Investment Portfolio for Retirement

[Beagle]

Suppose you're 65 and your wife is 63 and you have recently downsized your house and have exactly $500,000 to invest to supplement your superannuation. Modest risk conservative age appropriate portfolio suggestions please.
I'm starting this thread for ynot.

Please suggest a portfolio predominantly based around conservative sustainable dividend income.

My initial thoughts.

Of the Utilities I like and presently hold MEL and GNE approx. gross yields 6.8% and 9% respectively
REIT's I like and hold are ARG. PIE (exempt income about 5.2% yield) I also like GMT, lower yield about 4.5% from memory but also a PIE
Retail - I like HLG but presently don't own any. Gross yield about 10%
Retirement sector - OCA for 6% gross yield in FY19 growing strongly in the years ahead
Transport - AIR for gross yield of approx. 10%
Consumer staples ZEL for gross yield of about 14% looking forward to 2020 year.
Financials - HGH for approx. 9% gross yield
$25,000 - $50,000 in cash in a call account with HGH paying 2.5% as an emergency / medical fund

I wouldn't own bonds as the yields are too low and would use the power companies and REIT's as a bond proxy.

I am sure others will be happy to contribute and make suggestions to help you ynot.

[percy]

Well I am now 70.Wife is 69.
At the end of January last year I retired from selling books to school libraries. .
In May we downsized our house.Brought a new slightly larger over 60s house.
Share potfolio was reorganised.Objective was to hold along term portfolio to provide dividends, and once that was achieved the balance could be put into growth shares.Most Australian shares were sold.Two reason ;[a] I was finding the Australian small cap market difficult.[b] Australian dividends are not imputated.
Dividend NZ stocks. GNE,MEL,SPK,HGH,TRA........These stocks alone provide the level of dividends I wanted.
Other "core" NZ stocks.MCK and OCA.
Fun NZ stocks,ALF,IKE,PGW,RBC.
My largest NZ shareholding is not one of the above.
My Australian stocks include a few small holdings I will not list.
Aussie stocks.AQZ,MMI,SEQ,TTI,VHT.
I do not hold any bonds,however have a large enough cash holding.

[minimoke]

Can we assume Govt Super is worth $617 a week in the hand and house is mortgage free.

What is the couples budgeted / hoped for expenditure a week. How is their health?

What is value of house - as I would also look at a REL.

[Maverick]

Well , there will be no surprises from me. Put the lot in OCA.
"shock , horror!"I hear you all say what about diversification?
Forget diversification,It's only 500K , regular people will put all of that into one rental house (or 1.5 x rental houses) plus living in their own freehold house and have no issues. They'll even be happy to borrow some to do it.
Why OCA?
Beyond everything said on that thread (which implies good growth for ages), for the purpose of retirement its gives a fair dividend return and capital growth.
Wait, there's one more thing...here is the most important part...the share will also be inflation proof. For retirement funds that will be needed 30 years from now when plumbers cost $500/hr .Without keeping the 500k up with inflation, it will have eroded to almost worthlessness by the end.
I see the price of a village/house representing the amalgamated sum of labour costs of the era (land, plumbers, engineers etc all combined into one new house build cost) so in other words your OCA unit (continually maintained to new condition all paid by the residents) will keep up with whatever the costs of the future might be.
While HLG , AIR etc have good divis their assets don't` necessarily keep up with inflation for that plumbers bill 30 years from now (i.e HLG capital value growth is benign)
Can`t go wrong with OCA. At he very minimum if the share price doesn't go up one more cent above the rate of inflation from $1.08 the current dividend alone is adequate..but lets face it, its gonna go up sh*t loads as well.

Disc , retiring in 3 weeks.:t_up::t_up::t_up::t_up::t_up::t_up:

[Beagle]

Hi minimoke, yes it will be when his wife hits 65.

[Beagle]

Well , there will be no surprises from me. Put the lot in OCA.
"shock , horror!"I hear you all say what about diversification?
Forget diversification,It's only 500K , people will put all of that into one rental house (or 1.5 x rental houses) plus living in their own freehold house and have no issues. They'll even be happy to borrow some to do it.
Why OCA?
Beyond everything said on that thread (which implies good growth for ages), for the purpose of retirement its gives a fair dividend return and capital growth.
Wait, there's one more thing...here is the most important part...the share will also be inflation proof. For retirement funds that will be needed 30 years from now when plumbers cost $500/hr .Without keeping the 500k up with inflation, it will erode to almost worthlessness by the end.
I see the price of a village/house representing the amalgamated sum of labour costs of the era (land, plumbers, engineers etc all combined into one new house build cost) so in other words your OCA unit (continually maintained to new condition all paid by the residents) will keep up with whatever the costs of the future might be.
While HLG , AIR etc have good divis their assets don't` necessarily keep up with inflation for that plumbers bill 30 years from now (i.e HLG capital value growth is benign)
Can`t go wrong with OCA. At he very minimum if the share price doesn't go up one more cent above the rate of inflation from $1.08 the current dividend alone is adequate..but lets face it its gonna go up sh*t loads as well.

Disc , retiring in 3 weeks.

LOL you can't have too many. I love your enthusiasm, I really do but ynot wants very conservative so I would think that MUST include some pretty good level of diversification.

[Maverick]

"Please suggest a portfolio predominantly based around conservative sustainable dividend income."
The portfolio is "conservative sustainable dividend income". The portfolio doesn't need altering . To demonstrate the corrosion of inflation , Ynot just needs to remember what plumbers cost him in 1990 ($25/hr, now $80 + gst)then work out perhaps his idea of "conservative" akin to putting $500k (in 15 different pots) under the mattress is a certain slow train wreck.
Then for stage 2, the fun part, he needs to guide Mrs Ynot into the idea. (she will never have a bar of it though) so instead ... just tell her she can buy new shoes every time the OCA div comes out.....twice a year forever! Welcome to the "Maverick school of charm"

Disc . Retiring in 2.9998 weeks.:t_up::t_up::t_up::t_up::t_up:

[percy]

Can we assume Govt Super is worth $617 a week in the hand and house is mortgage free.

What is the couples budgeted / hoped for expenditure a week. How is their health?

What is value of house - as I would also look at a REL.

Govt Super $491.52 net each a fortnight.
No mortgage.
Last power bill [solely electric] $104.65

[minimoke]

Govt Super $491.52 net each a fortnight.

That's probably due to yoru focus on dividends and paying the price through extra taxes.

Which in a "diversified portfolio should mean: cash on hand; dividend yielding shares that dont loose capital value (for cash flow purposes that can also be sold down over first few years) and shares with less dividend but more potential for growth so dividends kick in in later years and higher capital value mean long term sell down creates greater return

[percy]

That's probably due to yoru focus on dividends and paying the price through extra taxes.

Which in a "diversified portfolio should mean: cash on hand; dividend yielding shares that dont loose capital value (for cash flow purposes that can also be sold down over first few years) and shares with less dividend but more potential for growth so dividends kick in in later years and higher capital value mean long term sell down creates greater return

After following the sharemarket for 52 years I settled on the portfolio I wanted for our retirement.
More than happy with what we have.

[Arthur]

It looks like a very risky long term portfolio. They might live for another 40 years. Having it all invested in NZ is a risky strategy. What happens to expenses if the $NZ drops in half? You do not even have any exporters that would benefit from the fall. If China or USA sneeze, foot and mouth comes here, tourism drops,there is a big quake in Wellington or Rangi blows, fake milk and/or meat take off our economy would be very prone to tanking, taking the entire portfolio with it.The electricity companies are on super high PEs and paying high dividends by eating the future. Technological changes could threaten both the electricity companies and Z. Online shopping is already killing property companies overseas. Diversification isn't buying baked beans from three different companies

[Beagle]

Arthur - Why don't you post what you recommend then ?

[777]

Govt Super $491.52 net each a fortnight.
No mortgage.
Last power bill [solely electric] $104.65

Plus a tax fund each year.
All declarable dividends are taxed at 33c/$ and your super is at 30c/$.And income splitting.

But then you may be share trader which changes things.

[percy]

Plus a tax fund each year.
All declarable dividends are taxed at 33c/$ and your super is at 30c/$.And income splitting.

But then you may be share trader which changes things.

Share investor's portfolio.
No share trading.

[percy]

It looks like a very risky long term portfolio. They might live for another 40 years. Having it all invested in NZ is a risky strategy. What happens to expenses if the $NZ drops in half? You do not even have any exporters that would benefit from the fall. If China or USA sneeze, foot and mouth comes here, tourism drops,there is a big quake in Wellington or Rangi blows, fake milk and/or meat take off our economy would be very prone to tanking, taking the entire portfolio with it.The electricity companies are on super high PEs and paying high dividends by eating the future. Technological changes could threaten both the electricity companies and Z. Online shopping is already killing property companies overseas. Diversification isn't buying baked beans from three different companies

Investing in USA is dangerous should you die.A NZder trying to get shares out of probate is near impossible,and is the reason I sold US shares a number of years ago.
My largest undisclosed shareholding is an exporter.
I have already survived a few earthquakes,and more do not concern me.
Yes the electricity companies will go gang busters with electric cars..

[job52]

I really appreciate the detailed response to Beagles excellent hypothetical question.
I'm 66,house and no debt, a reasonable amount of savings, still enjoy working,I have one very high risk investment,plus a small
passive income. I am going through this exercise at present.....for me deciding on the Portfolio Strategy is the hard part.
At present I'm out of the market and sitting on TD's

[Waiuta]

I hold bonds in IFT, KCFHA, MCY and ZEL. I also hold shares in AIR,CEN,GNE,IFT,KPG,NZR and ZEL. Also hold about $40K cash
It's taken me a while to get this mix and maybe I should have MEL instead of GNE and perhaps some HGH. We're in our early to mid 70's and overall I'd say it's pretty defensive and seems to suit our needs. I sometimes wonder if I should cash out some share growth but knowing it's there is a sort of insurance if needed.

[Arthur]

Investing in USA is dangerous should you die.A NZder trying to get shares out of probate is near impossible,and is the reason I sold US shares a number of years ago.
My largest undisclosed shareholding is an exporter.
I have already survived a few earthquakes,and more do not concern me.
Yes the electricity companies will go gang busters with electric cars..
Tesla's business model is solar, powerwall, car with no middleman. Not there yet obviously, but it does not take much of an oversupply of electricity and the power companies could be stranded assets. Not a basket I'd have all of my retirements eggs in. Personally I use a variety of fund managers for my overseas exposure. I have a few token ETFs, but have found my active managers worth the money. It would be worth talking with a few independent AFAs (authorised financial advisers) about their ideas.

[percy]

Tesla's business model is solar, powerwall, car with no middleman. Not there yet obviously, but it does not take much of an oversupply of electricity and the power companies could be stranded assets. Not a basket I'd have all of my retirements eggs in. Personally I use a variety of fund managers for my overseas exposure. I have a few token ETFs, but have found my active managers worth the money. It would be worth talking with a few independent AFAs (authorised financial advisers) about their ideas.

I have never used a fund manager.Never will.

ps.I am a very successful investor.

[Beagle]

I hold bonds in IFT, KCFHA, MCY and ZEL. I also hold shares in AIR,CEN,GNE,IFT,KPG,NZR and ZEL. Also hold about $40K cash
It's taken me a while to get this mix and maybe I should have MEL instead of GNE and perhaps some HGH. We're in our early to mid 70's and overall I'd say it's pretty defensive and seems to suit our needs. I sometimes wonder if I should cash out some share growth but knowing it's there is a sort of insurance if needed.

Looks pretty good to me.

[percy]

I hold bonds in IFT, KCFHA, MCY and ZEL. I also hold shares in AIR,CEN,GNE,IFT,KPG,NZR and ZEL. Also hold about $40K cash
It's taken me a while to get this mix and maybe I should have MEL instead of GNE and perhaps some HGH. We're in our early to mid 70's and overall I'd say it's pretty defensive and seems to suit our needs. I sometimes wonder if I should cash out some share growth but knowing it's there is a sort of insurance if needed.

I brought GNE and MEL at issue.MEL is our power supplier.Perhaps MCY is the best generator to hold ,as their generation is closest to their customer base.?I would not recommend one generator over another.
Sit on what you have,it looks a pretty good portfolio to me too.

[Snoopy]

I hold bonds in IFT, KCFHA, MCY and ZEL. I also hold shares in AIR,CEN,GNE,IFT,KPG,NZR and ZEL. Also hold about $40K cash
It's taken me a while to get this mix and maybe I should have MEL instead of GNE and perhaps some HGH. We're in our early to mid 70's and overall I'd say it's pretty defensive and seems to suit our needs. I sometimes wonder if I should cash out some share growth but knowing it's there is a sort of insurance if needed.

Well I beg to differ with the other Beagle and the one who holds the 'perce' strings. Nothing wrong with any of those investments on their own, I agree. But as a portfolio it looks very strongly correlated, perhaps unhealthily so, to the energy sector. CEN, GNE and IFT (through Trustpower) are all Gentailers. ZEL owns a stake in NZR. AIR and ZEL both suffer when fuel prices are high. Petrol price goes up and the retail malls are hit through drying up of spare cash (affects KPG). If you have retired, it looks a bit risky to hold such a combination. I would suggest diversification into other sectors less susceptible to the pitch fork of the dancing energy demon.

SNOOPY

[peat]

Conservatively it should have these components as a basis set to appropriate percentages e.g. cash <5%; NZ Fixed Int 30% Int'l Fixed Interest 12% etc etc.
Even with a 500K portfolio those divisions means mostly using funds so as to gain company diversification within each sector. It is usually accepted as practical to have a large element of fixed interest in NZ despite it not being quite correct.



Cash




NZ Fixed Interest



International Fixed Interest


Property




NZ and Australian Equities


International Equities - Core


International Smaller Companies


Emerging Markets



Specialty

[ynot]

Can we assume Govt Super is worth $617 a week in the hand and house is mortgage free.

What is the couples budgeted / hoped for expenditure a week. How is their health?

What is value of house - as I would also look at a REL.

Thanks so much for this feedback guys as I am stumped regards knowing what to do. At this point all I can conclude is knowledge is good. The more information I have available the better equiped I should be to make an informed decision.
As for our situation, we have always lived within our modest means so I see no major change there going forward. We would however like the 500k to enhance our modest lifestyle as we move forward.
Our health is good, I prefer to invest in good fitness and diet rather than health insurance.
Yes, once wife retires we will recieve $617 pw. For now im still working (modest income low stress employment ) but, only becuse I want to. If i wake up tomorrow and decide to persue other interests I will !
House is mortgage free.

[LAC]

I am a few decades away from 65 but basically what I have setup for the Mrs. will be my retirement portfolio if mortgage free and a paid off boat to head off for catch every chance I get:)

In equal shares:

NZX50 Fund (FNZ)
MEL
CEN
SPK
AIA

[Bjauck]

Thanks so much for this feedback guys as I am stumped regards knowing what to do. At this point all I can conclude is knowledge is good. The more information I have available the better equiped I should be to make an informed decision.
As for our situation, we have always lived within our modest means so I see no major change there going forward. We would however like the 500k to enhance our modest lifestyle as we move forward.
Our health is good, I prefer to invest in good fitness and diet rather than health insurance.
Yes, once wife retires we will recieve $617 pw. For now im still working (modest income low stress employment ) but, only becuse I want to. If i wake up tomorrow and decide to persue other interests I will !
House is mortgage free.
The fact you were able to be a home owner (and then trade down to provide retirement capital) does show how NZ traditional home ownership has been the bedrock of NZ retirement planning.

As home ownership declines (and is not necessarily the best choice for all people anyway) and fewer families can afford to be owners, a retirement savings plan needs to be established which incurs the same level of tax obligations as home ownership for the same level of gains. KiwiSaver as a savings plan is just a very small step in that direction.

[RupertBear]

I am noticing that most of you only hold a few stock. As in 5 or 6. Hmmm I hold quite a few, as in 18. I thought I was being defensive by doing this but maybe I am over diversified? :confused: How many stocks do people think is a good number to have?

[minimoke]

I am noticing that most of you only hold a few stock. As in 5 or 6. Hmmm I hold quite a few, as in 18. I thought I was being defensive by doing this but maybe I am over diversified? :confused: How many stocks do people think is a good number to have?
I have 8 in my "set and forget " portfolio (I Haven't touched this for years and it keeps on ticking over nicely)
I also have 8 in my "aggressive" (this gets reviewed regularly with stocks go in and out depending how they are performing). I'm looking at adding 2 more - maybe

[777]

I have 30.

[Beagle]

Conservatively it should have these components as a basis set to appropriate percentages e.g. cash <5%; NZ Fixed Int 30% Int'l Fixed Interest 12% etc etc.
Even with a 500K portfolio those divisions means mostly using funds so as to gain company diversification within each sector. It is usually accepted as practical to have a large element of fixed interest in NZ despite it not being quite correct.



Cash




NZ Fixed Interest



International Fixed Interest


Property




NZ and Australian Equities


International Equities - Core


International Smaller Companies


Emerging Markets



Specialty





Thanks but that's straight out of the authorized financial advisor standard rulebook. What ynot needs is specific advice. For example if one were to have some of their funds in emerging markets which fund would you recommend ? How does he buy them e.t.c.
I would go with TEM in that sector which is easy and cost effective to buy on the NZX but I would only recommend a maximum of 5% in that area. (Almost zero yield for one thing, same for international fixed interest) (Disclaimer - Not that I am an AFA or specifically recommending anything)

[LAC]

I am noticing that most of you only hold a few stock. As in 5 or 6. Hmmm I hold quite a few, as in 18. I thought I was being defensive by doing this but maybe I am over diversified? :confused: How many stocks do people think is a good number to have?

I have
5x NZX,
3x ASX and
2x NASDAQ

Two years ago I had about 14-16 NZX only but was spending too much time on reading useless material for the colourful stocks I owned. I just simplified things now. May add one or two of the ones I sold over the coming year.

[percy]

I am noticing that most of you only hold a few stock. As in 5 or 6. Hmmm I hold quite a few, as in 18. I thought I was being defensive by doing this but maybe I am over diversified? :confused: How many stocks do people think is a good number to have?

Ezeey Peezy RB.
Poor or indifferent result sell.
Better than you expected result buy more.
Doing this you will have your portfolio under control.

[peat]

Thanks but that's straight out of the authorized financial advisor standard rulebook. What ynot needs is specific advice. For example if one were to have some of their funds in emerging markets which fund would you recommend ? How does he buy them e.t.c.
I would go with TEM in that sector which is easy and cost effective to buy on the NZX but I would only recommend a maximum of 5% in that area. (Almost zero yield for one thing, same for international fixed interest) (Disclaimer - Not that I am an AFA or specifically recommending anything)

Well sure , but I thought it might be informative to people who haven't read the textbook.
I wouldnt underallocate too much to int'l f.i. but I agree it is easier to manage NZD FI and being the ultimate destination currency one could accept over exposure to it. EM percentages should of course be small as volatility is high. But some, not none!

I wonder if there is single fund that does all this for you? Bound to be...

[BeeBop]

Well sure , but I thought it might be informative to people who haven't read the textbook.
I wouldnt underallocate too much to int'l f.i. but I agree it is easier to manage NZD FI and being the ultimate destination currency one could accept over exposure to it. EM percentages should of course be small as volatility is high. But some, not none!

I wonder if there is single fund that does all this for you? Bound to be...

As I sold down my NZX shares a year or so ago, I put the monies into Milford Diversified Income Fund. A nice holding and seems to deliver a conservative/balanced mix of growth and income.

Last week, however, I made the call that things had bottomed out enough, and I bought back into the NZX with my USD - I will maintain my holding in Milford and let it compound up.

[Joshuatree]

Conservatively it should have these components as a basis set to appropriate percentages e.g. cash <5%; NZ Fixed Int 30% Int'l Fixed Interest 12% etc etc.
Even with a 500K portfolio those divisions means mostly using funds so as to gain company diversification within each sector. It is usually accepted as practical to have a large element of fixed interest in NZ despite it not being quite correct.



Cash




NZ Fixed Interest



International Fixed Interest


Property




NZ and Australian Equities


International Equities - Core


International Smaller Companies


Emerging Markets



Specialty






This is a good blueprint to follow. lizard was in to this.She reviewed reset every three months stocks that had run well and gone over their weighting had the top taken off and the funds reallocated. This is the fun/rewarding part in a disciplined investment portfolio esp in the last 9 years or so of the Bull.

[LAC]

This is a good blueprint to follow. lizard was in to this.She reviewed reset every three months stocks that had run well and gone over their weighting had the top taken off and the funds reallocated. This is the fun/rewarding part in a disciplined investment portfolio esp in the last 9 years or so of the Bull.

What does this actually mean?
Where and what do you put the 500k in? Simply saying Emerging Markets doesnt cut it.....




Cash




NZ Fixed Interest



International Fixed Interest


Property




NZ and Australian Equities


International Equities - Core


International Smaller Companies


Emerging Markets



Specialty

[peat]

What does this actually mean?
Where and what do you put the 500k in? Simply saying Emerging Markets doesnt cut it.....




Cash




NZ Fixed Interest



International Fixed Interest


Property




NZ and Australian Equities


International Equities - Core


International Smaller Companies


Emerging Markets



Specialty




ETF or some sort of fund. choose based on quite long term results - at least 7 years.
Consider Ishares or Vanguard and as Beagle says Templeton for EM, though Ishares do it too.
I'm not going to make a full list of specific recommendations , too time consuming. The sort of work a paid financial adviser or even a full service broker would do for you.
But I'll drop something in for FI AUD http://www.pmcapital.com.au/enhanced-yield-fund as an example
and for local equities you could use AFI or Kingfish

[Ggcc]

I feel two people on the pension with a freehold house and $500,000 in the bank is a fantastic retirement plan based on todays values of our dollar. The pension for two is approximately $500 per week which is ample to live off (only live off). Any holidays would come from the supplemental income the $500,000 would provide, which is approximately 1-2 decent holidays per year. The other question is do you have other dependants like children or pets? They cost lots lol.

I would invest half in Infratil for great dividends and growth and reasonable safety. Plus in $100,000 in the retirement sector. If I did not worry about the capital and focused on dividend, $100,000 in kingfisher(KFL) which gives a great dividend while hovering around $1.20-1.40 per share based over 5 years with 8.5% dividend. Leaving $50,000 in 6 month term deposits, or high on call accounts for access to money.

[Zeitgeist]

How actively do you want to be managing this $500k retirement nest egg?

Assume capital losses are tolerable provided the yield is retained? What about complete loss of one of the shares?

Hard to give any tips at this stage without an answer to those. Obviously a low appetite for managing the fund and worrying about financial performance of an individual company would lead one towards ETFs or managed funds. I'd never recommend the latter. But a dividend style ETF like the Smartshare DIV fund would give around 5.9% yield less 0.5% fees for 5.4% overall return (as an example only based on current factsheet)

I'm not sure even Buffett would back himself to put all his entire retirement eggs in a single basket (e.g. OCA)*

* I'm assuming Berkshire is a look-through investment ;)

[Onion]

I'm not sure even Buffett would back himself to put all his entire retirement eggs in a single basket (e.g. OCA)

What would Buffett do? I don't think he is going to retire but when he dies all his Berkshire shares are heading for charity. What he leaves to his wife will be as follows:


My money, I should add, is where my mouth is: What I advise here is essentially identical to certain instructions I’ve laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife’s benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.

Given that Buffett is already 250 years old, I assume his wife is getting on too. She probably doesn't need to be looked after for 30+ years.

[Lewylewylewy]

Ive pondered this for a few days and come to the conclusion that it's best to spend the whole lot on a bunker and guns.

[ynot]

How actively do you want to be managing this $500k retirement nest egg?

Assume capital losses are tolerable provided the yield is retained? What about complete loss of one of the shares?

Hard to give any tips at this stage without an answer to those. Obviously a low appetite for managing the fund and worrying about financial performance of an individual company would lead one towards ETFs or managed funds. I'd never recommend the latter. But a dividend style ETF like the Smartshare DIV fund would give around 5.9% yield less 0.5% fees for 5.4% overall return (as an example only based on current factsheet)

I'm not sure even Buffett would back himself to put all his entire retirement eggs in a single basket (e.g. OCA)*

* I'm assuming Berkshire is a look-through investment ;)

I don't mind actively managing it but I do have doubts about my ability to get it right.
Maintaining yield would be a priority.

[ynot]

How actively do you want to be managing this $500k retirement nest egg?

Assume capital losses are tolerable provided the yield is retained? What about complete loss of one of the shares?

Hard to give any tips at this stage without an answer to those. Obviously a low appetite for managing the fund and worrying about financial performance of an individual company would lead one towards ETFs or managed funds. I'd never recommend the latter. But a dividend style ETF like the Smartshare DIV fund would give around 5.9% yield less 0.5% fees for 5.4% overall return (as an example only based on current factsheet)

I'm not sure even Buffett would back himself to put all his entire retirement eggs in a single basket (e.g. OCA)*

* I'm assuming Berkshire is a look-through investment ;)

I could live with 5.4 % . Could I expect any growth in the value of the ETF ?

[Zeitgeist]

I could live with 5.4 % . Could I expect any growth in the value of the ETF ?

Yes - all ETFs rise/decline in line with their underlying instruments.

Disclaimer: I personally do not have any money invested in these ETFs but I believe they were initially Superlife products. Superlife are my Kiwisaver providers, since gobbled up by NZX.

I'd advise DYOR into the ETFs before proceeding - look into things like liquidity, confirm how they're priced, dividends available as cash etc. Provided that all checks out, and I'm sure it would, you could have these ETFs forming the bulk of your allocation. You can obviously split a proportion out to higher dividend payers if you back yourself to pick/manage a few.

If you haven't already, I'd recommend setting your strategy, write it down or store it somewhere safe, and refer back to it every time you hover over the buy/sell button on any investment in future. Only in exceptional circumstances should your future self over-ride this strategy.

[Leftfield]

Some good posts in this thread.

My left field comment is that the reliance on ‘safe’ dividend yielding stocks and/or bonds is overrated. Let me explain.

I retired 4 yrs ago with my own mortgage-free home and some savings. I started investing in shares 5 years ago gradually investing $150k that was ‘risk free’ and surplus to my retirement needs as determined by a 5 year budget.

My strategy was/is to invest primarily in small cap ‘growth’ potential companies using principles espoused by Jim Slater in his book The Zulu Principle. My aim was to ‘grow’ my capital and I was not greatly interested in dividends as I considered dividend yield stocks were often ‘overpriced.’ My objectives were to; stay within the NZX, beat the banks term deposit rates and beat the NZX50 average return with tax free capital gains.

I’m not a short term ‘trader,’ as the longer term tax free aspect of capital gains is very important IMHO.

How did I get on??? Well post #37 on the 2019 Stock Picking Comp Thread provides a hint.

[Sgt Pepper]

Some good posts in this thread.

My left field comment is that the reliance on ‘safe’ dividend yielding stocks and/or bonds is overrated. Let me explain.

I retired 4 yrs ago with my own mortgage-free home and some savings. I started investing in shares 5 years ago gradually investing $150k that was ‘risk free’ and surplus to my retirement needs as determined by a 5 year budget.

My strategy was/is to invest primarily in small cap ‘growth’ potential companies using principles espoused by Jim Slater in his book The Zulu Principle. My aim was to ‘grow’ my capital and I was not greatly interested in dividends as I considered dividend yield stocks were often ‘overpriced.’ My objectives were to; stay within the NZX, beat the banks term deposit rates and beat the NZX50 average return with tax free capital gains.

I’m not a short term ‘trader,’ as the longer term tax free aspect of capital gains is very important IMHO.

How did I get on??? Well post #37 on the 2019 Stock Picking Comp Thread provides a hint.

I am following thia thread with some interest as it has relevance to me
I am 60, have worked in the health service all my life. At 32 I joined the staff super scheme,National Provident Fund which although has moderate returns, has the attraction that , in addition to the employer subsidy , has an unconditional government guarantee on the capital and a guaranteed base return of 4%. After 65 i can either acccess the whole amount in cash, convert it to a life time monthly pension or take one quarter in cash and convert the rest into a pension
I have an interest in shares although my only direct holding is in Rubicon. If interest rates return to normal then my decision will be based on do I play it safe and invest the cash in a bank for a safe return or take more risk as an active investor. Decsions..decisions.

[ynot]

How actively do you want to be managing this $500k retirement nest egg?

Assume capital losses are tolerable provided the yield is retained? What about complete loss of one of the shares?

Hard to give any tips at this stage without an answer to those. Obviously a low appetite for managing the fund and worrying about financial performance of an individual company would lead one towards ETFs or managed funds. I'd never recommend the latter. But a dividend style ETF like the Smartshare DIV fund would give around 5.9% yield less 0.5% fees for 5.4% overall return (as an example only based on current factsheet)

I'm not sure even Buffett would back himself to put all his entire retirement eggs in a single basket (e.g. OCA)*

* I'm assuming Berkshire is a look-through investment ;)

5.4% is an appealing benchmark for me at this stage but as other posts are pointing out, there is more than one way to achieve income.
Please post if you have alternative strategies to the 5.4% ETF.

[value_investor]

What I would do with 500k:

Before I say anything, I think its important to think that you're going to be in the market for longer than you think. Most 65 year olds today will live for another 20 or so years minimum.

Firstly, I would insulate the fund with a ETF that tracks an index. Probably putting 30%. I would do a combination of the S&P500 through Smartshares USF and the nzx50 in FNZ. This will give the fund some stability long term. The S&P500 has averaged 9.8% over the last 90 years and the nzx50 gives exposure to the whole local market at a similar rate. I could see exposure in multiple markets being good but I don't know enough about that to comment.

Next, I would look to another 30% into stocks that can earn me a dividend over the long term. These are companies that have a history of increasing dividends every year already. By that, I mean stocks that have a strong moat already. I like the electricity sector so I would look into something like MCY, GNE or MEL. However, my favorite pick and this is quite defensive would be IFT so it depends on risk appetite. A company with excellent returns, and increased dividends every year since their IPO. Over the years, the yield just holding it would increase. IFT isn't the only choice but would be my biggest position.

Noteable mentions: I would have no issue with holding a combination of IFT and other shares such as these just for diversification. EBO (High PE is offputting with dividends increase YoY), or even AIA (same reason for IFT chosen). Not a fan of AIR for long term dividends due to fuel price effect and not a fan of HLG. Tastes change on a dime and retail is a fickle game..

Next I would put 25% into growth sectors. Most likely choice would be into OCA, due to its relative potential (more room to grow than say a RYM) to the others and the PE being so cheap. From a dividend perspective, the yield is going to increase huge in just a few years. The sector will not enjoy its best gains in the next 2-3 years but likely beyond that. OCA wouldn't be my only choice, diversification is key so I would also hold SUM, ARV and RYM in combination.

Next I'd put 10% in a speculative position, where I could see both capital gains and potential dividend growth. This is likely to be where SML and ATM play their part. This 10% is held just to keep you sharp and occupy your time. I'd even say HGH due to the price downturn would be an interesting hold. This 10% could likely be held in part just in cash when the markets are very highly valued and there is nothing really out there (like most of 2018).

I'd keep another 5% in cash, just to go on trips (if still possible) or spoil the grandkids. Hopefully no mortgage at the point of retirement.

[RupertBear]

What I would do with 500k:

Before I say anything, I think its important to think that you're going to be in the market for longer than you think. Most 65 year olds today will live for another 20 or so years minimum.

Firstly, I would insulate the fund with a ETF that tracks an index. Probably putting 30%. I would do a combination of the S&P500 through Smartshares USF and the nzx50 in FNZ. This will give the fund some stability long term. The S&P500 has averaged 9.8% over the last 90 years and the nzx50 gives exposure to the whole local market at a similar rate. I could see exposure in multiple markets being good but I don't know enough about that to comment.

Next, I would look to another 30% into stocks that can earn me a dividend over the long term. These are companies that have a history of increasing dividends every year already. By that, I mean stocks that have a strong moat already. I like the electricity sector so I would look into something like MCY, GNE or MEL. However, my favorite pick and this is quite defensive would be IFT so it depends on risk appetite. A company with excellent returns, and increased dividends every year since their IPO. Over the years, the yield just holding it would increase. IFT isn't the only choice but would be my biggest position.

Noteable mentions: I would have no issue with holding a combination of IFT and other shares such as these just for diversification. EBO (High PE is offputting with dividends increase YoY), or even AIA (same reason for IFT chosen). Not a fan of AIR for long term dividends due to fuel price effect and not a fan of HLG. Tastes change on a dime and retail is a fickle game..

Next I would put 25% into growth sectors. Most likely choice would be into OCA, due to its relative potential (more room to grow than say a RYM) to the others and the PE being so cheap. From a dividend perspective, the yield is going to increase huge in just a few years. The sector will not enjoy its best gains in the next 2-3 years but likely beyond that. OCA wouldn't be my only choice, diversification is key so I would also hold SUM, ARV and RYM in combination.

Next I'd put 10% in a speculative position, where I could see both capital gains and potential dividend growth. This is likely to be where SML and ATM play their part. This 10% is held just to keep you sharp and occupy your time. I'd even say HGH due to the price downturn would be an interesting hold. This 10% could likely be held in part just in cash when the markets are very highly valued and there is nothing really out there (like most of 2018).

I'd keep another 5% in cash, just to go on trips (if still possible) or spoil the grandkids. Hopefully no mortgage at the point of retirement.

Sounds like a great approach to me, thanks for sharing :)

[Lewylewylewy]

I think, work out the cost of your needs, and the cost of your wants. For example, you need food, and want money for petrol. Then align your investment risk levels accordingly to cater for each. Ensure that your investments are inflation protected, particularly ones covering your needs. Diversify and hold some cash. Enough cash to cover downtime if your needs had investments have a break from returns.

As a dividend portfolio, shares can IMO be considered diversified investments in themselves, however it would be better to have a range of investments that aren't just shares, if possible.

For the sake of the exercise, i see the following as needs based investment shares (assuming from the bounds of the question, I'm doing a share portfolio):

Aia, pot, fph, mel, gne, cen, anz, wbc, ebo, oca

Wants based investments (including a range of return, growth and corresponding risk):

Atm (will eventually blossom), hlg, kmd, Briscoe, sek, mft, scl...

It may also be a good idea to have some ETFs in there in case too many teeth fall off the brain cogs with aging, or losing interest losses focus on the investments.

I don't know if id be comfortable retiring on such a budget. Granted the above selection probably averages a return of 3% after tax. Quite low, but may overtake a pure dividend targeting investment after some time, which might help for medical bills.

Personally, as I'm a few decades from retirement (depending what level of riches I want to retire with), i have growth stocks in my retirement box (and some private companies). This is the current contents of the nzx part of that box:

Aia, Atm, ebo, fph, mel, pot, sek.

I also have a trading account for my shorter term plays. Which will likely migrate into my wants based investments. Im looking forward to the next correction to juice things up.

[Waiuta]

There are many good opinions here but at some stage you need to be able to spend some of your wealth. It's all very well setting up a good dividend producing portfolio but I also think it's vital that we actually plan to spend some of what we've tried hard to accumulate. Otherwise, what's the point of it all?

'There's no tow bars on a hearse'

[Lewylewylewy]

I think the idea of the dividend is to give an income so you can spend that without worrying about running out of money

[percy]

I think the idea of the dividend is to give an income so you can spend that without worrying about running out of money

I have tried to buy companies that have the capacity to pay increasing fully imputed dividends.
Their share price should react as their dividends increase.
A case of having your cake and eating it too.!

[voltage]

percy, you are spot on, dividend growth long term is the way to go. Just out of interest what are your top 5 stocks for this?

[percy]

percy, you are spot on, dividend growth long term is the way to go. Just out of interest what are your top 5 stocks for this?

Refer to my post #2 on page 1 of this thread.
GNE,HGH,MEL,SPK,TRA.

[ynot]

Refer to my post #2 on page 1 of this thread.
GNE,HGH,MEL,SPK,TRA.

Anyone have a link to nz top divi stocks.

[ynot]

What would be nice (at least for me) would be a good correction down before I buy in. My gut tells me it coming but who knows.

[airedale]

I think the idea of the dividend is to give an income so you can spend that without worrying about running out of money

Robert Ķiyosaki described it as setting up your portfolio to give you a river of cash running in to your bank account.

[troyvdh]

Robert ...has written two books I believe with trump....does anything more need to be said..sorry mate

[Brain]

Anyone have a link to nz top divi stocks.

you could start with this site. But be careful many of the high dividend stocks are high in these tables because the dividend is historic and the share price is current and may have collapsed recently due to bad performance eg MPG and others. DYOR

http://www.dividendyield.co.nz/hightolowdividend.php (http://www.dividendyield.co.nz/hightolowdividend.php)

I am always on the lookout for respectable dividend plus growth.

[Ggcc]

Robert ...has written two books I believe with trump....does anything more need to be said..sorry mate
He is currently doing free seminar/workshop
around nz has anyone gone to see it and is it worthwhile or a have for money

[airedale]

We are straying off topic now, but Kiyosaki's books are mostly elementary common sense, nothing mysterious, earth moving, or dramatic, but I was taken by his "river of cash" description which is why I quoted it. It also goes without saying that your expenditure should be less than your income.Charles Dickens made that point in the 19th century.:)
Lewylewy has made the point.

[fungus pudding]

We are straying off topic now, but Kiyosaki's books are mostly elementary common sense, nothing mysterious, earth moving, or dramatic, but I was taken by his "river of cash" description which is why I quoted it. It also goes without saying that your expenditure should be less than your income.Charles Dickens made that point in the 19th century.:)
Lewylewy has made the point.


And it's been Fungus Pudding's mantra for over 50 years 'learn to live below your means'. Amen.

[epower]

Why go for a high dividend/lower capital growth portfolio when you could go for a lower dividend/higher capital growth portfolio and not pay tax and sell off some shares every year or so?

[percy]

Best to have both.

[fungus pudding]

Why go for a high dividend/lower capital growth portfolio when you could go for a lower dividend/higher capital growth portfolio and not pay tax and sell off some shares every year or so?

If you go for a decent dividend then you should be able to kark it with all investments still intact. Someone will thank-you for it.

[kiwico]

Why go for a high dividend/lower capital growth portfolio when you could go for a lower dividend/higher capital growth portfolio and not pay tax and sell off some shares every year or so?

Taxcinda and her friends (aka the Tax Working Group) currently appear to be dreaming up ways to make sure your suggestion is not a goer...

[epower]

If you go for a decent dividend then you should be able to kark it with all investments still intact. Someone will thank-you for it.

If you go for decent capital growth, your $500,000 might turn into $1,000,000 instead of high dividends staying at $500,000. Someone will also thank you.

[ynot]

If you go for decent capital growth, your $500,000 might turn into $1,000,000 instead of high dividends staying at $500,000. Someone will also thank you.

Good point but i suspect a bit harder to pick than big dividend earners. Might being the operative word.

[iceman]

If you go for decent capital growth, your $500,000 might turn into $1,000,000 instead of high dividends staying at $500,000. Someone will also thank you.

Not so. I think you will find many companies on the NZX that have a long history of growing EPS, dividends and SP. Healthy and growing dividend payers normally see steady SP growth over time as well.

[percy]

Not so. I think you will find many companies on the NZX that have a long history of growing EPS, dividends and SP. Healthy and growing dividend payers normally see steady SP growth over time as well.

Agreed..........................

[Sgt Pepper]

Agreed..........................
If i recall didnt Cavalier Carpets come into this category, especially in the 1990s. Favourite of mature invsetors looking to secure their retirement cash flow, good dividends paid three times per year.

[percy]

If i recall didnt Cavalier Carpets come into this category, especially in the 1990s. Favourite of mature invsetors looking to secure their retirement cash flow, good dividends paid three times per year.

Yes was a brokers' and investors' favourite for a good number of years.
Was easy to foresee their demise once imported synthetic carpets became avaliable.

[ynot]

Update: no decision yet but I still like the smartshare DIV ETF option.
My only knowledge of ETF's to date is with regard to precious metal etf's. They are considerd risky by some as they are potentially not all backed by the real bullion they proport to have behind them.
Can this same concern for ETF's be applied to the smartshare DIV ETF ? Appreciate your thoughts.

[BlackCross]

Update: no decision yet but I still like the smartshare DIV ETF option.
My only knowledge of ETF's to date is with regard to precious metal etf's. They are considerd risky by some as they are potentially not all backed by the real bullion they proport to have behind them.
Can this same concern for ETF's be applied to the smartshare DIV ETF ? Appreciate your thoughts.

The DIV ETF neither uses hedges nor derivatives, just holds the underlying shares which make up the portfolio. That's according to
https://smartshares.co.nz/document-library/statement-of-investment-policy-and-objectives-smartshares-exchange-traded-funds1.pdf

[ynot]

Appreciate if somone could clarify.
On the smartshare website it refers to DIV at 3 years annualised at 9.1% . I assume thats the growth on the share value ?
I can not see any reference to the history on the 5.4 % dividend return . Also no reference beyond 3 years, has it only been running 3 years ? And can the current 5.4% fluctuate over the next few years or does it stay at 5.4 ?

[Aarrgghh]

From their website(https://smartshares.co.nz/fund-investor-report):
"Returns are as at 31 March 2019 and are calculated on NTA movement, assuming distributions are reinvested on ex-date, and are after tax at 28% and fund charges."
Yes DIV appears to have only been active for the past 3 years, however bizarrely my ASB securities shows history from before this time, possibly just showing data from the S&P/NZX 50 High Dividend Index on which the ETF is based.
The 5.4% will fluctuate as companies in the ETF provide different dividend rates over time. Previous dividends are available on the info sheet (https://smartshares.co.nz/download-funds/smartdividend/nz-dividend)

[Snow Leopard]

10483

DIV listed 7-Apr-2015 at $1 a pop and thus recently had it's 4th birthday

[ynot]

Thanks Snow Leopard. I am now a retiree so forgive my senility but I still can't see reference to the div return for the previous years.

[777]

https://smartshares.co.nz/types-of-funds/smartdividend/nz-dividend

Surely what you want is on this page.

[Snow Leopard]

Thanks Snow Leopard. I am now a retiree so forgive my senility but I still can't see reference to the div return for the previous years.

They do not quote the historical dividend returns year by year, just the most recent/current value.

But as a special from one retiree to another here are the approximate historical values:



Year to: Div: EndSP: MinSP: MaxSP: Yield:
31-Mar-16 4.5c 108.0c 94.8c 108.1c 4.2%
31-Mar 17 6.4c 108.5c 105.3c 119.0c 5.9%
31-Mar-18 7.3c 107.2c 105.7c 116.3c 7.3%
31-Mar-19 6.8c 123.6c 106.9c 123.6c 5.5%


Future performance is likely to be different again as DIV follows the irrationality of the New Zealand market in general.

[ynot]

They do not quote the historical dividend returns year by year, just the most recent/current value.

But as a special from one retiree to another here are the approximate historical values:



Year to: Div: EndSP: MinSP: MaxSP: Yield:
31-Mar-16 4.5c 108.0c 94.8c 108.1c 4.2%
31-Mar 17 6.4c 108.5c 105.3c 119.0c 5.9%
31-Mar-18 7.3c 107.2c 105.7c 116.3c 7.3%
31-Mar-19 6.8c 123.6c 106.9c 123.6c 5.5%


Future performance is likely to be different again as DIV follows the irrationality of the New Zealand market in general.



Cheers, so considering the weight these company's carry we can expect similar returns going forward ?

[Valuegrowth]

I was waiting for a thread like this. Thank you Beagle for opening the thread/ideas and for all others for their valuable ideas. I have few questions. Asset prices have volatility. In some period we find recession, banking crisis and credit crisis and so on. Further all fund managers can’t book profit at the same time. Property and rent prices also have volatility. Not all markets will do well at the same time. Finally not all listed companies will have long term business (there is a risk of going concern for some companies). I would like to find attractive sustainable companies with businesses that I can understand.

[SBQ]

Excuse me for not reading the whole thread but has anyone mentioned owning real estate instead (directly) ? If I was into retirement age, I would look at tax efficiency and since living in NZ for the past 20 years, I find it very hard for the level of risk, to beat owning NZ real estate. I've proposed this question to local financial advisors and put it straight from a tax efficient point of view, why would you ever look to buy NZ equities (which for the most part, focus on dividend payments, instead of tax free capital gain of a rising share price) ?? Sure there's merit for some companies to pay dividends such as utilities, or shares that aren't expected to have any market share growth or reliant on expansion of their business, then yes, dividends makes sense. But when brokerage firms like Macquaries advise their clients or praise about having a dividend payment policy, that's just simply not tax efficient. Both independent financial advisors told me out right that i'm correct. For the level of risk and return, when you factor taxation, you're not gonna beat owning real estate over the long term in NZ. NZ is unique in this situation with the absence of CGT, or where owning multiple residential properties can be sold tax free (after all, a 5 year holding period is not that long).

Once you look at investing into businesses / equities, then you're involving a whole new level of risk, well beyond what the person in retirement should be. Now if we were talking quality stocks like those in the S&P500, then that's a different story. But then NZ has this silly FIF / FDR tax rule, and what person hold a pension retirement fund that is less than $50K NZD?

[777]

The trouble with real estate is you have to deal with tenants. FIF/FDR is a breeze in comparison.

[janner]

If I was into retirement age, I would look at tax efficiency

Think you have missed the point for this thread..

Which I take as to where would you be investing today for your retirement..

[SBQ]

The trouble with real estate is you have to deal with tenants. FIF/FDR is a breeze in comparison.

I've looked into the FIF / FDR and it gets really complicated if you hold mixed assets in the portfolio. Such as some Australian shares are exempted from FIF. There's currency exchange rate to factor. To add more complexities, how about 'quick sales' for buying and or selling more than once in the same year? Above all, it's part of the tax compliance for filing.

https://www.ird.govt.nz/toii/fif/calc-methods/calc-method-attributable/toii-fif-calc-methods-choosing.html

Look at page 19 here for quick sale calculations:
https://www.ird.govt.nz/resources/5/9/59f8ae2e-bf47-4df6-8b86-6b021aba2f11/ir461.pdf

and check out the flow chart on page 6:

vs: the guy that owns the house can easily pay a property manager. That's what i've seen most have done to muscle out the undesirable tenants. This would suit easily for any pensioner or retired person that seeks to enjoy vacations abroad, etc. without the hassles. I've also met many seniors that insist on living in their home and renting out a room as "home stays" which again, the income is tax free.

Now if I was living back in Canada, then the situation for pensioners is entirely different. They have CGT and complex tax code for owning rental properties or renting a portion of your principal residence home out (ie that % of the house rented is a "change of use" and will have CGT on that % value of the whole home). So in that sense, most seniors have their savings invested in equities or in lower risk bonds. But NZ's sharemarket isn't like that - it's a hell of a lot more riskier than your S&P500 mix.

Don't take my word for it. Countless of elderly people have told me the past where so and so have lost so much $ in past NZ stock market crashes or some finance company or corporate has fleeced shareholders. Even bond investments such as "Hanover Finance" were effective at vaporising the mom & pop savings they had when they thought 9% pa was a far better rate than what the banks were offering around 7-8% at the time.

[Valuegrowth]

SBQ
People have lost in property market too. There are highly leveraged borrowers in the property market in Australasia. No asset class is 100% safe.

[janner]

I've looked into the FIF / FDR and it gets really complicated if you hold mixed assets in the portfolio. Such as some Australian shares are exempted from FIF. There's currency exchange rate to factor. To add more complexities, how about 'quick sales' for buying and or selling more than once in the same year? Above all, it's part of the tax compliance for filing.

https://www.ird.govt.nz/toii/fif/calc-methods/calc-method-attributable/toii-fif-calc-methods-choosing.html

Look at page 19 here for quick sale calculations:
https://www.ird.govt.nz/resources/5/9/59f8ae2e-bf47-4df6-8b86-6b021aba2f11/ir461.pdf

and check out the flow chart on page 6:

vs: the guy that owns the house can easily pay a property manager. That's what i've seen most have done to muscle out the undesirable tenants. This would suit easily for any pensioner or retired person that seeks to enjoy vacations abroad, etc. without the hassles. I've also met many seniors that insist on living in their home and renting out a room as "home stays" which again, the income is tax free.

Now if I was living back in Canada. (Reply.. Cough... Cough ) .. Don't take my word for it. Countless of elderly people have told me the past where so and so have lost so much $ in past NZ stock market crashes or some finance company or corporate has fleeced

We know.... OK ?.

The very good question was not asking for history...

[Snow Leopard]

Cheers, so considering the weight these company's carry we can expect similar returns going forward ?

So you want me to make a prediction about the future?
OK. Here is my biased opinion which comes complete with a cast iron guarantee to be wrong by the time you read it.
The shorter the time frame the greater the volatility but assuming you go buy DIV at the next available opportunity:
You will get 5.5% gross or better annualised dividend over the next 10 years;
You will also have a 10% plus total capital gain in 10 years time.

But apparently the only certainities in life are death and taxes.

[Snow Leopard]

...Now if I was living back in Canada...

You should really go for it.

[SBQ]

We know.... OK ?.

The very good question was not asking for history...

Excuse my overstatement on FIF in my last post. There's good reason why people in NZ are obsessed with real estate and I can see why. It's because that asset class can be tax free.

Sorry for the repetition but I haven't found a direct answer so I question again, why is there a huge dividend focus by many financial advisors without the concern on "BOOK VALUE" ? It's a basic fundamental approach. You simply don't get a rise in share price if the company continues to pay dividends each year, which erodes the retained earnings on the balance sheet 'book value / share'. The logical choice is to have a tax free capital gain (by maintaining profits in the company which raises the book value per share) vs a tax triggered dividend payment. The obsession of dividend payment in NZ has shown listed companies to promote a 'dividend payment policy' while at the same time, the company borrows more $ for capital expansion, or even worse, issues more shares (a la The Warehouse style). So i'm not being a negative nanny, I just question why the obsessions of dividends on NZ share investments?

Perhaps i'm pointing out something too obvious in that NZ real estate is so much easier to retire on than any other asset class?

[ynot]

So you want me to make a prediction about the future?
OK. Here is my biased opinion which comes complete with a cast iron guarantee to be wrong by the time you read it.
The shorter the time frame the greater the volatility but assuming you go buy DIV at the next available opportunity:
You will get 5.5% gross or better annualised dividend over the next 10 years;
You will also have a 10% plus total capital gain in 10 years time.

But apparently the only certainities in life are death and taxes.

As you say only a prediction but a 10% capital gain in 10 years on DIV shares compared to the probable gain on a 500k rental property !

[kiora]

So you want me to make a prediction about the future?
OK. Here is my biased opinion which comes complete with a cast iron guarantee to be wrong by the time you read it.
The shorter the time frame the greater the volatility but assuming you go buy DIV at the next available opportunity:
You will get 5.5% gross or better annualised dividend over the next 10 years;
You will also have a 10% plus total capital gain over 10 years .

But apparently the only certainities in life are death and taxes.

Or if an investor is even luckier You will get 5.5% gross or better annualised dividend over the next 10 years;
You will also have a 10% annualized compounding capital gain in 10 years time.

[Beagle]

Have a look at the Fisher Funds group of companies, Marlin, Kingfish and Barramundi.
All pay out 2% per quarter as a PIE distribution which is not taxable in your hands.
Investing in a mix of these companies gives you a great spread of investment both within N.Z., Australia and with Marlin America and Asia.
More here - https://marlin.co.nz/ https://www.kingfish.co.nz/ and here https://barramundi.co.nz/
I have some of each which is a recent initiative for me as I believe they are an excellent option for generating retirement income.
Add in some of the other shares I mentioned when I started this thread for you and Bob's your uncle.

[ynot]

Or if an investor is even luckier You will get 5.5% gross or better annualised dividend over the next 10 years;
You will also have a 10% annualized compounding capital gain in 10 years time.

Based on the results posted by Snow Leopard over the last 3 year period the share price growth averaged around 4.6 % growth annually. Although like Snow points out this is market dependent looking forward. It could go nowhere over the next 10 years.

[Timesurfer]

The trouble with real estate is you have to deal with tenants. FIF/FDR is a breeze in comparison.

Not neccessarily. If you are doing residential realestate you can hire property managers.
If you are dealing in commercial realestate tenants are generally much less of a hassle.
If you buy into a commercial realestate syndicate it is generally a passive investment.

Of course, the more hands on you are the more return you can generally get, but just as with shares there are hands off investment methods for those just looking to enjoy retirement.
I

[ynot]

Had some great advice on this thread last year but had my reservations about diving in so have been on the sideline. Now or very soon I will be in. My circumstances have not changed, I'm looking for stable div income going forward. If anyone has other views on what was suggested last year please let me know.

[stoploss]

Had some great advice on this thread last year but had my reservations about diving in so have been on the sideline. Now or very soon I will be in. My circumstances have not changed, I'm looking for stable div income going forward. If anyone has other views on what was suggested last year please let me know.

IMO don't be in a rush to get in .... Just because AIR NZ was $ 2.90 a few weeks back and $ 1.80 today doesn't make it cheap .... same could be said for many shares . Best wait for the Bear to finish destroying the forest then when the green shoots appear maybe start having a nibble .

[Entrep]

Or you can DCA in like I am doing - I'm avoiding AIR like the plague right now though

[Cadalac123]

I would DCA AIR and am tempted but the impact on tourism and travel is pretty direct which is why I’ve opted to wait until travel restrictions between countries are removed

[percy]

Well I am now 70.Wife is 69.
At the end of January last year I retired from selling books to school libraries. .
In May we downsized our house.Brought a new slightly larger over 60s house.
Share potfolio was reorganised.Objective was to hold along term portfolio to provide dividends, and once that was achieved the balance could be put into growth shares.Most Australian shares were sold.Two reason ;[a] I was finding the Australian small cap market difficult.[b] Australian dividends are not imputated.
Dividend NZ stocks. GNE,MEL,SPK,HGH,TRA........These stocks alone provide the level of dividends I wanted.
Other "core" NZ stocks.MCK and OCA.
Fun NZ stocks,ALF,IKE,PGW,RBC.
My largest NZ shareholding is not one of the above.
My Australian stocks include a few small holdings I will not list.
Aussie stocks.AQZ,MMI,SEQ,TTI,VHT.
I do not hold any bonds,however have a large enough cash holding.
Above posted 09-01-2019.

A few changes.
Core;PGW increased from Fun to core.MCK and OCA sold.
Fun: ALF and RBC sold.
Aussie.SEQ and TTI sold.Added AVA,MSV and PTB.
Cash holding increased.

[Joshuatree]

Or you can DCA in like I am doing - I'm avoiding AIR like the plague right now though

Yes its simply in the wrong cycle to invest in atm imo. And who knows maybe the Govt will have to buy the rest of it

[ynot]

There were a couple of other suggestions made last year,

1/ kingfisher, marlin, etc
2/smartshare. Top10 div etc

I am attracted to this type of option due to it being out of my control so to speak.

I am concerned the likes of AIR & THL are in most of the divi funds. Should I be concerned about the effect that they can have on the fund and should I wait until funds containing these type of shares are rebalanced.