Can we be direct for a minute?

Discussion in 'Share Investing Strategies, Theories & Education' started by Silverson, 2nd Jul, 2018.

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  1. Silverson

    Silverson Well-Known Member

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    Evening all, hope this finds everyone well!

    Now that my super thread title has dragged you all here I'd like to generate some discussion in regards to DIRECT or individual share holdings and strategies for LONG term wealth creation/passive income.
    I know this will be unpopular with many as it seems LICs and ETFs are the ducks n*ts on this forum, however I'd love some discussion on stocks you would pick to buy and NEVER intend on selling and feel free to also post a strategy you intend to adopt or have pondered. LICs and ETFs can be included as part of a portfolio but please remember this is a discussion on individual stocks.

    In another thread a wise person made reference along the lines of how after many years of investing A key takeaway was to follow a strategy that suits you, be it right. Or wrong in another's eyes as its most important to the conviction of ones investment journey.

    I of late have been purchasing a basket of stocks in $1k lots, yes brokerage has been and is higher than if you were to buy in larger lots however I've found that I have been enjoying my share purchasing/accumulating of late. The part that helps me sleep is that even doing it this way and paying quite a lot of brokerage ($10k per $1mil) it's still a pee in the ocean in comparison to entry costs associated with property.

    Post away, again play the ball not the man if you don't like or agree with someone's strategy or opinion.

    Look forward the the discussion.
     
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  2. Foxdan

    Foxdan Well-Known Member

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    So.... what stocks have you been buying for the long term and why?
     
  3. jimmy

    jimmy Well-Known Member

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    Cba, wes, csl, coh, sol are some stocks I own or intend to forever. My approach is to buy lics as a core approach and buy direct shares as a bit of a satellite approach. May try eventually diversify overseas but am comfortable for now in early stages of accumulation phase to be 100% Aussie lics and companies... probably a lot better strategies but it lets me sleep at night.
    Cheers
     
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  4. Blueskies

    Blueskies Well-Known Member

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    Boring answer maybe but you cant go too wrong with the Big Australian (BHP). The world population just keeps growing, along with the standard of living expectations. Long life mines, diversified mix of core hard commodities, low cost of production. I don't care how technologically advanced the world gets, There will always be a demand for what they dig out if the ground.
     
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  5. Silverson

    Silverson Well-Known Member

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    @jimmy sounds pretty solid to me mate!

    @Foxdan have a few mate, my reasons for buying and holding are abit 'simple sam' but here goes.

    Have all big four banks with CBA the largest holding of all four - reason for this I can't see the banks going anywhere, we will always need money in my opinion and with the gov willing to step in to bail out, just reiterates the stance the banks have on this country/economy. If credible competitors Spring out one would assume it would be possible for the big four to just buy them out albeit at a premium to maintain the monopoly.

    Bought and will continue to and continue to hold - STO and WPL, bought when the price of oil had taken a huge hit, always remember Santos on the news as a kid growing up in the finance daily wrap etc and became my 'darling' bought half my years wages worth @$3.87 a little while back when I was going through a risk it to get the biscuit stage in my life. I always had a feeling with all the commotion in the world a wayward misle would strike an oil facility/refinery and the price of oil would sky rocket. Plus STO has been around for 60 odd years so it's given the company time to invest n infrastructure, r&d etc.

    WES and WOW can see them being around for a while and are part of our everyday lives, plus love Bunnings and the affiliation with the servos

    CQR, SGP, LLC, MGR - obvious reasons

    SUN, IAG - we need insurance right?

    MPL, RHC - can see us slowly all being on or needing private health in the future as our public healthcare system struggles with funding and coping with population growth.

    Hold 3 or 4 spec stocks, bit of a gamble there.

    TCL, SYD

    PL8 - small investment in this one mainly for the monthly dividend, helps with the big picture.

    BKI, WHF, ARG, CDM, AFI, MLT, WAM - honestly own the LICs for exposure to a myriad of companies but also puts my mind at ease as I would hope if there was a near economic Armageddon there would be people far smarter than I and would be able to make the right calls to preserve capital/dividends just in case

    TLS - owned for many years, dividends alone have been very kind to me, like TLS however I feel they have become a tad complacent, still have faith in TLS and have been adding lately.

    VHY, VAS

    BHP, FMG, RRL

    Oh and have SOL, remember when I was pondering first buying I read on another forum HC a member posting how this stock was not setting the world on fire and had done not much for them, it would be considered a slow and steady, long term investment. This was back in March 2015.

    Looking to add REA, CAR, ORG, AGL in the near future.
     
    Last edited: 2nd Jul, 2018
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  6. MWI

    MWI Well-Known Member

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    I agree to sticking to an investment strategy that works for me! As Warren Buffet said, "Diversification is protection against ignorance. It makes little sense if you know what you are doing." Same could be applied to property investing.
    Entry cost is just one aspect that differs and we don't wish this thread to turn shares vs. property investments but I just wander would you feel the same way and slept well at night if you had say $15million invested (just a large figure and assuming no borrowing as I assume your $1million would imply no borrowing too?).
    I have some borrowing much less now, started say with 80% LVRs now down to 25% LVRs yet having millions invested and yet somehow I can sleep ok at night.
    You see I have no doubt that a share can have a much greater % growth than IP. But in initial accumulation stages I had one of those 'aha' moments where I realised leverage in IP not % growth was the key. You see, property allows me to be exposed with little risk and no margin calls to the tune of millions. Could I sleep at night with that exposure to the ASX or other more volatile markets? For me, the answer is resounding 'No!'.
    Subsequently a share portfolio is something I dabble in (to the tune of tens of thousands and it varies all the time) until I can but another IP.
    When I understood that leverage is the key and not gambling for % growth, shares become an income exercise while IPs become my wealth creation exercise.
    I also think around 70%-65% of IPs in Australia are owner based as compared to 30%-35% with investors, so property becomes less volatile and some see it as a negative to me it is a positive as I don't wish for most to be able to sell at the same time, even if all investors sold out most of us would need to live in a roof under our head.
    The other thing of concern for me at the moment is that a large % of baby boomers plan to retire within say next 10-20 years, and if statistics illustrate that 80% are dependant on some kind of pension not many are hence self sufficient, and our Superannuation system in pension mode in retirement forces them to draw out more, there is a tired scale based on your age hence the older you get the more you must take out as a %. Now I don't know exactly the % of Australian baby boomers being invested in stocks but most private or government employees Super would be mainly invested in share market, I assume?
    So unless we quickly replace the workforce to pay the same or more taxes then I realise the share market becomes even more volatile and a disadvantage to me. Hence perhaps why more government intervention into property and super is imminent (I read some statistics that around 50% of wealth here is in property and around 20% in super), so where else can they go after to re-distribute the wealth?
    These are some of the challenges we face, many also forget that we did so well in stock market in the last 30 years because guess what two main industries in the world grew, mining and finance, hence we were very fortunate that our index was mainly composed of these two main sectors, doesn't mean we as Australians were such great experts at investing, right?
    I try to be a realist so I invest into an asset class that has made many wealthy millionaires BUT I also understand that each asset class becomes overvalued, reverts to its mean and then becomes undervalued, so it would be great to peak the right asset class at the right time, but that is a challenge for us all!
    Best of luck in your investing, care to share your timeframe and % return based on your investment strategy?
     
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  7. Silverson

    Silverson Well-Known Member

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    @MWI agree with what you have said, property makes up ~85% of my assets. I'm fairly new to shares (5 or so years).
    For me I'm looking to build a share portfolio of circa 1.5m then re assess when I'm there or close to.
    Again definitely not a property vs shares thread as they both have their place in any portfolio, however I'd like all to share their thoughts on shares in this thread.
    Have to say I like your thoughts on the topic of baby boomers retiring etc!
     
  8. Big Will

    Big Will Well-Known Member

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    Myself majorly of investment is in property however we also have significant amount in shares.

    For the shares part us we utilise a lot of ETFs (about 85%) as it gives us great diversification both with local stocks along with international and credit. We also dabble in direct shares and all shares are part of the asx200, as we are not about risk and want stability over the long term as we are 30 years likely away from retirement.

    Most people would be happy to get a 10% return p.a, yes we would always want more (which we do get) however I wouldn’t like a 30% one year and the next year down 20% and the year after 0% with a 40% year after as it gets really hard to budget and also would find it difficult to not sell during the depressed periods.

    FYI not saying our portfolio is immune to depression but it is really divsified with different international/local etfs including property, credit, emerging markets etc that we should be a lot smoother.
     
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  9. Brady

    Brady Well-Known Member

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    Personally haven't invested in shares outside of super and employer scheme, so definitely not an expert.

    But wouldn't a few well rounded LICs invest in most of the direct shares you're looking to hold?
     
    Last edited: 3rd Jul, 2018
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  10. Silverson

    Silverson Well-Known Member

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    Yes absolutely they would but as stated wanting to chat about specific companies/shares.
     
  11. TAJ

    TAJ Well-Known Member

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    I am currently researching companies that are investing in the future of medicinal cannabis.
    Most of my share exposure is however within the LIC framework, as a diversified mix provides the required SANF.
     
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  12. sharon

    sharon Well-Known Member

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    I only hold LICs at this stage.
    I am doing that and paying down the PPOR.
    Once that is out of the way - I really like CBA, SOL, CSL so far.
    So they are on my "to do" list. :)
     
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  13. sharon

    sharon Well-Known Member

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    @dunno - I am keen to hear your views here. You have pointed out some of the issues with some of the LICs. I assume you have a more direct investment portfolio approach?
     
  14. Blueskies

    Blueskies Well-Known Member

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    Might get a good run now the cryptocurrency bubble is behind us. ;)

    Seriously, if you are going to dabble in speculative microcaps just make sure you are going in with your eyes wide open, for every 10X-er most will amount to nothing, likely with complete destruction of capital.
     
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  15. dunno

    dunno Well-Known Member

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    Hi @sharon

    I was 100% active direct Australian shares previously. Outside super I’m continuing with 100% direct and relatively concentrated – the way I have always invested.

    Inside super, I am transitioning my asset allocation to 50% International passive, 25% Australian Market Cap passive and 25% direct investment. I intend to make the transition to the intended allocation smoothly between now and preservation age in ~ 12 years. I’m currently 82% direct Australian, 5.6% passive Australian(VAS) & 11.4% International passive spread over three different ETF’s.

    The target 25% direct allocation in SMSF will likely transition to be a lot more diversified than current.

    I don’t dislike LIC’s – they may eventually be how I populate the 25% direct Allocation (yes that is the allocation I see them belonging too), or I may become my own pseudo LIC transitioning from the current concentrated portfolio to a diversified collection of shares which are purchased with a view to managing them in a very slothful way.

    I have a mindset of questioning everything and am generally not happy investing in anything until I think I know the warts better than most others. If I can’t see a decent thesis for going short and be comfortable living with that possible outcome, then I’m not prepared to be an investor on the long side. It’s made for good investment outcomes but not for good forum communication outcomes. I have probably alienated people on the LIC thread by discussing some warts. I have defiantly alienated people in the past when discussing direct investments. People seem to get so defensive once they are invested and don’t want to see or hear anything but sunshine and lollipops. – so I don’t talk specifically about individual shares anymore. (or LIC's any further, for that matter)
     
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  16. Lacrim

    Lacrim Well-Known Member

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    I don't know, I just can't see why LIC's are so attractive. Yes they've been heavily touted on this site as the bees knees but their performance (at least for the 'safe' LIC's) have been pretty subpar unless you picked the bottom - and we know how hard that is to do.

    For example if you bought AFI or ARG in 2007, you'd almost have nothing to show for it in 2018! apart from a slight increase in dividends. Meanwhile Sydney prices more than doubled and rents have increased at least 30-40% since (and well overdue for another round of increases).

    With LICs, you have zero control, its pegged to the index essentially, you can but wouldn't/shouldn't borrow to invest in them, dividends can and DO get cut or stagnate, so what gives?? What exactly is the appeal apart from the relative stability and inherent safety?
     
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  17. Brady

    Brady Well-Known Member

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    And yet if you bought from 2009 onwards you would have done pretty well.
     
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  18. L3ha7

    L3ha7 Well-Known Member

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    Are you using Lic divis to pay down the ppor?
     
  19. oracle

    oracle Well-Known Member

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    I understand where you are coming from. But let's not forget shares and property move in cycles and if you buy at the wrong time you could end up waiting for a long time before you make good money. Sydney example you gave you couldn't have picked a better time for investing in Sydney. But don't forget people who invested in Sydney market in early 2000s also waited nearly a decade before they made any decent return. What are your thoughts now on Sydney property. How likely is it for Sydney property prices to double from 2017 peak over the coming 10 odd years?

    If you go back and see the returns between 2000 and 2007 you can clearly see the prices rose very rapidly and so did the income. Income has been higher now than what it was in 2007. It's the same story with other old LICs and the index. Had you bought shares at the peak you would have still over the last 10 years earned 5.5% to 6% gross income from dividends. And if you are smart and kept regularly buying (which is so much easier with shares than property) your end returns would have been much better because you would have bought at the bottom and doubled your money on some of your purchases.

    argo-2000-2007.PNG

    Cheers,
    Oracle.
     
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  20. Nodrog

    Nodrog Well-Known Member

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    @dunno it’s not about being defensive as some of us just don’t care about some warts, within reason. To be honest I have no reason to be upset with what anyone thinks of LICs as in our situation it just doesn’t’ matter anymore. They’ve contributed toward us being very well off. I stopped posting in the LIC thread deliberately as your analysis of WHF progressed, as I didn’t want to be seen to stifle discussion about the negatives.

    Importantly being one who appreciates detailed analysis of LICs I was very much enjoying your commentary until you started saying stuff like the following:
    After that I didn’t see much sense in further participating in any discussion!
     
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