Can I just ask what do you use to buy the shares? do you have a financial planner? commsec? investsmart?
Hi Sue,
I use commsec (it's free to join) to buy & occasionally sell - they have good (free) research. I never invest in managed funds. I do invest in quality LICs (eg ASX codes are AFI,ARG,MLT). I never use a fin planner or a broker for advice. I'd much rather do it myself. Most of the things I don't use charge 1-2% of capital annually. So if the average annual return is 10%, they are taking up to 20% of it.
would it be silly to buy bank shares now at the peak? seems like all teh quality companies are at their peak.
As you say most quality cpys are currently at their peak. This happens much of the time - and especially during bull markets - like now. When I look at the 5yr charts of my portfolio - almost all of the prices start at the bottom left & finish at the top right. They've been at or v. close to their peak for the last 5 yrs - that's why they are quality cpys.
Would it be silly to buy banks shares now ? They are all yielding 6.5-7% (after grossing up for franking) ATM. If you are using a resi loan, then they would v. nearly pay for themselves. They are forecast to yield about 10% more (ie 7.1-7.7%) next year, and a similar increase the year after. If the next housing boom happens then I'd expect banks would be a good asset to hold.
A v. important difference between shares & IP. Rents generally rise at around CPI. Quality share earnings & yields grow a lot faster.
also, what would you do with $100k? most of my equity is tied up as security for IP's....I only have around $100k to invest in the share market and will probably margin lend 80%. Should I reinvest in IP to generate more equity so I can enter the share market with at least $400k (inc margin lend)?
I'd suggest any IP investor with $$ to invest in shares -
- do some research.
- get a free commsec account - they have good free research. I'm sure there are others eg etrade, sanford, the other banks.
- get a free trial subscription to some of the research cpys newsletters eg huntleys, rivkin,intelligent investor,fat profits. See if any appeal to your style of investing.
- don't set up a margin loan facility for at least a couple of years.
- don't invest outside the ASX200 for the first year (if ever)
- don't trade. It's v. tempting to buy/sell because you can at 30 seconds notice. Get the same mindset as IP investing, buy quality shares & forget about them. It gives a high SANF.
should i margin lend 100%? I do have a buffer in place and plan to pay the first year's interest in advance.
My margin loan is currently 34%. It's never been above 40% and it is v. unlikely to. I believe that 40% is about the average over all margin borrowers. Work out how much a quality portfolio needs to fall in value by to generate a margin call. Then see how often the ASX falls by that amount. It has 10%+ falls a couple of times a year. It falls by up to 50% every 20ish yrs. How lucky do you feel?
When I read that people have 70% LVR margin loans, I think they are either sophisticated traders with sophisticated protection in place, or they are gamblers who probably don't understand much about the risks they are taking. Many of them will learn the hard way.
Hmmm, now after reading your post, I can't decide to invest in blue chip or managed funds. I am ok with small % of small growth companies in my portfolio for a bit more risk and possibly greater gains. Maybe invets in blue chips stocks, property trusts and a a managed fund like CFS emerging companies.
I would not buy managed funds They have MER of 2%ish. They ALL claim to beat the market over a specific period - they are all probably telling the truth, but probably not the whole truth. LICs are a better alternative - their MER is <0.2% - no entry fees, v. low MERs, v. liquid.
LICs (such as ARG & AFI & MLT) are a good first step into shares for many people. See this
post.
And all the above my opinion, and definitely not advice.
Cheers Keith
