I was retrenched from the resources industry last year and now at 60 seemingly unemployable.
...
I am going around in circles trying to figure out a strategy for the next 7 years before I can apply for a pension. I would like to have a coherent idea before I go to a financial planner.

I also agree a financial planner (fixed fee, no commissions) seems a good idea to get guidance on the combination of your cash/shares, super and how it fits with pension eligibility. Before that it would certainly be worthwhile to read (or re-read) the relevant MMM blog posts, and perhaps bogleheads.org if you want to delve deeper into investment philosophy and planning.

I think the rent or buy decision is an important crossroads to decide. If you opt to buy with cash, then your investment funds will be limited. If you decide to rent, then you have substantial investment funds to allocate.

A few further thoughts on the investment aspects :

Share portfolio : I would encourage you to diversify. Two oz banks and a Telco is a very narrow portfolio for 230k. You could consider swapping (at least some if not all) for a few index ETF's (e.g. Vanguard Australian Shares - VAS and Vanguard Global Shares - VGS) and cover the entire world. However you need to weigh up any capital gains tax liabilities before selling the CBA/NAB/TLS.

Cash : I'd recommend looking into high interest savers such as ING (100k limit), RAMS (250k limit, no withdrawals though, so might not be suitable!) and Ubank (200k limit). You can achieve 3.3-3.5% if you jump through a few hoops (e.g. make a deposit $200 or $1000 per month; can just shuffle money between them if need be). You need to live off this interest so I would be getting the absolute best rate possible, but you do need to be disciplined/focused to meet the bonus interest criteria each month.

Super : I'd recommend reading superannuationfreak.blogspot.com . My wife is in the hostplus indexed balanced option, which I believe is the best value in town, so I suggest it's worth a look. If the asset allocation 75/25% might be a bit aggressive, you could dampen it, e.g. 80-90% indexed balanced / 10-20% Cash. Although on an overall basis, you already have quite a large allocation of cash. Anyway as I said earlier, this comes back to the key question of whether you opt to buy a place.

While you're on superannuationfreak's blog, I'd definitely recommend reading this post too : http://superannuationfreak.blogspot.com.au/2014/10/everything-you-need-to-know-about.html

Good luck !

The Traveller

  • 5 O'Clock Shadow
  • *
  • Posts: 2
Re: Australian Investing Thread
« Reply #1598 on: December 30, 2015, 08:24:32 PM »
Many thanks everyone for your suggestions.

Using the FFA/dungoofed strategy provides a taxable income of around 25k/year albeit the safer path of cash and bonds does seem to limit portfolio capital growth and renting at 200/week to $250/week would use up 40% to 50% of income, which short of finding some type of employment, leaves a very frugal lifestyle.

Happy suggested buying a PPOR before 67 (well in my case before 66.5 years)

I had come to that conclusion myself as renting in retirement is an increasingly expensive option and pension rules currently benefit the house owner over renter. So using the incoming 2017 changes at 66 depending what my asset base was I could purchase or build a PPOR that leaves me within the range of the Asset free threshold of 250k and pension cut-off threshold of 547k.

Somewhat depends on the rules of the day in 2 or 3 changes of government’s time.

So it’s the interim period I need to work through.

Purchasing a house Option:
In country Victoria in a small to medium town I could purchase a cheap house for between 120k to 200k. In say Ipswich area of Brisbane 180k to 250k and stamp duty is half cost of Victoria. If I used 200k to 250k inc stamp duties and legals to purchase then my cash reduces to 200k to 250k.

This together with share portfolio of 230k at an overall non-super portfolio earnings of 4%pa (as per FFA/Dungoofed strategy) gives and income of 17k to 19k less rates.

This seems to provide more options including renting the property if I got a job elsewhere or if I spent a year or two away. Or I could get a lodger. After 6 years I would hopefully have some tax free capital growth on upgrading.

I have a lot more reading to do and thanks for the various links

FFA

  • Pencil Stache
  • ****
  • Posts: 525
    • Financially Free Australia
Re: Australian Investing Thread
« Reply #1599 on: December 30, 2015, 10:19:15 PM »
Hi traveller,

if you buy a place and let's say you have 230k residual cash. that leaves your AA (ex super) at 50/50 oz shares/cash.

It's actually quite a reasonable split between growth and defensive assets for someone who's 60 years old. Of course is also depends on your risk tolerance and how your super is invested, which I don't really know.

Anyway, it's a good coincidence that your natural position falls this way, at least the high level AA is somewhere near the right spot.

What needs attention is the sub split within Growth and Defensive. Especially the Growth which is very high risk / undiversified, although the franked dividend yield from those shares is nice. I'd suggest at least 20% international exposure (e.g. VGS). And would rather see at least half the ASX exposure in an index ETF (e.g. VAS) instead of the direct shares. As I mentioned before, CGT exposure on selling the CBA/NAB/TLS needs to be considered before selling to buy into VAS/VGS. If you bought a long time ago and have very low cost base (high CG), then you might stagger sales over the years to use up any tax free thresholds and avoid CGT (due to nil marginal tax rate). If you have flexibility in your super investment choice, another way is to hold more international shares in super, to offset the lack of international shares outside. This also helps your income in the interim period, since the VGS yield is lower.

If you do end up working again, definitely ask the financial adviser about super strategies - salary sacrifice / transition to retirement / recontribution. There's lots you can do, some of them are loopholes likely to be closed very soon by the Govt. I don't know details as it's too far off for me, except that it can make a big difference for someone over 55, so I suggest you look into !
« Last Edit: December 30, 2015, 10:28:44 PM by FFA »