Dollar Cost Averaging or Lump Sum into LICs and ETFs

Hi all, hope everyone is having a fantastic new year and this finds you all well.
My question/topic for discussion is the following-
Say you wanted to take a position in a number of LICs and ETFs but are unsure when or how to enter, what would be your purchasing strategy? Would you DCA into them or just make a lump sum purchase?
Would you feel comfortable purchasing X amount of all LICs/ETFs you wish to take a position in at present (lump sum say 5k each) then look to see which are trading at a discount to their NTA and purchase into them, if all are at a premium purchase ETFs as @Nodrog has mentioned in the past (see I listen).
To minimise brokerage costs/maximise returns what would your ideal purchase patterns be?
During times of gloom would you ideally like to keep the same strategy and just increase the amount you purchase or would you have a different buy plan?
I'm aware that even 'Bob the worst market timer in the world' still had a great ROI even whilst purchasing on the single highest days of the chosen cycles but I'm hoping for a discussion namely on purchase patterns and minimum amounts invested to minimise brokerage costs etc
Thanks in advance and look forward to the discussion.


Disclosure: I personally just plonked what I could afford spread into afew LICs, VAS and VHY circa a year ago and paid a hefty premium to NTA for WAM, but have made no additional purchases apart from afew direct shares (new years resolution, stop buying direct)

 

I believe the research shows lump sum gives the better returns. But you asked what would I do. I would DCA because that is more in my nature / risk profile. And other responses will also likely be along those lines, keeping cash in reserve to buy in the dips etc

 

An investor's gotta do what an investor's gotta do.

Lump sum or DCA? It's completely up to you. I know that's not very useful and seemingly callous but I'm not you nor you me or anyone else. That is the reality of it I'm afraid.

As for me, it's when I feel it's OK to invest funds or I have a rush of blood to the head (it happens occasionally) but I attempt to set an annual amount I want to invest and place those funds into the market. Not necessarily a given amount each month or quarter just what I feel I'm comfortable with at the time. I've placed in more than I have intended, sometimes less. So far this year it's less but that could change. It all depends as it's all about me when it comes to finances!

In regard to brokerage nowadays it's comparatively chicken s#it with online brokers so I'm not sure it's a consideration if you're a buy or hold person. Trading is a different matter altogether.

Sorry if I'm vague or appear indifferent. I'm not but advising others is not my forte and way out of my comfort zone.

 

Thanks for the reply appreciate it.

Without getting too personal could you please go into a little more detail as to how you would DCA I.e. purchase same amount on same day of every month and how many LICs would you buy?
What in your opinion would be the minimum amount to buy so brokerage wouldn't eat up returns?

I agree, I expect DCA to be the clear favourite, I'm curious as to how that would look for some. I'll give an example:

Figures and dates are for illustrative purposes, and not actual amounts more a template:

1. Make original purchase of LIC/ETFs you wish to have exposure to for example 10, purchase $2500 of each regardless of NTA.
2. Purchase $1000 of each quarterly (probably not ideal amount as ~10% brokerage)
3. Have cash reserves to participate in SPP or to purchase in dips when opportunity presents.

 

Don't be sorry at all mate, that's exactly the reply I was after!
Every Saturday night afew mates get together and chat about random issues events, the past few weeks investing methods/frequency has been a recurring topic. General feel across the group is purchase set amounts per month, forced savings plan if you will. I, the odd man out agree with your approach (I understand there's no right or wrong) and would like to let funds accumulate in offset (if there's debt) or in a high interest online savings account and then purchase annually, unless as you say an opportunity presents or the old rush of blood.

Thanks again for the reply, exactly the discussion I was hoping to have in this thread and yes I'm aware 'different strokes'

 

@Silverson not saying mate chat is wrong but I've observed a few which went pear shaped. Group think has its downside.

Years ago when I was in the workforce a number of colleagues got to discussing property investments. This was years ago when it was common to fly "investors" interstate for a presentation. A few who were mates took up the offer and all came back after signing up after the sales pitch. One had five. No need to go into specific details of what happened.

An outcome for one of them was almost funny if you have a dark sense of humour, which I have. Receiving a rental guarantee for a set period. On expiry of that guarantee, approached the tenant for the rent and was shocked to discover the tenant had been paying $100 pw less than he had been receiving. In effect, he had been receiving some of his "capital" back from the price he had paid and was declaring it as rental income.


It's good you seem to have independent thinking.

 

For DCA you would probably wait about 3 months, do it on a dip or 3 month low. I think it is better to just put your buy orders in at the price you are happy to pay if you have a few orders in at least one usually get hit at a bargain price often the price can inexplicitly momentarily drop 5%. You may want to buy your first tranche at market price to avoid missing upside if it looks like it may run.

 

Assuming you’re not talking about a very large lump sum such as an inheritance or property sale proceeds etc.

From some previous discussions on PC.


1. Any spare cash goes into online high interest account until you have around $4K to keep brokerage acceptable. Less than this would be ok if a great buying opportunity arose due to a correction or a discounted SPP (no brokerage) was offered for example. If you currently have a lot more than $4K spread it across more than one LIC / ETF.

2. When you have $4K buy a suitable LIC offering best value. If all expensive just buy an index ETF. Or keep it simple in the case of the older LICs and just buy whatever to maintain desired balance between them. NTA with older LICs usually doesn’t get too crazy and tends to average out overtime.

3. If a significant market correction occurs rather than keeping cash aside perhaps consider using a very conservative amount of debt to take advantage of these. Otherwise you could have cash sitting idle for very long periods before a great opportunity arose.

Only thoughts as can’t give advice.

 

That is the first time I have ever heard of that happening, whilst I do feel sorry for the individual I must admit I did have a little chuckle, not at him but at the tricks some developers/sellers make to make a deal.
Agree re group thinking, thankfully not a single person in the group shares the same view on investing, makes for great discussions that get a little high on th Db readings at times, but forces all to keep thinking.....not always a good thing.

 

Oh Lordy, the times when multiple SPP's occurred. So easy, relatively speaking, to throw $45k or more into the market.

 

Thanks very much for the reply, thoughts is all we are after here, there is already too much advice in the world!!

I was having a very brief wonder over some figures yesterday evening.
Assuming one had purchased AFI, ARG, MLT, BKI, WHF, AUI and SOL (our favourite non LIC) on the 9/1/2017, the gross returns to date would be ~16.5% and with a net div currently of 3.73% or 5.32% gross
Again very quick calculations and not 100% accurate from my scrap paper, not to be taken as gospel.

 

He he yes. Not hard to do.

Or you could be greedy like Thornhill. Own the same LIC in SMSF, his name and his wife’s name. When an attractive discounted SPP is offered all three participate. Then when shares are allocated the SMSF buys the shares off other parties using an off market transfer to get them into the SMSF. No brokerage with the right broker.

Final result is three discounted SPP lots of a single LIC now residing in a low / no tax SMSF.

GREED IS GOOD.

 

Yeah. Limited to $25k concessional but there is still the $100k non-consessional. Bring back the $100k concessional!!!

I'vd been out of that for a few years now so my question is whether the off market is still available or is actual sale required? When actions are no longer applicable to you, you do tend to lose interest.

 

No the $25K concession Contribution is irrelevant. The SMSF is BUYING the shares off husband and wife. So existing cash (not immediate contribution) in SMSF is used to get effectively three SPPs.

You could do the same with SPP in your name.

 

Got it. It then becomes a case of managing any CGT. Useful. Thanks.

Did a number of SPP's once on behalf of others. Slight PITA doing the forms for beneficiaries as I was the Authorised Trustee. A heads up for those who may be in the same situation is prepare for it otherwise the application may be rejected if you're applying for the max.

 

No no no. There’s no CGT. As soon as SPP shares in own names are allocated the transaction between them and SMSF takes place. Allocation date is put on off market transfer form even if processed a week later.

Are you sure you only had one white rabbit last night.

Not advice.

 

Ah ha. Get it even further! Slowly the penny drops.

As an addendum about nothing in particular, I found with SPP's it is an advantage to have the SMSF under a Corporate Trustee rather than joint trustee names. SK Super Fund is different to SK Personal Money so the company doesn't question if the same applicant is applying twice if you get my drift.

It's also easier to change Directors than changing Trustees. Have to say it did relieve some burden when my wife died. Had enough anguish to cope with and not having to overly worry about legal transfer of Trustees did lighten the load slightly.

Welcome to thread drift. He he Yup, only one.

I am reminded of dealing with issues after my wife was no longer on this Earth. Good to keep in mind that bureaucracy don't really care about you're personal issues.

A poen by WH Auden based on Pieter Brueghel's, The Fall of Icarus has, in part, these lines:

Don't dwell on it too much but keep it in mind.

 

Absolutely. The same individual is not supposed to apply for more than one SPP. But as you say a SMSF with Corp Trusted can get away with it.

As for your second point that was also an important reason for us choosing a Corp Trustee.

 

Wow, I have some thoughts running through my head over this stuff. Always something new to learn and consider.

SMSF with a portion in pension phase, say $1.6M or over, and cashed up. Drawn down $15k (the minimum for pension is a legal requirement not the max you can do) to personal account, purchase SPP as does the SMSF. SMSF then buys. Could work.

 

What's an SPP?