Your survival guide for investing in 2019

I posted this mainly because of the comments on active / dynamic vs passive / strategic asset allocation. The following compares active Mgrs using dynamic asset allocation vs Vanguard Diversified Index Funds which simply use Strategic Allocation:

Your survival guide for investing in 2019

 

It'll all be very confusing for this prawn with little brain. I'll refrain from reading the full article as a consequence.

All I want for Christmas - and beyond - are investments I don't have to think or care about much apart from the income which goes into the bank. The simplest approach and nothing more than that suits me.

Edit: I should have said I'm not dissing articles of this nature as they are certainly of interest to others.

 

He he. The trouble is now our portfolios are so rediculously simple and boring with so few holdings to discuss I need something else to entertain myself with even more so now. Bit like those who like to regularly watch / read the news but it never really changes what they do on a daily basis. In my case I don’t follow the news much at all but like reading investment related stuff even though it has nothing to do with or changes what I do with our own investments.

Plus I have to admit to enjoying helping / sharing info with others. So even if something is of little interest / relevance to me I’ll make the effort to post it if I think it might be of interest to others here.

So I suppose in my case it could be said that:

 

Wish that stubborn @dunno would stop sulking and start posting again. His posts are extraordinary, challenging (uncomfortably so at times) and have helped me enormously in clarifying my thinking and making decisions I knew should have been done well before now but which stubbornness and perhaps some ego delayed me from doing so.

So thanks @dunno. Now get your arse back here now.

 

That's a given.

Over the years I've occasionally had thoughts on whether a lot of media articles, although intended generally to help, actually cause confusion. So many conflicting and potentially conflicted views.

 

He he, I just came back to edit my previous post to:

Getting back to the article extract it was simply yet again illustrating that all the complicated, and no doubt expensive, dynamic (active) asset allocation being done by professionals in the majority of cases didn’t do as well as an investor who just stuck with their simple, static allocation of say - x% ASX, x% International, x% cash / bonds etc.

 

I also miss @dunno posts.
It's super great to listen to you index huggers - but equally - I like a little more spice and a different point of view. I like that @dunno made me think.

 

Yes indeed.

It would appear though that outside of @dunno ‘s ASX Direct Share Portfolio he’s also an indexer.

But his analysis of various topics, different and challenging views makes for great reading. And yes he certainly gets one thinking.

Unfortunately he doesn’t appear to want to come back so @sharon we’ll be relying on you to post more for greater variety of views. Anything different has gotta be better than me rambling on all the time to help keep the forum more active.

 

Oh my goodness - heaven help the good people of PC if you are relying on me for any sensible posts on anything financial. So far I get excited with less then $200 dividends per year - so bad it's laughable. But hey - everyone has to start somewhere!!

PC is less without @dunno - our loss.

 

You’ve been following the forum for awhile now. You will have more knowledge than you realise and certainly more than some newer investors here. I find also that when having to answer others questions and put one’s thoughts in writing it can help clarify things in your own mind and lead to insights about yourself.

In fact for a new investor your explanation may end up making more sense to them than mine. My wife always struggles to understand what I’m talking about as she’s visual and I’m more kinaesthetic / wordy. And that’s when I’m sober.

It would be great if lurkers and regular readers here who don’t post or only post infrequently posted more. The forum content would be much richer for it. Then I can keep quiet much to some members delight.

 

Mate can I ask why you sold your direct holdings such as cba and wes? Why didn't you just hold them and collect dividend and then just keep buying LICs? I know you talk about simplicity but surely just leaving them do their thing and continue to add LICs wouldn't be to difficult?
Reason I ask is I am thinking of leaning toward a 6/7 ETF/LIC core (60%) then direct holdings just to keep it interesting.
I'm holding just shy of 40 companies at this current moment and as I've made it clear in other threads am looking at using small amounts of leverage to kick this investing thing in the butt a little. I, in all honesty would probably feel a little more comfortable using leverage with an ETF or LIC.
Genuinely interested in your reply to the first part!
Hope all is well!

 

More than enough of CBA / WES (a lot actually) in our LICs / ETF. So why do I need to double up increasing risk to boot by holding them directly as well. And there’s always something to be done with direct shares eg WES with the Coles spin-off for example from what I hear as I don’t follow any direct companies anymore.

Can you be sure CBA and WES will be as successful over your investing lifetime as they’ve been in the past? It’s a very disruptive environment out there nowadays and getting more so by the day.

These are issues I don’t want to be concerned with anymore.

With an Index ETF the holdings sort themselves out without you even having to know about it. Out with the bad / irrelevant in with the new / relevant. Hopefully the LIC Mgrs are doing a similar job for us for a rediculously low fee.

Essentially set and forget with nothing much for me to do or be concerned about.

Or maybe it’s simply senility taking hold of me earlier than most.

But this is just what I do and it wouldn’t be the first time others have thought I’m stupid.

 

Understand and agree thanks for the reply

 

Where I really struggled over the years is whether one should go for high growth shares or high income shares.

When I was in Net Worth creation phase, I thought I should go for high growth.

Now I am retired, I thought I should be going for high income.

My best candidate in both categories is:

Growth Share: REA
First Purchase: October 2010 (over 8 years ago)
Growth: 28.35% p.a.
Income: 5.86% p.a
Total Return: 30.07% p.a

Income Share: WES
First Purchase: March 2009 (nearly 10 years ago)
Growth: 9.19% p.a. (not adjusted for Coles demerger)
Income: 11.18% p.a.
Total Return: 15.76% p.a.

I am still not sure whether one approach is better than the other, so I went for both and ended with a portfolio that has generated since my first share purchase in May 2003 (15.5 years ago):

Growth: 8.77% p.a.
Income: 6.15% p.a.
Total Return: 13.64% p.a.

Is one approach better than the other? Thoughts?

 

Yield vs income are two very different things. In general higher growth in dividends is preferred to higher “initial yield”. So higher growth shares (dividend growers) are preferred to high income shares (dividend payers). A typical example is CSL. The yield is very low compared to say a stock like TLS. But due to CSL’s incredible growth the dividend “income” will be way superior over time.

Preference toward growth stocks will provide the retiree with vastly greater dividend income overtime. However the problem is that many retirees need the higher income “now” to meet living expenses so they tend to load up on high income stocks with a high current yield thereby sacrificing greater income later on.

Just reading back I’ve done a crap job of exposing this and need to head out to feed the chickens who are screaming their guts out.

Further information can be found by searching on “yield trap”. This should help:

 

Well you can only say that after the fact, in my opinion there is no growth or income stock

They all ties to valuation of the business and growth and income join at the hip like Warren Buffett said, you can read Warren wise words half way through the newsletter in 1992 where he explain value and growth, value is similar to your high income where stock valuation is low and paid high dividend .

Chairman's Letter - 1992

 

""Is one approach better than the other? Thoughts? ""
There is a fable out there about Cendrillon by Charles Perrault 1697 and it starts ---""Once upon a time ""
and ""Happily ever after"" and the misery and abuse that happens in---between till Cinderella meets Prince Charming and the fairy godmother ---god father and the glass slipper...

Myself one can see similarities from the mindsets and the way people post with Cinderella and Investing
and bankruptcy and what happens over time with investing ,not everyone becomes a multi million unencumbered stand alone millionaire in fact very few ..

Now we look at the question ---is one approach better than the other --and the slipperiness of certainty …

When I first starting investing in equities around 1990 just to balance the property holdings out just in case one went nowhere as property did under Labor for many years into the mid late 1990's ,and you had the Allen Bonds ---Christopher Charles Skase--- both very very smart Men running on ""ÖPM""and Skase would take his lunch to work when he built his empire at Port in ntn qld ,and I have some of his artwork from his office that he would sit in front of at his desk that I bought at a auction for next too nothing ..

Myself I don't think it matters what approach and path one takes ,once one looks at the multiple studies by the people showing their experiences and outcomes within this site priceless in some ways as one could read 1000 books from so called fast bucks guru's and still have 20 cents in their back pocket in ten years time..

I have the early feeling of deja vu for next year and a new government and what happened before and may well happen again ,and we have both been through those years and came out the other end --just keep doing what you have done all the time and let other keep doing what they ---one will be right the other will be in the long line up outside the local centre link outlet..

 

I think it very much depends on your stage in life/personal circumstances but on the whole I think growth stocks are preferable because:

A.) The growth component is tax free until selling
B. ) Any stock that grows big enough generally becomes a good yield stock as well.

However the challenge is knowing genuine growth stocks Vs speculation/hype/pipe dreams. Testament to this is the graveyard of delisted biotech stocks, tech start-ups, mining explorers, the tech wreck, even the recent cryptocurrency madness, It is often only in hindsight that you can tell the difference.

 

Great points. Spot on of course in that growth and income are tied at the hip. My problem with it all is trying to indentify the best stocks whether it be value or growth. Hence as stated this is only known AFTER THE FACT.

Which is why I personally have neither the interest or desire to try to analyse and pick direct shares. By simply owning a low cost LIC / Index ETF I get the lot including value & growth. And likely some duds as well. But that happens to even the best stock pickers.

 

Fixed