Peter Thornhill 2017 #2

Please give me plenty of notice. I may have to increase my home brew consumption to cope with it all.

 

Short term lurker. First time posting on PC forum. Took a few days to try to read all the posts on this great thread. A bit about myself. I'm 65 and worked continuously for 47 years. Property manager by trade but only worked as pm in various government property roles. Role was made redundant late last year. First started speculating in property in about 1973 when I bought a block of land. At that time I only earned about $30pw. Does anybody remember queuing to put $5 into their building society account. About 18 months later a friend's father gave his mates a lecture on wealth creation using Classon's 'Richest Man in Babylon' and 'Nickerson's 'How I turned $1000 into $3M in real estate in my spare time' as the texts. The errors of my land speculation (no income and no tax deductibility for costs) were pointed out to me so I sold the land and started acquiring home units. Eventually owned 3. Got married (but unfortunately to a 'spender'), sold units and had 3 kids. Separated after 25 years.
Started afresh. I have been struggling with a suitable investment strategy that seemed low risk and long term until I came across Peter Thornhill. Bought Holme's book on 'Super Smart Money' which mentioned the Thornhill strategy. Then bought Peter's book and attended his lecture at UCS earlier this year. I have gradually transitioned the share portfolio from individual stocks to LICs. I favour the Millner family so already had SOL, BKI, MLT, HHV (and dont tell anyone but some URB). I also follow the AFIC 'family' with AFI, AMH and MIR. I still have some individual stocks but mainly as a reminder of how bad an investor I can be at times. Now to my question. I was originally going to try to replicate PT's thoughts in my retail super account of investing in LICs. I need to consolidate 2 different super funds into a retail pension fund. I am using Hostplus as the basis ue to their low fees - I didn't want a smsf due to the higher administration costs plus trying to make my life simpler not harder. Hostplus allow you to invest up to 80% in shares with limits of $200K on each share holding. However, they only offer ARG, AFI and MLT for their LICs. I couldn't see how I could buy over $400K in 2 LICs without affecting its share price. I also held off for 3 months waiting to see if their share prices dropped in October but unfortunately not. Grew a bit disillusioned as I could see it would take a while for the LIC income and franking credits to eventually grow to match the Hostplus Balanced fund which seemed to be achieving twice the return at around 13.2% over 1 year and 11.8% over 5 years. I'm withdrawing the minimum 5% as a pension. Has anyone else had this problem? I currently have a low income part time, 'retirement' job so I meet the work test and am contributing to a separate Hostplus fund in accumulation mode. Not after advice - just general discussion on the matter.

 

Welcome.

I can’t give advice but from memory Hostplus Indexed Balanced Fund is the favourite choice of Barefoot Investor Scott Pape due to extremely low fees.

Personally I’d stick with Hostplus Balanced Option and do the LIC thing outside of Super.

Have you maximised the tax free threshold in own name as you can earn a reasonable income without paying tax?

Gotta feed the chickens now and it’s still raining for yet another day. Back later.

PS: I’ve got the patent on the backward username.

 

Thanks @austing for your comments. Yes Scott Pape pushes the Hostplus Indexed Balanced Fund but the Balanced option obtains a higher after fees return than his recommended indexed balanced. This year I'm hoping to maximise the tax free threshold but I'm relying upon some significant salary sacrificing into super - hoping that they take that into account. I am in line for an inheritance at some stage and want to include some of that within super then build on the LIC exposure outside super. Probably means I need to work for another 5 years till I'm 70. Did Daryl Dixon have an identical stance to PT? Are there any articles on his approach?

 

Has anyone looked at UniSuper?

 

@Anne11?

 

Money mag Nov 2017 issue page 87 has "Best super funds: balanced options". Ranked 1 is Hostplus Balanced - 1 yr return = 10.9%; 3 yr return = 9.2%; 5 yr return = 11.3%; 7 yr return = 9.9%. Australian Super Balanced is ranked 3rd with 1 yr return = 9.7%; 3 yr return = 8.5%; 5 yr return = 11.0%; 7 yr return is 9.5%. Yes these would be accumulation phase.

 

Yes i am currently with them. Fees ranging from .5% to .7% for moderate balanced to Growth option.

Its not cheap but not expensive either, so i stay with them for now. Thinking of moving to a cheaper fund at some point, but I don’t want to move at this stage.

 

Sorry it’s late, please explain further.

Daryl Dixon wasn’t as concerned about Resources as Peter. Daryl is a SMSF and defined benefit pension fan if your’re lucky enough to have one.

Last interview I know of with Dixon:

 

Thanks for that - very interesting.

 

Sorry posted comment on SAPTO in wrong area. I was hoping that salary sacrificing might bring my salary under the SAPTO limit but I see that its classed as reportable income so I would exceed the minimum. I also have a small defined benefit pension which I am not sure how its tax status is treated for SAPTO purposes as it was only recently converted from partial TTR to full pension when I turned 65.

 

I actually included a link to SAPTO document in my original post but removed it as it wasn’t clear if you had a partner now etc. At 57 I haven’t really looked into it at depth either.

My wife and I have a very small PSS DB pension each which unfortunately reduces the tax free amount we can have as a Super pension. Don’t tell @SatayKing though as he mightn’t talk to me anymore.

 

Too late. Shock and horror on my part.

However, to mitigate my disappointment such as it is, the ones who receive a DB and for whom I do not have much respect are those who are fortunate enough to receive a DB some three times the married rate age pension and still complain how tough they are doing. Pfft!

To initiate thread drift, it is a fascinating subject on whether to take the PSS cash or DB. All depends really. I'm attempting to assist a friend who has been dumped into the deep end late in their working life following a relationship breakdown and part of the settlement was a some PSS.

They will have to decide to either receive a DB or take the cash. They do have a fair amount in an industry super fund as well. Concerned about leaving something for their beneficiaries - a vexed subject in it's own right. I placed the thought, owning their home outright, one aspect to consider is how to pay for the continuing household overheads. So from that position, taking a full DB or converting a portion to do that makes sense. Sure the DB ceases on death but the beneficiaries would still have the proceeds from the home and any remaining super in the industry fund. Seemed to calm them down and now approaching the matter in a less stressful way. Stress ain't good for calm thought.

 

Perhaps a one off consult with Dixon Advisory might help given they seem to specialise in this area.

From what I understand generally it’s rare that taking the cash is a better option than receiving the DB pension. It’s a very fortunate person who has access to a decent sized DB Pension nowadays.

 

I'm with them from my old days, but haven't contributed for years. I've kept the accumulation account as it's been my best super accumulation account over the last years. But it and another account have had their days I think and I'll be combining to SMSF soon.
It is interesting having a few super accounts as the comparison shows how vastly different they are - some quarters one is up 2-3% and another is down -2%. I wouldn't have thought there's that much difference but there is. Over a year or two the differences mostly even out (which is why I still have a number).

 

Absolutely. It is one thing I strongly suggested as I made it clear I have no specialist expertise. My aim in the discussion was to assure them there were many options, to take it one step at a time and to break their objectives into components. Way better than the attitude of What am I to do?

Damn hard when someone is just starting to explore these things when they're over 60 and never had to think about them previously. As super and other investing activities have evolved, I think I've simply absorbed the changes. For a new comer I reckon it'd be a hard slog and probably akin to wading through treacle.

 

Thinking the same. Getting tied of the costs associated with property. Good capital growth on the eastcoast. Might be a good time to get rid of IP's and invest elsewhere..

How state charges can kill investment returns - Cuffelinks

 

There are 2 threads about why property is better than shares and why shares are better than property in this sub-forum - good reading. I see a role for both in the larger investment lifecycle.

Now, on with PT. I noticed that Motivated Money hasn't been updated in a while.... must be off enjoying the dividends, or setting up a LIC to get in on the new-found interest

 

Got some feedback from the great PT in regards to the dreaded discount /premium to nta and buying on the regular!

He stated very plainly just buy when you X amount of funds and no attempt was made at all to time the market or price of the chosen lic to invest in!

Simple advice from a simple man!