Yield Portfollio/Recommendations

[krusty]

I currently have my student loan amount saved and put to one side. Thought it might be an idea to shove it into some (5 odd?) high yield solid performing nz shares. The amount is $55,000. I am expecting my first call/payment from ird shortly. I expect the minimum payment will be about $5,000pa due in August/January 2012 and May. I know the yield will not cover the payments, but I thought it might do better than the 4% odd the bank is paying. I will need to pay tax too. Happy to pick up the shortfall. Hopeful of some capital appreciation to ward off inflation.
My training didn't lead to employment. Happy being a non performing member of society.
ird's student loan calculator suggests repayment will require 11 odd years - all else remaining static.
Daft idea? What would you do?

[minimoke]

Happy being a non performing member of society.
What would you do?
Each to their own. Perhaps do the right thing and give us performing members of society the tax money we've paid to you back. Pay off your student loan.

That aside, congratulations on your education. You have at least learnt that "free" money from the government can be put to good alternative uses. At least you are looking at ways of improving your lot by investment so well done

[krusty]

I pay more than the average kiwi in tax to sustain our kiwi lifestyle.

[krusty]

God only knows why the government funds useless training for non existent jobs.

[neopoleII]

i for one would not invest into anything that offers a higher yield than bank rates with borrowed monies in this day and age.
if you had employment and a long term view....... ok.
but your at the start of your life, still no assets behind you and carrying a debt..... but you do have an education..... even though that is yet to pay a dividend.
i would suggest paying off your student loan as fast as possible, then building a deposit for a home, then entering the share market.
if how ever you do invest in the nz sharemarket..... i would only go for blue chip stock....... tel, contact, fbu etc.
otherwise your 55k could turn to zero.
or...... you could be lucky and be very rich in a short time.
shrewd crude did things his own way via pokerstars and is doing exceptionally well...... so it can be done.
but for every winner there are lots of losers.
play safe for a while, set up a safe asset (home) then have a go at riskier investment vehicles.
at worst you wont end up in negative territory........ life is long.

my personal risk profile is/was ...... clear debts, save deposit, built first home, built bigger home, developed lifestyle block, bought small farm, then entered sharemarket.............. and lost quite a bit, but still have my place.
i earn under 60k.
and am happy.

[minimoke]

God only knows why the government funds useless training for non existent jobs.
there's two answers to that question. Firslty each political party prays that students won't have too hard a night on the 27th of November. They hope the hangover is insufficient to prevent a benificairy of some student "bribe" from turning up at a polling booth at somestage before 7.00pm and ticking the right box.

The second reason is that the Government (regardless of political hue) wants us to look good in OECD statistics. This means as a nation we need to report as many students as possible in education/training. Even better is to report students completing an education - the more the better. the OECD does not measure the value of that education so it really doesn't matter if the training is useless or if there are no jobs at the end of it - govt has other ways of manipulating the Employment / unemployment figures which makes us still look good.

[krusty]

Some times I think training is just to keep idle hands from doing naughty stuff.
I am in my 40's. Had my 'labouring' years. Got an expensive house, flash car, investments, and a good income. Only debt is the new student loan.

[Halebop]

I'd scrap the shares idea and repay the loan. Debt, interest rates, shares and rising inflation are a recipe for regrets.

Since you appear to be comfortable, why not give it back to government and let them lend it to other students?

What did you study? Sounds like the new graduates standard tale of woe... "no experience, can't get experience..."

[percy]

Some times I think training is just to keep idle hands from doing naughty stuff.
I am in my 40's. Had my 'labouring' years. Got an expensive house, flash car, investments, and a good income. Only debt is the new student loan.

Why bother.? ! Pay it back,and save yourself a head ache.!!!

[roniirani]

Why is is everyone telling him to pay it back in one go? it makes no sense? You know they are interest free and we live in a time of ever increasing inflation so basically its shrinking everyday.

I don't understand why you think you'll have to pay back 5k if you don't have a job? You don't have to pay anything if you earn under 17/18k. By my rough calculations you must be earning close to 70k from something else for you to have to pay that much back.

I'm in a similar situations to you krusty, but I have a Job. I've gone for a much higher risk profile then what you are thinking about. Your decision is really age dependant for me - I dont know how old you are so that make it a bit tough.

I think you can afford to be much more aggressive when you are young - you have years of working left.That 55k is only a tiny fraction of what you will earn in the next 40 or so working years you have ahead of you. Its a much different situation if your 65, retired and need income from your portfolio.

Just my 2c

[Halebop]

Why is is everyone telling him to pay it back in one go? it makes no sense? You know they are interest free and we live in a time of ever increasing inflation so basically its shrinking everyday.

Because it's tax payer guaranteed money, we have enough debt already, the intent of the loan is not shares but education and shares are no certain thing right now and probably for many years of secular bear market.

But if you feel entitled to sponge off me, go for it. Just don't expect me to be polite or to advise using my gurantee to speculate.

Just my 2c

[Sideshow Bob]

The other factor is that I think that they are still running the scheme that if you make a voluntary repayment over $500, then they will deduct another 10% of the amount off the loan. ie $500 becomes $550 reduction.

[roniirani]

Because it's tax payer guaranteed money, we have enough debt already, the intent of the loan is not shares but education and shares are no certain thing right now and probably for many years of secular bear market.

But if you feel entitled to sponge off me, go for it. Just don't expect me to be polite or to advise using my gurantee to speculate.

Just my 2c

Wow must be great up there on your moral high horse. We didn't create the system.

I hope you have never hidden your wealth in LAQC's or family trusts all these years? not paying the tax man what he truly deserved ? I hope not with such a high standard of social morality.

[shasta]

I currently have my student loan amount saved and put to one side. Thought it might be an idea to shove it into some (5 odd?) high yield solid performing nz shares. The amount is $55,000. I am expecting my first call/payment from ird shortly. I expect the minimum payment will be about $5,000pa due in August/January 2012 and May. I know the yield will not cover the payments, but I thought it might do better than the 4% odd the bank is paying. I will need to pay tax too. Happy to pick up the shortfall. Hopeful of some capital appreciation to ward off inflation.
My training didn't lead to employment. Happy being a non performing member of society.
ird's student loan calculator suggests repayment will require 11 odd years - all else remaining static.
Daft idea? What would you do?

Considering i paid off my student loan with 7% interest, if i could access capital with even 10% interest i'd be all over it, i have so many targets it aint funny.

PM me what u have in mind re shares & i'll send you some stocks to look into, depending on what youre after.

If the Govt is silly enough to hand out free money i say take every bit u can & pay back the minimum ;)

[Felix]

Krusty I tend to agree with Ronirani's comments and I think given your age and current status you should consider a higher risk profile. Sure pick up some shares in large companies with high dividend yields but also consider some smaller companies or those that pursue ambitious growth plans rather than paying dividends.

With high dividend yields you need to consider whether the yields are sustainable. For example Restaurant Brands' yield is currently 7.1% and they have signalled their current profit levels are sustainable so their current yield is not likely to erode in the next 1-2 years. This makes them a good candidate.

Also don't discount companies where the yield is currently low. If their profits are growing and/or their dividends have been increasing over the years then they are candidates too.

Ultimately it comes down to how much risk you are prepared to take and how much of the $55k you would be prepared to pay back from your own pocket if the investments turned in some losses.

[Halebop]

Wow must be great up there on your moral high horse. We didn't create the system.

I hope you have never hidden your wealth in LAQC's or family trusts all these years? not paying the tax man what he truly deserved ? I hope not with such a high standard of social morality.

...don't/haven't used a LAQC. Do have trusts but they don't shield me from tax and don't "hide" anything. I'm fortunate enough to be in a high earnings bracket and don't begrudge paying the tax that entails. I'm currently working moderately long hours - around 60 per week - so probably work more than 20 hours a week to pay for governement services, including those "free" student loans. As you rightly pointed out with the "moral" high horse, the argument is a moral one. I also didn't "create the system" - but we all do contribute to it and did contribute to it's creation by voting (or not voting) or communicating with our MPs (or not communicating with them). As a younger person I was in the worst treated group of students, paying interest from day one. The economy at the time was arguably in a worse shape than now so I understood the logic even if I didn't appreciate being on the sharp end of it. That was the social contract of the day - tax payers ensured I had an education - but I had to pay a share myself and continue to pay a share for new students today.

If you feel your social contract is take whatever you can from me and your neighbours by whatever means possible, well, can't stop you... but we can ride the moral high horses. My social contract is not to take what I don't need nor to take advantage of something in a manner that wasn't intended. So I agree with your moral high horse statement - I do have the moral high ground.

[ENP]

If you stay in NZ and don't earn over the threshold of $18,000-19,000 (roughly?) then you don't have to pay anything off your student loan.

[ENP]

http://www.ird.govt.nz/studentloans/payments/compulsory/when/

[craic]

Over the past day I have been applying a well tried equation to the NZX with the intention of spending a large amount on shares. Basically I go through the market on the 2 year graph of prices on Direct Broking and hit the print button on any that show a reasonable upward trend for this year to date. I reject finance companies,property companies, new entries and any company that has not paid a dividend I finish up with about fifteen or twenty sheetsand I work out the % increase in price since January and add the dividend. The bottom line is What would $100 invested in Jan 2011 have yielded if sold today. For this exercise I ignore fees, the fact that maybe only half the dividend fell in the period and the fact that the % dividend listed is based on todays price and not on the amount paid. Turners & Growers gives a div. of 3.3% and a growth of 24% in the period so my number is 27.3. My top five today are AWA 36.2, SPN 31.29, Cav 28.29, TUR 27.33, MFT 27.8,and POT is close behind. I will invest my money on those figures but I have deliberately left Tel out of the equation because I am working a different system there.

[POSSUM THE CAT]

Halebop the only way you get any sense out of communicating with an MP is if you have a Gun in one hand & a Baseball Bat in the other

[roniirani]

Fair play to you then Halebop. Its a high standard you set yourself and others. I think we would live in a much greater country if everyone had the same standard of morality.

I could keep debating with you about the moral and ideological issues but I think krusty was after actual real world advice, rather than people having a go at him for having a loan in the first place. I have outlined his legal obligations (as with tax) he does not have no pay a cent more (unless he feels morally compelled by his sense of social morality) but he shouldn't pay a cent less.

[CJ]

Turners & Growers gives a div. of 3.3% and a growth of 24% in the period so my number is 27.3. My top five today are AWA 36.2, SPN 31.29, Cav 28.29, TUR 27.33, MFT 27.8,and POT is close behind. I will invest my money on those figures but I have deliberately left Tel out of the equation because I am working a different system there. So you are essentially after growth stocks that also pay a dividend, since growth makes up the majority of the figures?

What is your exit stategy - do you look for a break in the uptread or are are long term holder. Do you consider what you do 'trading'.

[moimoi]

Krusty; why bother with "solid" (i am assuming your meaning blue chip-ish shares) dividend yielding shares?

Other than the loan, your debt free and have assets and have income so why not just have a punt with your "free" money on something like an aussie mining spec play. With "real" inflation what it is the yield on the dividend payers is possibly not alot at all.

or

Go buy a lawn mowing franchise,(or better yet something that you already have a bit of knowledge of) find a young punter who doesn't have capital but is prepared to work hard, chuck the punter headlong into the business, keep a watchful eye on them from a distance, and allow them to pay off your $55k over time to secure ownership of the business for themselves.

Thereby creating an agreed monetary return to yourself and using tax payer funding to create a new tax payer...even the moral highlanders could be impressed..

lol :-)

[Joshuatree]

craic AWA? Do you nmean AIA?

[percy]

craic AWA? Do you nmean AIA?

Must be AWF.

[craic]

was AWF - its that rum again!

[percy]

was AWF - its that rum again!

I sold my RUM {Aussie} enjoying my POT {NZ} holding my PEA {Aussie} but did not buy MAD{Aussie}. lol.
AWF latest announcements are very positive.They are now supplying labour to the health/retirement sector.What is interesting is the fact that Kevin Hickman [one of Ryman founders,director, and large shareholder] is also a large shareholder of AWF.

[craic]

So you are essentially after growth stocks that also pay a dividend, since growth makes up the majority of the figures?

What is your exit stategy - do you look for a break in the uptread or are are long term holder. Do you consider what you do 'trading'.

I do not trade because I do not have the capital or the wish to spend the time needed in front of a PC. Shares that don't pay a dividend are a no no because they are often mutual admiration societies for the principals who get well rewarded for producing nothing of value. A good example was a vending machine outfit where the principal was paying himself $600gs PA and running the thing into the ground. WDT is another one that has been promising the world for at least eight or nine years and still hasn't delivered. You can almost find them by looking at the number of posts for that share. Many have close to five or six hundred posts and no one has had a cracker out of them. Gold, oil, funny boats, funny motors and the like soak up the punters like blotting paper. I have to work two or three chainsaws and a couple of splitting axes to keep fit and sane and get cash to play with and I will be seventy four this October.
Sorry that should have read five or six hundred PAGES of posts look at Pike River and Heritage Gold on this page.

[Oiler]

I sold my RUM {Aussie} enjoying my POT {NZ} holding my PEA {Aussie} but did not buy MAD{Aussie}. lol.
.

Percy thats a classic post :laugh: It must be just about time for some more RUM,POT and PEA at the ole Lone Star again. We'd be MAD not to.:t_up: Besides Bermuda will be back soon.

[percy]

I do not trade because I do not have the capital or the wish to spend the time needed in front of a PC. Shares that don't pay a dividend are a no no because they are often mutual admiration societies for the principals who get well rewarded for producing nothing of value. A good example was a vending machine outfit where the principal was paying himself $600gs PA and running the thing into the ground. WDT is another one that has been promising the world for at least eight or nine years and still hasn't delivered. You can almost find them by looking at the number of posts for that share. Many have close to five or six hundred posts and no one has had a cracker out of them. Gold, oil, funny boats, funny motors and the like soak up the punters like blotting paper. I have to work two or three chainsaws and a couple of splitting axes to keep fit and sane and get cash to play with and I will be seventy four this October.

Great post craic,with sound advice.

[777]

I like the fact that you are investing long term craic.

[percy]

Percy thats a classic post :laugh: It must be just about time for some more RUM,POT and PEA at the ole Lone Star again. We'd be MAD not to.:t_up: Besides Bermuda will be back soon.

Always look forward to meeting up with the wise heads,and the bright young guys.Good company.! Will take along a bigger notebook for all the hot tips,next time.
Glad you enjoyed my post.!! I think craic could add fire to any meeting with [I think ] his home brew.!!!!

[Snoopy]

Krusty; why bother with "solid" (i am assuming your meaning blue chip-ish shares) dividend yielding shares?

Other than the loan, your debt free and have assets and have income so why not just have a punt with your "free" money on something like an aussie mining spec play. With "real" inflation what it is the yield on the dividend payers is possibly not alot at all.


For a start Moimoi, I could understand your attitude if Krusty was talking about just a few grand. If it all turned to custard, he could mow a few lawns to get his capital back. But we are talking about $55k here. That is quite a few lawns to be mowed. So I find your attitude somewhat flippant with that kind of money at stake.

To take a conservative approach to loans, I think you have to reckon on the income generated by your investment being within cooee of covering your interest payments. Speculating on capital gains to cover your payments would be nice. But the problem is that even with a 'near sure thing' the market can remain irrational for longer than you can hold your loan. So IMO, banking on capital gain to cover all interest payments will almost certainly end in ruin, if you play that game long enough. Even if you can get away with playing the capital gain game 90% of the time, the 10% of the time that it doesn't work will still completely ruin you, due to the multiplicative nature of any time series of investments.

Finally I don't buy your implied argument that 'real inflation' makes looking for dividend payments not worth the trouble. I don't wish to wade into the 'moral' debate. But mechanistically, I think Krusty is on the right track.

SNOOPY

[CJ]

To take a conservative approach to loans, I think you have to reckon on the income generated by your investment being within cooee of covering your interest payments. You (as a taxpayer) are paying his interest so no problems there.