Peter Thornhill 2018

There's an s&p500?

Are you sure all this dividend talk isn't too exciting for you in your delicate condition get well, sure you'll be up and about in no time.

Silly people like me went and got a little MFF before really understanding what they were buying into. comparing MFF and MFG is an interesting exercise (if a little depressing on my choices).

 

Get well @Nodrog. With most medical stuff it is the agony of waiting both before and after. I know that aspect well having to wait today until the specialist had his morning coffee. I sympathised with him.

Welcome to my world. Suggest you stop doing comparisons. It can just add to your stress levels and stress can cause many health issues.

Plus a thank you to the ATO, The SMSF is grateful for your contribution as am I.

 

Didn’t your mother teach you it’s cruel to pick on geriatrics.

Up and about in no time? No way, I’m milking this for all I can or the wife will have me out doing more gardening projects. But thanks for the thought.

 

Thanks SK.

Same here, the ATO refund hit the SMSF account on Tuesday. Might be a case of enjoy it while we can. Tis a bit generous I must admit though. Plus a swag of dividends in the last week or so is as always appreciated. Given we follow the “spend less than you earn” approach I’ll be forced to decide where to invest the surplus? All a bit too stressful for this retiree as it interferes with my quiet contemplation of staring into space Becoming one with space seems natural to me as that’s about all that is between my ears nowadays.

Speaking of the SMSF Account I still grumble about the updated Macquarie CMA. Bloody terrible to use. Wish they had stuck with the old version. Maybe it’s just me.

 

Thread drift. Yippee!

Whatever will happen will. The future isn't always certain when it comes to our legislators - or anything for that matter. We don't even know for how long an individual's bum will be on a seat. As a result, I am not going to get all het up about the possibility and if whatever happens does, following some rumination on my part, I'll take action - maybe.

Fully agree with your views on that awful revamp of the CMA. Both in the SMSF and personally, I only use it as a hub and keep no more than $50 in it at any one time.

 

I reckon you should fact check the Ben Carlson article - at least make sure he's not being opportunistic with the date selection.!!!!

I haven’t got time at the moment to do you a drawdown chart of dividends but suggest you check out the Shiller data for yourself while you side lined. For example, real dividend peaked Dec 1930 @ 15.34 and hit a low of 8.09 in June 1935 a 47% reduction in real dividends.

Early 1920's seen a 54% reduction in real dividends and mid to late 40's a 45% fall in real dividends. Early 70's was about 25% as was GFC.

 

I’m trying to recover, not finish myself off. Or is that your intention?

No doubt as usual the time periods chosen will have a big impact on the outcome.

Putting the rosiest of data aside I strongly favour equities over all other asset classes and like to experience the least amount of pain in bear markets / crashes both income wise and psychologically. I’m yet to see broad agreement by professional market researchers that “price” is a less painful ride than “dividends” when the **** hits the fan. Hence I choose to live off dividends rather than capital.

I’m guessing the majority of investors would love to live off dividends alone. Trouble is it requires a sizable portfolio. That’s the dirty little secret that’s not often mentioned especially if the investor is holding a globally diversified equities portfolio. Then again some are happy to invest in higher yielding ASX only. Might be risky, might be not. Only time will tell. But that’s the investor’s choice usually governed by their SANF.

Haven’t read this for awhile but it might interest some:

Reality Shares

 

It does seem like a big task to get there when you are early in the journey (i.e. where I am at). Still I haven't been focused on it that long and the % of desired income achieved so far is encouraging.

Is the ASX going to prove somewhat of a yield trap and offer lower total returns going forward? It would be an irony given PT's teachings on such.
As always given a long runway with compounding ignoring the low yield of a high total return asset (class) makes a lot of sense.

 

Amen



I needs more monies

 

Yes, a bizarre thing for him to say. He also says

"Obviously, you can’t expect investors to have all of their money in stocks simply because they tend to provide a rising income stream over time. You still have to consider total return and not just yield"

Other than rampant speculation, the only reason for share prices to go up is precisely because the market expects the dividends to increase over time. In an efficient market there would be a 1:1 correspondence between (expected) dividend growth, and capital growth.

 

Ok achieving the level of wealth required to live solely off dividends requires diligent saving, compounding, ideally starting early and maybe some luck along the way. Many won’t get there. But for those that do the reward is amazing. None of the issues involved with total return investing such as diversification across across classes, rebalancing, correlation, factors, liquid alts, sweating on capital and petrified with its volatility, selling decisions to fund retirement (crap, worrying about volatility again) ... the list goes on. Nothing to do but watch the dividends hit the bank account, smile then contemplate how to spend and reinvest them.

Although guilty of it myself at times I see so much searching for solutions all aimed at trying to minimise “CAPITAL VOLATILITY”. Well unless one wants to tie up a significant part of their wealth in bonds (still no guarantee the inverse relationship with equities works every time) and face the ravage of inflation then focusing on DIVIDENDS is the best way I’ve come across to remove much of the volatility that cause most to fear the stock market.

But this is simply how we invest as retirees. Because this approach has been so incredibly rewarding for us I know I’m guilty of being too passionate about it. For that I apologise if my views come across too strongly.

But enough from me. Continue on as you please.

 

Draw down chart

Blue Area is price drawdown
Red Line is dividend drawdown

When flat lining at zero price/dividends are making all-time highs. Remainder of periods are shown percentage below previous all-time peak. Provides picture of depth and duration of drawdown.

Date is the Shiller series that Ben Carlson referred to.
Online Data - Robert Shiller

 

The relationship between the peak and depth of drawdown would be relevant to a persons income.

A lot to be said for having a cash buffer in times of drawdowns.

 

If the ASX has lower returns going forward, but if it meets your needs/goals, who cares?

Depending on your timeframe, you still might reach FI faster because of the higher income stream and favourable tax outcomes, while ‘suffering’ slower growth.

Maybe US returns 8% per annum and we return 6-7%, which gives us 4% yield and 2-3% growth per annum which is enough to grow with inflation and actually slower than the economy. Not an unreasonable expectation by any measure.

I’ll be satisfied with that, I don’t care about ‘missing out’.

 

This is kind of a weird way to look at the data, as bull years set the new baseline which then make massive dips appear that are just "corrections"

 

In the vein of Thornhill's spend less than you earn.



and

 

Hope you're recovering well. Home brew is your friend.

Peter is poisoning the well by making Academics appear unreliable. The fact is we don't know the future and the long tail is proof that something even worse can happen, no matter how unlikely.

 

LOL.

How lucky am I that my wife enjoys making and drinking home brew.

 

Interested in your thoughts on MFF / MFG @Hodor. They've been on my radar for some time but seem expensive.

 

I’m fine thanks. Mostly just trying to keep a low key to avoid bleeding around stitches. And I’m using it as an excuse to get out of working in the yard.

Three craft quality home brews here at the moment. Ginger Bitter, High Tale Pale Ale and Strawberry Saison. And soon to be ready two Brew Dog clones being Alpha Pop (rye beer) and Dead Pony Club (session pale ale). Has helped immensely with my recovery. Told the doctor that. Her unimpressed reply was “well it doesn’t seem to have done you any harm”.