LIC Performance Comparison ARG v AFI

Yes.
There are some incredibly experienced and knowledgeable people on here that are only so willing to help you out, but patience is wearing thin.
Investing can be so simple yet so complicated if you let it beat you up.

Try and get back to basics.

 

Thank you @Burgs ,

I really get it regarding patience wearing thin. I understand I am driving here everyone crazy to the point where some of you think I must be a troll. I've even driven myself crazy.

I spent all night watching all the videos from this guy - Lars Kroijer

You see, because it's income I want to draw from my investment in only a few years from now is what has made this very complicated for me.

If I was 30 years old now with a full time job, then what to do is a NO BRAINER. Invest it ALL into VDHG and be done with it. Done and Finished.

But because I want to use my investment for income in only a few years , I keep thinking of ways to better achieve the best scenario from an income and tax perspective, while trying to not have to sell capital to supplement the dividend income.

I keep bringing up scenarios in my head like 'what if I invest 50% VAS and 50% high yield maybe this will get me income plus growth' and then I think 'Oh wait, how about if I do 50% LIC's and 25% VHY and 25% CBA Shares will this give me growth and a good income stream'.

Even recently I thought 'ok how about VAS+VGS for growth and SOME dividends and BKI purely for income' an then I looked at BKI performance and it's underperforming the index.. So I'm thinking 'Why would I invest in something underperforming an index' - Not realising that the reason to invest in it is for income and it doesn't matter about what BKI is doing in relation to the index.

Then I'm thinking 'VGS, thats international do I get franking credits?'.

Then I had a 'brilliant' idea of targeting dividends rather than growth, a high yield alternative possibly VHY and some similar ETFs, just re investing the dividends to build up the total value and when I have to retire in a few years and just stop re investing the dividends and just start using them for income. Then this article put me off that idea: Everything You Need To Know About High Yield Investments - Strong Money Australia

As you can see I have been doing a lot of research not just asking questions and hoping to get everyone to hold my hand.

Sorry for the long post but you see where I'm coming from now?

Anyway, after a 30 page thread over the last 2 years (sorry) and the help from everyone here I've become quite comfortable with VDHG and 1 LIC such as AFI or ARG.. reason for the LIC is for its tax friendly income stream and to weight the portfolio slightly towards Australian. Maybe 10% of the LIC

I'm considering a high growth ETF, IOO to the mix just to spice it up a little for added growth. Just maybe 5%


-Frank

 

Frank Manno I can see what you are trying to achieve, financial independence, which is what a lot of us are trying to achieve.

I wrote a long reply and I deleted it.

It appears you have been researching and asking for opinions for several years now.

Simply put you should by now have an idea of what your core holdings are and any satellite holdings you want to suit your beliefs/comfort/sleep at night.

Your financial plan needs to cover this.

 

Why did you delete it, now I can't help wondering what you had to say in a nutshell

Not that it would have influenced me, I like getting opinions and peoples thoughts and then I do whatever I'm comfortable with anyway..

Yep core holding VDHG thats cemented in stone..


-Frank

 

@Frank Manno even though you have done a lot of research over the years on what might be the best solution I do want to mention one thing which I think is important.

Instead of thinking income may I suggest you think total return instead. You see high income can at time come at lower growth and what usually people miss is it's the growth that enables growth in income in future years. When you have some time check out dividend history of CSL and Telstra. You will know what I mean. At a rough guess CSL dividends have been growing at 15% per annum for over a decade while Telstra's dividends are lower than what it was a decade ago even though it's dividend yield has always been higher to start with.

Read some post from @dunno about why there is no difference between income and capital growth as you can easily sell some shares to manufacture your own income.

Cheers
Oracle

 

That is good news and you have confirmed what you stated earlier being:

So VDHG and one LIC.

Applause

Update your financial plan.

 

I just want to make sure I understand you correctly. I will make this up.

So if I own 2000 shares in VAS which brings in 4% dividend and 4% growth.

If I want 6% income, I take the 4% dividend and make up my own difference of 2% by selling 30 shares?

The figures are fictional but this is the idea you're saying?


-Frank

 

I think once this pandemic is over I should take you all out for dinner and drinks, it's on me!

-Frank

 

Yes. That’s the idea.

But in order to do that you need to invest in assets that have best possibility of growth.

My point is don’t shy away from assets with low yield. Make sure you also factor in the capital growth aspect and look at total return not just the yield.

To give you another example US stocks the S&P500 yields around 2%. From lows of GFC around 670 it rose to 3400 before the recent correction. That’s over 5 times. Our index rose to 7200 from lows of 3100 just bit over double.

Here you can clearly see US stocks makes up for the low yield by having greater capital growth.

Cheers
Oracle

 

And hopefully a sizable chunk of this is in Super where “creating your own dividend” is tax free after commencing a pension.

 

Only problem is I don't know when I may need access to funds. Could be next year, could be in 5 years. I have no guarantees with work the way things are going. The industry that I work in has been hit badly by the shutdowns and no social gatherings rule.

If I'm not working and relying on dividends then super would only help me on the dividends earned and put those in a cheaper tax rate right? So I pay 15% tax on my dividends.

If I earn dividends of $60k a year for example, the first $18k is free so I pay income tax on $42k a year taxed at 30%? For a saving of 15% I have to lock my money up until I retire.. Not worth it

Correct me if my figures are wrong but thats how I worked it out


-Frank

 

@Frank Manno , let me start with saying that brother I am on your side and we even share the same advisor. But I am starting to have some serious concerns about your understanding of numbers and general investing. Please don’t take this the wrong way and I am only saying this out of concern and genuine care in seeing you invest successfully.

Considering the amount of time you have spent researching and learning, some of the questions your are still asking rings alarm bells.
In my opinion you are still looking for the perfect portfolio / plan, but with your level of understanding to date, I am not sure you are the best person to be making that decision for yourself. I would normally not recommend someone to give complete control of there investment plan to an advisor. Personally I need to understand and be comfortable via that understanding with any investment plan regardless of the advisor. But I am thinking you might be better of giving complete decision making control to your advisor.

I see an advisor as someone who guides you along the way and educates you rather than dictating every move and decision. But in your circumstance handing that all over to an advisor could possibly serve you better.

I hope what I said above doesn’t come across the wrong way as it is coming from a good place.

 

Hey Big A, all good I am not taking offence and I actually appreciate your post and concern, thanks..

I thought I nailed this, an index fund and an LIC it can' t get simpler and safer than that


-Frank

 

Just reading some of your posts in the last few days is where this concern is coming from. And I get it, this investing business is not easy to get your head around. I have spent the last few years educating myself and have gotten to a point of obsessiveness and yet I have barely scratched the surface.

Some of the questions in your last few posts regarding the number crunching rang some alarm bells for me. One example from your post about the tax rate of 30% on the earnings above the 18k tax threshold. Not saying its a big deal but the numbers are way off. Firstly the remaining $42 would fall into multiple tax brackets. 19% between 18200-3700 then 32.5% for the rest up to the 60k. Without doing the exact numbers as there is also Medicare levy that needs to be considered, you would find the average rate across the remaining $42k is below 30%.

If I remember correctly you also asked a question about if you were buying two different shares at a split of something like 70/30 would you buy 70 shares in 1 and 30 shares in the other.

That question is all I needed to hear to have to step in and say what I am saying. Because I believe your genuine is why I am concerned. If anyone else had asked that question I would definitely think they are punking us.

If you are still working with Alex then maybe seek more guidance from him. I know from my experience with him he will always have time for you if you are interested in listening.

 

Heh fair enough

Accounting / Investing / finance etc - It's just not my thing, never was. This is why my 'investing education' for a better choice of words has been an uphill battle.

With the 70/30 thing to be honest I still don't understand it but I've accepted that its based on the dollar value.

I mean seriously if you said to me you wanted an equal amount of bananas and pears in a bowl I would give you a 50% split.. I wouldn't sit there and buy $10 worth of bananas and $10 worth of pears and say there you go there's your equal amount now would I ? I'm trying to be funny here but this is why I got confused.

Yes I am still with Alex. All good, I do discuss with him as well.

I really do appreciate your post, thanks.


-Frank

 

Just keep buying the same amount of VDHG every month and never look back.

 

Sorry to be harsh but either do what the planner says or post on here. You can't do both because you confuse yourself. Right now you're paying a planner to plan and disregarding their plan. That's throwing money away.

Quite frankly you are getting confused on the simple stuff, you are the person that ends up on A Current Affair after getting swindled out of their money. Please verify that your financial planner is accredited to make sure you're not going to lose it....although you didn't earn that money (inheritance?) so if you lose it you won't get much sympathy from me. I wish death on scum who connive people who work hard out of their life savings. Inheritance to me is different though, I'm indifferent.

Step 1. Make sure your planner is good and certified. If they do individual stockpicking they likely aren't.

Step 2. Do what they say.

Easy.

I wish you well Frank. Sounds like you got very lucky, invest wisely, reap the benefits and donate as much as you can to worthwhile causes.

 

Reading this thread is like me watching a horror movie , I am scared to watch it because I sort of know the end but watching it anyway hoping for a better outcome.

Finding the balance between the three variables: high amount needed, high return, low risk is very hard to do, can only have two if the three, not all three at the same time.

An analogy for the 70/30 split would be like you want to eat a healthy variety of fruits, not just bananas, or just pears, so say you need to eat 70% of bananas and 30% of pears does not mean you eat 7 bananas and 3 pears because depending on the size/weight of each fruit, a large banana is bigger than a pear, so that is why you have to use the weight to measure the % of each fruit ( with shares you use $ value)

 

I'll spoil the movie for you and tell you how it ends.
The OP buys VDHG + 1 LIC

or

75% VDHG + 8% VAS + 8% 1 LIC + 5% IOO + 4% NDQ
I may want a little more weight towards Australia

Thank you for the banana and pear recipe analogy.. I'm going to research the weighting tonight. Watch some YouTube videos on this and do some research.


-Frank

 

Stop right here. The extra funds won't help you, you'll just be more inclined to tinker around. Balancing funds at 8/5/4% each will be a nightmare that won't really help your portfolio returns.