Thoughts on my investment Strategy

Not to worry -it's all good.

I feel like my FP is treating me like I'm in my 80s not my 60s.

I'm not sure if their ultra-conservative approach (with no attempt to educate me) is due to lack of knowledge/experience, or if it's just part of their plan to keep me relying on them (and paying them).

I will keep educating myself.

 

I agree, they are just hard to come by.

 

Cramer



You never know how your future self will behave, it's extremely hard to measure an investors "real" risk profile

 

100%. I’m in the more is better than less camp.

Thank you @twisted strategies , appreciate the kind words.

 

my strategy is to keep as many small folk profitable in the game ( property ownership and stock market ) as i can

a bit like being a zebra on the African plains ( many zebras confuse the lions ) the odd kick from another zebra isn't as bad as a pack of hungry lions looking at YOU

i talk in generalizations a lot to deliberately provoke folks to think what is best for THEM

some members here are liable to live another 50 or 60 years .. i am VERY UNLIKELY to live another 30 years , so naturally our strategies should differ .. but some of my ideas MIGHT work for those folks in say 40 years time .

now with Storm Financial ( as i understand from a veteran financial advisor friend )the problem was LEVERAGE ( borrowing money to invest ) and of course the folks who encouraged excessive borrowing , now of course we could blame a few more who forgot to teach people about finances ( and complicated contracts )

if it looks to complicated i normally move on to something i can understand clearly

so complicate regulations deserve some blame as well

please take care , my simple brain sees the current investing world in a very scary place ..but at least i am not compelled to pump more money into the bubble ( i have no formal super )

 

i strongly encourage that ,( whether you seek expert advice or not )

 

I agree 100% Call me crazy but everyone on this forum works hard for their money. We’ve spent years training or studying so we could work in our chosen professions. I dare say most people work for money unless you are one of the few that ‘loves’ what they do and does it for the passion.
Here is my question, if we spend so much time and effort to earn money why don’t people invest time learning how to manage it? There are plenty of resources available that are free. If you’re put your mind to it you can be more than qualified to set up your securities folio or devise financial strategies.
Don’t let the sharp suits and slick haircuts fool you, you can do it too!

 

Thanks.

That's a great question. I think some people place too much trust in a financial planner (in the same way they place trust in their Doctor). I was one of those people only a few short weeks ago. I thought all I had to do was choose a reputable FP and they would make all the best choices for me. As it turns out, it doesn't quite work that way. It creates a lot of stress for me if I don't understand what they're doing and why. So I have no choice but to educate myself. It is drastically slowing down the investing process, but I feel much better about it.

 

everyone on this forum works hard for their money. Nope
Must be new around here @Nodrog and @SatayKing do nothing for theirs

 

Around 35 years of investing and unfortunately a very slow learner. If only I’d accepted that success is generally the result of following the simplest of proven strategies ie index / low cost broadly diversified LICs investing and importantly DON’T FIDDLE. Accepting average returns will highly likely way outperform any attempt to beat the market longer term. Investing is very different to other pursuits for the vast majority, the less involvement the better. You are your worst enemy! The sooner most realise that the wealthier they will be.

 

Which requires, as one poster put it although in a different context, "ice in the veins" when things may not go according to your perception and a short-term view is applied.

As for working hard, very true. There are people involved in some 200/300 companies in Australia and 1,600 world-wide who are working hard for me. I'm lazy in that regard.

The hard work I am facing is clearing up detritus following the storm which came through last night which does nothing for my sangfroid.

 

Surely another coffee is required while you survey the situation, then another why you contemplate the situation, then another while you plan your attack, and then another before you do anything about it tomorrow?

 

By which time I will have placed a call to the clean-up crew.

Not even for the windscreen wipers?

 

So the meds had kicked in. But I'd excuse a 91 yo for almost anything. Grand he was happy though.

Best investment strategy ever.

 

Sorry, for some people it’s worked as in past tense. The ability not to work hard usually comes from one or a series of smart decisions somewhere or a lucky ticket in the birth lottery.

 

Been a few months with no update. That's because there has not been much to say. Investing moving forward has been simplified to buying 2 index funds ( VAS & VGS ) on a regular basis. No more holding onto cash trying to time the market. No more trying to work out if active or index is the way to go.

Pretty boring.

In my search for something to tinker with, I thought it might be a good time to look at the structure I hold the investments in and how suitable they are for its intend purpose. This is something I have been giving more thought lately and feel like there are issues with the current set up and its intended purpose.

Bear with me as this will be a ( Long ) thinking out loud post. I find putting stuff down in writing helps with breaking it down and the feedback assists in finding holes or alternatives.

The investment theory is keep it simple, which is the path I have moved towards. The structures the investments are held in are anything but simple.

The purpose of the structure is asset protection, tax efficiency and passing down for continued holding into future generations. Hold period is indefinite but of course no one can predict the future and selling down certain investments in the future must be considered.

There is the family trust with a corporate trustee that holds a majority of investments. Then there is a company that is a shareholder of an active business, is also a beneficiary of the family trust as a bucket company and holds an investment of its own being an interest earning investment so no capital gain. The mentioned company shareholder is then a second family trust.

I am questioning if holding the bulk of the assets in a family trust for the intended purpose is the best option or whether holding in the company is a better option. Or a split of both.

The trust is great for income distribution, asset protection with the added capital gains discount not available to the company. Issue is the trust must vest and come to an end after 80 years. This is a problem. Having to move assets on vesting will trigger some serious capital gains tax with no real benefit if your intention is to continuing holding the same investments but are forced to change the trust or holding entity. Yes there are options that half way through each 80 year period you commence transitioning investments across to a new trust. A lot of effort and still liable to capital gains tax hits but at least you can manage this over a longer period of time and minimize the hurt.

The other down side I have with the trust is with relation to the bucket company and capital that is loaned from the bucket company to the trust. The company has capital coming in from the business that its a shareholder in and also the interest earning investments it holds. That capital is re invested in additional interest earning investments as I have avoided acquiring capital gaining investments due to the loss of discount for a company. Spare capital I have then loaned to the trustee of the family trust to invest in assets that have a capital gain component. Thanks to the time spent with @Terry_w reviewing my structure and the arrangement it has been done to ensure compliance with the Div7a rules. Written loan agreement and interest being paid from the trust to the company against this loan. Problem I have with this, is that I don't see how this can work long term. The loan arrangement is anything but simple and adds a level of complexity to the structure. As capital continues to flow to the company I either have the option of investing in interest earning assets, which I don't mind but in itself is another discussion of how much of such an investment is suitable or continue lending it to the trustee / trust further growing the loan which must be repaid. The interest being paid on this loan is of no issue as its taxable regardless of the trust declaring it or paying it to the company as the interest and the company declaring it. Its more about the effort of managing the arrangement and compliance while considering that it will have to be paid back at the end of the loan period which is set at 7 years as per Div7a rules for unsecured loans.

This brings me to the next option. Do I just bite the bullet and start holding potential capital gain assets in the company rather than just interest earning assets? The company can continue on forever ( Technically ) compared to the 80 year trust end date. Eliminates the whole loan to the trust issue which is a pain in the backside. But you give up the capital gain discount when selling the investments. How much of an issue is that if the plan as of today is to never sell down the assets and again as of today the plan would be that those investments would most likely just consist of holding VAS & VGS. Nice and simple. Happy to also keep holding some of the interest earning investments I currently have in this company.

I am thinking a mix of both might be most suitable. Keep holding and building investments in the family trust. Keep all capital that comes into the company, in the company and use it to acquire investments with both interest earning and capital gain potential. By having both it would be less likely that the need to sell down investments from the company will arise, which negates the capital gain discount disadvantage. If and when the need to sell down arises the trust investments can be sold and capital gain discount applied.

Simple yeah?

If anyone has bothered reading this far, any thoughts?

 

It is not a case of one 'structure' for everything. People often come to me with the idea that they want to do X, Y and Z and want a structure for it. They might be better off with some in a company, some in a trust and some in their personal names.

My views on structuring are constantly evolving too. I think asset protection bankruptcy focused on too much, and it is better generally to focus on the taxation consequences. Estate planning is important too, but perhaps less so where a person plans to spend up big before they die - but they still have to plan for a premature death.

 

Set up your own unlisted IC.
Shares (some or all) can be owned by a trust and the dividends are then distributed.
And will last forever, unless disolved.