Peter Thornhill 2018

Discussion in 'Share Investing Strategies, Theories & Education' started by Redwing, 6th Jan, 2018.

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  1. oddshapes

    oddshapes Well-Known Member

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    Oh sorry, and here I was thinking it was about me, SatayKing must be having a bigger impact on me than I first thought, a powerful message indeed ! .... :D

    Similar to yourself, our plan is to accumulate stocks in the best tax efficient manner as possible that focus on paying an increased dividend and to hopefully retire never having to touch our capital, as such, I wasn't real sure where ETFs fit in.
    Reading your blog I always wondered why you would own ETF's as to my understanding their main focus is not to increase dividends, only to track a particular index, say ASX300 for example, of which not all companies in there would even pay dividends let alone aim to increase them.

    Clearly I need to understand this better, I've just found the large ETF thread which started in...gulp....2015, so I have some reading ahead of me. Also, if I remember rightly, Firebug may have written an article recently touching on ETF's and how the dividends (partially franked) calculated, I might chase that up as well.
     
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  2. Snowball

    Snowball Well-Known Member

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    While the old LICs are a more targeted way to invest for a growing income stream over time, an index fund like VAS will basically provide the same thing, albeit not being the primary goal of the index.

    Both options own a wide variety of Australian companies which will most likely grow profits over time and this leads to growing dividends.

    In the case of the index, there’s 300 companies in there and around 230 or so are dividend payers. And you can bet that one of the companies goals is to increase the dividend they pay to shareholders over time along with profits.

    So whether they aim for it or not, the index ETF is likely to throw off increasing dividends, just that they’ll be a bit more variable than the LICs.

    Both options have roughly the same yield as well and similar sector diversification with some minor differences. The LICs mostly underweight resources and real estate given dividends have been less reliable historically.

    I don’t want to tell people to exclude ETFs and only choose old LICs because both are pretty similar investments each with their own pros and cons that has been well covered here and I’m sure will be again in the future :)

    My thinking on it has also softened over time as regulars here would’ve seen as I’ve learned more and done more research. Will elaborate in a future blog post.
     
    Last edited: 29th Nov, 2018
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  3. R-Hub

    R-Hub Well-Known Member

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    Trying to work on the idea of having money set aside for decent downturn in the market. What things have people considered and amounts do they have on hand?
    Trying to find a balance between money fully invested and money ready to be invested. Even if using credit to invest, how much do you hold back for these times?
    I know it depends on indiviual circumstances and risks, but interested in whats others are doing or have done.
    Or is it as simple as leaving access to a large amount of credit for when required, (loc, redraw/offset, splits).
    Thanks:)
     
  4. Coconutwheels

    Coconutwheels Well-Known Member

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    I've been rolling this around my head too, we sold an ip this year and the proceeds will form 43% of our target portfolio size. Initially the plan was to dump it all in at once, but I've just invested up to 15%, so at the moment we are holding a fair amount of cash. I think once I'm able I'd like have a LOC available at around 30% of my portfolio.

    I'm complete novice to this, and all this is back of napkin calcs

    The other thing I'm not sure on is roughly what portion I want ETFs/LICs .
     
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  5. R-Hub

    R-Hub Well-Known Member

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    Its all a bit of work in progress as you learn and growth your knowledge base. And your really learning about yourself and your investment needs. All very individual.
    Thanks for the input. 30% would a good base, I will always use credit as part of the investment plan, so will continue to play with figures. Got to have SANF. :)
     
  6. rizzle

    rizzle Well-Known Member

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    This is where the concept of dollar cost averaging (DCA) is useful. The idea is that nobody on this planet know exactly the right time, so the next best thing is to spread the investments over time. So say for example you make purchases every 2/3/4/6 months etc (whatever works for you) with a set amount. This spreads the risk and statistically will help you achieve greater returns.

    Now in the current environment, you might tinker with your DCA strategy, which might have a normal buy of $5k per period. You might decide that we're in such a bearish period that your amounts will be $2.5k instead (thus saving more cash for rainy day). Then at some point in the future, you might decide that the market is more optimistic, so your buy amount now becomes $7.5k.

    Dollar cost averaging has been written about extensively if you want to do some desk research.
     
  7. Snowball

    Snowball Well-Known Member

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    Wouldn’t the opposite be more sensible?

    Buy more because the market is lower and less when it is rising.

    I think tinkering with DCA because of where the market is ruins the whole point/benefit of it.
     
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  8. ShireBoy

    ShireBoy Well-Known Member

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    I would've thought so.
    The whole point of DCAing is to not worry about the ebs and flow of the market.
    If the market is bearish, you simply buy more units at the time. You don't start making smaller purchases because you think it's dropping further.

    If anything, you keep to your standard DCA strategy, and in harsh times you buy MORE on top of your usual DCA parcels.

    That's what I'd do.

    This isn't advice.
     
  9. rizzle

    rizzle Well-Known Member

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    Yes, the strictest/truest form of DCA is the exact same buy amount at consistent intervals Anything beyond that is tinkering.
     
  10. Redwing

    Redwing Well-Known Member

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    Peter Thornhill has a new My Say out but it doesn't appear on his site (Only #57 but he's up to #58) o_O

    My Say

    Excerpt of #58 below where Perter has his say on Bonds

    The element I find intriguing is the ongoing fixation with the security of government bonds. Every second day I am being made to feel irresponsible for an asset allocation that doesn’t include fixed interest investments. This brings me to the issue that exercises my mind in the current climate.

    I don’t want to go through the detail of the relationship between bond yields and bond values; suffice to say that as interest rates fall, bond prices rise and vice versa. This means that with interest rates at current levels we have had a bull market in bonds of unprecedented magnitude.
    As a gentle reminder for those old enough to remember, the interest rates rise in the late 80s, early 90s led to a collapse in bond prices which led to many ‘capital stable’ managed funds becoming unstable.

    The following is the opening paragraph of a 1994 Fortune magazine article.

    “Wasn’t this supposed to be the year Alan Greenspan got to triumphantly parade down Wall Street to the cheers of bondholders big and small? In many ways the circumstances seemed right. In January 1994, the 34th month of economic expansion, bond yields were historically low and inflation seemed negligible: Wages were going nowhere, and companies dared not raise prices. But within seven short months of that promising start, something fairly unusual happened: 1994 became the year of the worst bond market loss in history.”

    Does any of this sound familiar?

    If you are interested, here is the article: http://fortune.com/2013/02/03/the-great-bond-massacre-fortune-1994/

    In the current climate, how do central banks and governments ‘normalise’ interest rates without triggering the next biggest “bond market loss in history”. Unless of course, interest rates never go back up, so we can all rest easy!
    What does this mean for me?

    I remain, as always, sanguine, alert but not alarmed. Aware that if the bond markets tank, the inevitable reaction of the sharemarket will be panic.

    Spend less than you earn and borrow less than you can afford: Lock and load for the amazing bargains that will present themselves.
     
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  11. PKFFW

    PKFFW Well-Known Member

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    Would you have link to that article?
     
  12. RayO

    RayO Well-Known Member

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    I can’t find any link on the email to post
     
  13. oddshapes

    oddshapes Well-Known Member

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    Hopefully this works, attached is a pdf of the article, best I could do.
     

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  14. PKFFW

    PKFFW Well-Known Member

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    Thanks, I'll have to check my subscription because I didn't get the email.
     
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  15. Silverson

    Silverson Well-Known Member

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    Hope everyone had a fantastic Christmas!

    Quick question and a silly one at that, but....
    Does the All ords and asx200 or any index for that matter include dividends when looking at the value(points) or is it simply share price.
    For eg, if you look at AFI vs the 200 over the last 5years the 200 is up 3 odd percent and AFI is down 6 odd exc dividends
    This is something that I feel I should know but I'm just not certain
     
  16. Nodrog

    Nodrog Well-Known Member

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    Indexes including dividends are known as “Accumulation” indexes as opposed to what you normally see which are “price” only indexes. Accumulation indexes usually have “AI” suffixed to the code eg ASX200 - XJO (price) vs XJOAI (Accumulation).

    Bit dated but here’s a chart I created quite awhile back comparing above. Too lazy to start the PC to access the charting software for an updated chart. Note that the accumulation index has long since surpassed the pre GFC high unlike the price index (orange lines):

    51FBE54E-5B0A-41E4-8F1B-B7E9F1AB3773.jpeg
     
    Last edited: 26th Dec, 2018
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  17. willair

    willair Well-Known Member Premium Member

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    Quote..
    A Black Swan event is an event in human history that was unprecedented and unexpected at the point in time it occurred. However, after evaluating the surrounding context, domain experts (and in some cases even laymen) can usually conclude: “it was bound to happen..

    Thanks for the link, interesting outlook from someone who has the outlook that data and technology are not the solution to every problem,from the way I read it..
     
  18. Nodrog

    Nodrog Well-Known Member

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    And here’s me thinking it was a pub in the UK:confused::

    B2788E3F-C810-4191-80D5-10145CD1658C.jpeg

    On a more serious note is the bloody stupidity that whether it be households, investors, central banks or Governments many seem to think that problems solved by too much debt can be solved by even greater debt. It needs to be brought to a head and the pain suffered. Perhaps then the simple Thornhill message of Spend less than you earn, Borrow less than you can afford will be heeded. Well perhaps for a decade or so until it’s forgotten again given human nature then rinse and repeat.

    Oh well what can one do. Personally I’ve always aimed to be debt free as soon as possible. So when the inevitable reckoning arrives, being debt free and always keeping plenty of cash on hand I’ll be in a position to take advantage of the fallout from this obsession of living on borrowed money. So just like Thornhill I look forward to the next big one.
     
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  19. Silverson

    Silverson Well-Known Member

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    Fantastic, thanks very much for confirming!
    Thanks very much for also posting a pre 2000 chart! Was scrolling through another forum yesterday and noticed abit of dislike for the old Arg,Afi,Mlt of late and of course the dislike (understandable) for the dilution of SH holdings at Bki with their raise. There were many comments of why would you bother with the above LICs due to their underperformance of the index yet remaining at a premium to NTA. I guess many have their focus on growth and selling to realise gain, not income which really is what these are all about
     
  20. Nodrog

    Nodrog Well-Known Member

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    Depends on how you look at it. I suppose as a “dividend” investor like Thornhill is if you were going to buy direct stocks for your portfolio what would you choose? Reliable dividend payers and growers which AFI / ARG / MLT favour or a heap of other shares as well such as speculative / mining shares and those that don’t pay any dividends as in the index ETFs? So based on this which type of fund would you prefer, LIC vs ETF?

    That said I’m not a fan of paying more than a small premium at most. And to sound like a hypocrite I also hold ETFs in addition to LICs. I suppose despite the fact I prefer the holdings in the LICs if I pay too much of a premium for the LICs it potentially negates these benefits compared to an index ETF. Quite frankly I like both and tend buy what offers the best value at the time.
     
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