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GFC Proof Strategy
Old 10-16-2009, 02:54 PM   #1
Dryer sheet wannabe
Join Date: Oct 2009
Posts: 11
GFC Proof Strategy

Im an average wage earnerand invest heavily and am 70% of the way through my plan to early retirement by age 42, currently 37yrs old.

The GFC was a perfect test for my investment strategy as I sailed right through it without a dent and it actually was a huge benefit to my overall position. (Im not gloating, but letting you know how I did it.)

First of all Im an Aussie and we have been significantly less affected. Global reporters say its thanks to our commoditiy sales to China, and sure thats true, but its also largely because our companies and banks are significantly more responsible with thier debt obligations....

So heres my strategy....for your comment
Im 100% in direct Australian shares with initial yeild on purchase date above 7%...
All shares I buy must have Debt to Equity below 50% and preferably below 25% or even 0%. 60% of my stocks have no debt at all and only two stocks I own have debt above 30%....
Once they pass this test I look for companies that grow income by 10%+ p.a. and have ROE over 20%
Liabilities must also be minimal...cant give you a measurement here as its different in all different sectors, but compare them to its peers....
I look for at least 3 years of consecutive performance (althoughGFC will dent most companies marginally for 2008 or 2009)

I then subscribe to a company that does fundamental analysis using buffets methods on valueing a company and we buy stocks only when they are 10%+ undervalue, preferably 20%+ and during the depths of the GFC we were getting them at 50+% undervalue....When they go above 30% over value I usually sell at least half my holding and reinvest in an undervalue stock, unless its a stock I feel is overvalue because its in a particularly strong position, sector or other great reason....

The reason I sailed through the GFC is because my strategy is totally based on stocks paying good dividends and then I chose when and where I reinvvest them. During the GFC whilst my on paper wealth declined similarly to most, my purchasing power from my increasing dividend stream significantly improved relative to the shares I was purchasing and I was able to buy 3 times the volume of shares at double to tripple the yield. so it effectively accllerated my plan by about 6-7 years. And the best part of this bit is as each company increase its yield by 10-20% thats 30-60% more increase then if I was buying the very same shares today.

Id like to hear what you think, but hey hear I am post GFC and whilst most people are panicing about a possible double dip.....I hope it doesnt happen for other peoples sake but if it does, my strategy will actually benefit significantly....

To me its a fool proof strategy and as I find international shares worth buying obviously the safety of my strategy will improve.... when I have enough dividend income to retire on I will then increase safety by grabbing some physical gold, silver, coper , some fixed interest and some bonds. But until then its all about dividends and growing yields.
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