Thoughts on my investment Strategy

Big A, whilst I understand you need an advisor attached in order to transact within super, once setup do you still need one if you don't make any changes? Thanks

 

Well once your set up, if you drop the advisor I guess there is no way they will know. And even if they did I can’t imagine they are going to shut your account. But if they don’t give you transactional authority that will be a problem at some point. Even if you don’t want to make changes, when you get your super contributions you will want to invest them. If no authority it will just sit in the cash account.

 

@Big A

Hows the portfolio tracking nowadays?

 

Yeah not to bad @Redwing . I haven’t added anymore property trusts and actually sold out the holding I had in CLW. The property trusts are doing what I expected them to do during a market downturn so far. I do have a few retail asset funds with Fortius and they have reduced distributions. But Im not to upset by that. Considering the current situation they are still paying something. I hold a significant amount in funds holding office and they have performed really well. Most have not reduced at all.

So the property trusts are doing well but have no intention of adding anymore. Want to accumulate more equities.

on the equities front I have continued to buy in small parcels during the drop. Still following the plan to split capital into aus / international and index / active funds. I am evenly split between aus / international in the portfolio. Aus index vs active is also pretty evenly split. International I still haven’t got it evenly split. 75% is still in active. The plan is to put new capital allocated to international into index till it balances out.

Still having trouble with letting go of some element of trying to market time. Can’t help but feel the market has run too hard too fast, especially US. I just off loaded my only resi investment so will have a decent amount of cash to throw into equities in a few weeks time. Plus have been building up some cash holdings anyway. So I can’t get myself to lump sum a significant amount right now.

Have been a little nervous about the mortgage syndicate funds I hold. Keeping in regular contact with the relationship manager at Australian Unity and that’s helped re assure me. I am being cautious with adding any more syndicates but have still added a few while being a little extra picky. So far they have held up well. But it’s still early days and I am aware things could get worse with resi property. I think I mentioned in another post, in the almost 4 years I have invested in something like close to 40 syndicates and currently hold around 20. With that I am now facing the first syndicates that had to be taken possession of by the manager and sold. 1 has now been sold and awaiting settlement. Final result was a loss of 8.5% of capital. But received around 15.5% income during the 18 month hold period.
2nd one has also been sold and awaiting settlement. This one will return all capital and I received an average 9.5% p.a income during hold.
As long as it doesn’t deteriorate significantly from here I am pretty happy with this investment class. Will wait till early next year and if it holds up well will continue to add more capital in syndicates.

Conclusion: so far so good. Getting frustrated at times waiting for the right time to put money to work. But I’m realising that’s a never ending saga. There’s always some reason to worry and question if it’s a good time to invest.

 

Since it has been fairly quiet on the shares forums as of late, I will share some thoughts.

My plan for this year was to work on moving away from trying to time the market and put as much capital into equities as possible. That plan was to balance out the holdings across aus / international and within each of those go half active funds and half index.

As we near the end of the year, reflecting back I am reasonably happy with the direction I am going. Would have liked to have taken more advantage of the large drops back in March than I did.

While I still haven’t completely dropped the habit of attempting to time my buy in’s, I think I am getting better. Due to offloading my only resi investment property recently and having had some capital returned from property trusts, I found myself with a good chunk of cash to put to work. With the market having had a strong run as of late I have been hesitant to put that chunk all in. But over the last 2 weeks I have been fighting the forces of market timing and put most of it in. Actually did a large chunk this morning.

As much as I think there could still be another correction around the corner I feel like we could just as easily rally from here.

The other thing that I have watched closely lately is how my active holdings have performed compared to the index holdings. I am realising that even if the market is feeling to me a little frothy, a number of my active holdings are having some stellar months. So while the index might go sideways at any point, I have watched some of the active funds have great months.

This made me think, while I sit on this cash thinking market is getting ahead of its self and could move back down I am missing out on the returns these active guys are achieving during this market volatility.

With my aus holdings I have almost achieved a 50/50 split between active and index. But I have added a little more towards the active funds recently as they are proving themselves in the current climate.

With international I never really got it close to 50/50 just yet and still more like 80/20 active vs passive. While I want to get even split I just can’t mentally do it right now considering how much of a run the US market has had. Being that VGS is made up of a significant portion of US market, I just can’t bring myself to throw in large piles in VGS right now. So I have continued to tilt more to active in international as well.

Even though I feel like I have improved the mindset, I am still not quite there yet. Still having the internal mind battles between dropping certain habits that statistically have been proven to be unhelpful.
Looking over some of the active funds I hold this morning I saw that having put some capital to work a month ago and not all of the spare cash meant I missed out on returns between 4%-7% in some of the funds I hold on that idle cash.
I thought to myself I could sit here another month with cash on the sideline and possibly miss out on a other xxx% return while waiting for the next drop. Sure the next month could result in a drop rather than increase, I don’t know that the odds are better one way or the other on any given month.
So as a long term buy and hold investor I just hit buy. But for some unknown reason I have still kept some cash aside even knowing what I know and what I have just said.
Like I said I still have some way to go to overcome these mental obstacles. Baby steps.

 

No resi property
Ssshhh don’t tell the property chat police!

 

Haha.

I still have exposure to residential property via mortgage syndicates. Let the developer build the property and I get 8% p.a for lending them the money. No need to deal with realestate agents or tenants.

I have converted to never wanting to own resi investment property ever again. So much more easier investments to own than resi.

 

@Big A
So here's a question for you.
Going from the earliest pages on this post Resi property gave you the lump sums to now invest in assets mostly other than residential property. If you had to start completely from scratch back as a wage and salary earner how would you go about investing - what would your blueprint be?

 

Good question. Keep in mind, my main source of cashflow was a business that gave me the ability to do the few early developments that I did. While those developments gave me a nice windfall, the baulk of my wealth has come from running businesses.

Would I do it again? If I could make similar margins on a development site today then sure I would do it again right now. But those sort of margins are hard to get today. Not saying its impossible to find small developments today that could be good earners. I am just in a place now in which I don't need the hassle and could find easier investments that provide a decent return without the headaches.

If I was back at the start now I guess I would still take on small development projects. Another thing is that I have very little experience and knowledge about development. It sort of fell in my lap via a real-estate agent friend who pointed us in the right direction and a builder we got introduced to that did good by us.

If you are a wage or salary earner then it's probably still a good approach. Unless your on a big salary buying index funds while a great strategy will take a lifetime or two to get you a comfortable passive income.

 

Not really.

Save $3k a month for 20 years, assume modest 6% total return and you have the equivalent of $42k a year that will last forever. Or $56k a year for a typical 4% SWR (good for at least 30 years).



That's an annual overseas holidays, new car every 8 or so years, good eating kind of money. Can do it in 15 years with $4k a month contribution and 8% CAGR.

 

So @Big A starting afresh, or the advice you'd be giving you kids would be to build a business rather than wages to build some solid investment funds and invest from there.

 

Yeah fair enough. I guess it depends on what you consider comfortable. Let’s say you start at 20 and by 40 you have reached the numbers you quoted. Could you live of your $42k or $56k passive income? Depends I guess. Is it just you? Do you have kids? Do you own your own home outright? I would imagine you don’t own your own home if you saving $3k a month earning an average salary.

Personally at 40 with 2 kids assuming I am paying rent as well, I don’t know if $56k would be comfortable for me.

But I understand my version of comfortable is probably different to what someone else might consider comfortable.

Your graph is a good example of what is possible with equities.

 

100%. If you are fortunate enough to be able to build a strong cashflow business that will have the biggest impact on your end result.

I’m not going to sit here and pretend I’m some big business guru who can start successful business with the click of my fingers. My good fortune in business came from hard persistent work with a good dose of luck. Many people work hard for many years and it doesn’t always result in significant success. There is always an element of the stars aligning that when combined with hard work results in success.

I wasn’t highly educated. Never got a single degree. But I knocked and knocked until luckily one day a door opened.

So yes, if your able to get a good business of the ground then it’s easy to use a strong cashflow from business to build a portfolio that will give you plenty of income.

 

We did something similar and found ourselves accidentally retired in our 50s, not rich, yet comfortable. Buys you the gift of time. They’re not making any more of that.

 

And that’s without any consideration of super one may have/be accumulating

 

That's the thing, many of people have a dream of $100k passive, but the opportunity cost of that is almost always time. Not that there is anything wrong with that, but I think too many people discount the time cost too much (or don't even think about it). I want as much of my time, with a fit mind and body as possible. So I've determined how much I want, with a smidge of extra fat so I get a balance of time and money.

As @Big A mentioned though, children can be a spanner in the works with considerations like schooling, roof over head, medical costs. So a bigger buffer might be warranted for parents.

 

I so badly needed to hear this @Big A ! It's so hard to give up on it after so many years on that resi road, especially house prices increasing so much in the past many months.

 

I am glad I could be of assistance. I am only sharing what I have learnt from others here on PC. Being on PC opened my eyes up to other options that I once would have never considered.
Even though I started investing in equities before getting on PC, it wasn’t till some wise members kept at me that I finally started to understand and accept equities.
I think the Aussie love affair with property is we are scared and don’t understand the other options. Once I did, I decided resi was more hassle than it was worth.
Again developing something that has instant upside on completion is a different thing all together.

 

BT Panorama is a great platform. In regards to investments, I find that a core/satellite approach works, that is a blend of index funds and actively managed funds and the weightings will depend on your risk tolerance. There's also different ways of diversifying investments depending on your goal.

 

Its been an interesting month. Markets have had a strong run. Looking over some of the active players I hold it looks like the index's might have had a good month over the actives. There looks to have been a move to the value sector which has caught out the actives who are focused on growth stocks.

That's why I like to have a foot in both camps.

Funny how a month ago markets had been perceived as expensive by some including myself considering the current climate. Yet looks like we have had a over 10% jump in AU and I think also close to 10% jump in international.

Are we now priced to perfection or is there more to run? Will there be another significant drop around the corner? My best guess would be..... flip a coin and see what it tells you. Your just as likely to get it right using a coin flip as trying to analysis what the market does next.

Gets super frustrating at times. Amazing to think that even with the sharpest minds in the world consistently analyzing and trying to figure out what happens next the end result is anyone's guess.

This all brings me back to the same conclusion that I know has been pointed out to me many times already. Stop trying to work out what the market is going to do next week , next month or even next year and just invest. Invest as much as you can as often as you can.
To that conclusion I have already put the majority of available capital to work this last month and will be putting the remaining capital in tomorrow.

I was secretly still hoping to ride that one big wave into the sunset with @Nodrog , that we had once both dreamt off. I have relented and come to the realization that surfing is not really my thing and I am better off just getting in the water and splashing around with everyone else.