Peter Thornhill 2019

@DoggaPP you are spot on. The fixation with “dividend investing” around here is too much and leads to increased portfolio risk by focusing on highest initial yield investments. What we are really talking about is amassing enough assets to live on the natural yield of the portfolio, should you be fortunate enough to do so.

Vanguards approach is a lower risk path to the same goal compared to AU dividend focus imho.

 

Yep sure was. And proud of it. Mind you I had one oozo before hand so everything tasted like aniseed after that including the wine.

 

Ditto. Not easy to achieve but an amazing place to be if you can. There will be times during one’s accumulation years when income is not so expensive to purchase as is now the case Globally. Grab it when these opportunities arise. But given human nature these times of fear is when investors will likely do the opposite.

 

I'm starting to think a lot of modern portfolios are constructed to smooth out market volatility to prevent irrational behavioral, just a thought.

 

The ouzo explains everything - your taste buds were shot .

 

More common than you think but they often tend to hold concentrated, yield focused direct shares. That of course comes with some risk as can be seen by the reaction of many self funded retirees to the proposed franking credit changes.

That said, nowadays I do think the paranoia about being diversified has gotten a bit silly. I lose count of the comments I’ve seen by investors proudly stating that the index fund they invest in is superior because it contains 6,000 stocks whereas a another fund with similar mandate contains only 3,000 stocks.

Others have multiple funds because one has South Korea whilst the other doesn’t.

Crikey many wealthier retirees including a number here achieved much of their wealth before ETFs and easy access to International equities were even available.

If you take note of the media and many so called experts one would think ASX banks are one of the worst things you could possibly invest in. Some of these talking heads will also tell you that China and emerging markets is the place to be. God forbid, as a older retiree if I had to choose then give me CBA any day.

The same with the Global favourite being the US which is now 10 years into a massive bull market. Those closer to retirement being told to invest in the US rather than our terrible terrible highly concentrated ASX market may potentially spend the next decade or two watching the US market go nowhere. Living on capital they say. That’s assuming there’s any capital gain to draw on. Again despite the perceived risk something like CBA with its high income might contribute far more toward a comfortable retirement.

You don’t have to conform to the popular flavour of the month view. Choose what best meets your needs. If a less well off older investor has Buckley’s chance of achieving much in the way of wealth by retirement then a few bank and other higher yielding stocks may be their best option for an improved retirement despite copping flack from others screaming at him / her but but what about Home country / concentration risk etc.

It’s not a perfect world and there is no perfect portfolio. Each individual’s circumstances will dictate their needs and level of risk.

Not advice.

 

Thank you. I am one of those less well off and will never get to the point of living off dividends (I am a realist). I have a portfolio that is 100% home country and heavy in banks (CBA in particular) - for the reasons you have stated above.

 

I’m as guilty as others here lately for preaching diversification. The irony is I’m Diversified now because I can “afford” to be. Earlier on I was also way overweight direct banks and high yielders. As the portfolio has grown over time I’ve simplified and diversified it because I no longer need these high yielders to achieve the income we desire.

Owning your own home combined with small / modest Super, a handful of higher income stocks and eventually being elegible for the pension ain’t too bad an outcome compared to many out there.

And seeing this is a Thornhill thread I’ll post Peter’s view in relation to those in this situation:

Give me the long-term predictability of shares, at any age - Cuffelinks

It would be worth reading the article and all subsequent comments.

Not everyone will agree with his views but the strategy has been a god send for many investors / retirees out there regardless of their level of wealth.

 

I have only recently started to diversify @sharon . We are still overweight the banks and like you particularly CBA. I have a 10 year plan to balance things out a bit but am in no hurry. Moving in the right direction is good enough for me

 

@sharon as you seem to appreciate people should do what they can within both the resources available to them at each stage and according to their attitudes.

I really do believe when that is understood and also able accept the outcome, which may or may not be the "ideal' according to views of others, they're in a pretty good space in a financial sense as well as being OK health wise physically and mentally. Couldn't ask for better really.

 

I've got enough that when I get rid of more property, I can fully live off of dividends, however as every dollar I invest in the sharemarket at this point is essentially borrowed funds, from my offsets, I'm mostly going towards banks, for the income. I figure that if I can beat the interest rate that I'm paying for funds, I can slowly move some $$ into an index fund of some sort. I'll worry about diversification much later on. Not sure if I'm on the right track, but so far things look OK from this end. Still learning.

 

Not a bad strategy I reckon. There is a element of risk as always but with risk comes reward.
Your betting that yield from the banks will continue to be greater than the cost of interest you are currently paying. I would say that's a reasonable assumption to make.

I don't see interest rates rising any time soon and while there is a possibility bank dividends could drop I wouldn't imagine it would be enough to put you in the negative.

Is your strategy though to continue to hold debt against those shares in the long term like say 5 plus years? Or do you plan to pay down the borrowed funds used to pick up the bank shares?
When I say borrowed I understand it funds pulled out from offset against property but still considered it as borrowed funds as you will need to pay that back at some stage.

 

Chasing yield is OK but make sure you don't fall for yield trap. Banks should be OK mostly being too big to fail and government will always step in if things gets really bad.

The most important thing is to stay the course even if things become ugly around you. I think the banks are going through a rough patch right now. Market is trying to price in the impact on future earnings for the banks due to the recent falls in properties around Melbourne and Sydney.

Shares can provide really good long term returns provided you can stomach the volatility.

Cheers,
Oracle.

 

I've got a LOT of funds in offsets. Several homes are 100% offset, in fact. I've got a couple that will still be IO for another 5 years. I'm slowly paying down the debt, starting with the smaller loans. One loan gets an additional $1100 per month paid into it & it's already P&I. Once that gets paid down, I'll start on the next one and add the entire amount I'm currently paying on this one, onto the payment for the next.....and on it goes.

 

I don't intend to hold ONLY banks. That's just a starting point for me for continuation of income. I've got a (very) small parcel of BKI, but not sure if I like it. I do intend to get some more LIC's or EFTs or both......just not sure which ones yet.

Stomach volatility? Sheesh, I'm a Mt Druitt investor. Boom & bust there. It's a good training ground to hold on tight & look out for the bargains in times of gloom.

 

Mount Druitt ay. You wouldn’t happen to be familiar with a development at 2 Ayres grove mount druitt?

Sorry to go off topic. I ask because I have some money invested with a non bank lender who is funding that project.

 

No, sorry I can't help with that one.

 

I quite like the idea of using the P&O Cruise 'retirement home' concept. You just book cruises end to end then make sure the doctor on board has or can arrange all your medication. I'm told that the meals are a lot better than in a retirement home. Is that your high care option @Nodrog ?

 

That’s basic level, I want first class though including high quality ALDI wine. Better than that overpriced rubbish @kierank drinks. Bugger if you get seasick though I suppose. Then again you could just blame it on the alcohol.

If @SatayKing decides on taking this path I found the perfect ocean voyage drink for him, NAVY Strength Four Pillars Gin:

 

We won’t get that Aldi **** on P&O.

You will need to lift your wine game if you are going cruising with P&O.