A portfolio of Australian stocks with us yields a dividend income return of 7.5%. Capital growth is on top of that. A stock exchange listed Real Estate Investment Trust (REITs) portfolio yields 6.0%, plus capital growth. REITs invest in major shopping centres, office buildings and industrial parks. Direct property investment in homes and apartments provide a net rental income yield of around 2.0%, plus capital growth. Interest only investments rates range from 0.1% for “at call” bank deposits, to 0.6% for 1-3 year bank term deposits, and 0.75% for 10 year Australian government bonds. However there is no capital growth. Stocks and property provide income and
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There are three "high conviction" questions you need to ask before buying a stock: 1. Is this stock a better buy than adding to my existing holdings? 2. Would I sell some of my portfolio to invest in this stock? 3. Would I be prepared to invest a sizeable part of my wealth in this stock for the next 10 years? If you can answer in the affirmative then the stock is a worthwhile addition to your portfolio. Opportunities to buy stocks can present themselves in various ways. The whole market can collapse as happened with the onset of the
Value-Focused means we will only buy stocks we consider are reasonably priced relative to our assessment of their intrinsic, true or real value. Risk-Adverse means we will not buy stocks that we assess as overpriced, even if market sentiment favours them going higher (as happens in bull markets). We do not speculate or take foolish risks.
There is an objective, determinable value for any investment, which is independent of the stock market. This is known as its intrinsic, real or true value, and is defined as “the discounted present value of all the cash that can be taken out of a business during its remaining life”. This universal value formula is applied to valuing bonds (government or corporate debt issues), when sold in the market before their maturity date. The formula actually applies to all investments be they bonds, stocks, real estate, commodities, works of art, or government bonds. With bonds the interest rate and maturity
The real question when you buy a stock is – “Am I getting my money’s worth?” This is one of Warren Buffett's key principles. It focuses the decision making on the real issue of the value of the business being bought, and away from trying to guess what might happen in the market. It is unwise to pass up something that’s attractively priced today on the chance it may be more attractive tomorrow. That might happen, however the future is never certain. Wait on the side line and you risk missing out. What matters is that you are getting value
Warren Buffett gives the best advice on investment advisors, fees and bias: “The question of finding investment advisers is a hard one. Most advisers are far better at generating high fees than they are at generating high returns. In truth, their core competence is salesmanship.” Warren Buffett “Money managers purposely work at manipulating numbers and deceiving investors. They’re selling the fund of fund stuff – it’s really unbelievable, piling on the layers of costs. But if they are good at marketing they don’t need to be good at anything else. The poor guy in the general public is getting a terrible product.” Warren Buffett “Many