Parking funds in ETFs or LICs until the property market recovers

I've really enjoyed reading all the posts. I would love some advice from the brain trust on my plan which i will share now along with some back ground information. So here goes: I have decent chunk to invest from selling my property last year. The plan is to rent until market looks close to recovering then buy back in. Initially I was chasing bank honey moon rates moving cash from one bank to another to get a return of around 3%. I've recently taken the plunge and brought CBA & WBC share. I'm not expecting much growth but dividends are wonderful, much better than bank interest. I still believe banks are on a downward trend so might sell out my positions when profitable and buy back in with next dip (hoping to track with trend). I'd also like to diversify with EFTs and LICs. I like the idea of not been overexposed to one sector but I know little about the tax implecations of both. I read in the thread that both efts and lics payout dividends but how you claim them is different. What I didn't understand is how do efts and lics treat unrealized capital by the investor that is realised by the fund? Probably not making much sense! I will keep trying.... say an eft or lic sell out of a position and make a gain or loss how does that capital gain or loss affect me as an investor? Also if we do get a major correction can the eft and lics sell out of positions at massive losses like managed funds so I risk losing everything?

 

@KittyCat, my lazy approach means I throw all the stuff at the accountant at tax time. They are paid to do, and experienced in, numbers so I don't concern myself.

However, this link may be of some assistance to you from the ETF aspect.

Frequently Asked Questions: Annual Tax/Capital Gains Statements

Other wiser contributors on this forum probably can provide more detail.

As to LIC's in general if they sell and make a capital gain, @Snowball's post last night will likely give you some guidance. Should they make a massive loss then my guess is the share price will tank and dividends could be suspended. It's happened.

 

The sharemarket is generally not somewhere you’d invest cash “temporarily” in this case being needed to buy back into a recovering property market. But I suppose it depends on how good one is at timing the market?

 

Timing the stock market into timing the property market is alot easier said then done.

 

I was led to believe it’s easy.

 

Hehe, I recall you commenting on your previous life as a share trader.

I don't know who said this (Bogel?) or whether my twisted mind thinks someone said it in relation to the share market but it goes along the lines of :

Short-term, 10 years; medium term, 40 years; long-term, your entire life.

 

Bogel, is a mini version of the famous Panera Cinnamon Crunch Bagel.

I think you may have meant Jack Bogle.

 

Haha Sorry! just being extremely cautious as usual

 

Thanks @SatayKing @Snowball @Nodrog and @Froxy

My logic was that when the market turns around the banks will recover and they are very cheap atm. There would be a lag, the housing market would pick up first but once reporting started the bank shares would pick up too. If I was left "holding the bag" so to speak time would see me in a great place. This is my first time investing and so far I've only invested about 1/4 of my cash (still a lot of money). I was too chicken to put more in when the market tanked in October

I really have no idea what I'm doing! I read and read and read and the more I search the more I discover to learn. I don't have the crystal ball we all want, just think worse case means I might be renting for a lot longer than planned.

 

Sounds good, keep reading & learning & nothing wrong with investing slowly as you get more confidence through learning & doing.I have found this site to be 'gold' for great info.Also nothing wrong with being 'a bit chicken' as you said in October,this too is learning, slow & steady investing .

 

I too wanted to do what your saying, but instead of selling my position in the ETF's,LICs or direct stock wanted to be able to just use the capital(like an offset if you will). I'm not smart (or maybe stupid) enough to try time the share market and get in and out of stocks.
Any share market investment in my humble opinion needs to be invested with a timeframe of decades, not months or years to reduce the risk of capital loss.
From what I gathered the only way I could achieve what I was after is to borrow the amount I had in cash against a property, dump the cash in an offset so it's 100% offset then use cash from offset once opportunities present in the housing market. You would need specific tax advice however. Don't take this as gospel, just me thinking out loud

 

I suppose one only makes a loss if they sell at a loss. But yes this could mean renting for a very long time if the plan doesnt work. Lol, not even sure im comitted to the plan. The offset idea is interesting....

 

Or get an equity release against a property and use that to invest in ETFs (tax deductible loan). Hang on to your cash for the property purchase (if property is your PPOR any loans won't be deductible)

 

Warren Buffet says dont put a $ in stocks that you cant keep there for a minimum 5 years. Thats good enough for me. I think a bank on 2.5% is a better return risk vs reward than stocks for 12-24 months with the chance of losing it or going no where. Also, you’re taking away control at time of purchasing, what if you have to pull the trigger on a home when you stock took a dive. Of course, all depending on how much you invested and how much you need at time of purchase but something to consider none-the-less.

 

Or you could keep the cash in an offset account and earn 4.5%ish.

 

That's why so many just leave it in fixed term interest within the Banking systems ,thus side stepping the worst of sudden price volatility ,plus safe government covered but it's boring investing plus tax ..
I looked into many Israeli start up's 4 years ago launched by veterans of the Israeli military high tech spying and communication silent units which interprets signal intelligence ---one of those start-ups became successful internationally spanned of Unit 8200,investing in 3 of those were very bbq plate risk and only one paid off big time that'swhat I call risk as opposed to your money at !% less tax while the other went up over 1000%..inho..

 

It's my approach too. I only have money invested in the big four because I believe they can't lose. It is boring but it feels safe

 

Well, maybe not to some extent but the price can. Personally I wouldn't be relying on price to fund a alternative project. Track the prices from around 2005 to now and reflect on how some would feel when they were at their nadir and wanting out.

The year I picked at random. It has no special relevance apart from being pre-GFC.

 

So many pre GFC investments have still not fully recovered. I could only imagine how challenging it would have been.

 

@willair silly me, I misread your post. Yes I think it's very safe to leave money in bank but the tax is an issue. I won't dally in anything speculative but investing in the big four seems a good strategy for a newbie. I will invest more in time but still nervous about where the market is heading. I am currently thinking I will sell out soon but at a profit and possibly buy back in on dip.