Join our investing community

Investing at different life stages and strategy

Discussion in 'General Investing Discussion' started by Hodor, 1st Oct, 2016.

  1. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    79
    Location:
    hodor
    This is a topic I find interesting, so I'll kick it off with my thoughts and see what others come up with.

    The "I'm young and have time to recover" is an attitude/phrase that I don't like, perhaps because I fell into this group in my early 20s to some extent, perhaps it goes hand in hand with been less risk adverse at that age. It is something that can sabotage your wealth and investing in at least three ways a) when you have time on your side to steadily accumulate wealth you place your cash in high risk/high return investments that you really don't need to, take advantage of time and compounding b) when they (almost) inevitably fail they can loose faith in investing and stop. Sure there are success stories out there of people that made risky investments and did well, however there are 10 failures for each success you don't hear about. c) When young each investment tends to be a large portion of total wealth, there is a big difference between taking a risk with 10% of your invested wealth vs 50% or more when you are just starting out.
    I made these mistakes with spec miners and pharma companies. I could look back and say it was a relatively small some of money, however invested well it would now have compounded to quite a respectable sum. You can't replace that lost opportunity.

    Another pitfall I have seen is people feeling the need to do something different when starting or only having a small amount. I have seen people explain how they would invest $1 million one way and then because they only have $2 thousand they invest it in a totally different way, usually trying to make a huge return in a short time. Which is really just falling for b and c above.

    Whatever your stage of life and investing (small or large) your strategy should be the same - optimal return without undue risk.
     
  2. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    I don't believe in lifecycle investing. The strategy I started with in my twenties is the same I follow in retirement albeit with some stupid reckless and forced detours along the way.

    Accumulation during the working years was all about growing an "income" stream for the future. Every additional LIC / Industrial share purchase kept getting us closer to our passive income retirement target. That wonderful goal where passive income replaces employment income.

    Here's the strategy worded more eloquently by a poster on another site:
    PRE-RETIREMENT:
    Investing for dividends during "accumulation" years is shown in the chart (dividends reinvested) below. The yellow line is the one that interests us being an investment in Industrial shares and / or LICs which are more focused on Industrial shares. Of course a lump sum was invested here at the start but it gives an illustration of the huge impact of compounding.

    Note that franking credits haven't been included. These would pay most of ones tax or in Super give an extra 15% boost to income returns. Outside Super, Discretionary Trusts and bucket companies etc would help with the rest of the tax in the case of high income earners. So this chart would still show an excellent result even after tax. As you can see an initial investment of $100K in Industrial shares compounded into a massive $10.288 Mil over a period of 35 years:
    IMG_0025.PNG

    POST-RETIREMENT:
    Now we come to retirement where income is being spent.

    The following chart shows a lump sum of $100K invested in dividend paying Industrial shares where the dividends are being used entirely to fund ones lifestyle in retirement. There is NO reinvestment of dividends.

    Again franking credits aren't included which could be used to pay tax outside of Super or in Super (Tax free pension) provide a 30% boost to income.
    IMG_0021.JPG

    I know I keep boring poor members here with these charts but they really are what have guided our investment strategy before and after retirement. As they say a picture is worth a thousand words!

    Not liscenced to give advice.
     
  3. Bran

    Bran Member

    Joined:
    18th Sep, 2016
    Posts:
    14
    Location:
    At work
    I could print this post out and stick it on my wall.
    I'd never thought about it like that either (the description of the other poster)
     
    austing and twisted strategies like this.
  4. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    ** with some stupid reckless and forced detours along the way **

    this applies to moves that fail , 'bold and adventerous' if they work ( but dangerously addictive , also )

    now i wandered into this investing game in the very end of 2010 , but with a ' headstart ' of an inheritance ( cash AND shares )

    the shares were WOW ( a nice car's worth , even now .)
    CSR ( just enough to decide to keep them )
    APE , ( damn lucky i ignored advice and kept them )
    and QAN ( now exited )
    and some legacy paperwork ( the hidden bonus was tracking down what happened to these holdings and seeing what happens to the likes of Mount Isa Mines , Rinker , Ansett Airlines , Poseidon Nickel

    both WOW and CSR were signed up the DRP so i continued that idea after inheriting them

    i have since added to CSR and APE , but also recovered the cash + costs invested ( but boosting shares numbers in process ( i am in 'hurry mode ' remember ... 9 years in my maximum accumulation time )
    APE rarely operates the DRP ( but signed up for it anyway )

    WOW has been accumulated via profits taken on other shares and via the DRP .

    now according to our gloriuous PM i am 61 and 'set up for retirement ' , however i would NEVER take financial advice from that man ( his wife seems to have a better grip on realty ... )

    however in my crude guesstimates i need to at least double my asset( s) values AND lock in reliable income sources ( this does not factor in inflation and taxation changes ... in they can't understand the current data correctly , how can i rely on their predictions even for next month )

    the hidden bonus is complacency seems to have disappeared from my thought patterns .

    to save you from further headaches , let's skip to ...

    POST RETIREMENT PLANs ( especially now the newest doctor , has suggested i have a 50% chance of living 10 years , LOL .... previously was on 'deatch watch ' .. i keep telling them the good die young )

    needs ... i still expect to be realistically under-cashed ( via asset values )

    a bonus is that frugal has always been my life-style .

    also i SHOULD still have some income sources locked in after the next stock market crash , since mainstream expectation seems to be liquidate , and then invest ( and spend sensibly ) i should be ahead of the game here

    so my retirement fund base needs to resist inflation but also grow in unit ( share )numbers .

    so WOW is most likely to be shifted to 50% shares , 50% cash in the DRP ( PRG is already set up similar to that )

    APE mostly pays cash divs ( so any DRP accumulation will be haphazard )

    CSR will be left 100% shares in the DRP until i am under finacial duress ( then will most likely switch to cash divs. or 50/50 )

    some share holdings will ( most likely ) be sold with some proceeds going into fixed interest securities ( if there are any decent ones on offer ,to rebalance the portfolio structure )

    the minute details will be flexible ( we are still due for a correction AND a crash before i retire )

    unlike mainstream thought, i WILL BE aiming to keep some DRP growth going ( to help resist inflation ) i do expect my living costs to rise ( even if i wished it were otherwise )
     
    austing likes this.
  5. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    Yes, Truong did a great job describing another way of looking at it.

    I tended to focus more on the actual dollars received. Year after year this wonderful compounding income growth strategy kept pumping out more and more income until it eventually reached an annual income that we felt comfortable retiring on. It seems slow at first but with dividend reinvestment it starts to take on a life of its own. Unless you're a high income earner obviously the sooner one starts investing wisely the better the end result will be.

    It really is incredibly simple. Impatience, chopping and changing strategy, and getting sidetracked with get rick quick approaches is the greatest enemy.

    And it's also not about being a great stock picker. Getting the big picture stuff right such as strategy and structures is more important. For example simple, boring dividend focused LICs with dividends reinvested held in the best tax structures available should get the job done.

    I'm only an amateur, not all that clever and I'm certainly not much of a stock picker but I'll be forever greatful to the likes of Daryl Dixon for getting me started on this path then Peter Thornhill for getting me back on track after losing my way.
     
  6. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    austing ,

    define a great 'stock-picker '

    i see a lot strategies explained ... and i can barely keep a straight face .

    assuming i don't have a deep insight into a business ( aka worked there as employee/contractor or sub-contractor )

    say JYC , .... here i was i needed to visit Perth and went via bus and train ( hadn't been into SA and WA before so decided to scout it out )

    now SA wasn't anything special but WA screamed GROWTH ( not just mining boom ) so newly focused on investing i REALLY kept my eyes open , BOQ was aggressively expanding there ( BOQ is my second largest bank holding behind MQG ) so memoed myself to add BOQ ( in preference to others )

    but could see housing/building growth ( just like BOQ ) as well ,

    so i spot a furniture maker ,JYC reasonable stats at the time ... in a growth state , and an area of ( then ) solid demand .

    sorry folks between the substandard ISP and it seems issues at Bell Direct ( database )

    will supply example data later ( been at this over an hour ... and that is more mindless time-wasting than watching football )

    the point was pick a good solid company first , and let the company make you look wise ( you don't need to fight over XJO stocks to get multi-baggers

    back in 2011 i was after tech stocks and saw this medical imaging stock ( going to start paying divs and at 16.5 cents )

    half the boutique LICs hold PME ... NOW ( but at currently rubbish yield .. i bought when little known but at least i have the div. yield ,and a lot of extra profit on the climb into 'fashionable ')
     
  7. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    Perhaps it would have been better if I said you don't have to be a stock picker at all. As mentioned before low fee conservatively managed LICs would still get the job done but because all but one are not pure Industrials the result won't be quite as good. However being vigilant and picking them up at a discount would help close the gap.

    In the charts I posted earlier Thornhill specifically used the Industrials Index to remove the impact of stock picking. WHF would be an adequate substitute with performance a bit less than the index due mostly to a small fee and taxation. I was merely trying to emphasise that pretty much anyone is capable of implementing this simple strategy even if they know bugger all about analysing direct stocks.

    I've been down the stock picking, active management and trading path for a period in my youth. Some do well with it but many don't. And it can be damn time consuming. I've no interest in revisiting it. Simple and boring turned out to be more rewarding, less stressful and much much less risky. I'm not out to impress but just tell the story of what worked for us who are now retired earlier and more comfortably than we would have been if not for following the path we did.

    All I can say based on observation over the years is that close to retirement is a dangerous time to be trying to play catchup. You appear to have a great deal of confidence in your investing ability. I wish you well.
     
    Bran likes this.
  8. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    honestly , i find it harder researching a LIC ( and harder again an ETF )

    when buying a fund/LIC you are putting a LOT of trust in them making correct judgements

    so i need the understand their style and mandate ( how and when they expect to earn more income for me .. than i can do myself)
    our current PM thinks i have adequate investments to finance my entire remaining life-time ( it sure as heck wouldn't be if invested in those fancy international ETFs he declares he is invested in .)

    the only way those ETFs will outperform a solid LIC like ARG , MlT , or WHF is if our PM implodes the OZ economy ,

    confident ?? i am far from confident , we are due a big crash ( possiobly next year ) and goodness knows which companies will survive ( let alone flourish afterwards )

    all i can do is invest , rescue the cash invested when sensible , and then put the cash into another investment , attractive at the time ,

    i hold about 150 companies but 30 of those ( including several large holding have no investment cash in there

    just profits running/DRPing .

    now LIC managers have their strengths and flaws , i don't mind paying high fees when they are earning big ( ACTUAl )returns , and will buy extra when the LIC is trapped in an unfavourable market ( for them ) i also respect low cost managers that run low risk/low return LICs releasing the market could collapse leaving them looking great (.

    so it is up to adjust the LIC balances at their best times ( currently i am checking the boring , staid LICs as 'safe havens ' because it is currently fairly hard to find a good value stock ... but these LICs bought theirs 10, 20 maybe 50 years ago )

    and since i needed accelerated growth i am underwieght on top 100 ( hoping to buy some in a crash )

    i can't afford 'set and forget ' unless there is no cash at risk in that holding so currently in fashion WAX has had the cash rescued ( but is still DRPed ) that cash went into SUN .

    PS DON'T forget fund managers as an investment , HHL has been a rocky ride but a profitableone
    AEF i did very well in but it was time to exit ( ( about 250% profit ... it was cute and niche when i bought in , has had a GREAT run but where can it go dealing with fashionistas
     
  9. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    Holy crap. You said your doctor has given you a 50% chance of another 10 years. I don't think I would last another next two years if I was trying to manage 150 stocks:eek:.
     
    twisted strategies likes this.
  10. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    just being born was a big drama at the time , even now the doctors can't believe when i say i have been much sicker .

    but cheer up the last ( previous) dianogsis was 'won't last until Xmas '( getting better all ready )

    so there is an incentive to plan for the long 'what if '

    the managing isn't so hard if you think large ( as in city rather than backyard )

    several holdings are inter-connected, others direct rivals ( WOW v WES )

    remember shares like MQG , TPM , SHV , APE , CCP , BTT, , CLV , HSN , NST , RCG , TRS , AOG , CNU ( and many others ) are without cash risk , ( and DRPed where possible )

    think of it as smaller cuts ( when there is a bad outcome ),

    remember i have to get this nearly perfect the first attempt ( crash => retirement date , )

    this might my first crash or burn in the markets

    but not first in life ( i have got through a few adventures , before )

    ( it is the caution part i am not so good at )
     
  11. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    now short term ( the next 3 months ) ( imo ) we are at an important pivot point ,
    nicely overheated and nervous for a short , sharp correction ... but still with enough momentum for another leg up before another genuine crash ( next year ) say the XJO makes another attempt at breaking 6000 ( later than i had hoped .. but i still have some holdings i would like to reduce and free-up the cash )
     
  12. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    Go Trump:). That might do it.
     
    twisted strategies likes this.
  13. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    i hold some ETFs , but the hard bit with ETFs is to benefit from them , not just track the market

    letting rivals create their own mstakes .

    will a Trump win/loss create the outcome speculated ( remember the British will never Brexit vote ??)

    and when a weaker US economy boosts the share market , ( according some Trump is an absolute disaster but how does the market react ??)

    i think we are being lead into a trap ... but which type , a confidence shaker , or an early Santa Rally ( the damn , i missed the train type ??)
     
    austing and Bran like this.
  14. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    I always work on the assumption that nobody knows what's going to happen. I never predict but rest assured I'm always ready to purchase future income streams at bargain basement prices when these rare opportunities arise.
     
    Hodor, Bran and twisted strategies like this.
  15. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    somebody knows , but it isn't me .

    i am thinking those 'who know ' won't collapse the monetary system ( just yet but planning for the possiblity would not be silly )

    i am guessing in a real crash , ( retail ) cash will be frozen for a short time .

    ( some ) asset survival is my main plan ( i doubt i will have time to re-build , now )

    hope and have multiple streams will be my main strengths ( and buy cheap if i can )
     
  16. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    now with ETFs it is the DETAILS that count , you are dealing with the tiny variations in the market( or index ) to work in your favour .

    but how do you lock those gains in with a vehicle designed for trading ( the market-maker sweeps ) to give 'instant liquidity ' as a security feature ( aka you feel safer because an exit is alwys open , counter-intuitive , perhaps )

    awesome if trading , but as an investor , is it so comforting that you can bail on instinct ( normally the worst time for many )

    Soooooooooo ! how do we make INVESTING in ETFs work ?

    for me i am selecting ETFs that :-

    A. have a DRP ( locking in those divs + the magic of compounding )

    B. pay more often than 6 monthly many pay 3 monthly , a few pay 4 monthly , and a few pay every month BUT the most advertised ones pay 6 monthly or yearly ( reducing the compounding effect )

    C. have a physical basket of shares/units ( which may give surprise rewards via company take-overs )
     
    austing likes this.
  17. austing

    austing Well-Known Member

    Joined:
    5th Jun, 2006
    Posts:
    386
    Location:
    north maleny
    Yes, and without the cost of brokerage. Although for better or worse I don't do it. Amongst our investments there are often better opportunities to invest the dividend elsewhere such as in a LIC trading at a discount. But for most the DRP can be an excellent thing albeit it adds to paperwork in keeping track of the cost base for CGT purposes.
    Excellent point and one you don't often see mentioned.
    One of the wonderful features with index ETFs. Not only are corporate actions automatically taken care of but the crap is also dealt with. That is, out with the bad and in with the good. Again for better or worse I prefer the mildly active low turnover LICs that generally avoid a lot more of the crap in the first place.
     
    twisted strategies likes this.
  18. Hodor

    Hodor Well-Known Member

    Joined:
    17th Sep, 2016
    Posts:
    79
    Location:
    hodor
    I'm not convinced that "somebody" knows,"somebody" will be "right" about a market crash. IMO it is more a function of the large number of predictions than actually knowing and reading all the signs correctly. Just because something should happen doesn't mean it will happen.

    Yes a market crash will happen and some time, been ready and confident to pounce is about the best I believe can be achieved.

    Did the person who won the lottery know the numbers that would be drawn?
     
    twisted strategies, Bran and austing like this.
  19. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    Hodor,

    regarding the lottery outcome , i will keep an open mind on that , after several attempts to warp the outcome have been detected over the years , and some mathematical anomalies exist on the historical data ,

    one analytical discussion suggested a successful criminal would target ( say ) 80% of all 3rd prizes , and 50% of the 2nd prizes as a high percentage of first prizes would draw unwanted attention .

    i planned for a crash in 2013/2014 and so far haven't even got a decent correction , but history strongly suggests a crash will happen .

    a crash in 2017 will be awkward for me but ( hopefully ) not unbearable , 2018 and 2019 ( should a crash occur then ) would rather uncomfortable ( bearing in mind i am planning to review my investments at the beginning of 2020 .

    members who are younger, strategies of large cash reserves is probably right for them , but i still to wring out maximum growth potential out of the current assets ( and cash in the bank won't do enough ).

    one thing i do remember from past meltdowns ( even though i wasn't in the markets )

    was sometimes the retail folk have restrictions placed on withdrawals ( that could prove inconvenient )
     
  20. twisted strategies

    twisted strategies Well-Known Member

    Joined:
    3rd Nov, 2013
    Posts:
    228
    Location:
    QLD
    austing ,

    to my mind a direct comparison of ETFs and LICs is unfair ( to the investor ) and i prefer investing in both in the correct timing ,

    ETFs were bought initiallyas an insurance strategy ( against my poor selections ) heck i had months ( less than 12 ) experience and i am in the middle of the 2011 correction , yes i did make many correct choices , but i could have just as easily made second-rate choices )

    SLF ( now exited ) was bought as a property ( REIT ) cover , in case MGR and SGP went badly
    QFN ( still hold ) was bought to hedge against MQG and WBC being poor choices in the financial sector

    and VAS simplpy because the XKO ( top 300 ) were cheap , and i didn't have the cash , experience or time to buy all the best buys .

    imo LICs should be carefully researched , considered and bought ( not snatched at like falling knives , VAS can be snatched take my word for that )

    should we have a crash within the next 12 months my ETF targets will be ILC ( in preference to VLC ) i a underweight in the top 20 because i needed rapid growth early on , and extra HVST averaged down as an aggressive compounding play exploiting the monthly divs paid in DRP ( instead of the the hedged and geared ETFs )

    i will not be ignoring the LICs but they will present less predictable buying windows , ( CDM is liable to dip on Brexit fears as an example , HHV on SRX dramas as another )
     
    austing likes this.