Author: Moin Zaman

March 28, 2024

How to register for dividend payments or reinvestment plans with your company shares?

Some companies pay a percentage of their profits as dividends into a bank account you nominate.

Another option some companies offer is for your dividends to be allocated to you as additional shares in the company.

For long term value investors, both are great options. They enable the compounding effect in growing your wealth.

Read on to see the steps to do the same.

Step 1 – Look up the company share registry

You can do this by looking at the welcome letter you would’ve received as a shareholder. The letter will have your SRN/HIN Number and also the name and website of the registry.

A registry is a 3rd party service used by the company in which you own shares, to manage shareholders holdings, personal details, communication preferences and dividend payments / reinvestment plans.

See example below:

Sample welcome letter to shareholders with registry details

Step 2 – Create an account with the registry

There will be a register or sign up section on the registry website for investors. Go ahead and create an account. You will need your SRN/HIN number, and any one of your company holding details (ASX Code or company name) to complete your account creation.

Registering for an account with registry

Step 3 – Update your personal information and bank account details

Update these details and make sure they are correct.

Tip: You can also elect to receive all future communications by email instead of post.

Step 4 – Enrol in Dividend Reinvestment Plan

Check each of your holdings with the registry to see if there is a dividend reinvestment plan option.

The most common registries for reference are:

  1. Computershare – computershare.com.au
  2. Link Market Services – linkmarketservices.com.au
  3. Boardroom – boardroomlimited.com.au
  4. Automic – automic.com.au

3 reasons why we beat short term trading and index funds on the share market

If anyone is looking to try out the share market for a little while or start short term trading in the stock market this article is especially for you. 

Long term investing is the approach we grew up watching our fathers take. We learnt how to invest by osmosis. 

Fahd traded for 6 months during his university days and decided it wasn’t for him, before returning to it when he changed careers to investment banking. Why? He now understood that patience was required. 6 months wasn’t enough.

Christmas Eve Waiting GIF

For the last 15 years, we have taken a long term approach to invest money in all facets of our lives including the stock market. 

This strategy is also called ‘buy and hold’, where you buy stocks, index funds or REITs and hold them for an indefinite amount of time.

REIT – Real Estate Investment Trust; a company that owns, operates, or finances income producing properties.

In this article, we highlight why the long term investing approach is always the safest and best way to invest in the market. 

Reason 1 – Compounding

The difference between trading and investing is that trading is typically based on knee jerk reactions whereas investing allows your money the time to make a profit and accumulate wealth over time. 

This is where you can see the 8th wonder of the world take effect.

8th wonder of the world?

E = mc2 pales in comparison to compounding.

einstein GIF

“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

Albert Einstein

Interest to us isn’t the modern concept of interest. Rather it’s the ‘interest’ in the company in the form of our capital invested in it.

The reason this strategy will never be beaten by traders is that long term investing allows your capital to accumulate and gain profits over time. 

Over time the capital you invested is going to earn compounding returns (a.k.a. compounding interests) and the money experiences exponential and accumulative growth.

That right there is the key reason we beat short term trading. Compounding is really only possible with time.

Over time the capital you invested is going to earn compounding returns (a.k.a. compounding interests) and the money experiences exponential and accumulative growth in comparison to short term trades. Or something like that.

Reason 2 – Fees and taxes

If you’re a long term trader you will only ever pay one fee (brokerage or transaction cost) for the life of your purchase if you buy and forget like us. 

When I say forget, we have absolute confidence in the long term future of every company we own shares in and therefore we are mostly immune to the herd mindset the market is rife with. 

You also pay fewer taxes in Australia as a long term investor. The Capital Gains Tax (CGT) only applies to capital gains on shares or units when a CGT event happens, such as when you sell them (unless you acquired them before CGT started on 20 September 1985).

However, if you’re a trader, you have to pay your broker fees every time you buy and sell shares.  Also if you’re selling your shares to make a profit, you pay more taxes on that profit as a short term trader.

These fees and charges that you pay is money that could otherwise have been accumulating a return of 5-12% every year. 

These fees and taxes equal money that could otherwise have been accumulating at a rate of 5-12% or more and compounding. Money that you pay in fees and taxes is money that you cannot put to work for you.

If you’re a trader, you are also extremely vulnerable to short term corrections and recessions, especially if you are are new to investing. 

However, if you apply a buy and hold strategy, short term turbulence doesn’t really matter because you can hold the vision you had when you invested in the company. 

When a company we own shares in swings downward, and all our analysis and research still aligns with a bright future, we buy more shares of that company at a cheaper price. We cover this in more detail in our secret to buying at the bottom article.

This long term mindset allows us to sleep well at night and ignore the noise that is generated by the market.

Reason 3 – What history tells us

As a rule of thumb if you hold your money over ten years in an index fund or blue-chip stock, historically there is almost ZERO chance of you losing money. This is true, despite share market crashes, financial crises and world events.

From 1988 (that’s when Fahd was born) to 2020 the S&P/ASX 200 Index has risen from 1200 points to 5755 points. 

That’s what happened over 32 years. Fahd and I have only been investing for less than half that time, 15 years. 

Over 3 decades, the world has witnessed over 8 financial crises.

That’s 1 every 4 years on average.

Despite the crises, in the melting pot of human ingenuity, hope, greed and fear the S&P/ASX 200 index continued to rise from 1251 points to 5755 points. 

The reason the current COVID crisis is affecting us is because we are smack bang in the middle of it and a lot of us have transitioned from being dependents and having food put on our tables to being the breadwinners ourselves and providing food for our dependents.

Below is a list of the most prominent crises that we remember and how the S&P/ASX 200 was affected.

 1994 - Global Bond Crisis2008 - Global Financial Crisis2011 - 9/112015 - Chinese Market CrashCOVID 19 (2020)
High23116754349058917017
Low19203582280048815077
Loss+16.92%-46.96%-19.77%-17.14%-27.65%

What we can observe from the above table, is that even though the market has experienced some crashes in the long term, the market always corrects itself and we establish new highs and new lows.

Let us take for example a popular ETF (ASX: VAS), I am only using them as an example as I would not invest in them due to them not passing our framework for ethical screening.

ETFs are defined as exchange-traded funds, they are traded on major stock exchanges, like the New York Stock Exchange, Nasdaq and ASX. You can buy and sell shares in an ETF through your brokerage account. An ETF is a collection of tens, hundreds, or sometimes thousands of stocks and bonds in a single fund. It’s targeted for people who want less risk and don’t want to spend time researching stocks to select.

Let us also take a company we have researched, Medical Developments International Limited, ASX:MVP. 

Story time. It’s 2010. We have two investors, Amina and Zara. Both have a $1000 to invest and were told that once invested, they couldn’t touch it again for 10 years.

Amina is fresh out of high school and chose to put the $1000 in ASX:VAS (Vanguard ETF) after learning that an index is less risk and she doesn’t need to do any further research.

Zara is a single mother who did her research through various sources and put her $1000 in ASX: MVP (Medical Developments International).

They purchase the shares through NABtrade and pay a broker transaction fee of $14.95 on the 31st May 2010.

Fast forward. Current day 2020. Actual prices for ASX:VAS and ASX:MVP used in the table below.

 Amina (VAS)Zara (MVP)
Purchase price$57.11$0.235
Units purchased174,191
Total Cost$1,000$1,000
Price 10 years later$73.22$7.88
Value 10 years later$1,244.77$33,025.08
Total Profit24.47%3,202.51%

Zara made a profit of 3,200 %. That’s 33 times her initial investment!

paid pay day GIF

If an example of 3,200% return doesn’t convince you of the benefits of long term value investing, nothing will. 

Granted, not every company will perform like the one used here. It takes experience, skill and painstaking research to find gems such as this. 

Our current portfolio has companies that have already done 100% to 300% returns in a few months.

At Tabarruk, we never invest in Index Funds or ETFs. We aim to make sure our money is working as hard as Zara made hers work. Money compounding in quality companies that we pick across sectors will always beat the net averaging out effect in ETFs or index funds.

Every stock we purchase has to pass through the Tabarruk Framework and Screening™ process.

It is extremely important to know that in the last 10 years, the market has come out of a recession, and also undergone corrections (small dips). 

Today we’re smack bang in the middle of a recession due to #covid.

But quality always prevails and corrects over time, every time. 

If Australia were to go through a deep depression, we’re all going to be just fine if we hold quality company shares.

The question to ask yourself is, what quality of your stocks would you rather own?

A portfolio is only made up of two types of stocks:

  1. Value
  2. Junk

I could also compare the above scenario of Zara and Amina by adding the short term day trader, Tarek.

Let’s say Tarek trades every other day for 10 years.

Half of his transactions are buys and the other half are sells.

That’s 255 working days for 5 years = 1,275 days

2 trades a day is 1,275 x 2 = 2,550 trades

Let’s use SelfWealth as the broker, where transaction fees are $10 per trade.

2,550 x $10 = $ 25,000 in fees.

Excuse Me Reaction GIF by Mashable

Transaction fees alone! The cost of being a short term trader.

Even if we say Tarek traded half as often, 2-3 times a week, you’re looking at $10,000 – $12,000 in fees.

You can also safely assume that Tarek would have sold plenty of his shares within 12 months of owning them. Capital gains tax will eat a chunk of any profits.

I’m not going to bother with guesstimating what Tarek would actually pocket after all expenses over 10 years.

I will tell you one thing. The time needed to watch the market during open times, 10am – 4pm means he’s not doing much else, let alone a day job.

Also consider adding in the following:

  • Company selection
  • Volatility of market
  • Initial investment of $1000
  • Fear, greed, probability of success
  • Time to research number of different companies on any given day

How many companies and transactions do you think Tarek would have got right? Even with some MVP’s sprinkled in there, Tarek isn’t buying and holding shares for 10 years hence no compounding of profits.

The stress, the control of emotions and self-awareness of one’s own psychology needed to be consistently successful, is something very few could learn to be masters at.

Even then, I seriously doubt any of them would do a profit of 3,200% over 10 years.

Some of the best short term traders we know, have a win rate (the number of times they make any profit) is just over 50%. Even with a win rate of 50-55%, smaller wins may not make up for a few big losses. Breaking even might be an outside chance.

So, if you’re going to start investing, do it in a way that makes your gains accumulate. 

Bonus Wins

If your company offers you shares for your dividends, sign up for it by checking if the company has a dividend reinvestment plan. If you are wondering how to do this, feel free to contact us and we can help you out.

A dividend is the distribution of a portion of the company’s earnings, decided and managed by the company’s board of directors, and paid to a class of its shareholders. Common shareholders of dividend-paying companies are typically eligible as long as they own the stock by the ex-dividend date. Dividends may be paid out as cash or in the form of additional stock.

Accumulative and exponential growth is the best thing about investing. It’s not about just a fixed flat 5-7% every year but the accumulation effect because it grows at a certain percentage. The more money you have (in the form of returns) the more money it grows by every year. 

If I had the option of leaving you with only one sentence to remember out of this whole article it would be the following:

“You can’t time the market, but you can spend time in the market.”

The longer the time your money spends in the market, the bigger the potential scale of your return. 

I get that it is sometimes hard to buy and hold on, to weather turbulence. You may get frustrated, nervous or scared. 

By selecting quality investments and understanding that holding with patience and conviction is where the real growth occurs, you will give yourself the platform to have life-changing success.

The successful investors often do the opposite of what the ‘herd’ does, they let their money work over long periods and the accumulation and dividends will more or less guarantee growth.

5 strategies that doubled our money in 2 months on the ASX share market in the COVID-19 crash

$45k now worth over $100k

Fahd and I put a big chunk of our savings, about $45,000 AUD, into the share market in March and April. Today it’s doubled and is still growing! I share what we did and exactly how the last 2 and half months unfolded.

The ongoing financial crisis had markets hit bottom on the 23rd March 2020, and is proving to be worse than the global financial crisis in 2008 and perhaps even the 1920s great depression. These crashes are a once-or-twice in a lifetime opportunity to multiply wealth.

How it all started

Fahd and I met as kids 25 years ago in the Middle East. Our fathers worked together in an Islamic bank. We reconnected again in Australia while studying and found common interests in cricket and Islamic investing. Fahd had followed his dad by becoming a savvy investment analyst. I kept investing on the side, as my father had taught me, but forged a successful career in IT.

Our passion for ethical investing, often had us answering questions to help friends and family get similar results. This led us to launch Tabarruk, where anyone can learn how to grow wealth. We focus on buying sharia-compliant shares in Australian companies listed on the ASX share market.

The COVID-19 crash

Fahd had sold his entire portfolio of shares in January 2020 for a good profit, partly because he felt the market was overvalued and partly out of instinct that something didn’t feel right. I had my money tied up elsewhere and was waiting to get back into the share market.

When COVID-19 started, fear crept into the economy and panic selling ensued on global share markets including the ASX. Fahd and I were calm and objective, applying everything we had learnt over the years. Most of our purchases ended up being on the 23rd of March, the absolute bottom so far. We didn’t predict it. We were simply prepared for the market to go up or down, and had a clear strategy to execute in either scenario.

The 5 strategies we used during the crash

The infographic below shows the Australian sharemarket weighted index chart, pinpoints when we bought shares using our 5 key strategies for investing:

Our key strategy as shown above is the following 5 points:

  1. Buying quality, long term, ethical company shares
  2. Buying the same company shares if they dropped in price
  3. In-depth analysis of company fundamentals and financial reports
  4. Tracking macro-economic indicators like unemployment etc.
  5. Studying the market sentiment

Our home page has a summarised table showing the totals of our folio live. Members can see the entire folio live with each company stock with our analysis, purchase dates and prices.

The proof for those who need to see it

We’ve had people ask for screenshots. We’re happy to share, as we’re all about transparency. On request, we can also provide CHESS / HIN statements.

Here is my online broker screenshot as of 23rd May 2020.

And here is Fahd’s screenshot from his broker account as of 23rd May 2020.

Whats next? Is it too late? Absolutely Not!

The next 3-6 month period is an even more important phase of this crash. It’s a rare opportunity to invest in the best ethical companies in the right sectors on the ASX.

The 5 key strategies we used above continue to apply. Some additional criteria may be needed, depending on the change in circumstances or the specific companies we analyse.

Of course, you would have to get set up by knowing where and how you can start buying shares in Australia on the ASX sharemarket. With our referral link, you can get your first 5 share trades for free.

On tabarr.uk, subscribers can access:

Anyone can learn to do what we did. We started with as little as $500 when we began investing, and you can too!

How? Plan long term and apply our key and advanced strategies. Learn from our articles and updates as we share our ASX stock purchases.

How & where do I start buying shares in Australia on the ASX sharemarket?

To buy shares, you need to use an online broker. Most banks have an online broker product. We compare the most used products and list some information about each of them below.


SelfWealth

✅   #2 cheapest fee per trade at $9.50

✅   1-2 day wait for transfers into and out of SelfWealth

✅   Live chat support

❌   Australian markets only

❌   Limited functionality in mobile app

If you choose SelfWealth as your broker, join using our referral button below and you save $50 by getting 5 trades for free. If you refer friends and family, everyone gets another 5 trades for free.


CommSec

✅   Detailed market data and interviews

✅   Basic research reports

✅   Decent mobile app

❌   Limited global markets

❌   Customer care phone support


ANZ Share Investing / St. George Direct Shares

✅   Same underlying platform and system branded for both banks

✅   Advanced Research and charting tools

✅   Customer care phone support and Live Chat

❌   Additional cost for live price data (Not a problem if you’re happy to hit refresh)

❌   Clunky mobile app


NABTrade

✅   Free live price data

✅   Advanced Research and Charting tools

✅   All international markets

✅   Customer care phone support

❌   Clunky mobile app


IG Trading

❌   #1 cheapest fee per trade at $6 (but be aware)

❌   Minimal deposit required

❌   Technically you don’t own the shares as they are not CHESS sponsored, you are the beneficiaries of the shares.

❌   Because of the above, you can’t take part in dividend reinvestment plans


What do we use?

We use what’s easiest, which for us was the online broker linked to the bank we were already with, with the advantage of instant transfers in and out of the broker account.

Fahd uses NABTrade.

Moin uses SelfWealth and St. George’s DirectShares.

If your bank doesn’t have an online broker platform, you can choose any of the above options. You’ll need to transfer money from your bank account into the your broker account.


5 online brokers compared

Online broker cost comparison table

Thinking like an investor Series: Part 3 – Incentive and optimal choice

Hopefully over the course of the last few articles, Part 1 and Part 2, I have helped you better understand the mindset of an investor. So far, we have discussed about the 5 Checklist principles and the three core fundamentals.

In today’s article I am going to explore the issues of incentives and optimal choice by conducting a case study on the world’s commercial fisheries in order to understand this concept.

The reason we are conducting a case study of the world’s commercial fisheries is to analyse and dissect an industry which is on the verge of collapse, to sharpen our critical analysis. The first question is to ask why is the industry on the verge of collapse? Over fishing is a real dilemma the industry is facing with the depleting populations of fish and the rate of catch to feed the market demand has become unsustainable.

The real losers in this scenario are the commercial fishers, as they are prisoners to their reality. I am saying this because what makes sense for each of them to do individually, is taking them all closer the precipice of disaster collectively. Let’s say the fishers around the globe worldwide were to band together and collectively agree to catch less, they would benefit from the increase in demand for the goods.

However, this is highly unlikely as large agreements like that are almost impossible to negotiate and invariably break down. As an investor lets ask ourselves a question, its not like the fishers don’t understand their reality. So what incentive is driving their actions?

They are probably thinking “I’m best off taking as much as I can. If no one else restricts their fishing, I’m still best off taking all that I can.” As a result, the fish population continues to decrease and the fishing seasons get shorter. Commercial businesses and fishers are pushed to the extreme as they try to gain advantages over one another by buying bigger and faster boats and more expensive equipment; and they go out regardless of weather conditions, making fishing increasingly dangerous.

An investor will see that this is not sustainable as the last thing we want to see is a mutually self-destructive prophecy unfold. Iceland put into practise a very basic solution. They changed individual incentives, which in turn changed their behaviour, which lead to changes in social outcomes. The country redesigned and put incentives in place so that the behaviour of individual fishers would become more consistent with the preservation of fisheries, rather than their eventual destruction. Each fishery is assigned a total allowable catch for the year, and each boat is then assigned an individual tradable quota.

The reason I wanted to discuss this case study was because you and I as an investor have to understand the rules and right surrounding businesses and the incentives, they and their competitors face. It will help us understand, predict they influencing choices and behaviour that governs their actions.

Top

Someone from Sydney (AU) bought a yearly subscription 13 days ago