How Long Will it take to RETIRE on SHARES

Ok I am a believer

 

In today's environment, do you believe you could repeat what you achieved in the past, in Australia, if you gave it your best shot?

 

It would be difficult without lo doc/no doc

amazing times, I could not believe it when it got abolished. Imagine being able to declare any income you wanted? Of course there will be negatives to this, going crazy in the wrong markets at the wrong time

 

One such negative was as a complete global financial meltdown starting in 2008...

 

Your right
Did you see the movie .... the big short
Brilliant movie, so much suspense

 

I did, and enjoyed it very much!

Of course it wasn't just no doc / NINJA loans which were solely to blame for the subprime mortgage crisis. Selling the bundled up mortgages as bonds, the credit agencies failing, etc all combined to bring it about. But at it's core - people bought a debt that people were unable to pay back, and it all snowballed from there...

 

Yes I'm in that environment. A high income, taking risk and working with others all helped me not the lending environment.

I just signed a bunch of loan docs today, but I believe I'm at my limit now with big 4. Next stop low doc Rams with my abn.

 

Great
The loans helped massively and buying in booming markets

 

Please don't take this post the wrong way, however every investment needs to be considered in its entirety in particular the risk reward.

If I said I made my money betting $1000 on Leicester to win last year's EPL how would my investment acumen be viewed?

What if I said I borrowed a million dollars and went one round of red black on the roulette wheel.

How about if I bought a fixed asset without adding any value and just hoped that demand would increase with no change in supply?

Reward needs to be greater than risk. To me that's an investment.

 

Of course. And your investment amount should have consideration to the risk too.

 

There was a 2009 post on lessons learnt

Lessons learnt.

Regarding shares: I think I'd do the same again..... I didn't see the 53% ASX crash coming - I expected any falls to be less than 35% and consequently didn't sell everything at or near the top. My reasoning was that if I had sold within 5% of the top, paid the ~25% CGT & bought in again within 5% of the bottom, then I'd be no better off. And in my view, the ASX wasn't excessively overvalued back in Nov '07.

As the ASX fell, I sold off some shares & kept the margin loan at a good SANF level for me. My reasoning was that I anticipated needing cash to buy in again closer to the bottom.

In the past I've advocated never selling quality assets while their earnings appear to be stable regardless of their price. Lesson learned: Keep SANF in mind when making sweeping generalisations.

Various left field events have caused otherwise solid ASX companies to fail, eg undisclosed loans in foreign currencies that cause loan covenants to be breached when the A$ fell 30% within 6 weeks. Another is banks forcing cpys to repay debt instead of paying dividends. Lesson learned: expect the unexpected.

Regarding retiring as early as possible: I'd definitely do the same again.... being around when my kids are growing up is impossible to put a value on. Lesson reinforced: there's more important things than equity.

Re Diversifying: As the ASX rose I was tempted to sell low yielding IP, pay tax & put the equity into shares/LPTs. I'm glad I didn't. I still think diversification is one of the few free lunches around.

Re Set & Forget: I had intended that the plan was to be set & forget - so I could sail off into the sunset (or trek around the Himalayas for 6 months). and just draw down on the income. However, when unprecedented events affect volatile assets, some adapting is needed. Lesson learned: Adapting to circumstances is more important than attempting to forecast them.

The bottom line is that the principles of the plan have held together, despite experiencing unprecedented financial turmoil....

.... so far.....

Cheers Keith

 

+1

 

I noticed in one of the posts Keith mentioned SLF, just looking at SLF vs VAP. Franking oft quoted here is also low on both

SLF
Management Costs:0.40%
Benchmark:S&P/ASX 200 A-REITs
Dividend Yield:4.30%
Franking:0.90%
Dividend Frequency:Quarterly

VAP
Management Costs:0.23%
Benchmark:S&P/ASX 300 A-REITs
Dividend Yield:5.38%
Franking:7.43%
Dividend Frequency:Quarterly

 

Yes, I have read this thread some years ago.

The issue here was GFC/2008 came along and the share market tanked big time.

From what I recall this investor had to return to work, though I don't know whether this was full time or not?

I think this strategy was the LOE model, using not only shares but also property. This was also the days when lo doc/no doc was abolished, many investors needed these products to source finance for this strategy, otherwise there were issues accessing equity/finance

This is where this strategy may come unstuck and did, if you are relying on assets growing in xx years it may not happen you can only make assumptions/guess and if you do not have enough assets/equity to support this model then you could be up the creek without a paddle.

MTR

PS.......Another layer of complexity today is the lending criteria.

 

Be carefall reading Keith's old Somersoft posts. From memory he exited most LPT holdings including SLF before the "massive" crash in this sector took place. Many Areit (LPT) investors got massacred during the GFC. A very valuable lesson was learnt.

I personally would never rely significantly on AReits for guaranteed income like Keith did back then. And I don't think Keith would nowadays either. Index weight of Areits is more than enough exposure to this sector for me. In fact the less the better which generally tends to be the case with the older LICs,

 

Also property market tanked in Australia, not as bad as was expected, nonetheless it was not pretty. Melb was the only property market that boomed during GFC

 

A semi-retired old gent who did some part time work with us some years back had a large portion of his retirement savings in LPT's, I recall him telling me one of these fell 90%, requiring a 900% recovery just to get back to even

 

When I say massacared I really mean it. The following chart gives you a visual of how huge the crash in Listed Property was during the GFC compared to the overall All Ords index. From memory I think the sector on average fell 77%. A lot of retirees who had always believed this was a safe retirement income sector were decimated. Retirees with large exposure to the sector who could went back to work whilst some others who couldn't were left in financial ruin. Leverage within these Listed Property Trusts was the main culprit.

 

I see what you mean.

I recall at the time my g/friend placed a property on the market and investors/buyers were spooked because everything was going pear shaped. For those who survived the share market crash, well done, did something right

 

I agree LPTs (as they were known back then) got massacared in a BIG way! I know someone that had 400k in centro shares at $11 (cannot remember the price exactly) to sell out at $0.50cents. It went as low as .04cents.
In fact I owned ABP (abacus) at $1.20 and it went down to 24cents. Luckly it was my only holding at the time and very small. Austing is right massive leverage was the the main problem. Also a lot of the trusts just tried to be too clever and didnt stick to being rent collecting landlords!
Since the GFC I have invested in Areits and have done VERY VERY well from them. GHC being my favourite and largest holding!

Am I still purchasing them.....NO! LICs have won me over!