My Failing Debt recycling strategy using..... HVST

Can you 'short' HVST - equal and opposite to what you hold?

 

Via CFD's most probably - for what point though? You'd be paying the dividend out, and have holding costs both ways which would make it a negative exercise at the end of the day.

 

Yes, but you liable for dividend payment unless you get out before the XD
so you hold 1000 shares and get $1000 dividend
if you hold short and long on XD you get no dividend, you paid for $1000 short and you again $1000 long but the stock will drop and you make money on short by how much depend on the market ..taking in fees and interest for short you maybe even in a worse position

 

How extraordinary, thanks for sharing. I love the fainting goat

 

Just had a quick Google on HVST and some reviews

Beta shares DIVIDEND HARVESTER fund, an amateur’s opinion

What you win on the roundabout you tend to lose on the swings

Be wary of BetaShares Dividend Harvester

and

The Problem with HVST (Betashares Australian Dividend Harvester Fund)

For probably two years now I have been buying up the Betashares Australian Dividend Harvester Fund (HVST), which is a exchange traded managed fund listed on the ASX. The appeal of this fund is that it pays a very high dividend yield (about 10% to 14%) and pays this dividend monthly. The monthly dividend payment normally gets paid into my bank account in the middle of the month, and every payment is roughly the same. Hence HVST makes living off dividends very easy. This is why I have accumulated over $100k worth of HVST.

However, it is becoming increasingly clear that there are many flaws with this fund....

 

How nice, thank you for your lovely comment.

HVST may possibly be suitable for debt recycling except the OP, if I understand correctly, appeared to be hoping that he / she would get the capital returned when the loan changes from IO to P&I in the near future. So given the time frame involved and the OP’s objective it would seem, as you say, HVST may not have been the ideal product choice in this case.

But this is hardly helping the OP. He / she no doubt is thinking this and doesn’t need reminding of it.

Perhaps offering your thoughts on possible solutions as opposed to generalising that everyone here is clueless in regard to the sharemarket would be more helpful.

 

I disagree.

It took 24 posts in this thread for anyone to even mention the concept of dividend harvesting. This is an essential part of the fund.

The website itself states it:

"The yield of HVST has been approximately 10% to 11% per year. On the other hand, the long term return of the Australian sharemarket has been in the range 7% to 8% per year6 . Simplistically, the gap between the yield of HVST and the market return has been 3% to 4%, so investors should reasonably expect the unit price to decrease annually by approximately this amount."

But you have well respected people here talking about "the funds trend" and "waiting for a rebound" with seemingly no understanding of the product.

I believe this is dangerous.

This forum is great for property, financing investment, tax etc etc. But I get worried when I see people like the OP coming here for financial advice about shares and receiving some of the replies in this thread from people who don't appear to know anymore than him.

 

Hi @Grinners - can you please let me know if I'm right with what I'm thinking. .

HVST yields 10% a year, but its unit price will drop by 3%/yr also. So, the first year, you get 10% on 100% of your investment. The second year you'll get you 10% yield, but based on the newly reduced capital of 97%. And the next year you'll get 10% on 94.09% of your initial purchase.

This seems like reverse compounding to me. Shrinking yields and shrinking capital?

 

The gap between the yield and HVST will be different every year. It is possible for the unit price to increase (but that would require growth in the underlying assets greater than the targetted 10-11% yield).

It can't be directly compared to the ASX200 though as it is holding different underlying assets.

 

To quote the fund:

 

I understand that, but based on the average yield of HVST and average loss of capital, is what I've said correct? Do the returns shrink with the underlying asset value or are they somehow maintained?

What's the average total yearly return over the last 5 years? Just trying to get my head around how it can work.

 

Check out the graph I posted on page 3

 

Thank you - I missed that the first time.

Am I right on the negative compounding and shrinking returns? the quoted yield is based on current asset price rather than what you bought it for, so in reality the ROI will shrink as the unit price goes down.

So while the first year you might come out 1% ahead, based on your unit purchase price your yield will be reducing all the time. Yes?

 

So far its 1% p.a but taxed on that incmoe..Its a shocker to date

 

And I'm thinking that inflation doesn't come into that picture either?

 

totally agree..I too was dismayed at the replies. stick to what you know people.
long thread short, the OP basically didnt understand what he invested in (no offence), a good lesson for all

 

Yep we’re all dills here who know nothing about the Share market. My god if ever there was an example of a yield trap then HVST wins the gold medal.

Bloody hell these high yield products were designed with SMSF tax free pensions in mind. Plato offer a more active product based on dividend harvesting but are honest in their intentions. Tax will kill you otherwise without even taking into account erosion of capital. But according to Betashares to make it work 100% DRP is supposably required. What the hell is a retiree supposed to live off if all the distributions are reinvested?

Some of us here actually live in the real world where as retirees our sole income is from the sharemarket.

The reality is most of the new smart Beta ETFs are crap. Great in the lab but a very different story in the real world.

But enough energy wasted on this as I think I’ve fallen victim to trolling given the poster’s comments are too silly to be worthy of discussion. At my age you’d think I’d know better by now.

 

God forbid this is a forum. Different members have different views. I’ve spent over 30 years as an investor, trader then finally an investor given priorities change along with a dose of common sense.

As retirees we live solely off a modest part of our share income and continue to reinvest the rest. Family and charities will do very well when my partner and I leave this world. It’s not a game, it’s real for us.

What might seem like rubbish here to one person could be a gem for another.

The OP obviously realised now that the original decision was far from optimal. At least others are offering potential ideas rather than making belittling remarks.

Like all forums the OP can then make up their mind about what might be useful and worthy of further investigation.

 

Maybe have a read in the Somersoft site ,you would only have to type in a few ego is not a dirty word names and all follow the same lead-up path around the economic clock with sober regularity ,and most who invested with those people and what happened --but pour yourself a strong whisky before you read misery for some and a cornucopia of riches for others..

 

I for one, tend to trust the opinions posted in this forum, and 8 of 10 times I get steered in the right direction. I have learnt more about HVST in the last week than I have in the last 2 years. The opposing view points only adds to a healthy discussion. Being locked in an office and be told by an adviser, on what to do with my money, has never worked for me.