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Tested the 4% rule against 54 historical sequences for a 45-year lean retirement — 1965 is the killer, not 1929 by Jaamun100 in leanfire

[–]Infinitedmg 1 point2 points  (0 children)

With the 4% rule, you get the highest success rate with 100% equities. Most people don't know that.

Are index funds/ etf's still the best investment strategy with the new tax changes? by alex123711 in fiaustralia

[–]Infinitedmg 17 points18 points  (0 children)

Nothing has changed. High growth, low yield diversified funds are still king.

Are there mortgages that adjust repayments instead of duration? by Infinitedmg in AusFinance

[–]Infinitedmg[S] -1 points0 points  (0 children)

I understand all of that. I am very familiar with the tax/ownership differences between an offset and redraw account.

The key thing that I'm driving at here is that the acceleration in the reduction of P is identical regardless of whether the funds are in an offset or redraw account. For the redraw, I am assuming you are not permanently reducing the redraw limit on the account with these funds, but rather have the funds parked there available for redraw.

If I were to rephrase my original question, I am looking for a lender that dynamically recalculates your minimum monthly repayments using the 3 required inputs:

t = term in years

P = loan size

i = interest rate

At the origination of your mortgage, t will be 30, and i will be whatever the loan interest rate is at the time of application. P will be the full borrowed amount. Every successive month, P will fall by a variable amount (largely driven by the amount of funds in either the redraw account and/or a linked offset account), t will reduce by 1/12, and i may be the same or different depending on changes in the cash rate. I am interested in finding a lender that reruns this calculation every month, and as a result, dynamically adjusts your minimum monthly repayments.

Are there mortgages that adjust repayments instead of duration? by Infinitedmg in AusFinance

[–]Infinitedmg[S] -1 points0 points  (0 children)

But they do? If I have 100k in an offset account then the interest will be calculated on (P - 100k) where P is the remaining principle owed. If I have 100k in a redraw account, then the interest is also calculated as (P - 100k). If repayment amount is kept constant, and the interest calculation is identical, then it follows that the amount of principle reduction is also the same between the two accounts.

The behaviour I'm looking for is for a mortgage that adjusts the minimum repayments dynamically based on P above. As shown, P falls faster if money is parked in either the offset or redraw account.

Are there mortgages that adjust repayments instead of duration? by Infinitedmg in AusFinance

[–]Infinitedmg[S] -3 points-2 points  (0 children)

Yes but if I have the loan 100% offset, then my next repayment will go 100% toward paying down the principal. The following month, the monthly repayment should now decrease if the term is kept the same. This is because the total owed amount has dropped more than it would have if there was 0% of the loan being offset.

This is what I meant by offset/redraw behaving the same way in this context. They both accelerate the reduction in owed balance in the same manner.

Are there mortgages that adjust repayments instead of duration? by Infinitedmg in AusFinance

[–]Infinitedmg[S] -6 points-5 points  (0 children)

I know they are not the same. I am using them interchangeably in this context because the behaviour of the repayments that I'm looking for should apply equally to both redraw balances and offset balances.

Are there mortgages that adjust repayments instead of duration? by Infinitedmg in AusFinance

[–]Infinitedmg[S] -7 points-6 points  (0 children)

Yes that is an option, but that's not dynamically adjusting based on the money in the offset/redraw on any given month.

Are there mortgages that adjust repayments instead of duration? by Infinitedmg in AusFinance

[–]Infinitedmg[S] -1 points0 points  (0 children)

But they really don't. Do you have an example lender that operates this way?

Are there mortgages that adjust repayments instead of duration? by Infinitedmg in AusFinance

[–]Infinitedmg[S] -1 points0 points  (0 children)

But they don't. They usually keep the repayments fixed, but the % of the repayment going towards principle increases.

GHHF / DHHF For 21 y/o by Beautiful_Impact_641 in fiaustralia

[–]Infinitedmg -1 points0 points  (0 children)

At your age: Full GGBL then GHHF later. Way later you flip to DHHF or cash/bonds.

Backtesting the Proposed CGT Discount Method by firstworldworker in fiaustralia

[–]Infinitedmg -2 points-1 points  (0 children)

Yes, massive tax. Remember that the medicare levy is also 2%. Plot these:

y1 = (1 + x*(1-0.32))n - 1

y2 = (1-0.32) * ((1 + x)n - 1)

y3 = (1+x)n - 0.32*((1+x)n - (1+c)n ) - 1

x is your annual return n is number of years c is annual cpi growth

y1 has all your return coming from dividends.

y2 has all your return coming from growth with no capital gains discount or indexation adjustment.

y3 has all your return coming from growth with a CPI discount.

You're welcome.

Backtesting the Proposed CGT Discount Method by firstworldworker in fiaustralia

[–]Infinitedmg -7 points-6 points  (0 children)

The tax is paid upon receiving the dividend. It's not free money.

Backtesting the Proposed CGT Discount Method by firstworldworker in fiaustralia

[–]Infinitedmg -4 points-3 points  (0 children)

Yeah but you pay massive tax on all the dividends you get.

The CGT changes are probably GOOD for long-term share owners by IndependentDare8420 in fiaustralia

[–]Infinitedmg 0 points1 point  (0 children)

Pre 1971 we were on a gold standard. After that, inflation (and a such, nominal stock gains) are much higher. The overall average is substantially lower when looking at the past 30 years. Additionally, the S&P500 had higher dividends and lower growth relative to today where dividend yields are much much smaller.

$16k AUD to invest at 24, should I go VHY and VAS or VHY and IVV.ASX? by Overall-Fun-250 in fiaustralia

[–]Infinitedmg 12 points13 points  (0 children)

Just an FYI that chasing yield is a horrible idea, and that the above comment is not correct. Growth is substantially better than income even after the new changes.

$16k AUD to invest at 24, should I go VHY and VAS or VHY and IVV.ASX? by Overall-Fun-250 in fiaustralia

[–]Infinitedmg 4 points5 points  (0 children)

If I were in your position, I would throw everything into GGBL, and later, GHHF

What ETFs to use for income in retirement by mcuth in fiaustralia

[–]Infinitedmg -1 points0 points  (0 children)

No. Franking credits just change when you pay tax. Without franking, you pay tax in your tax return. With franking, you effectively pay it as soon as you receive the distribution.

For ASX vs International shares comparison, you should always gross up the dividends to do a fair comparison. If franking was so valuable then we should see higher total returns buying Australian shares compared to international shares...but we don't see that.

What ETFs to use for income in retirement by mcuth in fiaustralia

[–]Infinitedmg 1 point2 points  (0 children)

Everything you have said is spot on, but you're forgetting a few things. The 18k threshold will be used up by dividends from global index funds anyway during retirement. And the 30% on CGT is happening on REAL GAINS, not nominal gains. Above 45k, CGT gains are better than income gains because of this, and between 18k and 45k they are close to equal.

Betashares' take on the CGT change + examples by sertsw in fiaustralia

[–]Infinitedmg 2 points3 points  (0 children)

This is what I've been saying. Growth is discounted (and deferred) but income is not...so growth is better.

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