In the Superannuation environment, we recommend structures that will give you maximum transparency and control.
We favour structures in Superannuation that allow you to become the beneficial owner of the assets.
Investment markets can move significantly in unpredictable ways and experience tells us that selecting fund managers who consistently outperform the market is a challenge.
The ‘Core Satellite’ approach to portfolio construction uses index funds as the stable ‘Core’ of the portfolio, with carefully selected blue chip shares as the ‘Satellites.'
This is a very tax efficient strategy because Index fund managers typically turn their portfolios over less often than active managers.
This means that holding index funds can result in reduced capital gains tax. When you implement a buy and hold strategy, with individual blue chip shares, in your superannuation, you will not incur capital gains tax until you sell the shares.
When you are the beneficial owner of a blue chip share portfolio in super you can adopt a ‘Buy & Hold’ strategy and have the peace of mind that no one will ‘Buy or Sell Shares On Your Behalf Without Your Consent.'
When is the last time your Super fund called you and asked if they could sell a share that they brought with your money?
Holding Blue Chip Shares significantly increases your level of control. In contrast, Managed Funds buy and sell shares in the fund without your permission.
Adopting a buy and hold blue chip share strategy will give you more control.
Time In The Market
Is Better Then Timing The Market
A "Buy & Hold" can be much safer over time because blue chip direct shares move up and down in value. The longer you hold direct blue chip shares, the more likely you will make long term intrinsic gains.
People lose money in blue chip shares because they buy and sell at the wrong time.
If you sell at what you believe is 'high' and the market goes 'higher' you do not participate in that gain.
If you sell low, and the market goes lower, you may believe that you have successfully timed the market, but if the market rebounds and you have not brought back in then you have crystallized a loss.
Ask yourself, 'how long am I going to be an investor for?'
Intrinsic to your answer is, how long do you think you will be alive for?
If you think you will live for 50 years...Then the formula is as follows:
50 years x 1 = Investment Timeframe.
If you are going to live for 50 years the best outcome is to be an investor for those 50 years!
Now ask yourself, 'who do I know - or know of - who has beaten the market indexes over 50 years?
As an illustration, here is an example:
(This is not a recommendation or advice, as the example does not take into account your needs or your personal circumstances. Please do not act on this example without first consulting Bull & Bear Financial Strategies.)
The Commonwealth Bank issued Blue Chip Shares on the 12th September 1991 at an issue price of $5.40.
Do you know what the The Commonwealth Bank Of Australia is worth today?
The Commonwealth Bank has also been a faithful dividend provider and with that dividend comes the tax advantage of franking credits.
In 2008 Warren Buffett became the richest person in the world, with a total net worth estimated at $62 billion by Forbes and $58 billion estimated by Yahoo. He overtook Bill Gates, who had been number one on the Forbes rich list for 13 consecutive years.
Warren was the Richest Man in the world but he gave a 85% of his wealth to the Bill & Melinda Gates Foundation to help the world’s poorest people lift themselves out of hunger and poverty. Here are Warren Buffet's opinions on investing:
“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” - Warren Buffett
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” - Warren Buffett
“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” - Warren Buffett
“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.” - Warren Buffett
“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a fly epidemic; and the resignation of a disgraced president. Yet the DOW rose from 66 to 11,497.” - Warren Buffett
“Someone’s sitting in the shade today because someone planted a tree a long time ago.” - Warren Buffett
“Calling someone who trades actively in the market an investor is like calling someone who repeatedly engages in one-night stands a romantic.” - Warren Buffett
“No matter how great the talent or efforts, some things just take time. You can't produce a baby in one month by getting nine women pregnant.” - Warren Buffett
“Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.” - Warren Buffett
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Calling us on 0450 077 442 or fill out the form below for a free consultation with one of our Financial Planners.