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Peter Thornhill

Discussion in 'Other Asset Classes' started by Redwing, 10th Apr, 2016.

  1. Starbright

    Starbright Well-Known Member

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    Well said, thank you. If any other long term investors have a different strategy, I would also be interested to hear.
     
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  2. BKRinvesting

    BKRinvesting Well-Known Member

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    Ok so I've been doing some numbers on my own situation and using splits @ 20k rather than being able to redraw out every from a flexible LOC delays the home pay down by a few years. So a flexible LOC would be ideal,

    However I've not ever seen any of these flexible LOC products around? I would assume normally you have a preset limit on your LOC and it would have to be re-evaluated to change the limit?
    Has anyone been using a set-up like this?
    Is it truly flexible as it sounds?
    Are banks still offering it now post-APRA?
     
  3. austing

    austing Well-Known Member

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    The products should be available. Our resident expert will be able to help.

    @Terry_w, can you comment on this please or refer him to a useful post?

    Relates to the attached Debt Recycling strategy (using dividends) given to me by Peter T.

    Thanks in advance mate.
     

    Attached Files:

    Last edited: 14th Jan, 2017
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    AMP have an excellent facility which they call the 'master limit'. it allows loans to be restructured without creating a need to reapply and pass a credit assessement.

    Here is a simple example

    X has a $100,000 non deductible home loan
    He then asked AMP to split it into 2 portions
    Loan A $80,000 as an IO loan + offset
    Loan B $20,000 as a LOC

    X then pays off the $20k LOC completely.
    He then borrows to buy $20k worth of shares
    Interest is now deductible on this split

    X keeps saving in the offset account and now gets his dividends paid into the offset as well.

    Pretty soon X has another $20k saved and does the same thing.

    Now he has $40k of the original loan deductible and 2 lots of dividends coming in. This speeds up the debt recycling.

    to speed it up further X could consider periodically selling the shares when they are high.

    X sells the first lot of share that he bought for $25,000. He pays off the $20k that he used to buy then and has $5,000 left over. He has to pay some CGT but he may be left with $4k. He parks this in the offset and saves even more non deductible debt. He immediately rebuys more shares (after getting tax advice about wash sales). Even if he bought back the same shares at the price he sold them for he would be ahead. He might even get them cheaper.

    X could do the same with the second lot of shares too - then he might have $8k extra cash to pay down the non-deductible debt. This considerably speeds up debt recycling.

    Once X had purchased the shares with the LOC he would have immediately converted the LOC to an IO term loan as the LOC has a 0.15% higher rate.
     
  5. austing

    austing Well-Known Member

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    IMPORTANT

    PLEASE DON'T POST ANY FURTHER MATERIAL ON MARKET VALUATION AND TIMING HERE (or unrelated to Thornhill). I'M ARRANGING FOR THE PREVIOUS MATERIAL TO BE MOVED TO A SEPARATE THREAD CALLED:

    MARKET VALUATION AND TIMING STRATEGIES
     
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  6. BKRinvesting

    BKRinvesting Well-Known Member

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    Thanks @Terry_w
    I like the second idea - I'll have to investigate this further. :)
    However my line of thinking was if there was a "flexible" LOC product available as Peter suggests? In your example it's 20k chunks via splits - what I'm wondering if there is a one that is "dollar in, dollar out",
    ie every dollar put into the mortgage is then able to be redrawn from the LOC?
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Only if the loan is a LOC. But then you would have mixing issues.
     
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  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  9. austing

    austing Well-Known Member

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    Great post again @Pier1.

    We're just having some fun here. For me it's too damn hot to be outside so I'm playing silly buggers. Will this change my decades old investing strategy, NO!

    This Thornhill thread is all about DIVIDENDS. Well it was until the thread got off topic.

    I explained my dividend yield rules aren't followed rigidly. Common sense is also applied.

    So to sum up how my approach is applied in real life. Rediculously simple and very imprecise. It should be noted I'm referring mostly to traditional index ETFs and "market proxy" older LICs in the following:

    SHOW ME THE MONEY (ie dividend yield / income)

    THE LESS THERE IS THE LESS I BUY. THE MORE THERE IS THE MORE I BUY.

    It sort of also ties in with Buffet's quote:
    Be fearful when others are greedy and greedy when others are fearful.

    No fancy charts / indicators, no crystal balls, no following media or so called guru's predictions but just plain old common sense. When extreme fear and extreme greed take hold of the market you won't need any fancy indicators unless you're on a deserted island or blind and deaf, it will be blindingly obvious.

    BUT then comes the real challenge! One's conviction and psychology. Will you be one of the herd buying near the top of the market and selling near the bottom or able to stand your ground and take advantage of these rare opportunities?

    As mentioned in the LIC thread:
    Investing is simple, but not easy!

    Those who think it is easy are either the rare lucky ones or have never had a lot of their wealth in the sharemarket during a major crash. And it gets a lot worse with age as one's ability to earn employment income is coming (as has come) to an end.

    How relaxed will you be as you watch your capital reduced by 50% or more? How easy will you find it to keep buying more in this situation? How will your partner (who may not be an investor) react during this, investing is often a joint decision? How easy is it to not sell when you and / or your partner are nervous wrecks as fear takes hold?

    Which is why threads like this Thornhill one were started. The investing approach is very simple. Almost anyone can do it with bugger all knowledge required. But having conviction in it can be difficult when the sh*t hits the fan. That is why those like myself keep repeating the same boring message over and over again and encouraging others to read, re-read this material time and time again.

    It's all about trying to gain so much confidence and conviction in the strategy that you won't do something stupid at the worst possible time. In fact just the opposite which will see one's wealth creation significantly fast tracked when these wonderful rare opportunities arise.

    Not liscenced to give advice.
     
    Last edited: 14th Jan, 2017
  10. austing

    austing Well-Known Member

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  11. Pier1

    Pier1 Well-Known Member

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    The only optimising I use:
    SHOW ME THE MONEY (ie dividend yield / income)

    THE LESS THERE IS THE LESS I BUY. THE MORE THERE IS THE MORE I BUY.

    Couldn't agree more when speaking of conviction in your chosen strategy.
    Using the above optimization the only way to develop said conviction, I believe, is by regularly DOING i.e.
    Spend less than you earn
    Borrow less than you can
    Buy what you can of your chosen LIC/s when you can
    Reinvest your dividends
    Never sell

    DYOR
     
  12. austing

    austing Well-Known Member

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    @Pier1, stop showing off:). You've already won the number one post on the LIC thread and now you're trying to do it here:D.

    Only joking of course.

    Off course @Pier1 pointed out the obvious. Conviction will only come through DOING (ie implementing Thornhill's strategy) not just reading about it. Knowledge and experience in the market through implementing your plan (such as one provided by @Pier1) will help build confidence and conviction. Take me for instance. I'm your typical nervous nelly type, always worrying about something. But through having a plan, knowledge, experience and persistence even I have been able to build enough conviction to survive and prosper through market crashes. But it never seems to get much easier. One just learns to cope as best they can (meditation:cool:, distractiono_O, anti-anxiety medication:eek:, lots of home brew:)) and no matter how hard it gets manage to stick with the plan!
     
    Last edited: 14th Jan, 2017
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  13. BingoMaster

    BingoMaster Well-Known Member

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    Great stuff @austing and @Pier1.

    This excellent part...

    ...could simply be taken care of automatically by dollar cost averaging. So no implementation of "optimisation" even required on your part!
     
  14. austing

    austing Well-Known Member

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  15. pippen

    pippen Well-Known Member

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    Some great snippits of hints and tips not advice!! lately on this forum, running out of room on my bathroom mirror with the industrial share graphs and various other pieces of info!

    Keep them coming!
     
  16. Redwing

    Redwing Well-Known Member

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    An interesting read

    From Decimal to Digital

    $1,000 dollars invested in the Perpetual Industrial Share Fund in December 1976 would today be worth over $212,000 – around twice the result achieved by the All Ords Accumulation Index.
     
  17. austing

    austing Well-Known Member

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    Great read thanks.

    Probably one of the more important points in the above document:
    I find Peter's comments from a recent seminar in relation to those who at one time or another managed Perpetual's Industrial Share Fund a bit amusing:
     
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  18. Hodor

    Hodor Well-Known Member

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    Looking at the '87 crash at the time and it looks huge, looking at it from 2016 and it is a tiny blip. Wonder what the GFC will look like in another 25 years.

    Out of interest I looked at Berkshire from '76 to now, that $1,000 would be about $2.5m.
     
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  19. Redwing

    Redwing Well-Known Member

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    Damn Daniel..

    1976 was also when Apple listed $1,000 invested then would now be worth $43.7 Billion

    Buying $1,000 worth of shares in Wipro, one of India's top IT companies, back in 1980 would have increased your worth to $76.2 million by 2016.
     
  20. austing

    austing Well-Known Member

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    Oh how us humans get caught up with volatility. With the ups and downs of the market emotions range from euphoria to extreme fear. As a result terrible wealth destroying decisions are made by many. This is because most are focusing on this:
    IMG_0044.JPG

    But here's another chart. Now imagine if we humans could ignore all the ups and downs and associated emotional responces. Same market, same result. Which chart do you choose to follow?
    IMG_0045.JPG

    Posted before but the above is from this excellent article by Peter:
    Welcome - Motivated Money (Perception is reality)