Thoughts on my investment Strategy

Thank you again @Nodrog . Investors mutual small cap is an interesting one. While Bennelong ex 20 eliminates the top end I’m not sure it really captures the bottom end of the market. Looks more to sit in the middle.

Anything I can offer up in regards to unlisted property I would be more than happy to share. When your ready maybe we start a thread in the unlisted property section.

@Gockie while I’m no expert and you can see my learning process through this thread I would also say avoid exciting investments. When it comes to investing I feel simple and boring normally delivers the expected outcome as long as your expectations are reasonable.

Only thing I would keep in mind being your holding is in super is to consider the possible change to franking credit refunds. I would imagine if and when that comes into play the benefit of being heavy in aus equities will be reduced. I would consider shifting to towards holding more international equities to be able to use up any spare franking credits from the Aus holdings.

Or maybe some of my favourite holding in reits. Listed or unlisted. In saying that commercial property is at a peak at the moment and there are not that many great opportunities on offer.

 

Ok. I just bought 1000 of NDQ (Nasdaq 100 ETF) at $16.19. I feel positive with technology and its done well since inception 13.63% pa (26 May 2015). Low dividends though. But let's say money goes into R&D.

 

A lot of the super money is in boring stuff! Happy with my NDQ purchase just now - everything else I own is Australia market based

 

Thank you @Hodor . I agree it’s hard to sometimes take into context a written discussion compared to having it verbally. I wasn’t sure wether you were for or against index investing in your initial post.

I agree if a friend who has little understanding of the stock markets or even if they had a decent level of understanding I would only recommend they go index if they asked my opinion.

There are a few reasons why I’m at this moment in time still for holding 50% of my equities in active managed. First is that I am already in them as this set up with the adviser that I started this journey with.

Second there are some that have performed well over the 3 years. There are also plenty that have underperformed but for the mean time I am willing to give them a chance to bounce before I cut them loose.

Third reason is being that I hope to one day hold a significant amount in equities being 5mill in the next few years and hopefully one day growing to 10mill plus I’m not comfortable enough just yet to go all on index. As time goes past and I continue to see the index half of the portfolio out perform the active half I’m sure that will sway my thinking and comfort level to go all index.

 

I think any Al who lifts, gets the Nick name Big Al. I'm still Al but the Big part is disappearing with age.

 

That could be interpreted a number of ways.

 

Get your mind out of the gutter. With age lifting the weights doesn't get any easier. Just trying to stay injury free these days is an achievement.

 

I don’t need weights to get injured, currently still have a sore cracked rib from wrestling with a tree root in the garden. This nuisance injury really limits what I can do.

 

Wow a cracked rib from gardening. Yes I am really looking forward to getting older. I guess there has to be some downside to getting older , wiser and FI.

 

Don’t worry, the tree came off second best

 

That's some tree.

 

Well maybe ours wasn’t quite that large. More like a large shrub actually.

 

Or was it:

 

Hi All,

This is my first post on the PC forum. Whilst I came here for the property side of things I have found I am continually drawn to the shares etc section.

I think this is because even though I am very interested in investing in property, I see investing in businesses as the best way to grow wealth faster over time and as such I would like to have a significant part of my portfolio invested in the market.

I have found this thread in particular, resonate with me strongly, as it mirrors my circumstances yet, at a different stage of development.

A big thanks to you all for your comments and candidness. It really helps when you can quickly ascertain people are being fair dinkum in the advice of their experience. At least I hope I have got the mood correct. You certainly need to DYOR and be comfortable with your decisions but it helps potentially fast track the journey with the help of the experiences of others.

Now a little background on my particulars and where I am up to. Well basically, at the start of where Big Al was 3 years ago...This is why I am posting here I suppose. I do not want to steel his thunder and Al seems to have a great attitude to investing. It feels right.

My situation is:
I am turning 50, married with 4 kids. One starting Uni, one with special needs and two more at 12 at 10. So my running costs of the household are pretty much up there at $250k pa of which school fees are $80k. High I know but I do not want to compromise this and still have a good 10 years left at this level. Cry!!

Recently I sold my business after 30 years of it ruling our lives. Don't get me wrong it was great financially to us overall (the second 15 years anyway) but I decided enough is enough and you only live once. I have not heard of anyone coming back for a second crack at life.
I started it to give me some income during my university days. I studied commerce and economics hence my comfort zone in investing with a little risk and knowledge. So, in short, I am now in a position where I have a decent bunch of money (I think but maybe not enough given the crapoy yields on offer) a substantial PPOR, great holiday house (about $4m value) and no debt. I have the deeds in my hands. Great feeling!
Do I count this property as part of my portfolio. Not earning income and I want to keep them mortgage free. So my view is do not count them. It would make a difference in my portfolio weighting in the property category if I did.

And I also have $400k (cost) in a highly speculative small cap company that I have had for 4 years which is looking like it may (fingers crossed) pay off big time in the next 12 months (or not). This is my high risk play.

The rest of the money I have currently sitting in:

1. 20% of portfolio in cash in Commsec account earning 1.75%

2. 15% of portfolio in 90 day TD with Bank Vic earning 2.85%

3. 65% of portfolio in 10 x IG bonds with av. BBB+ rating and 2.8 year average maturity. YTM of 4.9%. One of them is in USD.

I have invested alot in short term bonds only for the reason that I can park the money with relatively low risk for a decent return until I figure out what to do next. Better than a TD. I can also sell them pretty easily as they are IG and in wholesale parcels. This is through FIIG.

I do not particularly want to work in the traditional sense anymore. I am financially literate but not experienced in the investing area. I have no issue with taking an active role over the next 15 years in my investments. This means it can get complex if needed. I have set up my structure with a series of trusts doing different things. This complexity does not bother me as I can do the accounts for everything myself and I enjoy it. I just get tax advice and the final lodgement done by accountants.

I have worked out I need a 5.7% pretax return across the portfolio to meet my needs. So I would like a safety buffer in there of say earning 7%. I also have 2 yrs expenses as cash put aside.

There area few issues I am debating with myself at present. I need to get my return up so as not to start eating into the capital but everywhere I look asset values are near historic highs and I am reluctant to buy anything. There is also regulatory risk coming up with the election. Yields are pretty crappy everywhere I look.

I have decided to take my time and research everything but I also am wary of entering an 'analysis paralysis' mindset. This is difficult as I enjoy analysis. I consider myself as having a reasonable appetite for risk but now I am relying on my nestegg for income this has diminished somewhat as the realisation of the need for capital protection has set in.

I have decided against a FP as I do not want to waste time looking for the right one. As I said, I am pretty aware financially, so whilst I believe there is someone out there that can add value, when I meet them I will make a decision then.

In the meantime I will be researching the risk/reward possiblilities in the following asset classes. At present I have no overarching portfolio weighting strategy. I am thinking that I will build a template for each category and assess at least annually whether the asset is worthwhile investing in. This template will take into account macroeconomic and regulatory environment, fundamental and technical analysis. I will research all weather portfolios as well not just growth and defensive assets.
I need to secure the income so the mix will have this overarching requirement of a 7% return overall. Yes I know this is high in this environment so I will have to take on risk.

The asset classes that interest me are:

Property Direct -keen to get some tax deductibles i.e depreciation.
- commercial
- resi
- development - small scale <$5m

Property Indirect
- AReits and Reits

which is best?TBA

Business Direct
- would have to be very simple to run with good cashflow. So small scale. Not preferred but I may need to do this for the next 10y anyway until expenses drop and or If I cannot achieve my income target. A Distillery would be great as I have a keen interest in the making of Rum, Bourbon and Gin. Haha. Actually for real!

Shares Direct
- Growth
- Dividend
- Spec
Both here and international and of all market caps.

Market Trading
- Shares/options only
Ruled out derivatives and FX. Far too risky.
I am interested in this as a potential substitute for going into business again. I know it is fraught with danger but I am reasonably confident that with a year of training myself ontop of what I already know in the TA side of things I could maybe eck out some decent cashflow. Have been trialling and learning with dummy account last 2 years but not focused at all due to work. To be determined.

ETF's
- bonds, index, commodities and gold

LICs
-Will wait until after election. Do not want to get stung with potential restructuring costs. Interested.

Fixed Income
- Direct, XTF's, Managed, Listed, Hybrids, all the flavours basically.

Cash and TD's

P2P and other high yield 'be the banker' investments.
- only interested in secured first mortgage type.

My aim is to earn 7% plus return but also balance this with spending more time with family and friends. Thinking 20hrs a week max portfolio management and if I dont want to work that week I dont have to. I have spent the past month relaxing but I am now getting itchy fingers and am ready to get cracking next week. I will reassess at age 60 and see how I want to structure my lifestyle then. I am of the view that I will need to keep active to remain healthy physically and mentally.

I really am not confortable putting any decent amount into property or shares at present due to my feeling markets are more likely to go down than up over the next few years. I am thinking I would rather miss out on a 10-20% gain with a smaller probability than have a 50% loss with a much higher probability. There are many reasons I think this from slowing global growth,earnings, Brexit, Trade war, debt levels etc etc (too many risks to mention really). Not really sure where I should start.

I am sorry for the big post and I am not really sure what comments and advice I am asking for specifically at this stage. My attitude is the world is my oyster and I need to narrow it down a bit otherwise I will be going around in circles on one leg twirling my hair for the next 5 years.

I suppose the crux of my question is if you where starting today (all over again) and given the current high valuations for many assets with a large sum to invest with a specific target needed. What would you do?

Again thanks very much for the imparted wisdom and great banter and sorry for the long winded post.
If anyone is interested and Al if you dont mind (totally understand if you want me to start a new thread...seriously mate) I will post my learning journey as I progress here?

Cheers everyone and sorry for any typo's. Read it quite a few times. Here it goes!

 

@Brumbie I understand your desire for yield but if need be why the aversion to dipping into capital in retirement? Are you wanting to leave a huge payload to family beneficiaries / charities when you leave this world?

@Big Al can probably help with Unlisted commercial property where the yield is around what you desire. But as you stated valuations are not exactly enticing at the moment as is the case with a number of asset classes.

Given I’ve bored the pants off many here hopefully others will inject some variety of opinions into this thread.

 

Thanks for responding mate. I guess my aversion to eating into the given capital is the desire to leave a legacy for my kids. I especially need to look after the one with special needs. I have talked about this extensively with my wife and we are both of the view that as long as as our son is looked after then everyone else will be ok. Given they will get the houses in the end.
I understand it is a very privileged position to be in but I am confident and deem it important that to leave a legacy is critical for the future proserity of my future family. This is an intangible but an important consideration. I am afraid though that in my persuit of yield I may be working against this aim. I see your point.

 

Hi @Brumbie and welcome to the discussion. Happy to have u in the thread as there seems to be some similarities in our situations. The more input and thoughts that are shared the more we all learn from each other’s experiences.

While I consider myself still a beginner and have much to learn I will give my thoughts and opinions on your situation and what I have done or would do moving forward. I will go through your post this morning and reply back on the different points through out the day.

I’m not as articulate as others with my posts and my writing skills need improving. @Nodrog learnt this with the lack of paragraphs in my early posts. But I’ll try my best to make sure they are at least readable and make some sense.

Cheers

 

Quote..
I really am not confortable putting any decent amount into property or shares at present due to my feeling markets are more likely to go down than up over the next few years. I am thinking I would rather miss out on a 10-20% gain with a smaller probability than have a 50% loss with a much higher probability. There are many reasons I think this from slowing global growth,earnings, Brexit, Trade war, debt levels etc etc (too many risks to mention really). Not really sure where I should start.

Don't worry about your writing skills ,I still don't know what a sentence is nor do I care..

The only question I would like to ask is--with the 50/50 probability of facing a full blown broadside or more then 50 percent as you will at some time and as nobody want to be perfectly transparent what would you do then?..

 

I know it will occur again and again in the future. There is not much you can do about it. I just don't want it to occur at the start. It would put me in a difficult position of trying to get back to even over the next 10 years. After such a big long run in the market. I don't expect to pick the bottom but more so that I want to avoid the top.
Would it make a difference if I invest now and am achieving my target? Not as much I suppose. But looking around the yield is not there as it used to be. That also tells me its toppie. Maybe things wont get back to LT averages with all the meddling going on.
My gut feeling is I will start investing in small amounts at first. I think at this stage of the cycle DCA is the way to go.

 

Thanks Al,
Don't sell yourself short. Reading your posts was actually very easy and enjoyable.