Peter Thornhill 2018

Can I ask Parkzilla, are you retired or still heavily in the accumulation phase? With my limited knowledge in the area I can understand simplifying your holdings in retirement but not in accumulation mode.

 

Don’t confuse confidence for expertise

If you are swayed by his arguments you need to do a lot more reading. Semmelweis reflex....

 

Fair point.
Perhaps I may need to read through the entire EFT thread too.

 

No need to rush especially if larger amounts are at stake. Lots of potential changes possible. It all depends on each individual’s circumstances of course. If the franking change is introduced it may impact the LIC sector. Doesn’t mean LICs won’t still be great investments but there may be some repricing and investors may wish to Structure their portfolio for best tax effectiveness.

Potentiall issues have been discussed on the forum previously.

A200 is very new and it’s provider Betashares hasn’t been around all that long. However I’m sure they’ll do fine over time. Vanguard however is a monolithic $5 Trillion giant who have been around decades. I just feel more comfortable with an index provider that has been around a long time and likely to be around forever.

Unfortunately another one of Labor’s proposed changes. Trusts to be taxed at a minimum 30% rate. Of course as to if it gets legislated and in what form it’s a complete unknown. But given the likelihood of a Labor Gov’t I wouldn’t completely discount the possibility.

It’s rubbish, has been discussed here numerous times. A number of PT’s earlier concerns about ETFs (eg counter party risk) have been proven false. Lately I’ve heard that at recent seminars even PT now seems to have less objection to plain vanilla ETFs but sticks with LICs as that’s what he’s comfortable and familiar with.

The only valid point he can make is that cap weighted index ETFs are not pure Industrial. But there’s only a single listed fund on the ASX that meets that criteria being WHF and has some issues as mentioned in my previous post.

Personally I focus on Peter’s main message of SHARES FOR INCOME (not scary capital volatility). As for implementation it might pay to be open minded.

Not advice.

 

I believe index benchmarks are a useful tool for people to become acquainted with sharemarket performance and returns.It allows you to identify stable long term investments and enter with a level of confidence.
A full time professional investor may use other metrics, DCF’s and god knows what.But for your average PT introduced regular Joe, this gets the cogs turning.
Then you land on PC and your head explodes in a good way.

 

@Nodrog - I am kinda surprised that you picked ARG over MLT. What was your thinking?

 

Firstly it should be noted that we own a large holding of MLT in our SMSF. My earlier post was about our “personal” portfolio. I didn’t want to duplicate holdings in both entities so MLT is in SMSF, ARG in personal.

In general though MLT has historically been very heavy on banks. You need to be comfortable with that:

MLT:

ARG:

 

Still in accumulation mode - only started this journey (Thornhill approach / LICs & ETFs) a little over 12 months ago! I've simplified the holdings now with the end goal in mind. Yes it means I won't get to participate in various SPP's etc for multiple LIC holdings, but now I have a very easy decision to make when enough funds are available to make a purchase (i.e. is MLT trading at or below its long term discount, in which case buy it, otherwise buy A200!).

 

I had a bit of back and forth with PT about it a little while ago to try and alleviate his fears but I’m not sure what he took away from it.

 

The most recent thoughts from PT appear to be this from his recent course that @mdk attended and who kindly provided a summary:

 

Was this referring to my concerns on Labor removing imputation credits?
In your interview with PT he kind of just dismissed it suggesting you're not a 'true investor' if it worries you. I've also read other interviews/comments of his where he has answered this question the same way.

I may be cynical and this is probably being very unfair to PT, but if I was earning $400k p.a. whereby this change wouldn't affect me, I probably would care either.

I guess I'm being a little dismissive of his answer, and stepping back to think about it, I'm certainly not in a position of knowledge to do so as he would have forgotten more about investing/wealth creation than I'll ever know, perhaps I should just heed his message.

 

Well, I guess he was implying look at the money coming in to your account and not focus on taxation aspects. Only a guess as I'm not him.

From one standpoint, I appreciate the level of concern if tax arrangements change. Then when you look at it, if someone is receiving $45k pa tax free from super that is the equivalent of a person earning around $55k pa through employment. Numbers can be done for ers for various amounts but the

It's generally accepted a person has more costs involved in order to get that $55k, so getting $45k with no such costs isn't shabby in the eyes of many. Similar numbers can be for various amounts of course.

Edit: My thinking and typing have no relationship to each other! Oh well, deal with it.

 

Fair comments. You are right to question this and not being unfair. In fact question most things others tell you when it comes to your finances including me who is just an amateur.

For a start the proposed change to franking credit refunds will have minimal effect on wealthy investors like PT. Why? Because given the recent cap placed on Super pensions PT and Wife will have a substantial balance in Accumulation which can still take advantage of at least half the franking credits with more offsetting tax on unfranked dividends (eg CSL, MQG etc). And in personal names the dividend income would also be substantial pushing them into or at least close to the company tax rate of 30%. If not some additional leverage and tax loss harvesting etc would improve the situation. I doubt he’ll have trouble getting a loan given his wealth. Again minimal if any loss of franking credits.

This is in stark contrast to most investors who can only dream of having more than one or two million dollars and would be heavily impacted under the proposed changes if investing in similar assets to Peter T.

 

Great point. Unfortunately tax can have a huge impact on wealth creation over a lifetime. Under the proposed change for example the use of an ETF (Trust Structure) rather than an LIC (company structure) alone could have a noticeable impact over time depending on the investors circumstance.

 

Just as an interesting anecdote, we bought PTs book, had a few questions, mainly about minimising Tax, and emailed him...within a day or so he called us directly ...and had a good chat about it...

His general attitude on minimising Tax was “well do whatever’s easiest, but if your lucky enough to be making investments and you have to pay a few more bucks in tax, is life really that bad?” His whole attitude is that there are more important things to be spending your time on than trying to squeeze every last penny out.

He’s a good hearted guy I think, can come across as gruff, but wants to help people invest well and focus on the big picture outside money.

Reminds me of Stephen Covey...put first things first...

 

It’s not about squeezing every last penny out. It’s simply about keeping an open mind to alternative options that can make a big difference over the longer term. If you’ve read enough of Peter’s stuff over the years he’s taken many opportunities himself to minimise tax!

I think it’s all too easy for those of us who are wealthier to forget how difficult it can be for many to save a useful amount for retirement. There’s a big difference between someone living on over $400K pa vs someone on $40K. Anything that can improve the end result without adding additional risk I thought would be at least worthy of consideration.

Have a look at the following classic video on Kerry Packer’s view about minimising tax discussed in the later part of this short video:

 

Interesting headspace to get down to two holding. Both are diversified, but i don't think i could leave all share investments in only two holding.


You think i have a trust issue?

 

Nah it was related to how ETFs work and how index funds are a great choice too. Was seeing if he would agree with that by trying to alleviate his fears but I don’t think he quite came around.

I’ve been asked about franking changes on the blog and people are probably expecting me to have a magic solution or something.

It directly affects me as we’re low income early retirees who get full refundability of franking right now. But my answer is that it doesn’t change the core strategy at all. It’s just a case of suck it up and push on. That’s probably a disappointing answer lol.

I’m still buying Aussie equities for the income stream so nothing has really changed.

Probably just means that more equity/savings is needed before retiring due to the lower net yield. Still better than the alternatives in my mind.

 

Yup but I'm pretty sure a collective host of planners, accountants and tax experts will be pouring over any changes in order to come up with strategies to lessen the potential impact. That is the nature of the industry which has been created.

 

Cheeky sod.

As discussed elsewhere that is only holdings in “PERSONAL” joint names. The larger component of our wealth is in the SMSF which has five holdings. So six different funds overall.