IP Admin & Mgmt in our twilight years
- Thread starter Ian (WA)
- Start date
The fence,
I bought 480 westpac shares via a challenge bank takeover mid 90's. My cost base was $5.45 in Dec 1995. The total cost was $2616. The dividend this year was $2441.90 plus those glorious franking credits of $1046. All dividends reinvested and a parcel of 100 shares inherited in 2004. Share value is floating between $33-$36 at the moment. Total shares owned over 1300.
Anyone that did that with bigger dollars would be sitting pretty.
Dividends payments with a mix of banks can work out to be quarterly income. We have unleveraged shares in our smsf. We also have personal shares.
And the property I sold in the nineties would be worth three times what I purchased it for, rents also would have tripled and the loan would be minuscule.
Still regret that sale
I bought 480 westpac shares via a challenge bank takeover mid 90's. My cost base was $5.45 in Dec 1995. The total cost was $2616. The dividend this year was $2441.90 plus those glorious franking credits of $1046. All dividends reinvested and a parcel of 100 shares inherited in 2004. Share value is floating between $33-$36 at the moment. Total shares owned over 1300.
Anyone that did that with bigger dollars would be sitting pretty.
Dividends payments with a mix of banks can work out to be quarterly income. We have unleveraged shares in our smsf. We also have personal shares.
And the property I sold in the nineties would be worth three times what I purchased it for, rents also would have tripled and the loan would be minuscule.
Still regret that sale
Any particular reason for avoiding ETFs or index funds? I used to buy individual stocks as well in the past but realised again it is a lot of work to keep following the company's results every 6 months and making sure the company is still going to keep growing at satisfactory rate in future.
Some of the best companies can eventually stop growing and even go down hill due to new competition from changes in technology etc.
I just wanted a truely passive portfolio with satisfactory returns. Hence, my change in strategy to move towards ETFs of broad based indices. Future plans are to have 50% ASX300, 25-30% S&P 500 and 20-25% Emerging markets.
Cheers,
Oracle.
Ian,
It is an interesting topic you raise, the administration of a portfolio whether it be property, shares or a mix including SMSF and trusts. Some people love doing it, others do not. For some it is about control and trust (or lack of) and others it is just a pain in the proverbial.
I think you need to separate the issues, administration and the conversion or liquidation of assets. The administration burden has an answer, as others have said, good property managers will do all the work. It also helps if you make sure your properties are good investment properties, low maintenance and attractive to tenants. There are small firms/businesses that will take on that administration/bookkeeping role for you without charging an arm and a leg if you want to go down that path now or later.
If you need to convert your assets and CGT is an issue, phase it over years after retirement so it minimises the impact. You could consider starting the process now, for assets recently acquired or that do not have much capital growth, consider transferring/selling into a trust structure or even a SMSF (if not residential IP's). You may incur some stamp duty perhaps but a small cost compared to later CGT costs perhaps.
I would also question why you wanted to sell good assets if the only reason is to save you administration time. Look at assets that are low maintenance, essentially those that fit the buy/hold strategy, defensive shares, blue chip, higher dividend, investment grade IP's, long term commercial properties, DHA properties perhaps where you are balancing return for time.
The estate planning issue is another spectrum and better people than I have made comment there.
It is an interesting topic you raise, the administration of a portfolio whether it be property, shares or a mix including SMSF and trusts. Some people love doing it, others do not. For some it is about control and trust (or lack of) and others it is just a pain in the proverbial.
I think you need to separate the issues, administration and the conversion or liquidation of assets. The administration burden has an answer, as others have said, good property managers will do all the work. It also helps if you make sure your properties are good investment properties, low maintenance and attractive to tenants. There are small firms/businesses that will take on that administration/bookkeeping role for you without charging an arm and a leg if you want to go down that path now or later.
If you need to convert your assets and CGT is an issue, phase it over years after retirement so it minimises the impact. You could consider starting the process now, for assets recently acquired or that do not have much capital growth, consider transferring/selling into a trust structure or even a SMSF (if not residential IP's). You may incur some stamp duty perhaps but a small cost compared to later CGT costs perhaps.
I would also question why you wanted to sell good assets if the only reason is to save you administration time. Look at assets that are low maintenance, essentially those that fit the buy/hold strategy, defensive shares, blue chip, higher dividend, investment grade IP's, long term commercial properties, DHA properties perhaps where you are balancing return for time.
The estate planning issue is another spectrum and better people than I have made comment there.
For what it's worth
The ASX 200 accumulation index was 7,873 in 1995, it was 39,163 in 2013
Hi oracle,
My shares strategy is based around dividends that can be used to provide a passive income for retirement, which means the dividends need to be fairly stable and grow above inflation.
I find that with index funds/ETFs the dividends received each year can vary a lot, and the same applies to the franking % too.
LICs can offer much more stable and fully-franked dividends, but historical dividend growth is very poor (even for the old-school stalwart low-cost LICs).
By investing directly, I can pick stocks which have a much better history of dividend stability and dividend growth (and future prospects), and with full franking credits.
Doesn't mean I spend hours reading annual reports etc. though, it's all still relatively passive.
That being said, I think index funds/ETFs/LICs are still good if you prefer a completely passive approach and don't want to read any company announcements etc..
If your focus is total return rather than primarily income return, then they may also be better for you.
If you are leveraged and using borrowed money to invest however, then I think you are better off investing directly as (if you have a good system to select stocks) your income will be more predictable and allow you to manage your cashflow much better.
I still hold a small LIC portfolio in my own name though, and offset my sharemarket education expenses against the dividend income
.Hope this helps.
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Thanks TPI.
Yes, you are right. Below is history of dividends from Vanguard Australian Shares Index fund.
And yes, it can be quite volatile
Yes, it is important to look at the total returns and not just the yield. You can always sell few shares to generate income if you are getting good CG along with dividend yield. And when using borrowed money you need to be mindful of the volatility of dividends.
Cheers,
Oracle.
Yes, you are right. Below is history of dividends from Vanguard Australian Shares Index fund.
Code:
half year full year Total
1999 1.46 1.65 3.11 + franking credits
2000 1.76 2.12 3.88 + franking credits
2001 1.99 2.14 4.13 + franking credits
2002 1.7587 2.3276 4.0863 + franking credits
2003 1.3754 2.6379 4.0133 + franking credits
2004 1.9471 2.8504 4.7975 + franking credits
2005 4.3192 3.8173 8.1365 + franking credits
2006 10.1475 3.832 13.9795 + franking credits
2007 6.4601 3.8916 10.3517 + franking credits
2008 6.3904 4.2214 10.6118 + franking credits
2009 2.0836 2.8776 4.9612 + franking credits
2010 2.7939 4.1391 6.933 + franking credits
2011 2.0058 4.3737 6.3795 + franking credits
2012 2.0651 4.792 6.8571 + franking credits
2013 1.996 5.1649 7.1609 + franking creditsAnd yes, it can be quite volatile
Yes, it is important to look at the total returns and not just the yield. You can always sell few shares to generate income if you are getting good CG along with dividend yield. And when using borrowed money you need to be mindful of the volatility of dividends.
Cheers,
Oracle.
True, but not in a post-GFC like scenario where the index tracks sideways.
Found interesting article describing various differences between ETFs and LICs
Full article here
Hence, it now makes perfect sense why LICs are able to smooth out their dividend payments whereas ETFs have large volatility in their dividends.
Secondly, LICs try and outperform the market while ETFs only track them as close as they can.
So if you want progressive predictable dividends and believe in fund manager's ability to outperform the market in general over long period than go with LICs. Else, invest in ETFs. Ofcourse, and the third option is to invest in direct shares yourself.
Cheers,
Oracle.
Full article here
Hence, it now makes perfect sense why LICs are able to smooth out their dividend payments whereas ETFs have large volatility in their dividends.
Secondly, LICs try and outperform the market while ETFs only track them as close as they can.
So if you want progressive predictable dividends and believe in fund manager's ability to outperform the market in general over long period than go with LICs. Else, invest in ETFs. Ofcourse, and the third option is to invest in direct shares yourself.
Cheers,
Oracle.
Well put oracle.
LICs can also smooth out dividend payments from retained earnings.
They are actively managed and not meant to be index trackers as such.
You still have to be selective when picking LICs, they all have different objectives, investment styles/tilts and fees.
Not all outperform their chosen index or have low fees.
LICs can also smooth out dividend payments from retained earnings.
They are actively managed and not meant to be index trackers as such.
You still have to be selective when picking LICs, they all have different objectives, investment styles/tilts and fees.
Not all outperform their chosen index or have low fees.
Sorry, no wonder you didn't understand the way I put it
If you donate the property the charity will pay inherit the cost base - no triggering of CGT to you or your estate and the charity will pay none either if they have tax exempt status.
That's good to know Terry but I have 2 issues, (1) the loans that are attached to the properties and (2) the charity's need for cash.
Nothing urgent though, I still have a few years before I have to decide how to do this.
These are not issues to worry about. Under the conveyancing acts the loan will go with the property - ie be payable from the property it is secured by (unless will states otherwise) and the charity will sell to get the cash.
