ASX Shares Why is this?

Yes it went Ex-Dividend today.

Who ever is providing that graphic of "up 36c (0.43%)" has adjusted Friday’s close by the cash dividend amount.

The chart itself is not adjusted.

 

Companies go ex div then shareholders exit and jump on the next share about to pay divs. Its stupid alright, but only people who have entered the stock well below the pre div price are doing this, otherwise its madness.

I see it as a time to get a discount on shares at times.

Sometimes shares go up after ex div but rarely.

 

Could I also ask if the 1yr, 3yr,5yr and 10yr performance figures on ETF watch include distributions added back or is it just price growth etc.

Cheers,

MJK

 

What we would like to know is are you enjoying this new thing you have got yourself into? Is it as good as property?

Maybe you can share your experience so far for other property investors who might be considering taking the plunge but are not sure whether it's good idea or not.

Cheers,
Oracle.

 

As an ex 100% leverage-to-the-sky property investor, learning about shares and beginning to transfer our savings from property to shares for an income stream is the best decision we’ve ever made.

It’s almost impossible to create an income stream from capital city property, after all the costs, without having many millions of equity.

Wish I did it from the start. Would’ve saved a lot of paperwork and headaches, not to mention the risk involved.

 

Say it isn't so!

This is a property forum after all.

 

Concept understood.

One of my concerns is the net yeild from properties can be a quite low and I've never bought below a 5% gross yeild.
So looking to ETFs to improve the income outcome
But yeilds seem pretty low with these ETFs around 4% pa except for the REITS. Does that work for you guys?

 

Paying off your leverage is why property doesn't yield an income stream. If you sold houses to pay off the loans the remaining property would pay you a wage. That being said, everyone wants to negative gear ips.

Property is a vehicle for capital growth, which can be multiplied with leverage. The right buying decision for property is essential to success. If you overpay, buy in a bad location, buy a bad house etc you will struggle to make money. There are other risks such as interest rates or loss of income.

Shares are much easier because diversified vehicles like ETFs and LICs eliminate bad decision making. One can buy at the top before a crash but that is market value and historically it will eventually return.

Property has a place for investors but the risks are a lot higher than buying the equity market with ETFs. You can generate an income stream from property but shares make it easier and safer.

 

Leverage can provide an income. You can sell and not pay down the loans, keep the loans the same and sell a property say every 5 years, a 400k property will give you more than 80k p/a for 5 years as it can be used to produce futher income, to pay down or offset loans even further liquid CG with shares. If you have a $3m property portfolio growing at 8% your equity is growing at $240kp/a, or say a million in 5 years. Pretty easy with xcol . ETF's and LIC's don't eliminate bad decision's some of those aren't good decisions, you still need to be on the ball, with ETF's you still need to exit and re-enter strategically to get a decent return. Shares are a much better vehicle for capital growth, property is to store wealth, give you security ,income and leverage and you only need to make a selling decision once or twice a decade.

 

A 5% rental yield ends up being about 3% or less after all costs, including maintenance repairs and little upgrades are taken into account just to keep getting market rent.

A 4% dividend yield if fully franked is actually 5.7%. So it looks less on the surface but it’s actually close to double.

If you ignore the franking refunds then it’s still 4% with 30% tax already paid versus 3% rent before tax. For most city property that’s being generous.

Does it work for me? Yes.

 

Yes I get all that. I have bought property predominantly for capital gain with mostly neutral cashflow over the years except the Tassie one which is a cash positive investment......but when looking for income Im thinking bank shares at 5-6%, Reits at 8% and the index ETFs come in around 4%.
I just wondered if investors on this forum used the ETFs/LICs only or if there were other ideas for converting equity to income and if investors where looking hard at the REITs?
Im guessing some here would be more interested in the capital gain and harvesting units to create income?

 

I wasn’t smart enough to pick the winner in the property vs shares race.

So, I took a “bet” on both by:

1. Buying property for capital growth, in our personal names (to minimise land tax) and trusts (to minimise land tax and avoid CGT for up to 80 years), in east-coast capital cities, as close to the CBD and with as much land as I could afford at the time, using OPM (keeping our cash in case the “$hite hits the fan”), running the IPs as a business (maximising income, minimising costs, paying others to look after them), using NG to the max, not selling so compounding can work its magic, formally reviewing performance at the end of every Quarter, ...

2. Buying shares (direct, LICs and managed funds) partly for capital growth but mainly for retirement income, in our SMSF (for asset protection and to avoid paying income tax and CGT in retirement), only using cash (no borrowings), not selling (if I can stop myself) so compounding can work its magic, watching brief every day but formally reviewing performance at the end of every Quarter, ...

3. Owning businesses (buying existing and starting from scratch) to generate cashflow to support the two strategies above.

Did I do OK? Definitely!!

Could I have done better? Definitely!!!

The main thing in my favour is that I took massive and decisive action (still am).

My tip is:- choose a capital growth merry-go-round to jump on, as early as possible to allow time for compounding to work its magic and time for one to recover from one’s mistakes (investing is risky so one will make mistakes).

 

@kierank your approach and thinking resonates with me. A bet on both may make even more sense in the current low inflationary environment. In my view inflation will inevitably rise at some point in the future. Who knows when - maybe 5 years, maybe 50 years. Some real property, some diversified equity,some debt, generating additional cashflow through active endeavor to increase investible assets, minimize income tax and avoid cgt, and let compounding work.

Here's some interesting info on real property appreciation (adjusted for inflation), as well as inflation rates, and real total returns on shares during periods of both falling, and rising inflation.

https://stanfordbrown.com.au/wp-con...0945fe4aa8eb3680f8914173f9191b1c0223e68310bb1

"The chart shows median house prices in the main cities since 1970, adjusted for inflation to remove inflation distortions especially in the 1970s and 1980s."



"This chart shows inflation rates in Australia, the US, UK, Japan, Germany and Canada (our commodity cousin) over the past 150 years:"




"Real total returns averaging 6.5% per year from shares over such a long period is outstanding and almost un-matched anywhere in the world. However this is an average over the whole period. The problem is that returns have been very different in different types of inflationary conditions. We cannot simply assume that these high returns will continue without understanding what inflationary conditions we face. When inflation has been low, real returns from shares have been highest - an incredible 14% (yes that’s after inflation) per year on average. But when inflation has been high, real returns have been very poor – in fact zero on average. I define ‘low inflation’ as below 2% (the bottom 1/3 of all years), ‘high inflation’ is above 5.5% (the top 1/3 of years), and ‘moderate inflation’ is between these two (the middle 1/3 of years). Average real returns in different ‘low’, ‘moderate’ and ‘high’ inflation years are shown in the lower section of the left chart."

"The left chart also shows that returns in ‘rising inflation years’ has averaged a very poor 2.1% per year, but returns in ‘falling inflation years’ have averaged a very healthy 11.2% per year. Shares do well when inflation is low or falling, but very poorly when inflation is high or rising.

"The blue bars at the bottom of the right chart show the average real total returns from shares for each of these rising inflation and falling inflation phases. The pattern is clear: - well above average real returns during each of the phases when inflation was falling, but very poor average returns each of the phases when inflation was rising. The best conditions for shares are when inflation is low or falling. The last great phase of falling inflation we enjoyed ran from the late 1970s to late 1990s when shares posted real returns averaging 8.2% above inflation. This was a tremendous outcome as the period included big shares corrections in early 1980s recession, the 1987 crash and the early 1990’s recession. The next phase will not be another period of high real returns because inflation will not fall by 10% or more as it did in the previous ‘falling inflation’ phases. The most we might expect in the coming years may see inflation fall a little further (eg in a global recession triggered by trade wars). However once inflation starts to rise again – as it inevitably will in time – shares will generate very poor real returns once again."

 

@ChrisP73, that was a great post.

You are obviously far smarter than me.

 

@kierank Oohhh no!!! Just quotes from the article!

 

Oh I see what you’re getting at. I do own a couple of REITs as well as LICs and an ETF. Mind you, that doesn’t mean I know what I’m doing to any great extent.

They each fit nicely into my income focused portfolio. No other individual stocks anymore. Too hard and can’t be bothered so I just leave it to others (LICs) to figure out.

I think most here simply go for index or LICs for long term set and forget diversified income streams, without the extra risk of picking stocks/REITs. And some sell down for income while others prefer dividends.