Peter Thornhill 2018

Scrap this from your calculations. It's just confusing your question with unnecessary info.

Why $150k? Couldn't you go up to $199,999?
But you need to think about how you're going to inject this amount. Do you take a punt and drop $200k tomorrow? Or do you DCA in smaller parcels over a longer time?

 

Ynot - sort of
Tax deduction is the amount of interest on the LOC.

 

Thanks @ShireBoy I'm trying more to work out the calcs involved (as I couldn't remember seeing any practical examples) of how the scheme might work. I picked the upper levels of the LOC as if I had used a lot smaller figure of say $20K it might not have been as clear.

 

I think your crossing the strategy's.

The strategy in the book is debt recycling. Your aim is to move your mortgage debt from non deductable to tax deductable.
When you pay some principal on your home loan, you re borrow it to buy shares/lic to start/continue to convert your home mortgage amount to investment loan amount. And it snowballs as it goes along.
In a sense the debt amount stays the same but instead of, for example a 200k (home loan) loan thats non deductable it becomes a 200k investment loan that tax deductable. (Over time)
All the expenses and interest on the loc is tax deductable.

 

Thanks R-Hub. Yes there are two strategies as you said, apologies I wasn't very clear in my original posting. The first strategy involving Thornhill's slow transition of the 'the mortgage debt from non deductible to tax deductible'. The second strategy (suggested by someone else) was 'DCA into the GFC' with Stage 2 - 15% drop use 30% of your cash reserves, Stage 3 - 30% drop use 50% of your cash reserves, etc. Stage 5 of that strategy and the final stage, I interpreted to fully using the LOC to buy as many LIC shares as possible. I wasn't too clear in elaborating that but if you started Strategy A now and within 2 years a GFC type event occurred (not saying that it is but just using that as worst case scenario), I was trying to work out how the financials might look by still having a loan and having then fully activated the LOC to buy LIC shares. I was just trying to see if my understanding of how the calculations would work was accurate so that I could then play with some numbers. That was why I mentioned the total repayments figures.

 

Be interesting to see the figures over 7-10 yrs.
Whats the dynamics of a the 4 main LIC in a down market? And a GFC type event? Do they move the same as the market, or do they hold up a bit more.

 

New article on Cufflinks by Thonhill

 

Great read, always puts his message out clearly especially for a noob like myself .
He has a fantastic point about how people associate risk being the volatility of capital in shares but not the drag on returns of bonds.

 

absolute common sense by Thornhill there.

I have a very similar theory/belief when it comes to risk. How the best performing asset class over a century or so can be the 'risky' investment has me stuffed.

 

Cufflinks has posted another article from Don Ezra in response to Thornhill's article

Reply to Peter: Why a glide path makes sense, with equities for growth

 

People get really worked up about this subject. MPT is a pretty good starting point. To claim that is is rubbish because you happened to back a winning horse is lucky fool writ large.

Increasing fixed interest or cash in twilight years is a no brainer for mine. People imagine their stock holding period is forever until a one off, bolt from the blue changes that...you will care about volatility then....and perhaps consider that volatility you once shrugged off at 40 is no guarantee of how you will respond at 75.

Holding large amounts of fixed interest and cash during accumulation phase is equally silly, when you have ample human capital remaining (wages = inflation linked bond) you should be heavily tilted to risk assets.

 

You have a knack for summing things up (often big topics), clearly and helpfully, in a small amount of words!

 

What's MPT?

 

Modern Portfolio Theory - google it. If not, Falcon could probably sum it up in a sentence or two

 

Good points. But it still likely depends on one’s psychology and / or level of wealth. Thornhill’s 70 and @SatayKing is not far off. I’m 58 and retired. All three of us went through the GFC but continue to hold nearly all equities.

There is no one rule, we’re all different.

 

Nobody ever said that. On the other hand.....

 

Sorry, misread. Edited previous post accordingly. According to my wife though it appears “stupid” best describes me in general especially if I have a different view to her.

 

Wow, what a thread. Thank god I had the last 2 days off work!

Just wanted to say thanks for all the great posts from everyone. The in depth discussion and explanation throughout is fantastic. I've ordered Motivated Money, hopefully it will arrive next week. I've read the Introduction to LICs guide and intend to move on to the full Introduction to LICs thread next. After that I'll move on to the other dozen or so threads I've got bookmarked. In between that I'll be reading the Peter Thornhill articles from various places around the net. That should keep me busy for a little while. I'll save the detailed questions for another day.

Is there any news on when Peter may next present his course? I emailed him but no answer yet.(it's only been a few days though and he could be on holidays, etc) I would love to go but even more importantly I'd love to bring my wife along. Whilst she is generally only interested in the "broad brush overview" of our financial situation and strategy, I think it would be hugely beneficial for her, particularly with regards to the perceived "risk" of the share market.

 

I know that Thornhill still runs his seminars (I went to one last year - I loved it, and learnt so much).

What are the chances of getting some of the PC big-wigs to deliver a whole day (or a few days) of presentations, discussions, and workshops? I'd love (and pay for) the opportunity to listen to @SatayKing, @Nodrog, @The Falcon (and @datto) and quite a few other PC gurus, deliver information, have discussions, share ideas, and chew the fat about a whole myriad of investment topics.

 

Good now you can go back and read the 2017 threads as well.