Passive Income From Shares - See History through Charts

Discussion in 'Share Investing Strategies, Theories & Education' started by oracle, 27th Sep, 2017.

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  1. dunno

    dunno Well-Known Member

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    Buy broad based low-cost ETF’s!!!

    Australia has an imputation tax system
    A Banking and resource concentrated economy
    Lots of crappy small resource companies that are easily eliminated from consideration.
    Some good well managed long established Listed Investment Companies with low costs that perhaps (just maybe) can utilise some of Australia’s peculiarities to deliver long term better results against the active management odds.

    So simply for Australia:

    Low cost broad based ETF’s.
    or
    A handful of low cost conservative LIC’s. (more than one to negate manager risk if you have no idea who the best manager is)
    or even a combination.

    Making it any more complex is just for splitting hairs and filling in time.

    And for me, I’ll probably end up re-inventing the wheel and make my own pseudo LIC with direct share holdings – so it’s a learning exercise in studying who's been successful and how they have gone about it.
     
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  2. KayTea

    KayTea Well-Known Member

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    Thanks, @dunno. I actually do already own a number of the 'big' LICs and a few ETFs as well. I just don't do anywhere near that amount of analysis - either pre or post purchase. I wish I could, but my brain power just won't go there anymore.

    That's one of the reasons I love PC so much - you guys are so great at what you do, and you share it, and explain it to those of us who can't do that stuff. I know everyone needs to take on board the "not advice, do your own research" comments that a lot of people make, but I figure you guys already do so much research (on all of our behalf) that I'd be crazy not to pay attention to it.
     
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  3. dunno

    dunno Well-Known Member

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    Share price capital gain plus total franked return for ARG between 1990 and 2017 is 14.2% CAGR. that turns $1,000 into $36,000 before any leverage and not a blocked toilet in sight!

    So, are you missing something?

    Work out all in cost returns on unleveraged property - then again maybe not, it might cause a bad day if your already committed that way.
     
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  4. dunno

    dunno Well-Known Member

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    Personally if I was going to be highly leveraged and relient on the cash flow to meet my interest bill I would prefer a liquid asset that I can sell if the dividend gets cut rather than an illiquid asset if I lose my tenant and can't replace. first outcome is a poor investment - second is a catastrophy.
     
  5. Lacrim

    Lacrim Well-Known Member

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    You can skew the numbers in any direction - that applies to property too.

    If I went gung ho in the early 90s with my real estate endeavours (too young though :(), including the benefits of leverage, NG, and including the exploitation of a very relaxed credit environment that lasted at least 10 years, the results would be phenomenal as well.

    I don't want this to turn into a property vs shares debate bc as I said, there's a place for both in anyone's portfolio, but I think one needs to fold in the benefits of leverage when comparing the two.
     
    Last edited: 28th Sep, 2017
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  6. SatayKing

    SatayKing Well-Known Member

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    From memory, bonus shares were issued from the asset reserve or share premium account (?) and I don't think they were classified as dividends so not taxable but sale of them was. Hope that makes sense. Haven't looked it up but I'd have a guess they were probably issued before the introduction of dividend imputation.
     
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  7. dunno

    dunno Well-Known Member

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    The numbers aren’t skewed - it’s simply the net return from the beginning of the data that I have available.

    If you want skewed numbers just tell what return you want to see and I'll apply the right amount of leverage.

    Wish I had a similar data set to model unlevered property returns - every time I've started I get a brain ache from just listing the expenses let alone managing them in real life. So I've only ever done a 'rough' return model for property and that was enough to know making it any more detailed was not going to make it any more pretty.

    I have no idea why people prefer property for leverage - you can easily leverage equity up to safe amounts - maybe it's because at the moment you can leverage property up to unsafe amounts.

    End of shares vs property for me - I don't care what other people do.
     
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  8. Lacrim

    Lacrim Well-Known Member

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    Well I do take an interest in what others do - otherwise I wouldn't be reading this thread.

    All I'm saying is that if I consistently dumped say, $20-30K per annum of my PAYG income remaining each year after expenses and tax into an average, market performing basket of stocks, I don't think my net wealth 20-30 years later would adequately free me from the rat race. In fact, I'm sure it wouldn't.

    Anyway back to this thread...
     
  9. Intrigued_again

    Intrigued_again Well-Known Member

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    Starts at page 72
     

    Attached Files:

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  10. Piston_Broke

    Piston_Broke Well-Known Member

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    Could'nt agree more.

    Actually I'm pretty sure it would.
    If you start with 20k, add 20k each year with a total 9% compound growth rate you will have

    20yrs = 928K
    25yr = 1.548m
    30yrs = 2.5m

    If you start with 30k, and add 30k you would have

    20yrs = 1.393m
    25yr = 2.323m
    30yrs = 3.754m

    and FTR according to Fidelity aussie share returned 9.1% over the last 30 years.

    http://www.fidelity.com.au/fidelityP2/?LinkServID=B91D14A6-B125-E8DC-BB83AAD60C35BC5A

    Motley Fool claim it to be 10.8%
    The greatest share market chart of all time
     
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  11. Intrigued_again

    Intrigued_again Well-Known Member

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    Sure

    In actual companies just using DRP

    CBA $6.07m gross income per annum $485k

    WBC $4.52m gross income per annum $372k

    WES $5.46m gross income per annum $343k

    I only $25k to with and $25k per annum
     
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  12. dunno

    dunno Well-Known Member

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    Milton's overall CAGR return for the entire data set is 17.7%

    upload_2017-9-28_20-57-53.png

    The dividend growth rate appears to be slowing. They don’t seem to have had the best NTA growth of late to underpin dividend growth rates. There was a period where NTA was getting a good fillip from equity raisings above NTA and deals combining other LICS and purchasing other private funds. Doesn’t seem to be happening as much lately, NTA is now largely dependant on only unrealised gains/losses

    upload_2017-9-28_20-58-33.png


    Unless they pull something out of the bag future performance might not repeat past performance. They are probably the most concentrated of the big old LICS, so on that basis alone they have a scope to deviate most, either positively or negatively, from the Index.
     
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  13. Nodrog

    Nodrog Well-Known Member

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    @dunno you've taken analysis of LICs to a whole new level. Thanks for your efforts.

    As for me I'm too old and stupid to change and somehow despite my shortcomings I've managed to do ok.

    But please keep these great posts coming as they are very enlightening and educational. We're lucky to have you here.
     
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  14. Nodrog

    Nodrog Well-Known Member

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    @KayTea the majority of the wealthier investors in the old LICs haven't a clue about any of this stuff. Thornhill, @SatayKing, @truong and I don't ever get down to this level of detail but have still managed to do quite well.

    I admit to enjoying reading this stuff from others but it doesn't change my simplistic approach to continuing to invest to boring old LICs. These things have prospered for decades so they must be doing something right.

    A reminder of that saying "the enemy of a good plan is the dream of a perfect plan":). Or as @SatayKing said "don't overthink it"!
     
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  15. dunno

    dunno Well-Known Member

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    Thanks for the mention.

    I don’t know about old and stupid- seems like you had it worked long ago.

    Kids are about to start school holidays next week so we’ll be heading off for a bit. But on return I’ll add a few more posts and look forward to you making sure I don’t over complicate things.


    It takes wisdom to keep it really simple.
    Seems we might be on the same page.

    Love your name – seen a garage called the same thing years ago in rural Tassie - thought it was really clever and always remembered it.
     
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  16. Nodrog

    Nodrog Well-Known Member

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    Curious if you follow that advice yourself? Or are you like me and guilty of holding excess cash at times depending on your view of the market?
     
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  17. Archaon

    Archaon Well-Known Member

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    Hi Satay,

    This stuck out to me as something I haven't heard of, care to elaborate?

    Cheers,
    Arc
     
  18. SatayKing

    SatayKing Well-Known Member

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    Looked up my old share statements and they did too have bonus issues after 1987! Totally forgotten about that. Shows how much heed I take of reviewing history, i.e. little.

    @Archaon, nothing magic.

    Ya hold, say, 10,000 shares and they are paying 5c per share fully franked @ 30%. Multiply the $500 by 3 and divide by 7. Franking credit $214.29. Of course if the franking is 27.5%, as it is with MIR now, then it's $500 by 27.5 divide by 72.5. More keystrokes involved, drat!

    As for the DRP, I've done a few times it especially if the discount is attractive. Sort of an cash income smoothing mechanism. Again, you hold 10,000 shares and a dividend of 9c per share is declared of which 5c is a special. Multiply the 10,000 by 5 and divide by 9. Result 5,556 (rounded). Go into the the share registry, and elect that number to participate in the DRP and cancel after payment made.

    Off to fight the 'roos on the Federal Highway on the way to Port Macquarie.

    Ciao.
     
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  19. SatayKing

    SatayKing Well-Known Member

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    Just as guilty. Subject to the same internal angst as others.

    Be nice to be indifferent but it isn't the case. Always wrestle about having sufficient cash to meet commitments versus placing it in shares - and when. Works out somehow.
     
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  20. oracle

    oracle Well-Known Member

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    Are you able to provide more details ideally with some examples of ETF that you consider low costs and broadly diversified for Australian investors.

    Are you a VTS/VEU or VGS/VGE camp and if I may ask your reasoning?

    Cheers
    Oracle.