Do you find there's "too much to choose from"?

We often here of analysis paralysis when it comes to deciding if/when/where/how to purchase an IP, what about other investment classes?

For example, when it comes to looking at things like shares, there's the consideration of individual stocks (and the research that can go into each company), then there are the LICs and managed funds, the ETFs, and all the seriously mind boggling comparisons and discussions that go with all of those. Reading some of the posts and threads on here can make my head hurt. I often feel that I could spend 12+ hours per day just reading up on possible share investments, and not necessarily be any closer to making a decision.

For all the seasoned investors, what's your process? How much research and due diligence to you do? Are you a stickler for all the fine details, or do you take the 'my gut feeling tells me.....' (and yes, I know that this should all be a solely numbers game, without any feelings considered).

I'd love to hear what people do when choosing their investments.

 

The Peter Thornhill class yesterday made it clear for me for future direction! Checkout my postings in that thread, I'm also happy to talk with you privately - it will be easier. I completely recommend going to any full day classes Peter may offer in your area though.

 

Anyway, this is my theoretical plan right now:
(Note: not advice.... and only indicative weightings)

Cochlear 7%
CSL 7%
CBA 6%
Argo 20%
Milton 20%
BKI 20%
Whitefield 20%

Beyond that I will play by ear.
Also disclaimer. I'm new at this but I do think the above is a solid portfolio if one was to be fairly passive in shares and thinking long term.

 

Pay very close attention to fees in both your super and other investments. A 1% or 2% management fee at multiple tiers can really erode your returns. Try to keep the total fees below 1%.You can easily find sub-0.5% fees. That will make investment choices much easier.

I highly recommend the bogleheads videos to learn some cardinal rules.

Video:Bogleheads® investment philosophy - Bogleheads

( warning - some very us-centric terminology )

You can then apply the general concepts to Thornhill, Bogleheads or whatever strategy you want to use.

 

I am a newbie so I can only share what I did to get started:


I dedicated 1-2 weekends with solid reading between 5-6 hours each day going through all the posts in the Other Asset Class section and after reading the book One million dollars for life by Ashley Ormond then chatting to PCers and formulate my own plan after doing my own research on those companies discussed in the posts and narrowed down to roughly:

85% Australian shares using:

- For LICs: ARG, MLT, BKI, WHF, AFI, MIR, QVE

- For ETFs: VAS

- Direct shares ( 5 companies atm yielding grossed up 8% or above) , the rule i set for myself is that each share wiuld only make up of up to 3% of my portfolio

15% International shares: VGS and PMC ( have not bought yet)

The key learning for me is to just take action , started buying and continue to learn.

In the beginning, I bought in regularly them took opportunities when the markets dropped ie Brexit, US election ( i bought a lot more during those events).

I only buy direct shares when the price is low enough to allow the grossed yield to be if dividend is cut by 30%, the yield is still higher than the mortgate rate. Also the compay needs to increase dividend and growing over the long term.

In selecting which LICs to invest i used the following criteria ( learnt from reading the posts):

- Low fees < .5%
- Been around a long time
- growing dividend over time
- grossed dividend > mortgate rate
- growing share price over the long term

Also to answer your question: no I work with data in my job so i tend to use data to make decisions than gut feel.


Hope that helps.

 

I will attend Peter's course when my buddy comes with me. You know who you are.

RE: BUYING, Did Peter say all in, DCA, or wait for an opportunity. E.g. CSL hit low $90s a few months ago.

Secondly, those three Cs, CBA, Cocchlear and CSL are significant components of the 4 LICs you have chosen. I understand that they are all clearly buy hold but what is the reasoning for holding them in addition to the LICs? Reduced management fees? Aiming for long term dividend growth on CSL and Cocchlear who have always increased dividends and have good business with competitive advantage? Am I missing something?

 

1. Re: buying. For anybody not confident he suggested splitting your money into 12 parcels and putting the money in monthly portions, and anybody more nervous to do 24 parcels and doing them fortnightly. And anybody super super nervous... don't invest in shares at all.
Anybody more confident can invest in 2 or 1 go.

2. Yes, they (Cochlear, CSL and CBA) would be significant as part of the LICs but then I also feel the long term potential should be solid on the three C's. Long term leaders in their respective fields and strong technological and innovative focuses, and really, look at the value add CSL and Cochlear provide.
My aunty was always talking about her CBA shares at Christmas.... I remember 20 odd years ago how well Cochlear and CSL shares were doing... Peter said don't focus on the price, it's irrelevant. Look at the cashflow (value growth + income). They reinvest a lot of money so they their prices will outperform (historically anyway).

Not advice....

 

Great post @Anne11

My path has been quite similar. I got into this forum when sommersoft passed into the nether. I had bought IPs using a buyer's agent, which have done well to be honest, but I've always wanted to follow the Bogle / Mr Money Moustache once all non-deductible debt was paid off.

My superannuation never went anywhere for 20 years and in retrospect I should have asked why. Eventually I realized that fees were eating all MY growth. Look at how the government legislate for superannuation. They are just putting money into the pockets of their finance friends and themselves. Now I don't trust the financial services industry, but I trust myself.

I started investigating cheap superannuation funds with my Bogle tilt whilst at the same time started reading the LIC thread here. It was lucky I did.

The pieces fell together for me. LICs and ETFs can be the cornerstone of a long-term diversified portfolio with low fees and a passive income in the vicinity of 6% grossed. I chose ING over SMSF because it was a lot simpler to manage overall. I can buy all the LICs and ETFs I want except QVE, which I will touch upon later.

After much deliberation I rolled it all over into ING living super with the direct share option. At a most opportune time I bought a lot of ETFs and a few LICs.

From a structure pespective my non-super funds all go into a trust. I am keeping powder dry for a correction but I'm also going to go in guns blazing with leverage. I still need to confirm with my accountant how to set up the loans to the trust.

In terms of content I am almost identical to @Anne11 except:
>> I purchased CIN:
+ low MER, performance
- Dividends less than 6% grossed and heavily weighted into 1 company
>> I haven't bought QVE:
- It's the only unavailable LIC on my hitlist not in ING, it has always been a premium to NTA, I'd probably prefer MIR
+ it has done well but only on a short time scale and therefore no long-term track record (although the parent company IML is well regarded)
>> My Aus/international allocation is still around 50/50.
- International ETFs (VGS, VTS, VEU) pay comparitively poor dividends compared to their Australian counterparts (VAS)
+ VTS has gone gangbusters in terms of growth, and I get some diversification
>> Additional shares that represent "International" allocation that I or intend to hold include:
+ PTM / MFG: decent dividends
+ FGG / MFF: LICs
>> Interest rates could move upwards faster than dividend yield.

In conclusion
> educate yourself either just to keep your advisor honest or to have the person you trust most in the world in charge of your investments
> fees will have a very bad compounded effect on your investments (see Buffets bet with hedge funds) so minimise them
> ETFs / LICs are a good way to diversify and minimise fees whilst having a mostly passive but with some active management.
> Keep the number of different ETFs / LICs to a manageable number.
> The general consensus long-term proven LICs would be: ARG BKI MLT WHF and AFI
> You can get reasonable dividend yield with some international vehicles

 

Same as with IPs really. Have a clear enough understanding of what it is you're trying to achieve and the roads to get you there should become more obvious.

 

Thanks, Gockie. I'll keep an eye out for any future Brisbane offerings. And I'll PM you, to see what little 'gems of wisdom' you have to pass on

 

True, but when there appears to be hundreds of paths available, all with unknown final destinations, it's hard to know which direction to head in.

 

Simple rules. Choose diversified funds so you don't have to learn how to pick stocks and it eliminates individual stock risk.

Australian sharemarket:
I like conservative Listed Investment Companies that have:
1. Been around over 50 years.
2. Never / rarely missed paying a dividend in any year.
3. Very low fees.
4. Broad diversification.
That equals AFI, ARG, AUI, MLT, WHF (buy just one or more if desired)
and / or
A low fee index fund representing the top 200 / 300 stocks in Australia by size eg VAS, STW.

International sharemarkets (Optional):
Reliable statistics show that over 90% of active fund managers fail to outperform the main International index over the medium to long term. So a low fee index fund that covers the developed world markets fits the bill nicely.
1. VGS

I admit I enjoy reading about investing purely out of interest but my actual investing approach is rediculously simple. It could be taught to anyone in less than an hour.

A simple portfolio could be:
Australia:
1. VAS and / or ARG

International:
1. VGS

Then just choose the percentage allocation between Australia and International that suits.

Not liscenced to give advice.

 

Lot's of people are mentioning Bogle - clearly, I need to do some more professional reading - any suggestions (titles etc)?

 

There's a thread in this section that talks about the Bogle approach? - Boglehead/Vanguard way to retire.

Could this be what they are referring to?

 

Yes, I think it is. Plus @wombat777 suggested watching a video (that might be quicker and easier, to get started). The reading might have to wait for a few days........

 

Yes - look at the videos link - Video:Bogleheads® investment philosophy - Bogleheads

The key with bogle is keeping fees low by using index funds, however the same can be achieved with LICs.

There are two basic fees. A general investment fee and some funds charge a performance fee. Make sure you read the fine print.

Most significant difference with Bogleheads is that they advocate use of Bonds. Peter Thornhill suggests avoiding bonds.

Some ETFs have an active management component and the fees on these can be higher than for regular index-focused ETFs.

It can be difficult to discern income just from LIC and ETF factsheets so it helps to look back at historical dividend returns to get a feel for how an investment will perform.

Whatever the investment, you can use a sharesight.com free account to plugin details for a hypothetical investment of say $10k going back 5 years. I am using this at the moment to check income performance of fund options.

This example is how to input an investment that started on 15 January 2016 ( it was a good time to buy due to a dip ).

Running a "What-if" to evaluate income



The result for the 13 or so months since 15 January 2016:



Looking at a comparison against a number of others ( all of these ETFs are on the ASX ). Same time period.


MVE capital growth is an oddity due to a split/consoldstion. I am not sure if actual growth is reflected here.

and Thornhill LICs ( same time period ).



Thornhill's point is that all of the above will generally pay consistent income levels even when the sharemarket dips.

 

Some of these I've heard of, but your largest weightings are in companies I've never heard of - I'll look them up.

 

Wow, @Anne11 - thanks so much for sharing all of that. It really gives me a great starting point.

I haven't got any LIC's in my portfolio, only some ETF's in the SMSF one. I'll have to look into those now, too. I think I'm setting myself a rather large undertaking - I wouldn't even know where to start to deal with LIC's.......

 

The ones with 20% weightings are the LICs. And an update: I've done some more research and decided I wouldn't hold so much additional CBA outside the LICs as they have a lot of CBA and banks already.

 

Again, thanks so much for sharing - some of those ETF's seem to be huge earners. Sometimes, I think all I really need is a crystal ball. And I'll definitely be trying that sharesite.com site you've mentioned.