Author Topic: RIO Share buy back  (Read 1247 times)

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Offline PeterM

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RIO Share buy back
« on: 21/09/2018, 10:21:06 AM »
Hi
The just announced RIO Share buy back has helped the RIO share price so that it has jumped from previous lows into a BUY signal.  But what is the impact on this buy back when this happens for the Sharewealth rules.   Should I still act on this or not - and if so why?

Also from what I have read on past buy backs it will comprise 2 parts - Capital and Dividend  (https://www.nabtrade.com.au/investor/insights/latest-news/news/2017/10/analysis_of_rio_tint ) - I still don't quite understand what will happen on the day of the buy back - if someone can briefly explain that too.

Offline Dave McCulloch

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Re: RIO Share buy back
« Reply #1 on: 21/09/2018, 03:12:48 PM »
Hi Peter,

Thanks for your question.

There are many many variables that come together in the market to determine "price" at any given time. The announcement of a share buy back is just one example.

SPA3 Investor is a mechanical rules based system. Having said that, there may be some times when you need to decide on other actions, for example what to do with a dividend if one is received or as in this case a share buy back is offered.

Your investment plan is the tool that you look to when posed with such decisions. Without knowing in advance what might come your way, it can be tricky to plan for so here's a couple of examples of actions that you might include to help with your decision making, and would therefore be written into your plan.

eg: When dividends are received, I choose to take them as cash and do not take part in dividend reinvestment plans (drp).

Eg: In my long term buy and hold (wait and win) core portfolio I choose to reinvest all dividends up until I the age of XX.

Eg: When share buy back are announced, I choose not to participate as I will not know in advance if the position will be open or closed.

In terms of what will happen to the price of RIO on the day of the buy back, it’s an unknown. There are so many variables that culminate in “price” on any given day.

By keeping things simple, it means that we are much less likely to be distracted by the huge variety of noise in the markets and that's also one of the benefits of creating a well thought out Investment Plan.

In Gary's Back to Basic series, he spends a full lesson on how to go about creating your Investment Plan and there are also some great examples of these in the SPA3 and SPA3 Investor short courses.


Regards,

David.