My Next Decision...

I have some spare cash available at the moment and have been thinking quite a lot about what to do with it. On the one hand, I think that I have enough in ETFs and Managed Funds. But if I brought some VT or SPY (Total World/US 500) through Interactive Brokers, Hatch or Sharesies, it would create a good foundation for which to build a lifetime index holding, from which I can use as income. Although I intend to hold them for a very long period, the problem with Smartshares ETFs is that the cheapest way to sell them is through ASB Securities, who will charge you a minimum of $30 as brokerage. Selling through Hatch for example, is only $3, so it is a much more efficient way of drawing income.

On the other hand, I like the idea of adding too one of my existing individual stock holdings or even adding a new one. One I am interested in, is Auckland International Airport (AIA). They own the 1500-hectare Auckland Airport site, along with a 25% share in Queenstown Airport. Both of which I have flown too this year. They have a PE of 156 though, which is extraordinarily high, especially with only a 13% revenue growth. Another possibility is Contact Energy (CEN). My Manawa Energy shareholding will transfer into 0.56 shares and $1.20 in cash on the 9th of July. I have discussed before that I believe Contact Energy is a superior company to Manawa, although the capital gains in it will never be great. Fonterra on the other hand, do offer the possibility of good capital gains. They only started offering shares to the public 2 years ago and yet have almost doubled in that time. Of course, past performance does not guarantee future success. But considering that their dividend yield is 10%, even if their share price doesn't move, it will take 10 years to double your investment.

If I brought a new shareholding, I would run the risk of being too diversified and be unable to keep tabs on the investments have I already have. Fonterra is enticing because of the high yield, and that my current FSF holding is already showing a 20% capital gain. Infratil have declined 10% from where I first brought into them. They have recently further increased their investment in CDC Data Centres, which means that they occupy 50% of their investment portfolio. A few months ago, their share price took a hit when it was revealed that Morrisons (the company that manages them) took in $430 million in fees. But the fact that many may not have been picked up on, is that a lot of this fee amount was the accumulation of 3 years of performance fees. So, in reality that fee figure was not a true reflection of the annual fees that Morrison charges Infratil. Nevertheless, I do personally think that there are too many Morrison employees. But the share price returns of 25% per annum since 1994 in Infratil, are proof that their investment structure works, and does beat the wider market in the long term.

I think I will be making a decision ultimately between adding to my investments, or opening an Interactive Brokers account and buying VT. In the Infratil case I would be averaging my buy price down, whereas with Fonterra I would be adding to a winning position. Whatever I do it will be crucial that I exercise patience. The market is at an all-time high right now, and I don't want to buy into something just prior to a market correction! The same goes with buying VT through Interactive Brokers. I think ultimately the latter option is the most sensible. It would help set me up for the future, and it is a safe investment. It is an unexciting investment to make, but Warren Buffett would say that the most boring option is often the best option.