I'm sure it's something you're aware of JIT, but bare in mind your above share/MF strategy will work only if you're prepared to work till 60-65-70(?) before you start living off those dividends. If that's the plan, all good.
Steve,
I am 30 now, so another 25 years will take me to 55, where (based on the current rules), I can access some of my SMSF $.
It's not that far off!... and what if I live till 90?!
This is my personal preference only, if you want access to the money earlier though, invest the money outside super using a DT.
I think some people here are offended by the simplicity of the strategy suggested, as the mindset is perhaps that investing should me more complicated?
The way I see it, for retirement, and lets take the age to be 55 in my example, I want the following:
A high long-term income stream.
An income that grows at a faster rate than bank interest or rents.
An income that will be relatively stable in the medium to long-term, but this doesn't necessarily mean a ''guaranteed'' income or an income that will necessarily rise every single year.
An income that is obtained passively and not dependent on my personal exertion, effort or time.
An income that is earned in the most tax-effective manner possible, ideally tax-free.
A capital base that increases over the long-term, but granted that it may fluctuate dramatically in the short to medium-term.
Low or no leverage or bank control.
Minimum costs for the actual investments made and transactions involved.
Minimum costs for managing the portfolio.
Minimum involvement by external ''advisors''.
If these are the objectives... then what is the most effective way for me to achieve them (I basically need to buy an effective future income stream that meets the above criteria)?
IMHO:
Dollar-cost averaging into Australian industrial shares via index funds, and for the most part, not ''diversifying'' into other asset classes to achieve this outcome as per traditional financial planning theory.
Starting the process as early as you possibly can.
Re-investing the dividends while you are accumulating.
Holding on for as long as you can before accessing the money, and letting the compounding growth of the money and time take its effect.
Investing the money in the most tax-effective manner and structure possible, ie. maximum tax-deductible contributions into a SMSF, and in some circumstances, this can be done with gearing, creating a two-fold and significant immediate return on investment, regardless of the actual performance of the investment.
Accessing the money at the most tax-effective time, ideally when the SMSF converts from accumulation to pension phase.
Minimising buying/selling or trading activity to minimise tax and costs.
For me, this is an income-driven and super-based strategy, that is passive but effective.
To grow your capital base as big and quickly as possible though, I feel that you need to use as much leverage as you possibly can, as fast as you possibly can, and this can only effectively happen outside super, and with assets that give you the greatest leverage (with lowest risk)... ie. residential property (RIPs or CGT-free PPORs).
The other means being via business or own business CIPs (which have preferential tax treatment), or other CIPs.
I am happy to take criticisms on my planned strategy.
My two-pronged approach involves geared up RIPs and PPOR outside super, and Australian industrial shares via index funds inside super.
With the possibility of business/own business CIP/other CIPs in the future.
Note: There is no mention of index funds in this particular book, and this is central to my planned strategy.