Can we be direct for a minute?

I haven’t really thought about it in great detail. I can only tell you what my experience is from owning STW and SLF during the GFC. I can’t say I really noticed anything unusual other than the ETFs mirroring the market. Whatever the reason I was just thrilled with all the bargains on offer including the market itself.

 

That’s been my general understanding also. I’m stuffed from a big day in the yard and was too buggered to try to explain it. Thanks.

 

Wish I could be like you. The only time I feel thrilled with all the bargains on offer is if I have money to buy them. If I don't it actually makes me feel frustrated to look at the prices knowing what a golden opportunity and I can't take any advantage.

Cheers,
Oracle.

 

I think there is as well.

I started investing a couple of years ago, initially only ETFs, but as I read more on the topic I decided to gain some direct shares exposure. My current portfolio is as such.

- Superannuation with sunsuper 100% in ETFs to avoid any temptations. Allocation is 25% Australia; 15% emerging markets; 60% international.

- Outside of super. 50% ETFs (VAS, VGS, VGE) or LICs (BKI, MLT, ARG) and 50% direct shares. I intend to not sell any holdings.

With direct shares, I tend to subscribe to the value and dividend growing approach (with a couple more speculative picks) as I aim at retiring early in 5 years or so and live on the dividend income.

I have a few Australian holdings, mostly dividend payers, like CBA, Westpac and TLS.

My other direct holdings are in the US market, where I believe is easier to find undervalued dividend growers due to the depth of the invest-able universe and the amount of info available on every single one of these large companies. Companies in the US also subscribe to the concept of growing dividends, like our LICs, and you can easily find companies that have grown their dividends for 25 and even 50 years consecutively. Examples of holdings I have are Proctor and Gamble, Disney, Enbridge, General Mills, Philip Morris, Starbucks, At&T, Ventas, Walgreens, Williams Sonoma, PPL, Dominion Energy, Cardinal Health, CVS health and Facebook.

 

I only had a relatively small holding in SLF (listed property index ETF) prior to the GFC so when it was 40% down I thought it might be starting to look like bargain territory so started accumulating. It proceeded to drop another 49% (89% down from peak from memory). I was NOT feeling to thrilled with that one.

Experiencing a near 90% loss in a diversified INDEX fund, it’s an experience you don’t forget in a hurry. Then again the AReit index is terribly concentrated.

Market weight only for AReits for me nowadays.

 

Making money/investing whilst rates rise. Where will you be investing in such times?
I think for me personally plan won't change, there won't be any additional allocation to savings acc, term deposits or any fixed income options.
Being a tad younger, I have yet to experience higher interest rates, or 'tough times'.
If interest rates are around the 7-8% will 4-6% dividends still be an attractive strategy?
Excuse my lack of understanding.

 

Exact same investments.

If rates get that high, it would be because the economy is flying, meaning earnings and dividends would be growing at a solid rate (even if the yield looks low, remember it’s not as much about yield but growing income)

 

Agree with what you are saying, however, what IF the economy is not flying and rates are forced to climb due to higher funding costs etc

 

thats not how interest rates work

 

I did some reading around the very high rates of the late 80’s/early 90’s. Things weren’t all brilliant in the economy back then. I would suggest when rates rise to much higher levels you wouldn’t want to convert your investments to deposits (incl. paying CGT) as you’d be “jumping” to something attractive in the short term and have to buy back your investments again when rates drop (which they have done quickly at times). Additionally I would suggest there’d be some good (cheap) valued top 200 companies out there during these high rates, especially if some money leaves equity markets to short term deposits. So likely a time to buy up for the future, presuming you can afford it.

 

Topped up more TLS at 2.75
More PL8 during the month and have a buy order waiting to be filled of PPT

What's everyone else buying currently

 

I worked with an older semi-retired gentleman years ago who had a lot of LPT's for income, the 90% drop in some LPT's certainly took the wind out his sails, they would need a 900% recovery to get back to even

 

There were many caught out including experienced investors. Even @keithj was a great fan of them as detailed in his legendary posts on Somersoft forum. Sell your IPs and invest in LPTs (high yields) and dividend paying shares to fund retirement was essentially the message. Fortunately he managed to exit them in time to avoid too much damage. Many others weren’t so fortunate.

I’ll accept what’s in the cap weighted index nowadays but no more than that. That’s about 8% in VAS from memory which is more than enough.

 

@Nodrog what was the price of SLF prior to the gfc and what were the affects on the dividends?
At $12.77 with 8.23% gross dividend currently, could it of been an opportunity to average down if you were a strong believer in property/reit?

 

Happy to be corrected due to a faulty memory on my part but I recall one big issue with LPT's at the time was the level of debt they had and too much debt can trash commercial as well as the small punter.

 

The problem was I’m not a strong believer in property / AReits as my view on listed property was similar to that of Thornhill. Initial ownership of SLF however was done in a moment of weakness well before the GFC. I just let it sit until the GFC hit then in another moment of weakness thought with SLF at around 40% down it seemed like a good idea to start accumulating. By the time it was around 70% down I decided to stop accumulating and I reminded myself what an idiot I was for not sticking to the plan which was to hold dividend paying shares excluding Resources and LPTs. By the time it was nearly 90% down I can’t remember my thoughts, perhaps I had passed out or was in a state of shock by then. Moral of the story is stick to the plan and don’t let greed get the better of me.

As for effect on dividends I can’t remember clearly but some LPTs went bust and others cut / suspended dividends. Debt was at the heart of most of it. I basically stopped looking as I was annoyed at myself for deviating from my plan and just wanted to get rid of SLF when the opportunity arose which I did after a long wait.

Given favourable comments by other posters recently I looked into Areits again to challenge myself incase the GFC experience and long held view similar to Thornhill on listed property had left me excessively biased against them. But no I’m still not a believer in AReits. Global Reits I think are more attractive but even there I came to the conclusion that index weight of REITs through our holding of VGS will do given the desire for simplicity.

As you can see I’ve had an ongoing battle with poor investing behavioural attributes. I’ve gotten a lot better over time but still far from perfect.

 

Probably one for terry w but if purchasing shares with ff dividends in a trust does the trust receive franking credits and then each income beneficiary pays the tax at their marginal rate? Or does the trust receive them net?

On $1m cba shares as an example its $57,100 net or $81,500 gross, how/what would trust receive

 

TLS seems to be ticking along nicely, in my opinion the bad results were priced in and of course the markets overreacted.
Anyone else get a chance to pick up any more TLS sub $3?

 

Thought I’d check in on old mates EGP. The concentrated value fund has lost money since inception and underperformed benchmark by huge margin. The manager hasn’t made a zac nor raised any meaningful capital since opening the fund (c.$50m).

As expected, the managers record of outperformance is compressing at a rate of knots. From 8% outperformance prior to establishing the current fund, blended performance (previous + current) is now down to 4% outperformance and shrinking fast. Current fund is at -4.5% pa based on the managers own numbers.

Que Sera Sera

 

Couple of things..
1.I never take pleasure in people losing money or making bad financial decisions but there also has to be an element of caveat emptor.. If people under-perform the index or lose money they should be fully aware that was the risk when they allocated their funds.

2. Reminds me of an interview I heard on ABC with Roger the Dodger Montgomery, A lady caller called though saying she had invested money in Clime whose mantra was invest in good businesses following the Warren Buffet model! She asked Roger why initial performance had been good but since then not great.. you could almost hear Rog squirming in his chair then he said well my name is over the door now so no chance of me leaving or something like that!! so the poor little old lady would have to sell incur any CGT then buy back into the "good" fund imagine what her long term performance would have looked like since then double whammy under-performing the market then switching costs..

I am in no way saying these fund managers are untrustworthy etc either, but even good trustworthy people don't always beat the market.

I am not averse to active however in my personal totally amateur opinion asset allocation becomes even more important then you don't want a large amount of your net wealth exposed to one active manager I personally believe in the core/satellite indexing approach if you are going to either A pick stocks yourself or B select active managers..

Again just my personal non professional opinion but even funds run by rock star managers often fall to earth at some point..


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