Can't sleep! The Q:Buy 'bargain' stocks or Let funds stay in offset?

A

antonio

With the recent unfolding of events - GFC MkII rah rah,
I've been totally thinking myself into a spiral and would be great
to hear some wise feedback from Somersoftians re money management/opportunity cost

The Question:
We have a little doosh in an offset account - offsetting interest ~ 7%

I'm trying to figure out if it's better to take some doosh and invest in
'discounted' stocks with a little dividend ~5% and 'buy and hold' for next peak

We'll lose 'income wise' with the gap between dividend yield and the offset interest

and gain capital-wise? (hopefully) :eek:

= = =

Is this thinking totally flawed?
What's missing?

= = =

Please untangle this thinking as I haven't been able to sleep - dammit!
:(

(thanks for your thoughts)
 
antonio said:
With the recent unfolding of events - GFC MkII rah rah,
I've been totally thinking myself into a spiral and would be great
to hear some wise feedback from Somersoftians re money management/opportunity cost

The Question:
We have a little doosh in an offset account - offsetting interest ~ 7%

I'm trying to figure out if it's better to take some doosh and invest in
'discounted' stocks with a little dividend ~5% and 'buy and hold' for next peak

We'll lose 'income wise' with the gap between dividend yield and the offset interest

and gain capital-wise? (hopefully) :eek:

= = =

Is this thinking totally flawed?
What's missing?

= = =

Please untangle this thinking as I haven't been able to sleep - dammit!
:(

(thanks for your thoughts)
Click to expand...


How are are you of the bounceback for the pariticular astocks you are holding ?

Manyu wondered about doing this when the AU$ wne t up so much against the US$... taking a awhile though, how long can you hold onto these things for ?
 
I think I would be quite happy with my 7% saving through the offset account. After the tax benefit you will be hard pressed to consistently beat that in the market.

The markets are extremely vulnerable at the moment, if you are losing sleep over the small difference that may be achieved by switching consider how you would feel if the market is down 5% today

SANF is a very important consideration IMO
 
jaycee said:
How are are you of the bounceback for the pariticular astocks you are holding ?

Manyu wondered about doing this when the AU$ wne t up so much against the US$... taking a awhile though, how long can you hold onto these things for ?
Click to expand...

Thx for reply Jaycee. I have practically zero exposure to sharemarket hence thinking if a good time to go in now for 'value'
 
Macca said:
I think I would be quite happy with my 7% saving through the offset account. After the tax benefit you will be hard pressed to consistently beat that in the market.

The markets are extremely vulnerable at the moment, if you are losing sleep over the small difference that may be achieved by switching consider how you would feel if the market is down 5% today

SANF is a very important consideration IMO
Click to expand...

Thx Macca. Yes SANF is very important too.

I guess I'm thinking like I was "missing out" on some bargains during the GFC

I guess I didn't mention I was thinking more long-term (and not day trading)
and potentially more (and then again maybe less) CG than just cash (eaten by inflation) offsetting interest
 
Don't worry about the seduction of "missing out on bargains." Remember the first rule of investment is: protect your capital!
This means not investing in anything that you don't fully understand. Volatility must also be factored into any expected ROI scenario, and with the scale of share market volatility right now I'd say stay well away unless you are sure of what you're doing.
 
Ms Jade said:
Don't worry about the seduction of "missing out on bargains." Remember the first rule of investment is: protect your capital!
This means not investing in anything that you don't fully understand. Volatility must also be factored into any expected ROI scenario, and with the scale of share market volatility right now I'd say stay well away unless you are sure of what you're doing.
Click to expand...

great post Ms Jade.
 
Yep I'd have to agree with the general here . The worlds a pretty scary place right now financially and Australia may not have even had their turn in that Que as yet.
Then you have the China/US thing = our safety net, or not.

Our markets could do absolutely anything yet and besides , they still aren't that cheap anyway . You'd probably find these recovery spikes are mostly just traders that know how to use the spikes .
I'd be happy with the 7% + benefits too right now and hey , maybe the real bargains come along over the next few mths if your game.
 
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random said:
Yep I'd have to agree with the general here . The worlds a pretty scary place right now financially and Australia may not have even had their turn in that Que as yet.
Then you have the China/US thing = our safety net, or not.

Our markets could do absolutely anything yet and besides , they still aren't that cheap anyway . You'd probably find these recovery spikes are mostly just traders that know how to use the spikes .
I'd be happy with the 7% + benefits too right now and hey , maybe the real bargains come along over the next few mths if your game.
Click to expand...

I agree, I was thinking to buy some for my super fund (thinking long term, I want to improve SMSF cashflow) but although blue chip shares are cheaper than before, they are not bargains
 
If I have the choice between a tax free, zero risk return of 7% and putting my money into a high risk investment fund run by someone with no experience I know which one I'd be choosing!
 
antonio said:
Is this thinking totally flawed?
What's missing?
Click to expand...

The main thing I see missing is your strategy. Are you planning to generate income by buying shares? Or, are you planning to buy more IP's?

If you are planning to buy and hold shares over time to generate income, now may be a good time to buy.

The answer is - it depends on your strategy .......


Regards Jason.
 
Bon said:
If you plan to hold shares, now is a GREAT time to buy!

I bought last week, planining to buy more next week.
Click to expand...

It all depends on whether one has the right mental temperment.

From the sounds of the 1st post, above, i would say that the poster would wont be 'sleeping at night' if he did buy and then prices dipped below the purchase point.

This market is not a secular bull market, therefore yes, buying near the bottom of its trading range makes sense, but it wont just be a case of buy and forget, a buy and forget strategy works best in a secular bull market.
 
Bon said:
The 7% isn't tax free...



It's possible... I have cash waiting, so bring it on!
Click to expand...

It is tax free in the sense that it is only reducing the interest you pay on your mortgage..you aren't actually earning interest..so how could you pay income tax on it? Whereas you will pay capital gains tax and income tax on shares.
 
antonio said:
With the recent unfolding of events - GFC MkII rah rah,
I've been totally thinking myself into a spiral and would be great
to hear some wise feedback from Somersoftians re money management/opportunity cost

The Question:
We have a little doosh in an offset account - offsetting interest ~ 7%

I'm trying to figure out if it's better to take some doosh and invest in
'discounted' stocks with a little dividend ~5% and 'buy and hold' for next peak

We'll lose 'income wise' with the gap between dividend yield and the offset interest

and gain capital-wise? (hopefully) :eek:

= = =

Is this thinking totally flawed?
What's missing?

= = =

Please untangle this thinking as I haven't been able to sleep - dammit!
:(

(thanks for your thoughts)
Click to expand...

You should consider borrowing to buy the shares rather than just withdrawing the money from the offset as this won't be tax effective.

eg. You have $100,000 in the offset account on your main residence.
You take out $100,000 to buy shares
= Your interest payable increases by about $7k pa. This isn't deductible.

or

You borrow $100,000 to buy $100,000 worth of shares.
= $7,000 pa in interest which would be deductible.

Saving you up to $3000 or so in tax pa.
 
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