Ultimately, the rules of income investing are unpretentious: keep it simple, buy reliable yield, not high yield, share prices are more important than dividends, go large on the banks, add some hybrids if you’re a chicken, and don’t forget the golden rule of income investing: only buy for income if the share price is going up. It’s called the “idiot income portfolio”. It’s the same as the “idiot portfolio” but slightly different.
The idiot portfolio is the portfolio financial professionals buy you so they can’t be sued. They distill it by listing all the shares in the S&P/ASX 200 index on Excel, sorting them in market cap order, and then, starting at the top, crossing out any stocks they can’t spell, don’t understand, and wouldn’t be able to defend if ASIC asked them “Why did you buy that?”.
The stocks that are left make up the idiot portfolio. In Australia, it’s not actually a bad portfolio, even if it is a bit boring.
For income investors, the idiot income portfolio is created slightly differently, but it’s still a pretty easy exercise. All you do is take the S&P/ASX 200 and, using consensus numbers, sort them in order of forecast gross dividend yield (the gross yield includes franking) with the highest yielding stock at the top. Now you work the same process of elimination, but with a couple of caveats for income, including the golden rules of income investing: anything that appears to yield over 10% probably doesn’t, and avoid anything paying a one-off big dividend. For a stock to be an income stock, the dividend has to be sustainable.
Denne historien er fra October 2021-utgaven av Money Magazine Australia.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra October 2021-utgaven av Money Magazine Australia.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
An outrageous, beautiful monopoly
Telstra's mobile business is a cash machine with few competitors, giving it the highest returns in the world.
Drop the anchor to judge value
Buying and selling decisions should be based on where a stock price is going, not where it has been.
Powering the AI boom
Beyond the software and chipmakers, where will the energy come from?
Get into life
Tucked inside super are products that can protect you from life's inevitable uncertainties.
Paths to home ownership
Taking the road less travelled can sometimes deliver unexpected benefits.
Sold! Quick ways to add value
Small, strategic changes can have a big impact on the look and feel of your home. And get you a better price on auction day.
Money lessons the kids need to know
Your children can learn a lot from your past money mishaps. Here are eight financial conversations I have had with mine.
Property-investing rules: are they likely to change?
The pressure for the government to curb the tax benefits of tax concessions, such as negative gearing and the capital gains tax discount, is unrelenting. Most recently, independent senators David Pocock and Jacqui Lambie proposed five options for paring back investment property tax concessions, with savings to the Federal budget of up to $60 billion over the next decade.
What's love got to do with it?
A rollercoaster of emotions could be driving poor crypto behaviour.
Are we ready to be cash-free?
Saying goodbye to our piggy banks too soon could leave small businesses in the dark when problems arise.
