Building a Share Portfolio for Income

Sash,always pays to read everything on different equities,but this is just something TLS has been working on for a while,the rest of the story is well know,something can swing the price just depend on how one read it..imho..
http://www.asx.com.au/asxpdf/20160314/pdf/435tnrvwcrh1hc.pdf

 

Some great info in this thread thanks for those who are sharing!
I love the idea, and with interest rates low atm it looks good however if you have any non deducatble debt (i.e PPOR loan) are you not just better served puting any extra avalible cash into offset acounts? On paper the return on that is whatever the current interest rate is, So realy you have to be doing beter than that to come out ahead, minus yeild of course?

 

Ta...

 

Yes cash goes in to ppor non deductible debt, equity is accessed via loc or sub loan, debt is now deductible. Dividends service interest on that loan ( I/o) and over time the "overs" are piled in to the ppor loan. That's the basics of debt recycling

 

Thanks for the clarification. I think i need to improve my LVR position first unfortunately.

 

@The Falcon how does the dividend service the interest on the loan? i.e. if it's going to be a LOC to buy shares, dividend goes back into the LOC?

 

My take:
Dividend would go into the offset account, on the main residence, and the interest on the LOC paid from this - perhaps the same month the dividend is received.

 

@Terry_w if dividend reinvesting was ticked, then what? LOC interest paid from offset?

 

Then you would be diverting income from the paying down of non deductible debt - but saving brokerage fees.

You would have 2 choices
1. Pay the interest from cash, i.e. the offset, or
2. let the interest capitalise

Seek tax advice.

 

Motivated Money just answered my question

 

Thanks for that Terry.

Guys, just a heads up, I will be significantly decreasing my forum input from now on due to having a number of other outlets for my time that I need to address first (ones that pay my bills ). Being a bit of an addictive character I've been spending too much time around here of late. Feel free to PM me of course but expect a delay as i'll just check from time to time. Cheers.

 

This link doesn't work.

 

Fixed it

 

Perception is reality - My Say No 52

A nice piece by Peter Thornhill

 

@sash I would seriously consider NOT using margin lending at all to build your share portfolio. I don't know your personal circumstances but sounds like you are a high net worth individual and I think you could probably build a solid portfolio over time with no leveraging required at all. Then there is practically zero risk and market fluctuations will be easy to deal with. I see you have already drawn down 58K already though

If you do use margin lending (and I have done so myself), I would go for a maximum LVR of 35%....approximately half of the highest LVR's of quality shares. This might seem very conservative but having been invested in the share market heavily from 2004 - 2011, I was able to experience both extremes in rapid growth and the GFC during that time. Anything higher than 50% is asking for trouble IMO.

IMHO, I think there will be more major turmoil to come in relation to world markets and margin lending could cause considerable stress.

 

Yes agree..I am looking at a LVR between 45-60% at this stage.

 

This is actually pretty high. You would have had a margin call with the last big drop in shares.

 

Yep. Too high. Around 30% callable ok for long term, BUT you need to be able to withstand the very darkest days, so some additional dry powder required

To paraphrase Howard Marks - the 6ft tall man drowned crossing the river that was 5ft deep on average

 

Margin loans have always appeared too expensive to me coupled with the risk involved. I have just found Interactive Brokers who from my brief reading and using their calculator offer 3.5%p.a. on AUD on relatively smallish amounts.

This seems like a cheap option to get some leveraged exposure to the market. Any feedback on Interactive Brokers? Any other places to look for cheap margin loans?