What about the general summary of advice I gave, IV? Which is to say that generally just DCA on Index Funds over time will produce reasonable returns over 5-10 years?
High Yielding Shares Again
- Thread starter MTR
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What about the general summary of advice I gave, IV? Which is to say that generally just DCA on Index Funds over time will produce reasonable returns over 5-10 years?
^ do you want affirmation that indexing, DRP and DCA works? Yes it does. Just turn off the television and keep buying, always keep buying and don't sell 
In principle I think its a great idea, especially for those that don't have time to constantly watch and analyse the market.
My commentary though is:
*10 years not 5, 5 is too short
*Keep the amount invested constant and automated (don't even watch it) This is very important because it means that 'more is bought' when the index is lower, so this increases exposure during lower markets and decreases (the increase in exposure) when the market is more expensive
*I would prefer to use a broader index that the 'high yield' index. If interest rates go up then the high yield index could decline.
If the market suffers a sudden drop make an extra contribution, and then switch off again.
The only time this approach doesn't work is when the index is very much over valued (which it definitely is not in the current market, when you hear market commentary that its over valued they are talking marginally over valued, seriously over valued are like the NASDAQ index running during the dot.com boom, or the Asian indexes prior to the Asian financial crisis).
But overall an excellent strategy
So really this is similar to the buy and hold strategy with property, just keep buying and holding for the long term.
Buy property which is well located/capital cities and you are basically riding the cycles through the ups and downs.
Continue to do this and in 10 years time your investment should be worth much more than what you started with.
Simple but historically proven, how much you make/% is dependent on how lucky you get.
MTR
Buy property which is well located/capital cities and you are basically riding the cycles through the ups and downs.
Continue to do this and in 10 years time your investment should be worth much more than what you started with.
Simple but historically proven, how much you make/% is dependent on how lucky you get.
MTR
was this clearly evident at the time, without the benefit of hindsight? people at the time were obviously continuing to invest in these markets indicating that they didn't believe a crash was around the corner?...
Excellent point. No one knows if a crash is around the corner or not. Its all speculation based on experience and knowledge but there is always a risk with any sort of investing.
I could be wrong here ...... but wasn't the issue that investors were continuing to drive up the prices of IT stocks of companies that actually weren't making any profit? Referring to the tech-boom-crash
A crash seems inevitable when there are no fundamentals except for hopes and dreams
I think tele and IV summed it up nicely. I also agree 5 years is too short a horizon. My horizon goes the length of my life. I don't think I would ever sell my index fund unless I get into an unforeseen financial mis hap which I guess though possible, is unlikely.
I turned off my DCA but the quarterly dividends are reinvested which just DCA but on a less frequent (quarterly) basis . I invested during this recent dip but don't watch the market every day. If the index falls below 5,000 I will aim to buy a lot more.
Conversely I have a pre set limit that I do not want the portfolio to exceed so as not to over expose myself on equities. When the value of my portfolio exceeds 10% of my target holding value I sell off the 10% and take the portfolio back to where I am comfortable with. As it happened the last time I did this a few months ago was the peak of the market this year - that was just more luck but I'm really glad I did it.
As an investor's forum it would be great to discuss and assess longer term strategies versus best time to buy or sell - no one will get this right.
I turned off my DCA but the quarterly dividends are reinvested which just DCA but on a less frequent (quarterly) basis . I invested during this recent dip but don't watch the market every day. If the index falls below 5,000 I will aim to buy a lot more.
Conversely I have a pre set limit that I do not want the portfolio to exceed so as not to over expose myself on equities. When the value of my portfolio exceeds 10% of my target holding value I sell off the 10% and take the portfolio back to where I am comfortable with. As it happened the last time I did this a few months ago was the peak of the market this year - that was just more luck but I'm really glad I did it.
As an investor's forum it would be great to discuss and assess longer term strategies versus best time to buy or sell - no one will get this right.
Oscar, have you found that VAS gives you a consistent 4% yield per annum consistently over the years in terms of dividend pay outs? I am just wondering that if I were to drip feed all my retirement funds slowly into VAS over the next few years, whether this is a sufficient nest egg for me to live for a long time on an inflation indexed asset with 4% yield?
I think the contributions on this thread have been excellent very helpful. Planning to follow the DCA model.
I think what my aim is basically keep $1M in shares and using the dividends as part of my income and hopefully never sell, buy quality stock and mix it with some high yield stock and hopefully buy when I see a dip in the market.
Thanks
MTR
I think what my aim is basically keep $1M in shares and using the dividends as part of my income and hopefully never sell, buy quality stock and mix it with some high yield stock and hopefully buy when I see a dip in the market.
Thanks
MTR
Emphasis is mine.
China I'm not sure if you meant this intentionally, but if so, this isn't thinking like a wise investor. This goes completely against diversification of assets and leaves you very exposed to the fluctuations of one particular market.
A salient question, Macca. Something I've not researched myself TBH.
I am thinking that the retirement portfolio will be mostly formed from income producing shares whether it is VAS or direct blue chips. There will be a minority holding in property, hopefully commerical and some cash/foreign currency.
Excellent point. For all we know, VAS could be like a giant Ponzi scheme wherein dividends are paid from new investors funds rather than genuine earnings.
Vanguard as a Ponzi, I love it
Ok, quick points ;
- Vanguard Australia is owned by Vanguard USA....Vanguard USA is owned by its underlying funds, which is owned by investors in the funds. Vanguard was set up this way, almost as a "mutual" organisation to protect investors. As far as risk of Vanguard going broke, have a look at http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/. There is plenty of other info out there on Vanguards structure. Having said that, you could take a bet each way and pick up Blackrock's Ishares ETFs....Blackrock is "systemically important", with $4 Trillion under management, if Blackrock goes the entire money system is finished.
- Redemptions of ETFs cannot be frozen as they are traded on the ASX. Unlisted funds can be frozen. I'd suggest selling at a time when the fund operator needs to freeze redemptions is about the worst thing you could possibly do, but that's besides the point.
- Suggest reading "Common sense on Mutual funds" now up to 10th edition, by John Bogle (Vanguard founder) for all you need to know about indexing.
Ok, quick points ;
- Vanguard Australia is owned by Vanguard USA....Vanguard USA is owned by its underlying funds, which is owned by investors in the funds. Vanguard was set up this way, almost as a "mutual" organisation to protect investors. As far as risk of Vanguard going broke, have a look at http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/. There is plenty of other info out there on Vanguards structure. Having said that, you could take a bet each way and pick up Blackrock's Ishares ETFs....Blackrock is "systemically important", with $4 Trillion under management, if Blackrock goes the entire money system is finished.
- Redemptions of ETFs cannot be frozen as they are traded on the ASX. Unlisted funds can be frozen. I'd suggest selling at a time when the fund operator needs to freeze redemptions is about the worst thing you could possibly do, but that's besides the point.
- Suggest reading "Common sense on Mutual funds" now up to 10th edition, by John Bogle (Vanguard founder) for all you need to know about indexing.
My point was simply that if you buy a derivative or invest in a fund it is possible that you may end up with nothing because most of these things are leveraged and as such can be wiped out in a market crash.
If you own shares directly a company may go broke but with diversification in stocks (not 4 banks) but segments, it is unlikely that you end up with nothing.
All of these companies were regarded as safe, they weren't. Some of the funds in Australia recovered, some didn't, but no one expected a subsidiary of the Commonwealth Bank to freeze redemptions for years.
http://en.wikipedia.org/wiki/Madoff_investment_scandal
http://en.wikipedia.org/wiki/Long-Term_Capital_Management
http://en.wikipedia.org/wiki/Bear_Stearns
http://www.asic.gov.au/asic/pdflib....ion_for_investors_in_frozen_funds_info111.pdf
If you own shares directly a company may go broke but with diversification in stocks (not 4 banks) but segments, it is unlikely that you end up with nothing.
All of these companies were regarded as safe, they weren't. Some of the funds in Australia recovered, some didn't, but no one expected a subsidiary of the Commonwealth Bank to freeze redemptions for years.
http://en.wikipedia.org/wiki/Madoff_investment_scandal
http://en.wikipedia.org/wiki/Long-Term_Capital_Management
http://en.wikipedia.org/wiki/Bear_Stearns
http://www.asic.gov.au/asic/pdflib....ion_for_investors_in_frozen_funds_info111.pdf
How I see it
If Vanguard goes bankrupt the assets would remains the same, a new company would just be required to manage them. The individual funds are owned by investors and the management fee goes to Vanguard itself
Here is an excerpt from Mel Lindauer (Bogleheads) which goes into some detail on how it all works
Also, check out this post when the markets were tumbling
Vanguard CEO offers perspective on challenging times
If Vanguard goes bankrupt the assets would remains the same, a new company would just be required to manage them. The individual funds are owned by investors and the management fee goes to Vanguard itself
Here is an excerpt from Mel Lindauer (Bogleheads) which goes into some detail on how it all works
Also, check out this post when the markets were tumbling
Vanguard CEO offers perspective on challenging times
Whilst googling the above, I chanced across this about Vanguard (Sept 2014).
Vanguard Reaches $3 Trillion In Assets, Matching Entire Hedge-Fund Industry
Vanguard Reaches $3 Trillion In Assets, Matching Entire Hedge-Fund Industry
Redwing is on the money, no correlation between Vanguard and Bear Stearns, LTCM and the like. DYOR of course.
