Peter Thornhill 2018

Hey guys,

I've been lurking around the forum for the past week and have taken an interest to investing in income producing shares after having read Peter Thornhills book Motivated Money.

One thing the book lacked was practicality. In relation to taking a step in the right direction I have some questions that I hope maybe some of you experienced people can answer me.

• If term deposits and property deliver very poor results as opposed to income producing shares (according to Thornhill), is it a safe idea to invest 100% across a board of LICS? (i.e 25% in each of MLT, BKI, ARG, WHF)
  
  
• Adding onto the previous question, is it best for a 'lazy investor' to focus there investing in LICS or to stock pick amongst the top industrial shares of the ASX?
  
  
• Being a long term investment, for protection reasons and tax planning is it best to open a discretionary trust first and begin investing through that as opposed to needing to set one up in the future and face CGT from transferring the shares over? If not, whats the best approach to do this?
  
  
• Where can I find some good information in regards to asset allocation amongst LICS?
  
  
• I've become aware of the importance of reinvesting dividends, is it best to receive the cash payment and then reinvest amongst LICS equally? or to select DRP upon purchasing the shares? Does the first option offer any benefits than the second?Also, If I opt for the second option, what is the process of changing this to cash payments in the future when I'm ready to retire?
  
  
• Should I also take this same LIC investing approach with my super?
  
  
• Adding onto the last question, should I do this through an SMSF? If so, what is the process, rules to follow and costs involved? And is it worth it as opposed to holding my super in a fund?
  
  
• I'm aware that you guys can't give financial advice, there should I see a professional to help aid the process and which ones in what order? (i.e Solicitor, Accountant, Financial Planner etc)

Thanks for taking the time to answer these questions, truly appreciate it. I've learnt a lot so far.

 

All of these questions require an AFSL to answer - except the trust one which involves legal and tax advice.

So see a financial planner first, then see a lawyer

 

Ok thanks for the honest answer. Are you able to recommend a reputable planner and/or lawyer in the Melbourne area?

 

Check out dover.com.au

 

Thank you Terry.

 

Hey guys,

I've been lurking around the forum for the past week and have taken an interest to investing in income producing shares after having read Peter Thornhills book Motivated Money.

One thing the book lacked was practicality. In relation to taking a step in the right direction I have some questions that I hope maybe some of you experienced people can answer me.
*Welcome. It's a pity Peter hasn't done any talks recently (as far as I know)...

• If term deposits and property deliver very poor results as opposed to income producing shares (according to Thornhill), is it a safe idea to invest 100% across a board of LICS? (i.e 25% in each of MLT, BKI, ARG, WHF)
  *Personally I'd say yes. They'd do the investing for you at low cost.
  
• Adding onto the previous question, is it best for a 'lazy investor' to focus there investing in LICS or to stock pick amongst the top industrial shares of the ASX?
  *If you're going to be lazy, LICs are the way. I still like to buy individual stocks I think might go up in value though.
  
• Being a long term investment, for protection reasons and tax planning is it best to open a discretionary trust first and begin investing through that as opposed to needing to set one up in the future and face CGT from transferring the shares over? If not, whats the best approach to do this?
  *I don't know, for shares I just do it in my name. Maybe other forumites might have other answers.
• Where can I find some good information in regards to asset allocation amongst LICS?
  *The websites of each of the LICs you buy? They should do a monthly newsletter.
  
• I've become aware of the importance of reinvesting dividends, is it best to receive the cash payment and then reinvest amongst LICS equally? or to select DRP upon purchasing the shares? Does the first option offer any benefits than the second?Also, If I opt for the second option, what is the process of changing this to cash payments in the future when I'm ready to retire?
  * I've got mine taking the dividends as cash. With the cash do whatever you want. If you buy small parcels I think you might end up with more complicated CGT calculations and more brokerage fees.
  
• Should I also take this same LIC investing approach with my super?
  *I'll say yes... I've got ING super and you can pick your shares in the living super option. Btw, I reckon you could borrow to buy shares outside of super (by pulling equity out of your home). I wouldn't go too hard on it, but go with an amount that doesn't affect your SANF.
  
• Adding onto the last question, should I do this through an SMSF? If so, what is the process, rules to follow and costs involved? And is it worth it as opposed to holding my super in a fund?
• * I don't think it's worth the admin and costs to do it in a SMSF
  
  
• I'm aware that you guys can't give financial advice, there should I see a professional to help aid the process and which ones in what order? (i.e Solicitor, Accountant, Financial Planner etc)
• *Talk to other forumites and keep reading and asking questions here. Question. How old are you? Just wondering how many years you have before retiring.

Thanks for taking the time to answer these questions, truly appreciate it. I've learnt a lot so far.
* No worries.
I'm in Sydney and sometimes we have meetups where you can talk about this sort of thing. Look in the meetups section

 

Thanks for your reply.

What's the pros and cons of doing it in your own name as opposed to a trust?

I figured the cash payment would be easier, I plan to buy $10k worth every quarter.

I wonder if I can do the same through AustralianSuper.

Why do you not prefer to go through an SMSF? Is that because you can buy them through ING and it saves the hassle?

A bit of background to help paint a picture. I'm 27 in August, have zero debt and don't plan to buy a house for a while. I'm an interstate truck driver so I still live at home, although i'm only there 2-3x a week, so saving money on rent/mortgage payments for now. Don't plan to buy a house until I have grown a modest portfolio income. I'm quite frugal and track all my expenses. I have a good savings record, i'm just at the stage where I need to start making my money work.

 

These legends ?

Dover Financial falls off a cliff at royal commission

 

Which cliff did they fall off? I watched it McMaster's interrogation live and thought he did pretty well. They did licence some people that perhaps they shouldn't have, in hindsight.

 

Care to recommend another service provider?

 

Looks like a last chance saloon....Caveat Emptor.

 

Legal Tip 151: Structuring the Ownership of Shares Legal Tip 151: Structuring the Ownership of Shares

 

Dover would be one of the only groups that I would recommend. Beware of anyone bank affiliated.

 

You can work this out yourself. Keep it simple, the “professionals” thrive on complexity and obfuscation. A few more months around here and you will learn enough. You’ll then know what exactly you need, probably just an accountant.

 

Ok. I'll continue researching. Thanks for all the knowledge on the thread, I've learnt a lot.

 

Thanks for your reply.

What's the pros and cons of doing it in your own name as opposed to a trust?
*Info on that will be on the forum

I figured the cash payment would be easier, I plan to buy $10k worth every quarter.
*Yep. I'd try to go decent sized parcels of anything because of brokerage, (and accounting). But do what you feel comfortable with.
I wonder if I can do the same through AustralianSuper.
*I think it's a yes (buy direct shares) but others will know
Why do you not prefer to go through an SMSF? Is that because you can buy them through ING and it saves the hassle?
*Absolutely. I don't think it's worth setting up the SMSF if the normal (fairly low cost) super fund can do it. Plus who knows, if a Labor government gets in, they may make it very unattractive for SMSFs to own shares in super. (Non refunding of franked tax credits)
A bit of background to help paint a picture. I'm 27 in August, have zero debt and don't plan to buy a house for a while. I'm an interstate truck driver so I still live at home, although i'm only there 2-3x a week, so saving money on rent/mortgage payments for now. Don't plan to buy a house until I have grown a modest portfolio income. I'm quite frugal and track all my expenses. I have a good savings record, i'm just at the stage where I need to start making my money work.
*Then you've still got your life ahead of you... well done for thinking about it so soon. I reckon, being rent free is a godsend... Go hard and invest big time with your savings...(and.. have you heard the concept of "dry powder"? You want to have that!!)

Knowing you are a frugal person/good saver, buy a home when you have a deposit and the area you want to live in is just about to boom... very hard to completely know when that may be though. Then when the house prices rises, you have equity. Then use that equity to buy more shares... property is also good because you can leverage (use OPM relatively easily). We don't know what exactly will happen to Australian house prices though because banks aren't lending as much as they did in the past, and this is putting a huge dampener on the borrowing ability of people. Maybe in the next 5 years most locations won't be booming... but some areas will do better than others. If buying property I'd stick to metro areas and try to buy close to city centres, transport (eg. Train stations) and infrastructure.

 

Ok i'll check the forum.

I could invest semi annually for bigger parcels, is this a better approach though? I see a lot of posts about dollar cost averaging being superior but I can see how fees can add up.

Just researched that AustralianSuper don't allow LIC, only ETFs.

I have at least 12 months dry powder aside on top of another amount I want to use to invest.

That's the plan. Find a nice property and use the equity to borrow less than I can afford to buy more shares, reinvest and you guys know the rest.

 

All good points. Appears to me that one negative in holding shares in a trust however is that you cannot negatively the shares. The losses are not distributable to the beneficiaries and must be held within the trust until they are eventually offset against other gains. Have I got this right?

 

Sounds ok! I reckon quarterly purchases is all good... and keep it simple.

 

Yes, but do you think there will be a loss?