Long Term Investing Valuation and Timing Strategies

VHY is that so?

 

To be fair, selling cost is one off while LIC fees are on going every year. I prefer to invest in LICs over properties due to our life stage and my increase understanding in how simple and passive it is to invest in shares compared to residential properties.

 

Property mgr, rates, insurance, body corp, pest inspection, fire alarm inspections, re-letting expense, land tax, maintenance etc - are these not ongoing fees?

LICs still looking cheap fees wise in comparison to IPs.

 

Retirement ideally 10 years away for me ( which would be 15 years before I can access super ). I figure that by learning investment in shares / ETFs / LICs now I will set myself up better for retirement. The extra passive income will help with my serviceability for further properties.

I'm yet to take the plunge for any LICs. My holding in SOL is the next closest thing.

 

Yes you are right Austing, entry and exit costs for LICs are much lower than for IPs and running costs for IPs is around 1% pa while the older LICs is less than .2%

 

Is this the only dividend stock you need to buy?

 

Very appropriate at the moment!

 

Ha Ha

One of the kids has VHY (approx 2.5 years)
Cap Gain -4.42%
Dividend 7.71%
Total Return 3.29%

They also have Milton, (approx 10 months)
Cap Gain -2.54%
Dividend 5.90%
Total Return 3.35%

And VTS (approx 3.5 years)
Cap Gain 17.53%
Dividend 2.61%
Total Return 20.14%

 

Nice one @Redwing. So for someone investing for income, VHY is a good option?

 

I was looking at timing more from the point of view of value for money. For example, if I buy $1,000,000 of x today, it would buy me $40k of annual income (not accounting for franking credits). However, the stockmarket is trading at near record highs. My question relates to if there is a more strategic time to buy in. So if the stockmarket dropped a significant percentage, for my $1,000,000, could I buy $70k of annual income (not accounting for franking credits)?

I have an aversion to buying when markets are peaking. I much prefer gloom and doom when purchasing. I was really wondering if it makes any difference?

 

If you're not getting stock tips from your hair-dresser or the checkout assistant, then you're probably in safe buying territory. Ignore taxi-drivers, they're always giving hot tips, whether it's horses, stocks or property.

 

I think it comes down to opportunity cost of not effectively deploying capital ( funds in a holding pattern in cash waiting for value ).

Maybe an approach of investing in a range of Indices, sectors and Segments will give you more opportunity to deploy smaller portions of funds at opportune times ( rather than focusing on a single ETF ).

 

What if you wait a few more months and the market rises substantially , or what if it drops soon and you purchase in a few months, then it rapidly drops further?



There's a number of posts re averaging in, or lump sum investing strategies

 

I actually have the capital to invest yet. Working on that now. I am just learning all I can in advance, so that when I have the capital I will have some idea of what I want to do.

I don't have a single ETF strategy. As a minimum I was thinking of the 3: VAS, VAF, VGS

Something like this would appeal to me more though (courtesy of one of the robo advisors):
VAS 30%
VHY 7%
VTS 8%
IEU 4%
IJP 3%
VGE 17%
VAF 27%
GOLD 4%

I would probably leave VAF at a lower percentage during accumulation and increase as my portfolio matures. More research is needed though.

 

Buy.

Buy a lot more!

But since there is nothing to invest now, I have to wait. All my capital and borrowing capacity are tied up in resi real estate projects right now.

All I am doing now is preparing for after that, when I will have capital to invest.

 

What's the point?

4% to a gold ETF? Do you think a 4% weighting to gold will make any kind of difference to the overall portfolio worth the extra 30 bp over that 4% being more bonds (or even shares)?

Minor over/underweighting of EU/US/JPY split, ending up paying 4 times the MER for the JPY/EU components (60 bp versus 15 bp) as compared to VGS? VTS is cheaper than VGS for your US exposure but then you need to take into account the potential issues of it being US domicilied. Nothing disastrous, but why bother if it doesn't add anything?

If you want to overweight emerging markets you can just buy them separately.

Unless you have a specific reason that you find convincing for each component of this and the way in which it's going to make a significant difference to your returns, this is just a heap of unnecessary admin work and transactional fees for no real point (and a very slightly more expensive MER)

 

Good points @ACMH16. I hadn't thought of MER

 

As a property investor, I would feel overexposed with a portfolio of VAS, VAF, VGS. What if something goes wrong with Vanguard Australia? Out of interest I looked up some robo advisors and their portfolios seem more rounded and less risky to me. But as you have pointed out, have issues.

Fair point. ASX:GOLD is trading at $153.26, which is quite a lot per share. It would mean at the start I would only be holding a few. That seems pointless.

 

If that's your concern then you could replace VAS with IOZ or STW. Both are ASX200 rather than 300 (which you may or may not think makes a real difference), but it would split your assets across different companies. You could do the same thing with international or fixed interest too.

The point of the funds is that they cover as broad a segment of the total market as is practible, and hence when you add something to them it's (generalising) to overweight that area, not because the initial fund missed it.

As far as the gold goes, it's not the number of shares that's important, it's the percentage of your portfolio/total dollar value. In what scenario will a 4% gold weighting be of any real advantage? What's the probability of that situation? Is the opportunity cost of the holding the gold greater than the benefit of the tiny holding? Remember that that particular etf is exposure to actual, physical gold (not miners like some of the others) - it earns no income and solely increases in value when people believe it should increase in value.

If you think you'll have to sell off some assets to live on in retirement, it may have a point. This would be as another asset class that may be high when other assets classes you hold are low and you need to sell something to live on. The scenario in which all three of bonds/local/international shares are down at the same time is fairly rare though. If you're looking to solely live off a dividend stream I don't see an argument for it here

 

Thanks. Makes sense. I will look into it.