Do you have a pension?

KomradeBishop wrote: »

Good example of what I meant, about it being hard to find a company that solid/successful, which doesn't have ethical issues - a whole host of things wrong with J&J, starting from here on down:
https://en.wikipedia.org/wiki/Johnson_%26_Johnson#2010_Hip_replacement_recall

Would waiting for perfect companies not lead to missed opportunities?
If you looked at the news about the recalls mentioned then the share price would have been depressed subsequently. (A buy opportunity) if for example, you decided to commit $5,000 to Johnson in August 2010 and reinvested the dividends then your pension would have increased to $11,142. A very good return.

Source: http://www.buyupside.com/backtest/divrebackinput.php

You'd also have 104 Johnson Shares giving you an annual payment of $265 (after 15% witholding tax) this year. They would in all probability increase this dividend next year and the year after.

To assuage any ethical concerns from that investment you could potentially use your dividend and accumulate them when the perfect company is identified and contribute the unethical profits into that investment. Or you could have sat on the $5,000 and missed a gain of $6,000.

Looking at a product recall, where a company lobbied their way out of performing proper clinical trials to determine safety, and then went on to ignore large numbers of reports of problems with the item which led to serious health issues, so that they could keep on selling it for years, fúcking over a large number of vulnerable patients in the process - looking at that as a profit opportunity is an incredibly shít and dehumanizing thing.

When a company displays massive ethical issues like that, then you need to question your own ethics if you're happy to continue investing in them.

The arms-length abstraction/distance that financial investments have from these companies unethical acts, doesn't absolve you in any way, of being ethically responsible for what you're investing in and thus supporting.

Profiting from a companies unethical acts, and then investing those profits in a more ethical company, doesn't magically 'launder' away any ethical conflicts/issues with your investment.

KomradeBishop wrote: »

Looking at a product recall, where a company lobbied their way out of performing proper clinical trials to determine safety, and then went on to ignore large numbers of reports of problems with the item which led to serious health issues, so that they could keep on selling it for years, fúcking over a large number of vulnerable patients in the process - looking at that as a profit opportunity is an incredibly shít and dehumanizing thing.

When a company displays massive ethical issues like that, then you need to question your own ethics if you're happy to continue investing in them.

The arms-length abstraction/distance that financial investments have from these companies unethical acts, doesn't absolve you in any way, of being ethically responsible for what you're investing in and thus supporting.

Profiting from a companies unethical acts, and then investing those profits in a more ethical company, doesn't magically 'launder' away any ethical conflicts/issues with your investment.

It is merely an illustrative example of how events affect a strong and solid company and in that particular case the company will be paying billions in lawsuits in the next few years, I'm sure heads rolled for events of that period.

Let's disregard, as an investment, a 130 year old, shareholder friendly, AAA rated company because of a negilgent subsidiary.

The point is that the price of the investment will go up and down due to the news events and as an investor you should seek to capitalise on that.

Ethical investing is new to me and I will read up about it.
I just saw that Hasbro made the Ethical companies list. They pay a dividend, I can understand the business model and the price is fair enough value.

How about adapting the strategy to annually reviewing the list of Ethical companies.
Pick the one that makes the most sense fundamentally, pays dividends, make a significant investment and hold long term.
Repeat the following year by adding to a growing portfolio of ethical companies.

[Deleted User]

KomradeBishop wrote: »

While valoren's investment plan definitely sounds like a fairly sensible one, simple and avoiding the complexity/opacity (i.e. scammability) of other financial investments, the problem I would have is finding companies which are that strong/solid - yet which aren't plagued with some ethical issue or other - because ethical issues are going to be prevalent among a large number of the most successful/long-term-stable companies (though not all by any means - I'd be curious about the few good pickings).

That is also one of the big problems with many pension schemes: When you look at where the money is actually being invested, at the list of companies being invested in etc., you usually don't have to spend long looking, before you find some companies which have serious/major ethical issues that your money will be getting invested in.

I don't think the ethics of a company bother most people much to be honest. Its certainly not something that would even come to mind if I were putting money into something. Making money from it would be my main concern.

Iwasfrozen

KomradeBishop wrote: »

I disagree - and as I said after the last thread, I'm done debating with you, due to your habit of making 'devils advocate' style arguments even you can't credibly believe - I'm of the opinion that you try to obstruct debate, not add to it.

Whatever you say buddy. I hope you cop on in time though.

[Deleted User]

Iwasfrozen wrote: »

I hope you're at least paying into some kind of pension. I think you're roughly the same age as me, public pensions won't be a thing when we reach 65. (or more likely 75)

Retirement age is 68 for us at the moment afaik
Can only go up with improvements

valoren wrote: »

It is merely an illustrative example of how events affect a strong and solid company and in that particular case the company will be paying billions in lawsuits in the next few years, I'm sure heads rolled for events of that period.

Let's disregard, as an investment, a 130 year old, shareholder friendly, AAA rated company because of a negilgent subsidiary.

The point is that the price of the investment will go up and down due to the news events and as an investor you should seek to capitalise on that.

Ethical investing is new to me and I will read up about it.
I just saw that Hasbro made the Ethical companies list. They pay a dividend, I can understand the business model and the price is fair enough value.

How about adapting the strategy to annually reviewing the list of Ethical companies.
Pick the one that makes the most sense fundamentally, pays dividends, make a significant investment and hold long term.
Repeat the following year by adding to a growing portfolio of ethical companies.

It's not just one event though - worth reading through the rest of the lawsuits filed against them.

As a company, Johnson & Johnson seem to follow the pharma-industry trend, of softballing on clinical trials in order to get their products out to the public more easily - at the cost of the public, who get used as guinea pigs.

They have a track record which makes it reasonable to pin them as actively pursuing ethically questionable policies, and reasonable to judge them cynically.

Your strategy on ethical investing sounds like a better approach though indeed - if I were to consider investing in the future, I'd probably take an approach like that; it's difficult to properly survey companies for ethical issues sometimes, but that's something I might consider in the future, if I start thinking about this kind of stuff more.

Graysen Helpless Spittoon wrote: »

I don't think the ethics of a company bother most people much to be honest. Its certainly not something that would even come to mind if I were putting money into something. Making money from it would be my main concern.

That's the problem. When you invest in something, backing it with your money, you are supporting the unethical practices of a company - it puts your own ethics into question.

People think the arms-length distance that financial investing provides them, makes them free from moral/ethical judgement, think that it gives them enough distance to disclaim any responsibility for investing in practices they know are unethical - it doesn't though; you want to profit from something, you are partially culpable ethically/morally, for any ethical violations leading to your profit (most especially, if they're violations that are easily discovered, which you have no excuse for not knowing).

Hugo Stiglitz

Joined a mandatory pension scheme in my new job. My retirement date sounds like a year that a 90s scifi movie would be based in. No way I'm going to survive until then!

I play the lotteries religiously. I want to retire age 30.

Thargor

valoren wrote: »

I don't have a pension. I set up a PRSA but then realised that US dividends are still taxed so that defeat's the purpose of using a tax shelter. I also like the idea of having instant access to my capital. I closed the PRSA during the cooling off period. They didn't realise I was still within the month's cooling off period and sent me a curt reply stating I couldn't access my initial funding deposit until I was 50. Eh, no thanks.

My basic plan for retiring is to focus on the income derived from the best companies on the planet.
I want to reach the point where my dividend income from being a part owner in these companies can reasonably cover my quarterly expenses. I can continue to work if I wish but it would not be a necessity.

I have picked a list of companies that;

Must have a strong competitive advantage. (they should still be trading when I'm approaching 60+).
Must have paid a dividend for at least 25 years. (you can't fake paying billions of cash to shareholders, so there's no potential insider fraud)
Must have increased the dividend for at least a minimum of 10 years. (shows that the management is shareholder friendly).
They must not be financial or technology companies. (the last two crashes/recessions were tech and financial, tech companies generally don't pay dividends).
I must be able to understand the business. (so no such thing as Flux Capacitor Technologies trading at 100+ times earnings)

Buffett - Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years

I have invested where the price/earnings is attractive for 6 companies so far.
The turmoil earlier in the year got me 2 of these for a great price.
Some are still unjustifiably overvalued but I will monitor these before making an investment.
I plan to just spend the rest of my working life accumulating shares in 10-20 of these types of companies.
They are spread across the sectors to diversify (Beverages, Energy, Healthcare, Consumer, Comglomerate, Utilities, Telecoms).
As the dividends increase I simply add in additional capital to purchase more shares.
When the dividends meet my living expenses then I can retire.
I use a regular trading account so that the cash is readily available if absolutely necessary.
It would need to be a very good reason for me to sell my holdings. I would plan on passing these holdings on after I die so no worry about capital gain tax.
Market 'crashes' are my friend as I'm still young. So long as I had the capital to invest immediately then a market crash of 50% wouldn't bother me. I would have the opportunity to buy the companies I like at a heavy discount, after all they should still be around when I hit my 60's.

Essentially it boils down to Buffett when he said "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.".

It's beautifully simple and cuts out all the bullshi+ noise you see everyday about the markets.

Any chance of a list of your companies and how you're doing please? I want to subscreibe to your newsletter!

Iwasfrozen

Thargor wrote: »

Any chance of a list of your companies and how you're doing please? I want to subscreibe to your newsletter!

Now Thargor, you've got to pay the man if you want his investment strategy.

osarusan

I run the gas off the electricity and the electricity off the gas so I'm sorted.

Thargor wrote: »

Any chance of a list of your companies and how you're doing please? I want to subscreibe to your newsletter!

I've just been reading for years about what to do about investing and was all focused on investing in Vanguard ETF's. The taxation complexities of etf's put me off. I simply looked at what the passive index fund's holdings were by market cap and realised that Vanguard own circa 6% of Coca Cola. Berkshire own about 9% iirc. Why would they own such a large amount?

I read about Buffett and realised that he has historically bought into companies that pay dividends and he does so at a fair value (i.e. when the **** hits the fan on Wall Street then Berkshire would have been gorging at the trough loading up with dull blue chips at knocked down prices). Given their stakes in these companies would be enormous then the dividends would also be huge. Berkshire would then use the dividends to buy other companies, make other investments.

My goal is to get to 10k in each of Coca Cola, Exxon Mobil, General Electric, Johnson & Johnson and Procter & Gamble then reinvest those dividends perpetually. These companies would be considered 'Dividend Kings', i.e. paying increasing dividends year on year since forever. I believe this kind of strategy is called Dividend Growth investing.

Currently I have circa 5k in each and this is spitting out €750 in dividends this year. I only began at the start of the year, the investment has been from accrued savings. I have benefited in a modest capital gain due to the depressed prices, which was the worst start to any investing year I believe. The price earnings are high for each of them now. I'd consider under 20 pe ratio as acceptable for blue chips. I am also interested in Colgate (very high valuation), General Motors (very cheap, I invested 500 in them as they were insanely cheap), Unilever, Reckitt Benckiser, Boeing, McDonalds, Nestle, Kimberley Clark. All boring, all ubiquitous but solid and stable companies. For me that's as simple and straighforward as investing can be for me and makes sense to me. I will get to where I want with Coke, GE et al through monthly savings and invest in others like Boeing where the value is good along the way.

These are the Vanguard holdings by size. Basically, take your pick from what companies you like here. I plan to avoid financial or tech companies personally. Vanguard really are brilliant. The link below is like the Premier League of the world's top companies.

https://personal.vanguard.com/us/FundsAllHoldings?FundId=0040&FundIntExt=INT&tableName=Equity&tableIndex=0

Charlie Munger (the Berkshire Hathaway Vice chairman) made a quote that simply lit a fire under my ass to get investing. He said that you must work your ass off to get to 100k in investments, that this is the hardest part of building wealth as you must live below your means, sometimes significantly so depending on your income but that once you reach that point then you have your money working hard for you. His words were to the effect of "The first 100k is a bitch!".

Considering a scenario with a pool sample of the above companies who have historically raised their dividends annually and you have 100k invested across a portfolio of these companies, across different sectors. Assuming a normal dividend yield of 3%. If you didn't touch the account anymore, didn't invest any more money then this is what you would receive annually.

In 2016, you'd be getting 3,000 a year.
In 2017, you'd be getting 3,300 a year.
In 2018, you'd be getting 3,630 a year.
In 2019, you'd be getting 3,993 a year.
In 2020, you'd be getting 4,392 a year.
In 2021, you'd be getting 4,831 a year.
In 2022, you'd be getting 5,314 a year.
In 2023, you'd be getting 5,846 a year.
In 2024, you'd be getting 6,430 a year.
In 2025, you'd be getting 7,073 a year.
In 2026, you'd be getting 7,781 a year.

So in 10 years without touching the portfolio, by virtue of an annual dividend raise of 10% you'd have received €55,594. And consider that is without doing anything at all. Not selling but sitting it out over the long term. The value of the underlying shares would do what they do but you'd have gotten 55 grand in cash for doing nothing except be a part owner of these companies. You would be an investor in them and not a trader/speculator buying at $20 and selling at $25 for example. That kind of activity would eat me alive in fees and commissions. If the underlying value happened to be 40% less than when you began then the dividends would have covered some of the shortfall. You'd like to think that values would rise over the long term, however I'm only interested in the income side of things. The value could be less than when you started but you would expect to get your cut each and every year.

That's what Charlie Munger meant by getting to the 100k sweetspot. Imagine reinvesting those annual dividends along with additional fresh cash every year, cherry picking the best valued companies from the Vanguard Premier League and you can see compounding at work. You would be building a financial fortress building and building towards the point where you decide to 'retire' and live off your business interests in these companies.

beach_walker

Yeah I have a pension. Employer matched contribution one and had similar in a previous job so I suppose there's a bit put aside. I'm very sceptical on it all though. We've seen how governments will feck over those who have one so part of me thinks I'll never see that money again. I put my effort and focus into practical savings (looking to buy in the next few years) and maybe start some long term investments in time.

Sam Kade

Fuzzy wrote: »

I manage my own investments.
These pension funds will probably be fu*cked by the time we are 75 and at retirement age.

Exactly and you know it's there when you want it rather than going with the rules of a pension plan.

esforum

I now have a public pension but before that setup a private scheme which is now locked until I turn 65 but as my pension runs until I am 70, I plan on getting the last laugh and being dead before then, take that bank!

On a more serious note, I actually did one of those paid opinion groups a few years ago, about 4 I think. It was amazing how many people dont know anything about pensions and actually a few in the room didnt even realise that part of their union payments went towards a pension scheme automatically but it was only allowing for something like 1 / 3 pay on retirement. Still, nice surprise for em

also, pensions are taxed and most people when they add in the state pension dont need as much as they are paying for. If the kids are gone, mortgage paid and you have half what you earn in a year, thats plenty.

lawred2

esforum wrote: »

I now have a public pension but before that setup a private scheme which is now locked until I turn 65 but as my pension runs until I am 70, I plan on getting the last laugh and being dead before then, take that bank!

On a more serious note, I actually did one of those paid opinion groups a few years ago, about 4 I think. It was amazing how many people dont know anything about pensions and actually a few in the room didnt even realise that part of their union payments went towards a pension scheme automatically but it was only allowing for something like 1 / 3 pay on retirement. Still, nice surprise for em

also, pensions are taxed and most people when they add in the state pension dont need as much as they are paying for. If the kids are gone, mortgage paid and you have half what you earn in a year, thats plenty.

only 1/3 salary per annum?

That's exceptionally good

lawred2 wrote: »

only 1/3 salary per annum?

That's exceptionally good

2/3 salary p.a. would be more normal with a decent pension.

Tar.Aldarion

Just started it really - should have years ago but money needed elsewhere, 10% matched so it's decent enough.

Greenmachine

No pension at the moment, in part because I am unemployed. When I secure a job the priority will be saving a deposit for a mortgage. Little point in having a pension if it means you are still renting from a landlord in your 70's or 80's.

Greenmachine wrote: »

No pension at the moment, in part because I am unemployed. When I secure a job the priority will be saving a deposit for a mortgage. Little point in having a pension if it means you are still renting from a landlord in your 70's or 80's.

Better by far I would have thought to have a pension if you need to pay the sodding rent! :pac:

lawred2

jimgoose wrote: »

2/3 salary p.a. would be more normal with a decent pension.

2/3 salary would not be normal

lawred2 wrote: »

2/3 salary would not be normal

It would be perfectly normal for a defined benefit pension that is not administered by blithering idiots.

lawred2

jimgoose wrote: »

It would be perfectly normal for a defined benefit pension that is not administered by blithering idiots.

ah defined benefit..

those are magical fairy land pensions

lawred2 wrote: »

ah defined benefit..

those are magical fairy land pensions

Well just call me Pixie Jim!

AlexisM

valoren wrote: »

Considering a scenario with a pool sample of the above companies who have historically raised their dividends annually and you have 100k invested across a portfolio of these companies, across different sectors. Assuming a normal dividend yield of 3%. If you didn't touch the account anymore, didn't invest any more money then this is what you would receive annually.

In 2016, you'd be getting 3,000 a year.
In 2017, you'd be getting 3,300 a year.
In 2018, you'd be getting 3,339 a year.
In 2019, you'd be getting 3,507 a year.
In 2020, you'd be getting 3,606 a year.
In 2021, you'd be getting 3,714 a year.
In 2022, you'd be getting 3,826 a year.
In 2023, you'd be getting 3,940 a year.
In 2024, you'd be getting 4,059 a year.
In 2025, you'd be getting 4,180 a year.
In 2026, you'd be getting 4,306 a year.

So in 10 years without touching the portfolio, by virtue of an annual dividend raise of 10% you'd have received €40,831.

Those numbers don't look quite right. A 10% increase on 3,000 is 3,300 which you have correct above but the following year you only have a 39 increase (about 1%), then about 5% and then 3% per annum. Overall you only have a 3% increase after the first year.

A 10% annual increase should bring the 10th year dividend to 7,074 and the 10 year total would be just under 48K.

AlexisM wrote: »

Those numbers don't look quite right. A 10% increase on 3,000 is 3,300 which you have correct above but the following year you only have a 39 increase (about 1%), then about 5% and then 3% per annum. Overall you only have a 3% increase after the first year.

A 10% annual increase should bring the 10th year dividend to 7,074 and the 10 year total would be just under 48K.

Thanks. Corrections below.

In 2016, you'd be getting 3,000 a year.
In 2017, you'd be getting 3,300 a year.
In 2018, you'd be getting 3,630 a year.
In 2019, you'd be getting 3,993 a year.
In 2020, you'd be getting 4,392 a year.
In 2021, you'd be getting 4,831 a year.
In 2022, you'd be getting 5,314 a year.
In 2023, you'd be getting 5,846 a year.
In 2024, you'd be getting 6,430 a year.
In 2025, you'd be getting 7,073 a year.
In 2026, you'd be getting 7,781 a year.

Total gross dividend - €55,594. Return on capital is 55.59%.

Assumptions - Starting capital 100k. Annual dividend yield is a consistent 3%. Annual dividend rise is 10%.

The above assumption of 10% increase is a simple linear example. The blue chip's generally raise their dividend annually between 8-12%. Used 10% as an average.
Beats the credit union that's for sure.
To extrapolate on the above figures; in 2036 you would be receiving an annual income of €20,182 for the year.
Over the course of 20 years from simply sitting on the shares you would have received a gross of €192,000 in dividends, almost double your original capital.

Now imagine reinvesting annually to accrue more shares which generates more dividend and couple that with fresh capital when you put your savings aside. That's the virtuous cycle of compounding right there

Pick the companies that have historically done the above and will reasonably continue this in the years ahead.

sebcity

lawred2 wrote: »

ah defined benefit..

those are magical fairy land pensions

I have one of them