@h00ts,@rookstar
Hi H00ts and Rookstar,
I noticed your tag over in the A2M forum re cashing out. Over the decades of investing I always like to be fully invested as I have noticed you only have to be out of a solid growth stock like A2M 2 or three times over the years to miss out many bags of growth. People like my brother and inlaws refused to stay fully invested and despite me warning them of their future financial position they have for the best part of 2 decades have had most of their funds in cash. Some people are just not wired to be directly invested into individual stocks as they loose sleep and stress when they see big falls in their portfolios. Fast forward to now when they are nearing or in retirement and covid has caused one family to go from $250K a year to $50'sk. You use to be nearly unemployable at 65 if you became redundant, now its 55 and even 45 in this hard new world we find ourselves in.
Personally you only have to set yourself up to be able to survive if another big financial calamity were to occur. By that I mean you have to factor that your income from dividends/PAYG could be slashed for 3 years or more by 70%. Personally I feel if you feel another big correction may be on the cards you only need to be 10 to 15% in cash to take advantage of bargain shares prices like we had in March 2020. I did what most of the BOD of A2M did and diversified now up to 80% of my A2M holding after it had grown more than 10 fold and made up over 80% of our portfolio. At one stage when A2M hit its SP peak our portfolio in our SMSF and personal accounts actually hit just over $30M. Its in the low $20m's at the moment but I am happy to now be diversified into about 17 stocks now with the biggest holding now being FMG.
I too will be turning 60 late this year and my wife despite me trying to school her in stocks is nowhere near where she should be. At this point in time is about preservation, not accumulation. I was aiming to set up our portfolios to bring in around $500k a year in dividends but due to the rapid recovery in some stocks especially FMG we are now on track to be bringing in in excess of $200K a month in dividends before adding franking credits.
I know its only going to be at this level for a short while things are going great guns in the iron ore space. Even if the price of IO goes back to previous levels in time and we are only going to be making less than half our returns its more than enough to live very comfortably and have plenty left over to reinvest and help out close family members.
I dont know about you h00ts but as time goes by I have noticed those that did not take take my advice and did not heed the financial position they would find themselves in are quite upfront in asking for some big handouts. Some cant comprehend that they cannot fund the lifestyle they were accustomed too and brazenly allude we should sell our inner city investment property to fund their remaining child private schooling so they dont have to touch their savings so they have enough in retirement. No one besides my wife, my accountant and some anonymous fellow posters know of how much we are worth as we live a normal life without the trappings of being where we are. In time once we build this forever home of ours that is going to be around $2.5m build its going to be hard to hide that we have much more than those that are close to us ever envisaged.
We at a later date once we are done doing/building what we worked a lifetime for will help out those closest to us but are not going to be buying houses for their offspring. Its all great coming into money and financial security but it came at the expense of decades of disciplined saving and investment on our part. Its not like we won the lotto and we get the feeling some people take it like that and somehow think because they are family its ok to ask some pretty over the top requests from us.
Anyway enough of 1st world problems, h00ts my advice to you is if you have enough to live off from your income stream if its cut in half only to be no more than 20% in cash if you feel such a drop was to eventuate. Personally I am fully invested as I am always mindful if something was to happen to me my family dont need to stress that I am leaving them with a single growth stock that makes up 80%+ of our portfolio that does not pay a dividend. I now have peace of mind for me and my family and if I was younger or my wife was more up to speed in the share market things may of been different to where we are now.
Personally I think with the money being splashed around the world and what I am reading from a a paid subscription service I have that there is too much stimulus going around in China, the USA and elsewhere for another crash for awhile. You may be right but with everything going in the world to stimulate their economies I think the next correction is going to be kicked down the road for quite few years yet. In the mean time you might see a 30 to 40% drop next time around but we are already up 50 to 100% from our 2020 March lows and god knows how much higher the share market will be when the next correction comes. I would rather be fully invested now and be receiving dividends along the way and be up over 100% and would be quite happy to be down 30/40% down the track. I have seen close family thinking they need to be in cash for security reasons and to take advantage of a future crash but they waited so long they did not have cash to reinvest especially when covid either caused them to go from good dual income families to onto center-link benefits overnight. You have been around the traps for awhile and you know what you are doing, just giving your my view, not financial advice. Good luck in whatever path you choose to follow.
