were a couple of stocks I was looking to sell down and
my calculations indicated that it would be better to do
so in the new financial year. So those potential trades
were placed on ice.Ready to run
There was one trade I was ready to make, though. With
the Reserve Bank of Australia clearly signalling lower
interest rates to come, I’d decided to put some cash
to work in blue-chip stocks with attractive dividend
returns. My initial target was lotteries and wagering
giant Tabcorp (TAH). I’d bought a parcel of shares earlier
in the week and was looking to double that position.
I revised my research on Tabcorp once more and
remained comfortable. Tabcorp’s lotteries business is
one of the best in the land, I reckon. And its wagering
(betting) business is also in a strong position. I expect
the company to be able to increase its dividend at a
reasonable rate (perhaps by 4%-6% a year) over the next
decade. That kind of growth from a 4.6% fully franked
starting dividend yield is likely to beat the pants off
a term deposit over the coming years.
Given I was going to be driving most of the day, I set a
reminder on my phone for mid-morning to take a break
and “buy TAH shares”. I was keen to do so before the
Reserve Bank board’s next meeting in a few days, at
which I expected an interest rate cut (which occurred).
We hit the road for a few hours after breakfast and
then stopped for morning tea, where I placed the Tab-
corp order. Later that evening my wife asked whether
I’d done much on the markets that day. I said “nothing,
it turns out”.
Then when I thought about it, I remembered the
Tabcorp purchase and was struck that I could forget
a fairly meaningful investment. And then I realised
that’s because my internal battle about whether or not
to buy more Tabcorp shares had already been fought
in front of the fire early that morning, well before the
sharemarket opened. The actual purchase was simply
a mechanical act that made almost no impression on
me – just pressing a few buttons on my phone.
The turning of a new financial year is an opportune
time to review your financial position, insurance policies,
investments and financial strategy. And that’s especially
so after a strong run for share prices in recent years. As
Sun Tzu advised in 500 BC: “Sweat more during peace:
bleed less during war.”Greg Hoffman is an independent financial educator,
commentator and investor. He is also a non-executive
director of Forager Funds Management (not involved in
Forager’s investment process).
Disclosure: Private portfolios managed by Greg Hoffman
own shares in Tabcorp.machine manufacturer Ainsworth Game Technology
(ASX: AGI) and Ardent Leisure (ALG), which operates
the Dreamworld theme park on the Gold Coast and the
Main Event chain of family entertainment centres in
America (think tenpin bowling and laser tag). I’ve been
watching Ardent for a while and need to do further
research. I made a mental note to come back to both
stocks when I had more time in coming weeks.
Check yourself
Like a skier or snowboarder checking their bindings and
choosing a run at the top of the mountain, it’s important
to know where you are financially before facing the
markets on a potentially busy day. So my next task was
to revisit estimates of taxable income and deductions
for the financial year for the various portfolios. Each
one is in a different position and has its own tax rate
and considerations. Two have tax losses from previous
years, for example.
I was also revisiting my expectations of taxable income
and deductions for each portfolio for the 2020 financial
year. Legally minimising your tax is an important way
to boost your after-tax investment returns. For instance,
realising a large capital gain over two financial years
might have a meaningful benefit for many taxpayers
compared with doing so in a single tax year. There
My focus is
situations
where
investors
may be
throwing
a baby out
with the
bathwater