No money down portfolio

Pincher

MisterMotivated wrote: »

If we're going to be dabbling with shares now, I'd like to make another suggestion.

Sell the spare £1 million house your parents gifted you and buy 950,000 shares in Purple Bricks on 1 December 2016 for 104p per share at a total cost of around £993,000 (using X-O.co.uk or similar to keep fees down).

Sell 390,000 of them on 6 March for 355p per share for a total of around £1,000,000 after CGT. Spend the £7,000 on booze and women (or men). Now, with no money down, you have 560,000 Purple Bricks shares, currently worth over £1.6 million :T

And pay 20% CGT!

I paid £113k in 28% property CGT, two years ago.
I'm surprised I didn't drive a car into Whitehall, and try to hack HMRC to pieces.

On a gain of £2,384,500 = ( 355p - 104p ) x 950,000
you are looking at £476,900 for 20% CGT.

Did I forget to mention, I really hate giving money to HMRC?
My schemes and plots usually minimise taxes as much possible,
which was why mortgage interest tax relief made me so happy.
Gone are the golden age of BTL. Sigh.

elephantrosie

Pincher wrote: »

Since we seem to be on a down trend for share prices, there is a rather neat trick to achieve the no money down portfolio, if you are brave, and lucky.

HSBC pays about 40p per share in dividend a year.

At £4.00, that is 10%.

So, you buy when it was £4.25, ( 9.4% ) on 14th June 2016.

On February 20th 2017, it was £7.11, which would be 5.6% if you bought at that price, but you are actually getting 9.4% because you bought at £4.25. Sell at £7.11 on 20th Feb, then buy back at £6.66 on 21st Feb. The 30 day matching rule matches the two trades, and you are deemed to have made a capital gain of 45p.
Well, stamp duty etc. means you probably made 44p. In fact, you might have to pay capital gains tax on the 45p gain as well, but let's just say that you made 45p by shorting HSBC.

So, you paid £4.25 for the share, and then you released 45p by this sleight of hand, so it's like you bought the share for £3.80.
40p dividend on £3.80 is 10.5%.

If I get lucky, and the share price keeps slipping, the sell/buys could release more and more money. With perfect play, using market corrections over time, it is possible to reduce the money invested down to zero. On paper, the shares are still recorded as having been bought at £4.25, but you are getting the dividend for no money down!

There is an added bonus, as you can use up the annual £11,300 CGT allowance as you go along, without reducing the shares you hold.

Even if it's only £3.00 instead of £4.00, you are getting 13.3% return.

For the people who can't resist fiddling with their bits, this is an alternative to going blind.

@pincher- thats so clever. but how much time do you spend on monitoring the share prices everyday?

grey_gym_sock

elephantrosie wrote: »

@pincher- thats so clever. but how much time do you spend on monitoring the share prices everyday?

i have to say: i don't think there's any real advantage in going in and out of the same share in the way that pincher describes. that's not really a criticism of him - i get the impression he's doing it partly for his own amusement

making use of your tax allowances (e.g. the annual CGT allowance) is sensible enough (when you can't fit all your stocks & shares investments in ISAs and pensions). but you can do that with more minimal activity - e.g. as "bed & ISA", which can combine realizing a gain (using CGT allowance) with using your ISA allowance; or sell something at the end of the tax year to use spare CGT allowance.

but otherwise, buying and selling too much incurs unnecessary costs (trading commission, stamp duty, bid-offer spread). you could get lucky or unlucky on the share price moves. but the costs are always against you.

Pincher

grey_gym_sock wrote: »

i get the impression he's doing it partly for his own amusement

making use of your tax allowances (e.g. the annual CGT allowance) is sensible enough (when you can't fit all your stocks & shares investments in ISAs and pensions). but you can do that with more minimal activity - e.g. as "bed & ISA",

All perfectly sensible.

Amusement, yes.
You could see it like trimming a Bonsai tree.
A zero money down portfolio is a perfection hard to achieve.

On the other hand, watching your Buy To Let capital gains building up over 20 years, and not able to make use of the annual CGT allowance, and then paying 28% on the gain, is truly upsetting. At a rough guess, 1997 to 2016 had £150k worth of CGT allowance. If I could have carried them forward, that's ~£40k of tax saved.

Using the 30 day rule to partially profit take a large gain over several years does makes sense. The money "released" can be put into ISAs, sure, but I already have money waiting to go into S&S ISA anyway.

If you accept that you want dividends, then getting the same 40p, but from shares that cost £3.80, instead of £4.00, makes sense. Alas, it's the same logic as sacking one employee, and expect the remaining nineteen to do the same amount of work.

Pincher

elephantrosie wrote: »

@pincher- thats so clever. but how much time do you spend on monitoring the share prices everyday?

Too much. But then how much time do people spend on MSE?

This particular trick needs a down trend any way, over a long time.
HSBA peaked on 20th February. I had to hold on for the 23rd February 2017 ex-dividend date, but it could have been a blip, so didn't sell right away. It's only by seeing the long decline over two months, and accepting the rise of sterling will further erode the share price that I decided to try this manoeuvre.

AnotherJoe

Pincher wrote: »

Since we seem to be on a down trend for share prices, there is a rather neat trick to achieve the no money down portfolio, if you are brave, and lucky.

I dont see shares being in a downtrend. I'm up roughly 4% this year across the board SIPPs and ISAs and that would have been higher but the Pound has been rising the last week or so which takes the edge off my mostly UK-lite portfolios.

You could of course buy selected shares on the basis those particular ones will go down but that doesn't seem like best cunning plan to me :P

Pincher

AnotherJoe wrote: »

You could of course buy selected shares on the basis those particular ones will go down but that doesn't seem like best cunning plan to me :P

The specific share is HSBA, sold on 5th April 2017, at £6.5624p.

Used the money to pick up the Lloyds dividend that went ex-dividend on 6th April. Had 30 days, so waited for Lloyds to drift back up a bit. Ended up buying and selling Lloyds without losing any money, so picked up the dividend for free.

However, this meant I missed the opportunity to buy back HSBA at £6.21 on 19th April. Could have bought on 28th April for ~£6.36p, but I'm hoping to use up more of the remaining basic rate band for 2016/17.

Deadline is 4th May on the 30 day rule, so I will have to buy back on Thursday to not pay the big capital gain tax in 2016/17. Overall, I am ahead on the Lloyds dividend, plus the £6.56 - £6.42 (today) difference.

It's not a sure thing, but neither are military manoeuvres.
In the end, you have to commit real troops, and actually engage in battle.

fairleads

Trading on the volatility in some of the more popular shares, HSBA and ADN for example, has been a nice little money spinner over the past three years but the volatility is less now than it has been, which may or may not be an omen.

Pincher

fairleads wrote: »

Trading on the volatility in some of the more popular shares, HSBA and ADN for example, has been a nice little money spinner over the past three years but the volatility is less now than it has been, which may or may not be an omen.

For volatility, I play Lloyds.

HSBA I actually held since June 2016. It's only because it started falling that I wanted to do something about it. Even at £7.11, 40p dividend is 5.6%.

Actually, now that the government stake is nearly gone, and Lloyds keep posting good profit news, I will be holding LLOY long term. 3.05p dividend on 69p is 4.4%. With upside potential, and getting 4.4% while you are waiting, it's a good bet.

Hmm, the Dark side is always present, nagging me to fiddle.
I started my Jedi training too late. May The Force help me to resist the urge of selling LLOY too soon.

phillw

Have you ever considered multiple identities who are officially resident in different countries and holding property in off short trust accounts?