Is Our Simple Retirement Strategy Safe or Stupid?

Discussion in 'Investment Strategy' started by GoldCoastBound, 13th Apr, 2021.

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  1. Chris s

    Chris s Active Member

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    I found this site really interesting, it talks about VDHG for diversification rather than just VAS and also talks about selling shares rather than relying on dividends (although it is a little more work you may not want to do).

    Passive Investing Australia
     
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  2. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    I find it strange how people get hung up on the current price of a share, it is nothing to do with value . OP has has explained the value they see for themselves. It is returns that count and give value. Have seen here quivel over wether APT was worth $22 or $24, and skiting about making peanuts on EML by buying @ 3.20 and selling @3.40.
     
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  3. GoldCoastBound

    GoldCoastBound Well-Known Member

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    thanks Chris, will take a look
     
  4. GoldCoastBound

    GoldCoastBound Well-Known Member

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  5. Lacrim

    Lacrim Well-Known Member

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    For peace of mind, you could diversify the remaining 60K VAS shares (or equivalent) into Direct stocks: LICs and perhaps VGS, VAE, VDHG, VEU, VGE and VTS.

    Perhaps go 60:40 direct stocks: index funds/LICs.

    I've created a list of common stocks the LICs invest in.

    I think that would be enough diversification.
     
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  6. Big A

    Big A Well-Known Member

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    I am no expert when it comes to franking credits and tax but I believe it goes something like this. Dividends come with franking credits which is taxed paid at normally a 30% rate. Some companies in the asx pay a lower rate and some dont pay at all e.g some reits. So when you get your VAS dividend it might be franked at something like 25%. Now if you fall into the high tax bracket of 47% if you include medicare levy then you will need to pay the difference between 25 and 47. Thats still a good 22% tax.

    I would consider another 22% in tax as something worth while minimizing if possible. You can look at a few way to reduce that 47%. Distribution from the family trust to kids or other family members. Using a bucket company to distribute into once individual's have reached the higher brackets.

    Something to think about.
     
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  7. GoldCoastBound

    GoldCoastBound Well-Known Member

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    Yes, we were set up in a trust/company from the start, so any tax payment is a lot lower than normal, plus the franking credits means we wont pay too much relatively speaking
     
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  8. Trainee

    Trainee Well-Known Member

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    If you are talking about a family trust with a corporate trustee, note that these will not form part of your estate.

    so if you have two trusts and three kids, say, you might need to put in some time with a solicitor.
     
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  9. MTR

    MTR Well-Known Member

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    I posted link on this and a comprehensive review on pros and cons

    Been looking at it, but swaying against it now?? Its a slow burner?????
     
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  10. MTR

    MTR Well-Known Member

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    Trust/company has worked well for us but SMSF not so great.
     
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  11. GoldCoastBound

    GoldCoastBound Well-Known Member

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    Yes, for the SMSF, we were able to drop 500k each into it, 1 time only
     
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  12. Sydneyboy

    Sydneyboy Active Member

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    Largely diversification for safety. The common question put to those with strong home country bias is, what if we are the next Japan? The Aus market is also comparatively focused on a small number of sectors.
     
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  13. twisted strategies

    twisted strategies Well-Known Member

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    ah yes ! the elephant in the room .

    i tried some international diversification , buying international stocks ( at the time i was interested ) was difficult and costly for the way i wanted to do it ( at the time the platform was very driven by active traders and 'buy and hold' seemed to pay a premium

    as a substitute i bought IEM at the time and they failed to perform as needed so exited at a minor profit more recently i have bought into several NZ companies listed on the ASX ( most are dual listed ) i also bought ASIA which had a bit of a run ( so reduced and took some profit

    i also bought EAI ( mainly for the Indian bias ( well stronger tilt than most LICs focused on Asia )

    i am very pro Asia for growth looking at Korea hoping they will unify ( North and South ) , yes it will be mega painful ( think Germany after the Berlin Wall fell , but should be long term solid ) and India which has huge room for improvement with infrastructure , not to be ignored should be Vietnam ,


    i also hold some other ASX listed stocks with international exposure BHP , MQG , VUK , JHG , and goodness knows how LNK will play out

    i would rather focus on South America and Asia/India looking for growth , but NZ is worth a look for quirky stocks in small economy ( big frogs in little puddles )
     
  14. mdk

    mdk Well-Known Member

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    Congratulations on your business success!

    You've received some great feedback already. Mine is just reinforcing much of it.

    60,000 VAS shares is a wonderful position to be in. As you've mentioned more money isn't going to make you happier and you feel comfortable investing so much in VAS, there really not much more too it.

    That said, home country bias is the main risk I see. Apparently the ASX accounts for approx 2% of the global market. That's a small piece of the diversification pie. Having VAS and a few investment properties (also in Australia), an option could be to add something like VGS to the mix. This way, the risk of being so heavily invested in Australia is reduced.

    A portion of your future income will come from outside of Australia. If safety is a focus, this will probably be valuable to you. The income will be a little less per share compared to VAS initially, but in theory the income will increase at a greater rate over time.

    If including international is something you want to explore. Do a search here on 'Pros/Cons for VGS or VGAD' and run your eyes over it.

    As has been mentioned, there's no franking credits attached to this income.

    Bottom line, what ever you do or don't do, so long as you're comfortable with it, is a win-win in your position.
     
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  15. Reddy

    Reddy Well-Known Member

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    Congratulations on your success. I am sure it’s not a easy task to achieve this level success in 7.5 years well done
     
  16. oasis1frog

    oasis1frog Well-Known Member

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    You achieved all that in 7.5 yrs from broke ! Out of interest, how much each of the 3 brands sold for ? (Are you saying the 3rd brand will sell for $5m+ ) ?
     
    Last edited: 16th Apr, 2021
  17. The Falcon

    The Falcon Well-Known Member

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    Way too much reliance on a handful of ASX businesses in financials and materials (50% of VAS). I’d get no SANF with this portfolio. Given that you have recently paid tax on sale of business, therefore your cost base is fairly close to current prices I’d be looking to significantly diversify your exposure via international stocks and create “income” via partial sell down of international stocks as required in addition to distribution yield from international and VAS. Capital is taxed at half the rate of income and given your recent cost base a combination will be more tax efficient than VAS alone.

    You need proper advice imho.
     
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  18. GoldCoastBound

    GoldCoastBound Well-Known Member

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    Excellent advice thank you MDK

    Yes its probably smart to include some international...i will go back and read them threads again with this in mind

    thanks
     
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  19. GoldCoastBound

    GoldCoastBound Well-Known Member

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    Yes its been an all consuming 7.5 years, but has obviously been worth it

    the first 2 ave over 3M USD each, and the 3rd brand will easily exceed 5M USD..from concept to exit in under 24months
     
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  20. GoldCoastBound

    GoldCoastBound Well-Known Member

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    Yes i agree now Falcon, thanks for your thoughts
     
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