smsf shares to buy?

[MIW]

Sheesh - another thing to sort out.

We're going to roll out of the company run superfund as it's been performing okay, but ...

So, thinking about a SMSF. Obviously I'm a property person, but we have a fair $$ of property outside the superfund so want to keep a bit of balance.

Hubby is over 50, so also looking at good dividend returns, whilst protecting the nest egg ... growth is not as important as dividend. Speculation is definately not important.

Having a scour of what has been paying what over recent years, and what industries are relatively "unrisky" in relation to competition threat either local or international, and looking at what industries will retain a high-ish return over the next 5-10 years, we're thinking about equal division between :

WBC
WES
NAB
CBA
TOLL
ANZ
Tabcorp
Macquarie
Woolworths

Would that make us to bank reliant? I like the banks as they have always been steady earners, are government protected (to a degree) and there is really not much competition except between themselves.

Any other suggestions. Should I have more logistics?

We'd still have a goodly bit left over as cash to invest at high interest, and would re-invest the dividend income.

Gee Lizzie, it's great to see proactive investors taking control, but I will come from a different point of view....(by the way my hubby is over 50 too).
Just a little bit of history first. We run our SMSF since 1995, were fortunate enough to increase it by 46 times, currently have a diversified portfolio, IPs, IPO's (land developer and thermal coal producer), physical commodities (silver and gold), cash in the bank and currently some minor holdings in shares (sold out 99% of the portfolio in June 2011 last year, just before the correction).
I don't mean to boast, just to provide a little bit of history that's all.
I'm not a great communicator too so please forgive the cautionary advise.
Running your SMSF doesn't necessarily mean all money needs to be in stocks.... A plan and a strategy, asset allocation, should suit your risk criteria and your circumstances too, so be prepared to switch if it's right for you.
I had used Metastock software and attended stock trading courses in the past and the first lessons they taught me was to preserve my cash.
I assume then you would know how to set stop losses to get out of the market first, as that's the only way you can protect your capital...
Then if you really wish to proceed, entering the market via 'dollar cost averaging' could be be way (to spread out the risk).
For SMSF I would choose high yielding stocks too but sometimes, perhaps a slighly lower yield of few % with potential for some capital growth may be an option too (so I would concentrate on the overall return).
I think all industries are risky at times, like banks currently, wouldn't you say and past performace is just that....
Perhaps my cautionary note will not be well received, but if your portfolio is large enough why not invest into something you are good at ("I'm a property person.." as you mentioned).
I plan to concentrate on SMSF too but to invest and switch into various asset classes instead.
I may be wrong in my assumptions so I appologise for that but I don't think any of us have total control over stock market yet owning our IPs, hopefully we do.....

 

[redwing]

can you go into this in more detail, i am interested, should i buy the book

First Chapter is available free here . The author is also a fan of John Bogle and Index Funds as well as re-balancing of the funds.

I have the book on the kindle and have taken the opportunity whilst doing some travelling for work to catch up on some reading. The kindle is great for on the plane or sitting around waiting at the airport

 

[Sunfish]

WBC
WES
NAB
CBA
TOLL
ANZ
Tabcorp
Macquarie
Woolworths

I looked at this list and screamed silently to myself. WES is the only one I would own.

Firstly, you may as well just buy more property than the banks, they are closely correlated. Obviously you avoided BHP and RIO deliberately but you should ask that little voice Why? They are two absolute must haves in an Aussie portfolio.

Personally [and I don't give advice] I believe this is a time to be ultra conservative. I have suggested to friend I discuss these things with to invest in very carefully selected, narrowly focused funds. He is with Sun Super and I suggested the capital guaranteed or the international (unhedged) shares. In a SMSF you have the luxury of being able to choose even more narrowly focused funds. I think it would pay off.

Don't fall into the trap of seeking dividend returns. There are good reasons for this to occur and they are not encouraging.

I haven't studied it but WPL will become a boring rent collector now that the Pluto gas trains are being completed. There have been cost overruns etc but the existing shareholders have worn that. If I had an SMSF I would be looking closely at it.

Note: I am NOT a millionaire, so what would I know?

 

[Deltaberry]

Sheesh - another thing to sort out.

We're going to roll out of the company run superfund as it's been performing okay, but ...

So, thinking about a SMSF. Obviously I'm a property person, but we have a fair $$ of property outside the superfund so want to keep a bit of balance.

Hubby is over 50, so also looking at good dividend returns, whilst protecting the nest egg ... growth is not as important as dividend. Speculation is definately not important.

Having a scour of what has been paying what over recent years, and what industries are relatively "unrisky" in relation to competition threat either local or international, and looking at what industries will retain a high-ish return over the next 5-10 years, we're thinking about equal division between :

WBC
WES
NAB
CBA
TOLL
ANZ
Tabcorp
Macquarie
Woolworths

Would that make us to bank reliant? I like the banks as they have always been steady earners, are government protected (to a degree) and there is really not much competition except between themselves.

Any other suggestions. Should I have more logistics?

We'd still have a goodly bit left over as cash to invest at high interest, and would re-invest the dividend income.

Too bank reliant. No point holding all Big 4. Also don't think your portfolio is as low risk as what might otherwise be perceived to be the case

Also the Big 4 banks are a lot riskier than what you think. One only has to look to Europe and USA to see that banks can collapse pretty quickly in a downturn.

They have low profitability (relative to the amount of money they hold). It's like buying a house and getting 0.5% net rental yield. A sharp downturn would see their profitability in strife. They're also enormous beasts and very very hard to cost control effectively.

Macquarie is a HIGH risk company. Went from $80 to $16 in a matter of 1 year during GFC.

 

[Edge7]

Lizzie,

The way I read it, it sounds like you want to buy and hold for the long term. Unfortunately, it is very tough to succeed this way and will be for the foreseeable future in Australia. A good example is highlighted with Macquarie referenced by Deltaberry that if you buy at $80 and come back a year later to find it is at $16, it is very difficult to recover that loss.

In Australia we just don't have the big global brands that are pretty much guaranteed to be still going strong in 10 - 15 years time. In America, the long term buy and hold still has a place due to their global businesses like Coca Cola, Johnson & Johnson, Apple etc. It is quite easy to see that Coca Cola will still be selling plenty of 'icy cold cans' in 15 years time.

My long term share investing horizon now is a business cycle - about 3-4 years.

Best to diversify over time but not too much. I won't hold more than 12 stocks at any one time. And once I know what I want to buy and want I want to pay, I ease in gradually, not fully invested in a stock all at once.

You can have capital gains and good dividends if you want to be a bit more active (not trading).

 

[Sunfish]

Those big DOW companies Edge speaks of have been, and will continue to be good performers. Microsoft will never again be as dominant as they once were but they are still successful. Caterpillar is going great guns. Even IBM is making good profits again.

They are selling at much lower PEs than they were and are starting to pay some half decent dividends. "Australian Growth Shares" will the heartbreaker for the next couple of years, IMHO.

 

[JIT]

I think for an SMSF you need to focus on a strategy/investments that will give you a good ''passive'' retirement income stream, that is basically ''buy and hold''/''set and forget'', and will be simple, easy and low-cost for you to manage when you are of retirement age, and have more pressing matters for your time than your investments, eg. travel, family, health...

So in terms of shares, for me this would mean investing in large cap shares with a history of good, rising and franked dividends.

But the core of the portfolio I believe should be in the stalwart old-school LICs, like AFI / ARG / MLT already mentioned here.

My SMSF portfolio will have a core of 5 LICs: AFI, ARG, MLT, WHF, MIR.

And then a smattering of large cap AUS shares, like the big 4 banks and the others listed in this thread (10-12 max).

As well as shares though, I would have some funds allocated (depending on your income needs, age and risk profile) to other asset classes... eg. selected ETFs, A-REITs, unlisted CIP syndicates, direct RIPs/CIPs, bonds/fixed interest, hybrids, cash/term deposits).

I wouldn't get too hung up about capital growth or overly ''active'' investment strategies, or about too many investments in international shares or hedge funds.

Also, although in pension phase for an SMSF CGT and income tax are both zero, and you can argue that they are effectively the same, so you can sell assets or get dividends to fund your retirement, selling assets is still a more ''active'' process as you have to be mindful of when you are selling and take some time to make this decision, as opposed to just passively collecting dividends.

 

[lizzie]

Thanks for the info guys - and all taken on board.

For those that didn't read the whole thread - my choices had changed since the intial post due to information, advice and realisation that I'd left off the miners (doh).

The reason I'm looking at shares is that we have a lot of $$ tied up in real estate outside the super fund, so looking to balance it out.

So - my list now stands at:

WOW - supermarket
CBA - bank
WBC - bank
QBE - insurance
CSL - health
COH - health
BHP - mining
RIO - mining
CCL - junk food

Cash in term deposit.

We're not too worried about growth (although it is nice) but more security in dividend return - and definately don't want to speculate or be glued to the computer. More a "set and visit every 4-8 weeks to check" type setup.

Thanks JIT ... although I have no idea of about half what you said in your post (ETF's, CIP's REIT's)! Will have a look at the shares you mentioned as I don't know who they are from the coding.

Thoughts? Recommendations?

 

[lizzie]

Will have a look at the shares you mentioned as I don't know who they are from the coding.

Ah, they are investment trusts (shares or property) that are traded on the stockmarket (EFT's, A-REIT's) ... see, i learnt something new today!

 

[oracle]

So - my list now stands at:

WOW - supermarket
CBA - bank
WBC - bank
QBE - insurance
CSL - health
COH - health
BHP - mining
RIO - mining
CCL - junk food

Cash in term deposit.
...

Thoughts? Recommendations?

Something simple and effective without applying any valuation methodologies. When buying shares you are interested in buying for smsf try to buy them when they are trading near their 52week lows.

Most sites will publish 52 week highs and lows for each shares. For eg. for CBA it's $42.3 (low) and $54.22 (high).

Remember when you have identified a business you want to be part of, possibily for the long term, buy it when there is sale going on and it's being offered cheap. It will add few extra percentage points to your returns, with little effort.

It will be hard, because when it's trading at it's 52week lows usually uncertainty around the world will be very high. You just have to follow your convinction and go against the herd.

Let me ask you something, CBA is trading around $50 today. If I told you I have some CBA shares and want to sell it for $42.30 (15.4% discount) today are you interested? If your answer is yes most definitely, then you shouldn't hesitate to buy it when it is offered at that price in future (As long as you still believe the economics of the business is still sound and the company is not in trouble financially).


Cheers,
Oracle.

 

[lizzie]

thanks oracle - great advice!

 

[jaycee]

thanks oracle - great advice!

Agreed.

Lizzie, are do you have a trading account at the moment that you can look at stock prices / charts etc ?

 

[JIT]

Also, I would highly recommend reading ''Motivated Money'' by Peter Thornhill which talks about the dividend investing approach in more depth.

And if you wanted to understand individual stock selection a bit better using a ''value investing'' approach and calculating ''Intrinsic Value'', definitely read ''Value.able'' by Roger Montgomery. This book is great in demistyfying value investing and making it accessible to the masses.

 

[wobbycarly]

Agreed.

Lizzie, are do you have a trading account at the moment that you can look at stock prices / charts etc ?

If you don't, simply download incrediblecharts.com. It's free (with delayed data) and can easily add some of those indicators like moving averages.

(No affiliation - I just think it's a great tool)

 

[jaycee]

If you don't, simply download incrediblecharts.com. It's free (with delayed data) and can easily add some of those indicators like moving averages.

(No affiliation - I just think it's a great tool)

Yeah good charts...

I find that literally looking up information rather than just reading / asking about it is a bit more "meaty" and teaches you more, even if the first thing it teaches you is what questions to ask next.

 

[Sunfish]

Return OF capital will be more important than return ON capital for as long as this global fiasco lasts, and that might be 10 years, who knows.

It's not the first time I've said this I know, I've been saying it for some time but during that time there has been no "easy money" out there. Today the risks are higher than ever. Talking as if it's business as usual on the markets scares me. It ain't.

Find a financial advisor who can think outside the square and won't take the easy route and say "cash". You must be sure that your cash is not in the PIIGS' bonds. Nor do you want "Australian growth shares", the default position of advisors, that might be a big FAIL soon.

Put funds in things like:

Capital guaranteed funds
Gold/precious metal funds
International unhedged share funds
Resource funds.
An expert will know others.

These are specialized and you will need advice though.

 

[MIW]

Return OF capital will be more important than return ON capital for as long as this global fiasco lasts, and that might be 10 years, who knows.
It's not the first time I've said this I know, I've been saying it for some time but during that time there has been no "easy money" out there. Today the risks are higher than ever. Talking as if it's business as usual on the markets scares me. It ain't..

I totally agree.

Find a financial advisor who can think outside the square and won't take the easy route and say "cash". You must be sure that your cash is not in the PIIGS' bonds. Nor do you want "Australian growth shares", the default position of advisors, that might be a big FAIL soon.

Put funds in things like:

Capital guaranteed funds
Gold/precious metal funds
International unhedged share funds
Resource funds.
An expert will know others.

These are specialized and you will need advice though.

Interesting points... basically in the direction the economy is going....

 

[lizzie]

Nothing about the market is business as usual for me ... I have no usual business!

Wondering if I should also add some energy shares to the list such as AGL or ORG to round it out?

 

[JWR]

Both good companies but well overpriced so don't buy them. BHP is very big and diversified so you have some exposure to 'energy' though a more specialised company will obviously be more suitable as an energy company.

In clarifying with the others - you should only buy when really cheap - so if only half teh stocks are cheap today buy those ones today and leave the rest of the money in cash. Then buy the rest when they become great value.

 

[intrigued]

Nothing about the market is business as usual for me ... I have no usual business!

Wondering if I should also add some energy shares to the list such as AGL or ORG to round it out?

I like these one's LDW we usually hang on for the long haul but we will have to let these go.

http://hfgapps.hubb.com/asxtools/Charts.aspx?asxCode=LDW&chartType=3&volumeInd=9&TimeFrame=D6

Also consider.

ASX
ORL
BLK

Regards