Dona Ferentes
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Called a barbell approach, I do something similar.
How many people get above average returns over the long term?
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Value Collector
Have courage, and be kind.
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Yep, and quite a few of the internationals generate income here in Australia.
I was at the McDonald’s drive through the other day, picking up some French fries and a coke, and as I watched the cars in front of me tapping their cards and driving away with their bags of food, I realised there was about 20 ways my index funds made money from each maccas customer.
1. McDonald’s earns a royalty.
2. Credit card issuer earns a fee
3. Eftpos terminal issuer earns a fee
4. Visa, MasterCard, AmericanExpress earn a fee
5. Electricity retailer earns a margin
6. Electricity transmission companies profit
7. Electricity generators profit
8. Fuel suppliers to generators eg coal, gas
9. Companies involved in transporting that gas
10. Coca-cola earns from the drinks sold
11. companies producing straws, cups, bags etc
12. Companies producing the raw materials for the paper straws, cups, bags.
13. Companies suppling all the ingredients in the food
14. Companies supplying the machinery to make all the packaging and ingredients.
15. Companies supplying all the steel etc to make the machinery.
16. Companies suppling the Iron Ore for the steel.
17. Multiple levels transport companies to carry out all the above
18. Companies making all the trucks and ships needed.
19. Companies maintaining all the trucks and ships.
20. Companies involved in waste collection after products are consumed.
21. Real estate companies leasing the store location and various warehouses needed.
It really goes on and on, and I love the idea of owning a cross section of the entire system ?
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am not so big on the high-conviction' bit , maybe because i am retired and can't guarantee a regular injection of new funds ( March 2020 taught me that when divs where trimmed and even cancelled on the payment date ( for one ) ( just because they are trickling today , there is no certainty in six months time )
2020 could have been much better if all the declared divs were aid in full , on time .. but lesson learned ( i still did OK )
am not big on leverage either , maybe i am not sophisticated enough , maybe something rammed into me by my depression era parents
being lucky is nice but being able to discern luck from good judgment ( and skill ) is better
the main reason i abandoned the race-tracks was two nice winning outings caused by two unbelievable outcomes ( and worse i couldn't believe i put money THERE , one was a well drawn dish licker at 25/1 two favourites broke down the rest got into trouble , the time was the slowest in at least two years ( at least ) .... and said winner took 18 months to win another race ( on a minor country track )
but it turned a train-wreck of a night into a rather profitable night
PS although i backed it each way , i thought it barely had a place chance .. a three length win was totally unexpected ( and the very slow time hints it wasn't full of 'a magic substance ')
would prefer to cherry-pick the niches in the global economy ( several market fixate on capital gains ) especially currently
Value Collector
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The way I get around fluctuations in dividends with out having to make adjustments to my home life, is by having 5 years worth of “wages” in what I call my “wage fund” that pay out over five years. (I understand not everyone can be set up like that though).
Basically the way I work it is as follows
1. dividends come in during the year and I deduct the probable tax payable from them, the tax portion goes into my “Tax reserve Account”.
2. 25% of the remaining after tax income get reinvested.
3. The other 75% gets deposited into my “wages fund”.
4. At the end of the financial year, what ever is in my “wages account” from that year I set up an automated 60 month (5 years) monthly credit to my spending account.
This of course means I always have a rolling 5 years worth of wages lump sum, sitting in my wages account, I invest some of it in Plenti, some in term deposits, and some offset against my home loan.
Any interest earned on this wage account gets invested into my superannuation.
————————————-
Doing it this way ensures the ups and downs in dividends are some what smoothed out, and Mrs VC doesn’t have to worry about large changes from year to year that would cause the household budget to need changing.
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I've been re-reading The Intelligent Investor it's the copy with Jason Zweig comments at the end of every chapter.
If the title of this thread is something that's on your mind, I would encourage picking up a copy, the ebook price is $18 or something.
I would summarise the message of the book as:
* There's two types of market participants: speculators and investors. The book isn't for speculators and discourages speculation beyond a small part of your overall net worth.
* There are two types of investors: conservative and aggressive.
* If you're a conservative investor, you should just be as passive as possible and invest in a mix of quality stocks and quality bonds. The mix shouldn't ever be more than 70/30 stocks/bonds or 30/70 stocks/bonds, and realistically given the unknowable nature of the future it should probably just always be 50/50 stocks bonds. When the book was written there was no easy way to buy the index, so there's some steps for identifying the portfolio of stocks a conservative investor should buy, about 30 different stocks with a long history of operations, dividend payments, profit etc. These days easier/cheaper to just buy the index.
* You need quality bonds in your portfolio just as much as you need stocks because the future is unknowable. Bonds will provide a stable return during lower/negative nominal growth periods and stocks hopefully return during higher/positive nominal growth periods.
* If you're an aggressive investor, you should only be investing if you realistically believe you can earn a 5%p.a. alpha over passive alternatives. Most people can't achieve this over the long run, for the reasons described in this thread, and therefore shouldn't really be aggressive investors, but if you want to it goes into detail about some mechanisms to do so. Most of those mechanisms described probably fall somewhat under a "value investing" umbrella, probably easier to just buy some shares in Berkshire.
Moral of the story, just buy 25% VAS/25% VGS/25% IGB/25% ILB and go do something more rewarding with your time.
If the title of this thread is something that's on your mind, I would encourage picking up a copy, the ebook price is $18 or something.
I would summarise the message of the book as:
* There's two types of market participants: speculators and investors. The book isn't for speculators and discourages speculation beyond a small part of your overall net worth.
* There are two types of investors: conservative and aggressive.
* If you're a conservative investor, you should just be as passive as possible and invest in a mix of quality stocks and quality bonds. The mix shouldn't ever be more than 70/30 stocks/bonds or 30/70 stocks/bonds, and realistically given the unknowable nature of the future it should probably just always be 50/50 stocks bonds. When the book was written there was no easy way to buy the index, so there's some steps for identifying the portfolio of stocks a conservative investor should buy, about 30 different stocks with a long history of operations, dividend payments, profit etc. These days easier/cheaper to just buy the index.
* You need quality bonds in your portfolio just as much as you need stocks because the future is unknowable. Bonds will provide a stable return during lower/negative nominal growth periods and stocks hopefully return during higher/positive nominal growth periods.
* If you're an aggressive investor, you should only be investing if you realistically believe you can earn a 5%p.a. alpha over passive alternatives. Most people can't achieve this over the long run, for the reasons described in this thread, and therefore shouldn't really be aggressive investors, but if you want to it goes into detail about some mechanisms to do so. Most of those mechanisms described probably fall somewhat under a "value investing" umbrella, probably easier to just buy some shares in Berkshire.
Moral of the story, just buy 25% VAS/25% VGS/25% IGB/25% ILB and go do something more rewarding with your time.
You need to start a thread where you condense books.
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I read a lot but mostly books that it would be an injustice to condense.
Financial history books (from Reminiscences of a Stock Operator through to When Genius Failed and onto contemporary The Bond King) can all be condensed into the following, apropos this thread:
A person or bunch of people believed they could "beat the market", leveraged up/took stupid risky bets/did crimes/took advantage of suckers/etc then they blew up spectacularly, leaving the public to eat the costs in a way that a commoner could never get away with, and did not beat the market, but either got rich anyway or died penniless anyway.
I use to love reading. Go through about 10-15 books a year. Somewhere I got lazy or impatient and started reading Amazon reviews instead.
Too much fluff in a lot of books.
I've never thought of it to that level of detail so it is an interesting approach.
For me, I work on the basis with holding a large spread of Oz companies and International ones, all those employees are working for me even though they may not know it.
Never held bonds though as some do. Not the slightest bit interested in them.
Have a cash buffer to cover future expenditure. With the account-based pension I have, I allocate 10% of it to give to my children and the rest goes back into the market. I essentially live off the dividends/distributions I receive from my personal holdings. Of course, compared with others my needs could be considered relatively modest bearing in mind I am single with zero debt and no one financially dependant on me. No wish for international travel or fine dining at $150 per head sort of thing. Essentially I do what I do without caring if others in my peer group approve of like it or not. I am not them and they are not me.
On that aspect, I do wish the Government and some organisations would cease admonishing me for being what they view as being too frugal. It's really none of their business how I wish to spend or not spend my funds. I am happy and content with my life so rack off.
Apologies for the rant and the thread drift.
Value Collector
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Maybe you would like Amazons “audible” subscription, I think you can try it free for a month, you can listen to books as you walk or do the house work etc.
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yes , broadly i have the same mindset
played with hybrids/bonds between 2011 and 2017 after all , all good investing is about risk v. reward balance
'bonds' are good ( when held to full term ) for regular interest payments ( when the bond is traveling well )
however some use bonds in complicated strategies ( like using them as collateral )
yes i am often amused by governments beseeching me to spend recklessly ( just like them ) to save THEIR revenue stream
reminds me of drug users on-selling drugs to fund their own addiction
A lot of it is just fluff. There's a few places that actually cut out the dribble and condense the book- for a fee. I haven't seen much new stuff that's been that interesting lately.
I'll consume patreon and youtube stuff as it's more up to date.
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Mr Belli love it. I fear that you are not an orphan with this thoughtful post.
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5 data-driven tips for beating the Australian market: UBS
5 data-driven tips for beating the Australian market: UBS
Learn how to beat the ASX market with these top 5 strategies from UBS, including franking and dividends, dividend run-up effect, seasonal effects, oligopoly premium, and index inclusion effect.
www.marketindex.com.au
Dona Ferentes
Pengurus pengatur
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above average .... that would be most of us, then?
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i do what i can , at tweaking for a good outcome
i would think the ( veteran ) long term holders would be doing even better again
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the trick is , if you decide to , is to buy when prices are low , which is NOT as easy as it sounds , you have fear and short-sellers running amok and hundreds of tempting targets ...which will bounce in say 3 years ( say APE ) and which will slide and slide and slide ( say RFG )
but good luck if you do
