good yield, high growth

[Oscar]

Shares are doing well at the moment. I am taking more interest in my index high yield fund. In the last 12 months it has returned 26% growth and 5% yield for a total 31% return. Fees are very low at 0.45%. Sure beats property maintenance and agent fees!

The overall value of my index fund is roughly 13% of my total net portfolio and I would like to get it to 20% over the next couple years.

What do you see are the risks or opportunities? I'd be interested in how some investors view index funds as part of their overall wealth portfolio.

 

[geoffw]

Shares have been volatile in recent years- you don't have to look back very far to see that. I don't have shares as a component of my portfolio as I should (except for my super fund which has grown just 1% in the last year- how on earth did they do that?) because I got burnt in a previous exuberant market.

 

[willair]

What do you see are the risks or opportunities? I'd be interested in how some investors view index funds as part of their overall wealth portfolio.

I don't go near them,and the difference is mathematical 31% is a massive return but span that over 5-10 years the outcome can be very different from bellyup to back too less then 8%,history only tells you what happened it never helps you too work out what's going to happen in the future,leave that too fast-buck-historian-gurus ..

 

[oracle]

What do you see are the risks or opportunities? I'd be interested in how some investors view index funds as part of their overall wealth portfolio.

I nowadays invest solely in ETF's (Australian Shares) for the long term. My super is also 100% Australian Shares.

Shares are volatile but have superior returns over the long term compared to other assets. The simple fact is shares represent ownership in a business and the sole purpose of a business is to make money. Business are run by humans who have proven history to run a business profitably no matter what the situation. Sure, you do get corrupt and inefficient people who run the business occasionally, and therefore you buy the whole index and not just individual company to reduce such risk.

Going forward I plan to have 50% of my share portfolio in Australian Equities, 25% in US and 25% in Emerging market. My end goal is to have a truely passive investment and I think the above will give me such a portfolio.

(PS: I do have a decent property portfolio as well..which I intend to keep for the long term as well)

Cheers,
Oracle.

 

[TPI]

Shares are doing well at the moment. I am taking more interest in my index high yield fund. In the last 12 months it has returned 26% growth and 5% yield for a total 31% return. Fees are very low at 0.45%. Sure beats property maintenance and agent fees!

The overall value of my index fund is roughly 13% of my total net portfolio and I would like to get it to 20% over the next couple years.

What do you see are the risks or opportunities? I'd be interested in how some investors view index funds as part of their overall wealth portfolio.

I think index funds make a lot of sense.

But, I don't use them myself now (I have in the past) as I prefer to invest directly, but still in a relatively passive way.

Dividends from index funds, even the high yield ones, are not all 100% franked (the last time I checked) - so if you could construct a portfolio that was (without too much effort), wouldn't this be better?

Index funds also have very low fees - but if you could construct a portfolio with zero ongoing "management fees" (and without too much effort), wouldn't this be better?

Listed Investment Companies (LICs) I think do a slightly better job, in that there are a few where the dividends are 100% franked and with even lower management fees (eg. 0.18%).

But, because they invest in so many stocks, their returns seem to mirror or reflect very closely that of the index they benchmark themselves against.

If you could construct a more concentrated portfolio of stocks (say 10-15), your odds of outperforming the index return will be much better, so if you could do this instead (and again, without too much effort!), wouldn't this be better?

[btw There are also a few high yield exchange-traded funds (ETFs) that are also very low cost, but I'm not sure their dividends are 100% franked]

 

[TPI]

Shares have been volatile in recent years

I disagree, shares... or more specifically, share prices, have ALWAYS been volatile!

If you are really investing for the long-term, then this volatility is not that big a deal.

 

[Oscar]

Going forward I plan to have 50% of my share portfolio in Australian Equities, 25% in US and 25% in Emerging market. My end goal is to have a truely passive investment and I think the above will give me such a portfolio.

(PS: I do have a decent property portfolio as well..which I intend to keep for the long term as well)

Cheers,
Oracle.

Hi Oracle, do you care to reveal percentage of your overall portfolio in shares ? When I'm all done I'm aiming something like 50% shares, 50% blue chip Sydney residential property.

 

[baby blue eyes]

I too have shares directly and in our smsf as well as property, in the smsf and individually.

I am buy and hold in both with good quality shares under drp. Annual Dividends from my westpac shares purchased in 1995 are almost at the level of the initial investment with franking credits. I purchased share capital raising in the gfc, but otherwise in the gfc I sat on my hands and did not fret over the dips in the share prices.

I also intend to expand my share holdings and I like what Keith J has done. A good mix of shares and property is what I am going to continue to do. Buy and hold works in both markets. That said shares is still around 10% of the total portfolio as I have not used leverage with them as yet, in the next few years some of my property equity may be used to leverage into shares.

 

[oracle]

Hi Oracle, do you care to reveal percentage of your overall portfolio in shares ? When I'm all done I'm aiming something like 50% shares, 50% blue chip Sydney residential property.

Sure...currently less than 10%, but am aggressively buying index ETF's every month (dollar cost averaging). Have big cash pile sitting in offset account so if there is a decent market correction 20% or more then might invest in one hit.

The plan is to only buy shares (I am in my early 30s) from here on. So expect over next 5-8 years to easily bring that ratio close to or above 50%.

Cheers,
Oracle.

 

[Deltaberry]

Shares are pretty high at the moment. Wondering where the value is.

 

[oracle]

Shares are pretty high at the moment. Wondering where the value is.

Yes agree. Still don't think they are in bubble territory. Especially if companies are increasing earnings and we continue to be in the low interest rate environment.

But you can never be 100% sure.

Cheers
Oracle.

 

[geoffw]

If you are really investing for the long-term, then this volatility is not that big a deal.

Perhaps the price variability is not a big deal, but the volatility of companies can be. A company going broke can do a lot of damage to your share portfolio- although that is not reflected in the price index.

 

[xactly]

What do you see are the risks or opportunities? I'd be interested in how some investors view index funds as part of their overall wealth portfolio.

Index funds....crucial. They are 50% of current holdings. 20% of investments (other 80% is property).
Plan is eventually 50:50 shares/property.

In regard to shares and funds, Xactly philosophy is based on:

fact 1. Xactly can't tell the future and has no time to delve into company reports, knowing that the most important info is usually not there. Eg. Who will be sprung embezzling next.

Fact 2 it is mathematically impossible to beat the house ( market ) in the long term for the vast majority of punters. Xactly is in the vast majority.

fact 3 Eary on in my investing I have done well speculating on various shares... Only to miss gains by cashing out early at wrong time or never and ride the price down again. I don't have the time or emotional discipline. Or the luck.
I salute those who do.

Fact 4 warren buffet says for the average Joe. Buy the index and sit on it. Xactly is pretty average.

Fact 5 MERs make a difference. That rules out all aggressive managed funds. Happy side effect is end of stressing over which one to pick. Also means all financial advisor products ruled out. Ask them why their recommended product can't match Argos or AFIS. This rule makes you bullet proof from scams.

So ....
I have LICs for low MERs, a couple of direct stock leaders in each sector. A few ETFs for the index. And an unhedged vanguard us index ETF ( vts). I don't mind if the dollar drops. I have some baby Berkshires... They are essentially a US LIC.

I sprinkle all of them with dollars in turn. If I ever feel like I'm not agressive enough I plug in the numbers into Noel whittakers stock market calculator. Then I realize fiddling is the enemy of long term returns. The indexes will get me there.
In the meantime I save my emotions for more interesting things and let investing be boring.
Cheers Xactly

 

[Intrinsic_Value]

Shares are doing well at the moment. I am taking more interest in my index high yield fund. In the last 12 months it has returned 26% growth and 5% yield for a total 31% return. Fees are very low at 0.45%. Sure beats property maintenance and agent fees!

The overall value of my index fund is roughly 13% of my total net portfolio and I would like to get it to 20% over the next couple years.

What do you see are the risks or opportunities? I'd be interested in how some investors view index funds as part of their overall wealth portfolio.

Prior performance is no indicator of future performance.
Depending on how the 'historical' performance goes over the next couple of years, these type of questions could become more proliferent on this forum.

But its nothing new, we already saw lots of it prior to the GFC, heaps of threads mainly around diversifying away from residential property by leveraging on property on investing in the stock market.

Yes this forum has been there and done that, unfortunately many of the people on this forum who were active participants prior to the GFC are no longer on this forum, and its not because they road off into a happy sunset

 

[Intrinsic_Value]

span that over 5-10 years the outcome can be very different from bellyup to back too less then 8%, ..

Span that over 10 years, yes people would have done very nicely, span that over 5 years, well we need to wait until next year, and then 5 yrs would have done very nicely as well.

But here is the catch.

Most people don't dive in when the market is depressed, most people panick or sit on the side lines. (And we know this again because of our good old Somersoft forum, the evidence is right here on this forum)

Its only after several years of positive returns that the 'retail' mugs start to get back into the game.

Intrinsic value was banging on and on on this forum about the good gains to be made by investing in post GFC sharemarket.

Intrinsic value predicted that those investing in recent years past would achieve a return significantly above property. And so it has.

YET NOW INTRINSIC VALUE IS WORRIED, he cant find many good opportunities in the share market. Yes the market can continue to rise, yes there is a chance that intrinsic values will rise to justify future rises in the market (although at this point in time those intrinsic values are not showing buying opportunities, ie i could be wrong because i cant see into the future, so i am prematurely worried because those intrinsic values that look low at the moment, could actually rise as the future plays out)

 

[D.T.]

Its threads like these that remind me WHY the market can be volatile... everyone's got a different view of exactly where its at and what can be done with it and in what time frames.

We're all presented with the same information.

After trying many different strategies myself, both on paper and with equity or cash, I'm convinced the best idea is to buy 'portions of businesses' rather than 'shares'. Ie buying stocks in companies I'd actually want to be part of after considering their return on equity, debt levels, etc

The information to do this is free and public. Eg Qantas continually feeding in extra capital whilst their percentage return is declining, who'd want to own a business like that?

 

[xactly]

Given property vs shares are roughly counter cyclical

I invest in both. But I alter the mix. Its 50/50 for me. That way half my money is pouring into an underdone asset, half in booming one.

It all evens out over time.
Unless of course it's obvious once in a lifetime stuff like:

The GFC- I bough more shares than pay off property. (Slowed down extra cash in offsets)
Sydney booming this year: I bought up again in bris. Put the brakes on adding to my mix of shares as outlined above post.

Once in a lifetime seems to happen every 3-5 years.

I admire Seech and Intrinsic value here and others with their more aggressive approaches. The chatter level helps me decide when to alter my mix.
If I'm not sure then it's back to 50:50

Takes the emotion out of it which is the enemy of investing.

 

[Intrinsic_Value]

both of the above posters seem to have their heads screwed on nicely.

One focuses buying shares as though he is buying a business, the other is effectively dollar cost averaging, and over long periods of time dollar cost averaging works so long as one is not fearful of adding additional funds when the markets are down. Buy its very nature dollar cost averaging buys more of stuff when its cheap and less when its expensive, so it is 'weighted' towards increased ownership of an asset when its cheap.

 

[Deltaberry]

I think if you want to be safe, you'd buy say a European index fund now. Get the forex exposure too

 

[xactly]

over long periods of time dollar cost averaging works so long as one is not fearful of adding additional funds when the markets are down.

True.
My approach will take long periods of time. I started 10 years ago from nothing. But now have more than my currently retired parents.
They go OK. Go overseas once every 2-3 years.

Peace of mind is priceless. My expenditure and wants are more than them and I love my job so happy to keep going. I don't see a long time as a downside.

It isn't sexy or high voltage. I won't write many amazing stories of high octane investing on the forum but it works solidly without fuss.

The fearful factor is easy to fix. You must never stop investing 50/50 (property/shares),
The Balence can shift Up to 80:20 either way BUT NEVER 100:0 .

This means you always put in SOMETHING. So no matter what the market you are obliged to invest. Saves you from greed and FOMO ( fear of missing out).
Saves you from indecision as you invest either in whichever index fund / LIC Balence is the lowest, and/or straight to the offset.

Saves you from stressing about timing as you are always investing everywhere and don't have to pick the hotspots,
Unless it smacks you in the face once every 3-5 years as mentioned above for the black sheep events which turn up astonishingly regularly.

Easy.
Also very simple to organize. A couple of clicks banking on line and suddenly your CDIA account fills faster. when it reaches 10k you have to spend it on COMSEC.
shares too pricy? Since you are only dealing with indexes the triggers are high P/Es over 15 for the index. Forget about stressing over individual company reports (yawn). If so....couple of clicks and its the offsets turn to rack up faster.

Automatic set and forget.