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Discussion in 'Introductions' started by Luke Vogel, 10th Mar, 2019.

  1. Luke Vogel

    Luke Vogel Member

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    Good morning all ...
    I'm now in a position where I'm ready to implement my financial plan again.

    We got caught up in the GFC/Commbank/Storm Financial debacle 11 years ago.

    Ive learnt a lot of lessons from that experience (which I'd be happy to share), but I'm not 100% sure about the political environment.

    Is anyone out there also concerned about potential changes to franking credits, capital gains etc ...

    I'd love to participate in a discussion and be prepared for whatever may or may not happen.

    Thoughts?

    Cheers

    Luke
     
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  2. twisted strategies

    twisted strategies Well-Known Member

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    welcome to InvestChat ,

    and back to investing

    first it sounds like you have more experience in investing than i have ( unfortunately NASTY ones )

    and have learned my No. 1 rule ... Do Your Own Research ( on top of any financial advice you receive )

    franking credits ...

    now with the proposed changes to franking credits ( SO FAR ) it will only affect you if you get a tax refund of franking credits from your investing ( which some people do)

    i plan to tilt my future investments ( but keep the current good investments ) towards equities that pay reduced franking credits ( mainly because they source a lot of revenue overseas , companies MQG , PDL and JHG and selected international companies ) and REITs which don't normally pat franking credits

    basically trying for more income to soak up any excess franking credits

    my main concern is if the meddling with franking credits is tolerated by the voters emboldened governments will try some more cash grabs , at super funds , and other investment areas in a desperate attempt to reduce budget blowouts causing by badly planned spending sprees ( like the NBN )

    the willingness of BOTH major parties to meddle with retirement ages ( and means testing ) and super investment plans ... including one financial moron to actually URGE retirees to enter reverse mortgages to fund other activities for themselves or relatives , i found jaw-dropping

    ( who the hell gave him a financial license ??? )

    with the coming elections ( state AND federal ) it feels like political uncertainty is at an all time high ( in my 40 years of being of voting age ) , neither major player seems to have a financial plan that would resist outright ridicule if you took it to the bank begging a sub-prime loan .

    negative gearing changes and capital gains tax changes have been tried before and all that happens is increased tax avoidance schemes ( and ATO has to try to understand more complex structures raising revenue collection costs and reducing revenue collection efficiencies )



    i am a very big Kerry Packer fan ( and long suffering NBN customer )

    now on top of political uncertainty you have the high likelihood of economic uncertainty in the near term ( say within the next 3 years ) , excellent if you can pick future winner in the chaos , but i suspect investment crushing for most .

    good luck

    i plan to diversify widely , shares , LICs ,ETFs REITs and some property improvements ( rather than buying extra property ) and be ready to tweak the blazes out of the existing plan
    and expect extreme discomfort if the global economy goes pear-shaped ( but i expect cash in the bank to be frozen there in the highly stressful times , ala Cyprus , so don't keep much cash there )
     
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  3. Luke Vogel

    Luke Vogel Member

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    Thanks for the comprehensive response.

    A couple of things I need to point out ...
    1. Im not a stock picker, nor do I have the time to devote to trying to pick good ones. I'm a big believer in the index approach so my risk is diversified across the whole index. Back in 2008, Exchange Traded Funds (ETFs) weren't on the radar, but I am a big fan because you can easily control them yourself and brokerage and management costs are a tiny (almost insignificant) fraction of Managed Funds.fees and charges.
    2. Speaking of risk, one of the big lessons I learned from the GFC/CBA/Storm debacle is spread your risk ... do not even use the same company or group of companies to place, manage, or hold you investments ... and more specifically, never ever use one of the big four banks with their vertical integrations ... way too much power in one institution .. just look at the RC investigations and reports.
    3. Franking credits ... have we lost sight of the fact that franking credits are in fact the result of the underlying equity having paid tax ... does it not then follow that the same income cannot/should not be taxed twice?
    4. Capital Tax is in my opinion quite a fair tax on asset growth. You only pay the tax when you have crystalised that growth by selling all or part of an asset. Im not aware of how they would expect to tinker with it to the detriment of the mum and dad investors ... I'd appreciate some further discussion on this.
    5. Negative gearing/gearing. Has anything emerged on this topic? Gearing is certainly a commonly implemented strategy for wealth creation ... any thoughts on how or why the govt might play with this?
    From some discussion in the media it appears that the target is property ... are they trying to warm up or cool the property markets? Intentions seem to be mixed ... Thoughts?
     
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  4. twisted strategies

    twisted strategies Well-Known Member

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    although i hold some ( Australian ) ETFs they suffer the same concentration risk as a standard 'blue chip portfolio
    lucky for me, my portfolio is far from standard in the usual heavily weighted stocks , so the ETFs work as an insurance policy against my inferior stock selection

    given your previous experience , i would think a restful sleep would be important to you ( not anxiety about your investments ) so whatever you are most comfortable with , is fine by me .

    i avoid negative gearing or debt unless i am buying quality bonds/notes , i own the properties outright and make improvements in as wise a manner as i can ( i will probably be dead before the next property boom , but the current holdings will have major redevelopment potential in 10 years , or less if local authorities are desperate for fees and charges ).

    i don't CHASE quick gains , but do take compelling opportunities when they are offered , i am more worried about being resisting inflation successfully .
    capital gains taxes are sadly a fact of life , i just wish the government would reimburse me for their investment blunders .. it was my tax-money they mis-managed after all

    i will not make the BRW 100 ( ever ) and have no desire to .

    the government ( of both stripes ) will be desperate to fund their blunders ( and THEIR pensions ) don't expect tax fairness , they have cooked the books and are trying to put lipstick over the damage

    expect change ( hopefully it will be someone totally unexpected at the ballot results , but you can only hope ).

    my quandary over index funds is that a number of Australia's biggest companies have been badly run AND the new managements might not be a major improvement

    i shudder to think what an Australian ESG ETF would hold ( no major banks , no TLS , no big miners , no WOW or COL ( liquor and gambling and fuel outlets ) , no WPL .. not much of the top 20 left is there .

    both parties are out to increase taxes in a way that is acceptable to the majority of the voters

    some see negative gearing as a tax rort , i see it as unnecessary debt risk , the government wants increased investment to look good but needs extra taxes to repair the balance sheet ( BOTH will not happen at the same time unless they let in increased international investment )

    while ETFs are popular now don't exclude quality LICs sometimes the extra fees are offset by solid judgment .

    the property market is losing momentum , an aversion to Chinese investors , tighter lending standards , reduced employment security , higher international borrowing costs , and a new bias about lending to residential investors , ONE of these choices would have been enough for a healthy cooling cycle , but somebody decided to use all four ( when RBA rates were struck @ 1.5% ) ... will it crash ... most probably, unless a major reversal in some policies are made this month ( the RBA can't cut enough to do it alone )

    cheers !!

    PS take your time in making decisions .. the stock market is near 10 year highs ( the downside is bigger than the likely short-term upside ) ( property is similar )
     
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  5. Luke Vogel

    Luke Vogel Member

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    Again, thanks for your considered input.

    I hear what you are saying about concentration risk ... hence my like for index ETF's ... of the three major asset classes (cash, shares and property) it is quite a simple matter to balance up a portfolio and thereby avoid the concentration risk you speak of.

    Similarly, through indexing, quick gains are in the "too good to be true" category so best to aim for average market returns and sleep well as you put it.

    As I said earlier, I'm all about mitigating risk as much as possible so I'm quite comfortable with my strategy.
    What I still struggle to get my head around is what the government is expecting to do with franking credits and CGT.
    As I mentioned earlier, you cant tax earnings twice ... so the removal of the franking credit system needs to be replaced with some other form of tracking perhaps ... at the end of the day, there should be no real change to to nett result ... earnings are taxed (as they currently are) those that have paid more tax than they are legally required to will be entitled to a refund.
    Personally, I like Capital Gains Tax ... (dont throw stones at me yet) ... it works very well for my (buy and hold) investment strategy. Again, I cant see how the government can muck with it without creating long term growth issues for the country, although I agree that the government is in dire need of digging themselves out of the **** they're in ... the only problem is that it is us (the mum and dad punters) who will pay for it.

    Cheers
     
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  6. Luke Vogel

    Luke Vogel Member

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    Ive been trying to read up on what the franking credit issue is all about.
    It seems to me that the issue relates to franking credits within superannuation funds, or more specifically, SMSF.

    Am I right in assuming that the issue is not relevant to direct shares, managed funds (including ETFs), and the like?

    The CGT issue looks like paring back some of the generosity of Johnny Howard with his 50% discount being reduced to 25% ...

    Grandfathering is also mention repeatedly ...

    Is this all a bit of a storm in a teacup?

    Thoughts anyone?
     
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  7. twisted strategies

    twisted strategies Well-Known Member

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    OK

    indexing ( ETFs ) has it's place ( in my portfolio ) i hold VAS ( bought in 2011 ) QFN ( bought in 2012 ) and MVB ( bought in 2017 ) ( VAS and QFN are DRPed )

    the art of compounding works it's magic here

    but timing those buys can be very important ( a rising tide lifts all boats and an ETF is basically a barge tilted towards floating NOT speed )

    my problem is frequent changes of tax rules creates confusion and uncertainty ( which is TERRIBLE when trying to plan your future , but creates opportunities for traders )

    franking is simply relief from double-taxation ( and that was an official court ruling ) how dare a government claw it back , how about we claw back pensions from politicians who have performed poorly during their stay in parliament , that would be more fair

    the taxpayer paid for CSL , TLS ( 4 times over ) and the list goes on and on
    the problem is 'the tax-payer has 'mucked in' to every government asset ( which is often sold later ... like our power grids ) the **** they are in was done with our taxes while we fattened their pension entitlements .. and paid them to mis-manage it

    they tell us about the schools they over-see but understand nothing about fiscal responsibility

    ( it is our fault the government wasted all the taxes to fund out pensions , but their's is sacrosanct , cashed up courtesy of the TLS float )

    me personally i will be reducing any potential franking credit refund by investing more in internationally focused companies ( and internationally based companies ) so the government misses out on some corporate tax ( and GST ) on the way .. tough , i have to trim my expenses about time the government lived within their means as well .

    the real danger is IF either party succeeds in changing the super/SMSF system ( again ) they will feel encouraged to keep meddling to their hearts content ( which of course can be a planning nightmare )
     
  8. Luke Vogel

    Luke Vogel Member

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    I cant argue with anything you said ...

    Kerrie Packer was right (refer the interview snip you posted earlier in this thread ... The government is not doing that good a job at managing our money, so why would we donate more? ... or words to that effect.

    Cheers
     
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  9. twisted strategies

    twisted strategies Well-Known Member

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    sadly i wish Kerry Packer was incorrect .. but

    don't forget LICs if you are trying to track the ASX , i bought BKI and IBC for conservative ( and cost effective ) management , i would add MLT but cannot get them at an acceptable price
    veteran investors might prefer others such as ARG , AUI and DUI

    sometimes a wise careful manager is worth the extra $$