Thoughts on my investment Strategy

@Big A who knows after you are gone your kids might not like boring slow building wealth through index ETFs. They might think the old man's thought process was so old school. You got to invest in things like bitcoin, gamestop where you can double or triple your money in a short time (they happily ignore that you can also lose all your money in short time ). So they go ahead liquidate all index ETFs and load up on whatever is the hottest speculative thing

I hope not but you can never rule it out either.

Cheers,
Oracle.

 

No lol.
IMO it's a process that goes on for a while.
Inheriting a wheelbarrow of cash or winning the lottery puts many people in a "zone" they have no competence in.
I reckon kids should be involved in family biz or investing asap. Even if it's just asking for an opinion. Asking to do some research. Make them minor partners in projects.
And then letting them have some autonomy, wins and losses.
I've seen a lot of this. Doesn't work for all kids, but those that have the inkling will fly with it.
And it can bring out issues, but then again that'll happen regardless. Seen plenty of that too.

 

I believe my job as a parent is to teach them and put them on the best possible path wether that be with investing or any other aspect of their lives. What path they decide to take themselves in the future is totally up to them. But that doesn’t dissolve me from doing my job now.

100%. This is exactly what I am doing. My oldest who is not even in his teens yet already has all his birthday / pocket money invested in investments via my holdings. I sat with him and showed him what I invest in and then made him decide which investments he likes best from my holdings. I guided his decision but he ultimately got to choose. I am already working on shaping his attitude and mind set towards investing, in his primary school years. Hopefully I will be around till both my kids are in later adulthood and after 40 years of managing wealth together they will stick to the path that got them to that point. If after that they decide to go down a different path then so be it.

I am very in tune with my children and feel like I know them pretty well. It’s still early days and lots can change as they grow but the single most important job I have, is to continue to mould them to be the best they can be. As long as I do this job well, then I would expect them to continue on the path we set upon now. If they go down a completely different and radical path in life then I would see that as having failed in doing my job.

 

Podcast: Cryptocurrency And Bitcoin – Stacking Satoshi’s With Stephan Livera

 

And here I was just saying how helpful and interesting the links you post up always are then you post up a link about crypto.

 

very simple thought from someone who really doesn’t have much of an idea on different structures, wouldn’t making money (and subsequently paying tax if sold) be better than not making money (or minimal) and not paying tax?

 

Ha Ha

The madness of crowds is interesting, isn't it?

Charles Mackay wrote "Extraordinary Popular Delusions and the Madness of Crowds" in 1841

 

With everything happening around the world right now my new saying is “ we have hit peak stupidity”

 

Yes, but why not save some tax while you are at it too?

 

Yes. But making money and paying only as much tax as I absolutely have to and not a cent more is the point of such planning.

 

Now that i have some idea of what direction I need to be moving towards, the next piece of the puzzle is this.

If I am going to add growth assets into the company holdings i will stick with just buying into Aus and international index. In the trust I currently use the BT panorama platform and buy into the wholesale managed fund versions of VAS and VGS. But following the conversations regarding the etf and fund versions I am wondering why the advisers push towards the wholesale fund versions? With VAS the etf has a lower admin fee and if you consider the brokerage costs on a popular platform such as self wealth of a flat $10 then the etf still looks to be better value. VGS admin fee is the same for etf or wholesale fund. Then there is the tax advantage of the etf over the managed fund version that has been raised. This relates to when equities in the wholesale funds are sold the tax consequence is spread across all investors regardless if you sold down or not.

So can’t figure out for the life of me why you would bother with the wholesale fund version. Since I hold the wholesale version on the bot platform in the trust I will continue holding that. With the new purchasing under the company I think a self wealth account to hold VAS & VGS would be the simplest and most cost effective arrangement.

I looked at the vanguard platform and that’s $600 a year in fees plus brokerage. Adding another BT account would cost $540 p.a plus brokerage for the ETF’s. With self wealth even if I did monthly buys of Vas and VGS that would cost $20 per month. $240 p.a. And from what I understand the self wealth platform achieves the same thing as the Bt platform with regards to managing the admin for accounting and tax purposes.

Any disagreements?

 

I've not understood the platform thing for a while. There's almost everything I'd want as an ETF on the asx.

Or manually alternate vgs and vas every second month. Or automate the alternation with pearler if you are investing in personal name (trusts soon, not sure where they are at with companies). Im not specifically pushing a low cost broker though, if nabtradeor commsec had pearler's autoinvest feature I'd probably be using one of them as I already have accounts.

 

The platform is just a convenience to be able to log in and check your holdings. Performance reporting is also good but with index funds it’s not really a big deal. I guess the main thing is the end of year tax statements for tax return purpose.

But isn’t Self wealth a platform that doesn’t charge any platform fees? I thought it was a free platform with the only charges being $9.95 brokerage per transaction. With the average purchase being $50k I am more than happy to pay the $10 brokerage.

Not fussed with the auto invest features. I like getting on and hitting buy every month. It’s like retail therapy.

 

Went away and did some more homework on the structure.

The testamentary trust is a great option but looks like they also come with an 80 year life span. While it offers great incentives during its life span it will face the same problem as the discretionary family trust of having to end.

A possible solution looks to be in the CGT rollover provisions. From what I understood ( I will have all this looked at by a professional before acting ) their are CGT exemptions when a shareholder of a company being a trust is replaced with another trust as long as the beneficiaries are the same. In that case if we move to the model in which investments are predominantly held in a company structure with a trust as shareholder, come 80 years and the trust must go we can replace it with a new identical trust without triggering a capital gain event.

Now for the trust already in play that holds assets it look like we can also use the rollover provisions to avoid a capital gain event come vesting time. Again, from my understanding shares held by a trust may be transferred to a company under the rollover provision without triggering a capital gain event. This applies as long as the company shareholders are in common with the beneficiaries of the trust that transferred the shares to begin with.

Still think there is a role for a testamentary trust in this somewhere. I am surprised testamentary trusts are not part of more peoples wills.

 

I'm not.

The mentality of quite a number is still in the past when the majority of deceased estates were a couple of bank accounts and the family home. Some do not even know the tax components of their superannuation and consider equal distribution of it is "fair" without an appreciation of what they could mean for after-tax issues for their beneficiaries.

Have been involved in these types of discussions over a few years and it's put in the too hard basket or I'll deal with it later - meaning never.

 

small business concession could potentially apply, but only if the trust is a small business

 

@Big A is it really wise to make taxation related structuring decisions for things 80 years into the future? I can't even guarantee franking credits will be here in 5 year time let alone all the discounts etc you are worried about.

Cheers,
Oracle.

 

Sure things could change in the future, but does that mean we shouldn’t plan based on what we know today? If we don’t base our decisions on the rules and policies as we know them today then what do we base our decisions off? Is it really that much work and effort to have things set up in the best possible structure based on the rules / policies as we know and have in place today?

I really struggle with the it’s all too much effort attitude. Most people go to work day in and day out to earn a thousand or two a week. If I could save thousands every single year, from doing what I imagine will be less than 1 full working weeks worth of work to set up a more efficient structure, would that not be wise?

I say this to friends and family all the time. Paying higher mortgage rates, not shopping around for the best prices for a number of services, not minimising tax by looking at concessions such as additional super contributions. All these things would take mere minutes or at most a few hours to save you hundreds if not thousands of dollars. Yet they will go to work for $30, $40,$50 an hour, yet not pick up the phone or jump online for an hour and save $500. WHY? Because it’s to much hassle.

Crazy.

 

Found your thread @Big A thanks for the pointer
Taking on the feedback by @Nodrog I read the first page & now just having a quick squiz at the latest posts before going back to chronological.

I think another good response to this is from Kerry Packer when he was asked before some Senate Inquiry about his company's tax-minimisation schemes, he replied: "Of course I am minimising my tax. And if anybody in this country doesn't minimise their tax, they want their heads read, because as a government, I can tell you you're not spending it that well that we should be donating extra!" He delivered it so well, it’s best to watch it here Partner showed this to me - really cracked me up.
I feel the senator who asked him the question agreed with him .

Also Big A you’re lucky I ditched (parked?) the small devs idea. I was seriously considering doing some small devs eg: THs & duplexes on my house IPs (even signed up to an online course ), before deciding I should start with some shares. Now I know you had exp in small devs I would have shamelessly hit you up with questions . Lucky for @Harris too the border is closed I may have flown to Melb, stalked & followed him around and asked him a million things .

Ok back to reading after some dinner!

 

Yes that packet line is a classic.

Happy to share any knowledge I have. Unfortunately when it comes to property development, it’s very little. I had a partner who i did it with and he managed most of the process. Add to that a real estate agent friend who guided us and a booming property market all made us look much smarter than we were.