# Timing of investing into a managed fund



## DionM (25 January 2008)

As part of a good, balanced investment portfolio I've been wanting to invest into a managed fund.

However, how do funds distribute profits (and losses, given the current market) around their holders.

For example, we've just off the back of a some major down times on the market.  If I were to put my $10,000 into a managed fund today - and say the market goes up again - would my balance go up - or would there be some sort of delay or indeed a distribution of the losses incurred recently, which would affect my balance?

I guess what I'm trying to ask is - like picking the bottom of share prices, is there an 'art' of picking bottoms of when to buy into a managed fund?  Does all the money just go into a big bucket, or is each individual contribution marked against it's own bit of "earnings" (for want of a better word).


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## ROE (25 January 2008)

Dont try to time the market but time in the market is what it counts 

Be not afraid of going slowly, be afraid of standing still


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## Nyden (25 January 2008)

DionM said:


> As part of a good, balanced investment portfolio I've been wanting to invest into a managed fund.
> 
> However, how do funds distribute profits (and losses, given the current market) around their holders.
> 
> ...




I guess the best way to time the market would be to buy into a listed index fund, as opposed to a managed fund. 

STW - a stock you can buy on market for standard brokerage, is essentially this. It pays its distribution as dividends as per any normal company & It follows the ASX 200 I believe.

I'll personally be buying into this next week, it's the only market exposure I'm willing to gamble with at the moment. The way I see it, a major market crash like Tuesday, would only hurt me by 10%, as opposed to some of the heavier losses I took :


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## Julia (25 January 2008)

Dion, you probably need to ask the question of the Fund in which you are considering investing.  They will probably take some days to process your holding so trying to time it would seem  pretty difficult.

It's some years since I had managed funds, but they work by allocating each investor a given number of units depending on the $ invested.  So if you have,say, 100 units which today were worth $1 per unit, and then the market dropped tomorrow 10% then your unit would be worth 90c.

Have you considered investing directly rather than paying the fees involved in managed funds?


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## roland (25 January 2008)

I have some capitol invested in Colonial First State, there are quite a few funds to choose from. It's really not unlike the stock market and you can go online and choose to add extra capitol on dips.

Personally I feel that adding a managed fund adds to a balanced portfolio


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## Nyden (25 January 2008)

roland said:


> I have some capitol invested in Colonial First State, there are quite a few funds to choose from. It's really not unlike the stock market and you can go online and choose to add extra capitol on dips.
> 
> Personally I feel that adding a managed fund adds to a balanced portfolio




Yes, but there's fees there right? STW You can buy on market, it tracks the ASX, & no fees (auto taken out of distrubtions I believe)


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## roland (25 January 2008)

Nyden said:


> Yes, but there's fees there right? STW You can buy on market, it tracks the ASX, & no fees (auto taken out of distrubtions I believe)




Wow, Nyden you are everywhere 

The fees generally tend to be less than brokerage if you are a trader. Add to this that you are more unlikely to withdraw. The idea with a managed fund is long term, bit like a super fund - all dividends are rolled back in. 5 year returns are averaging in excess of 50% - try to get that from ING

Also, if a a market sector declines, it takes a couple of clicks to move from geared shares to real estate or something else


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## Nyden (25 January 2008)

roland said:


> Wow, Nyden you are everywhere
> 
> The fees generally tend to be less than brokerage if you are a trader. Add to this that you are more unlikely to withdraw. The idea with a managed fund is long term, bit like a super fund - all dividends are rolled back in. 5 year returns are averaging in excess of 50% - try to get that from ING
> 
> Also, if a a market sector declines, it takes a couple of clicks to move from geared shares to real estate or something else





Well, that Index fund can be long term as well. I'm sure with the ASX doubling over the past few years, the returns are pretty strong there too.

I like the appeal of the freedom of it; should it be obvious that we're going to crash / correct, I can pull out / re-enter.

Yes, I am everywhere


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## roland (25 January 2008)

Nyden said:


> Well, that Index fund can be long term as well. I'm sure with the ASX doubling over the past few years, the returns are pretty strong there too.
> 
> I like the appeal of the freedom of it; should it be obvious that we're going to crash / correct, I can pull out / re-enter.
> 
> Yes, I am everywhere




I can pull the Colonial fund anytime I like, there are no restriction on entry and exit


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## Judd (26 January 2008)

Nyden said:


> STW - a stock you can buy on market for standard brokerage, is essentially this. It pays its distribution as dividends as per any normal company & It follows the ASX 200 I believe.




The only slight difference is, when I read the full details on the website, is that you have to include the distributions in the year they were earned and not received.  For example, if you receive a distribution on 2 July, the income has to be declared in your income tax for the previous tax year.  STW has low internal management costs of 0.29% of the assets.  There are also some funds like Vanguard, which have a variety of index funds both Australian or international.  And there are the recent iShares listed on the ASX.

Two website.  Just for info and not promoting as it's your choice

http://www.vanguard.com.au/

http://www.asx.com.au/investor/lmi/types/etfs/index.htm

It is now certainly possible to mix and match.  Apart from international index funds, wife and I no longer have any mainstream unlisted funds because they charge high fees, most turn out to be quasi index trackers and while some may be the rooster in one year, the next they turn out to be the feather duster.


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## Rogue Trading (26 January 2008)

Nyden,
Can you give me more information on STW please? Does one buy shares in STW or units? When does one receive dividends? How long has STW been listed? Are STW geared in any way? So there is never any margin call?
What is the min. parcel size on STW?
STW sounds like a good way to trade the index on the long side at a reasonable price. This something I was trying to find out on a different thread so you have helped me a lot.
Thank you for your help.
Regards.
Rogue Trading


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## Judd (26 January 2008)

Rogue Trading said:


> Nyden,
> Can you give me more information on STW please? Does one buy shares in STW or units? When does one receive dividends? How long has STW been listed? Are STW geared in any way? So there is never any margin call?
> What is the min. parcel size on STW?
> STW sounds like a good way to trade the index on the long side at a reasonable price. This something I was trying to find out on a different thread so you have helped me a lot.
> ...




RT, go to the ASX web site listed in previous post and follow the links.  Heaps better info there and you can read at your leisure.

But as well here is link for the Company Search in respect of STW on the ASX

http://www.asx.com.au/asx/research/...panyName=&principalActivity=&industryGroup=NO


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## Rogue Trading (26 January 2008)

Judd,
Thanks very much for the link.
Regards.
Rogue Trading


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## Nyden (26 January 2008)

Rogue Trading said:


> Judd,
> Thanks very much for the link.
> Regards.
> Rogue Trading




Hello there Rogue (Hope you're not the rogue who caused our little melt down! I jest : )

Did the ASX site answer all of your questions? If not, please feel free to ask here as to any that remain unanswered.


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## Rogue Trading (26 January 2008)

Hi Nyden,
I am really a Rogue Traders fan hence the nickname. But it doesn't hurt to get people thinking. Your link to the asx was very helpful thank you.
Regards.
Rogue Trading


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## krisbarry (26 January 2008)

DionM said:


> As part of a good, balanced investment portfolio I've been wanting to invest into a managed fund.
> 
> However, how do funds distribute profits (and losses, given the current market) around their holders.
> 
> ...




Timing is everything, some mananged funds run 1 day behind the market and others up to 3 days.  So given the crash we have just had it would be wise to get your money in straight away.  Lets say the fund is $1 a share, and we get a 20% correction, then the funds share price ends up being 0.80 cents, so effectively you are buying more units per every dollar at 80 cents, than you are a $1.

So again if you placed your $10,000 into the market this week and over the next 2 months the market goes up 10%, you will have approx $11,000 minus fees


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## krisbarry (26 January 2008)

Below is an example of the fund I am in and what has happened to the share price over the past few weeks.  Buying in on the 22/1/08 would have been nice. 






**Date  ****Entry  ****Exit

24/01/2008  0.8500  0.8432 
23/01/2008  0.8137  0.8070 
22/01/2008  0.7598  0.7532 
21/01/2008  0.8517  0.8448 
18/01/2008  0.8920  0.8850 
17/01/2008  0.9029  0.8958 
16/01/2008  0.9029  0.8963 
15/01/2008  0.9395  0.9323 
14/01/2008  0.9470  0.9397 
11/01/2008  0.9476  0.9403 
10/01/2008  0.9677  0.9603 
09/01/2008  0.9703  0.9629 
08/01/2008  0.9854  0.9779 
07/01/2008  0.9948  0.9873 
04/01/2008  1.0275  1.0202 
03/01/2008  1.0252  1.0179 
02/01/2008  1.0418  1.0344 
31/12/2007  1.0400  1.0326 
28/12/2007  1.0414  1.0340 
27/12/2007  1.0454  1.0379 
24/12/2007  1.0394  1.0320 
21/12/2007  1.0209  1.0135 
20/12/2007  1.0034  0.9960 
19/12/2007  1.0120  1.0045


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## Nyden (26 January 2008)

Judd said:


> The only slight difference is, when I read the full details on the website, is that you have to include the distributions in the year they were earned and not received.  For example, if you receive a distribution on 2 July, the income has to be declared in your income tax for the previous tax year.  STW has low internal management costs of 0.29% of the assets.  There are also some funds like Vanguard, which have a variety of index funds both Australian or international.  And there are the recent iShares listed on the ASX.
> 
> Two website.  Just for info and not promoting as it's your choice
> 
> ...




Judd, I actually have a question here with regards to STW! 

Do you know if their distributions count as income tax as per normal dividends, or do they count towards CGT (ie able to be offset against capital losses), as they're basically Fund Distributions?

Just not sure on the stance here, with regards to any EFT I guess.


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## Judd (26 January 2008)

Nyden said:


> Do you know if their distributions count as income tax as per normal dividends, or do they count towards CGT (ie able to be offset against capital losses), as they're basically Fund Distributions?




All I really know is what I read on their website (link below)

http://www.streettracks.com.au/

where I noticed that in a section in "What's new" is a reference to a 2007 Tax Guide.  Opening it up, it reads as if the STW distribution is exactly the same as if the fund were an unlisted one.

Regards


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## Nyden (26 January 2008)

Judd said:


> All I really know is what I read on their website (link below)
> 
> http://www.streettracks.com.au/
> 
> ...




Hmmm. Still trying to determine as to whether or not this applies;
http://www.ato.gov.au/individuals/content.asp?doc=/content/00096850.htm&page=44&H44


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## Judd (27 January 2008)

Nyden said:


> Hmmm. Still trying to determine as to whether or not this applies;
> http://www.ato.gov.au/individuals/content.asp?doc=/content/00096850.htm&page=44&H44




I can only suggest that you download and read the Product Disclosure Statement and go to Part 10, which starts on page 38.  It refers to taxation of distributions.  Other than that perhaps a taxation specialist is the way to go.  Not my sphere of expertise (as I have none )


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## krisbarry (27 January 2008)

Nyden said:


> Judd, I actually have a question here with regards to STW!
> 
> Do you know if their distributions count as income tax as per normal dividends, or do they count towards CGT (ie able to be offset against capital losses), as they're basically Fund Distributions?
> 
> Just not sure on the stance here, with regards to any EFT I guess.




Distributions count as Capital Gains


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## Nyden (27 January 2008)

Stop_the_clock said:


> Distributions count as Capital Gains




You are sure of this STC?

If so, thank you very much.


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## IFocus (27 January 2008)

Timing can add to your return but doing nothing no return

Speaking in general terms buying into a successful fund in draw down is the best method as a rule for higher returns. There should be plenty of reading on the net about some of the longer term top hedge funds (that take positions in stocks and futures not leavaged products)in the US and the numbers continue to show when returns start to draw down  people pull there money out where as thats the time to put money in, generally a bit at a time in case the fund blows up this is for the US.

Similarly the same applies here look thought the funds that have a consistent higher  return in relation the the XJO over 5 years or more.

One consideration rather than STW is do some research on the stock AFI if I remember correctly they look to sort of mirror but out preform the index and have done so for some of years but please check that its been awhile since I looked at them.

If you are a true long term investor (think 10 to 20 years)this ongoing correction / bear market is the time to do this buying some on the way down some at the bottom some on the way up over maybe the next year or so is a strategy I have seen used by others to generate very good returns

Good luck, research, research and need I say research  is the key most people send more time planning there holidays than they do  buying stocks

Hope this helps

Focus


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## Judd (27 January 2008)

Nyden said:


> You are sure of this STC?
> 
> If so, thank you very much.




A broad statement by STC which is not entirely true.  A distribution from an unlisted managed fund or, apparently from STW, may consist of:

Franked amounts;
Franking Credits;
Unfranked amounts;
Discounted capital gains;
Non-concessional capital gains
Interest:
Tax deferred amounts.

These are listed on the end of year statements that managed funds send to holders of unit trusts.  I know because that is the sort of stuff we received when we held unlisted managed funds.

AFI as in the post above is a Listed Investment Company which provides dividends - as opposed to distributions - and LIC discounted capital gains.  These dividends are included in your tax return in the year when they are received unlike managed fund distributions which are included in the in your previous tax years return.

There are a number of these LICs, such as ARG, CHO, MLT, MIR, SYL, DUI, AUI, WHF, CIN which have been around for many a year.  These "older" ones are internally managed and most have an equivalent MER of way below 0.5%.  The newer ones, WAM, WIL and so on, are externally managed and have an MER of about 1% and some even have a performance fee.

(Disclaimer: We hold AFI and a number of the others and have for quite a while)

I've done this for someone else, but I'll do it again.  The links to annual reports for some of these older LICs

ARG

http://www.argoinvestments.com.au/results.php?id=422

AFI

http://www.afi.com.au/annual_report.asp

CHO

http://www.choiseul.com.au/?reports1

MLT

http://www.milton.com.au/?reports1

It may be worthwhile reading them (and their websites) to see what they are on about.

Regards and now off to sell groceries to the masses.  I wont say how much per hour I get for doing that as it is embarrassing.


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## Nyden (27 January 2008)

In truth, I don't know why funds like this aren't more popular? Especially with armatures.

No need to be sifting through announcements, no need to have any understandings of individual companies, or fundamentals of demand. 

Hmmm, surely all these funds don't track the ASX 200 though? Many would be managed. Shall have to look into them!


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## Julia (27 January 2008)

Judd said:


> Regards and now off to sell groceries to the masses.  I wont say how much per hour I get for doing that as it is embarrassing.




Don't be embarrassed, Judd.  You're working doing something necessary for our society to function.  Much better than sucking from the public purse.
Goodonya.


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## Judd (27 January 2008)

Julia said:


> Don't be embarrassed, Judd.  You're working doing something necessary for our society to function.  Much better than sucking from the public purse.
> Goodonya.




Ah, but Julia I did suck from the public purse.  I was a public servant for 30 years before I took a redundancy (well, in technical sense my 5 year contract was determined) in April 2007.  All for the better I think.



> In truth, I don't know why funds like this aren't more popular? Especially with armatures.




I think the are.  It seems if you go along to the annual general meetings or the information sessions about 400 to 700 people turn up.  However, if I went - at age 49 - it would bring the average age of the attendees down by some years.  Lot of older people there who have seen a number of fluctuations in the sharemarket and know the value of dividends.  Tell you honestly, I know one lady who is just on 80 years of age.  Her income from dividends (and this will scare the bejesus out of younger players in the market) is $1M per year.  And no, I am not after her so get your dirty minds out of the gutter.  I just hope she lives to 120 and spends all her money.


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## Nyden (27 January 2008)

Judd said:


> Ah, but Julia I did suck from the public purse.  I was a public servant for 30 years before I took a redundancy (well, in technical sense my 5 year contract was determined) in April 2007.  All for the better I think.
> 
> 
> 
> I think the are.  It seems if you go along to the annual general meetings or the information sessions about 400 to 700 people turn up.  However, if I went - at age 49 - it would bring the average age of the attendees down by some years.  Lot of older people there who have seen a number of fluctuations in the sharemarket and know the value of dividends.  Tell you honestly, I know one lady who is just on 80 years of age.  Her income from dividends (and this will scare the bejesus out of younger players in the market) is $1M per year.  And no, I am not after her so get your dirty minds out of the gutter.  I just hope she lives to 120 and spends all her money.





Judd, question on AFI. Do they simply deduct fees automatically from the dividends, the same as STW? 

AFI is a managed fund, isn't it? I must say, I am quite impressed with the low fees there. Doesn't seem to follow the ASX200, but rather 20-30 stocks?

& Finally; AFI pay dividends, don't they? As in, not distributions?

& Mate, selling groceries sounds like a lovely stress free job (correct me though here! ), I'd love to be doing something like that.


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## Judd (27 January 2008)

Nyden said:


> Judd, question on AFI. Do they simply deduct fees automatically from the dividends, the same as STW?
> 
> AFI is a managed fund, isn't it? I must say, I am quite impressed with the low fees there. Doesn't seem to follow the ASX200, but rather 20-30 stocks?
> 
> ...




OK, first I am not an expert, a tax specialist or any other form of person who can provide financial advice.  Let me make that very clear and I would also say that, after blowing up a margin account last year and costing my family heaps, I am the last person on the face of this earth you would ask "And what do you think about the share market?"

AFI and others like it are managed funds in my view.  But not as usually a managed fund is perceived.  They are actually established companies listed on the ASX in just the same way as BHP.  They are required to abide by ASX listing rules and various legislation which are applicable to companies.

The difference is they they invest in other companies which are also listed on the ASX.

Directors are paid fees, they pay brokerage and all that sort of crap.  This is expensed in the profit and loss account.  That pay corporate tax.  All the same as, say IAG, RIO, CAB, you name it.

They rarely sell. In fact it is estimated that AFI has some $1billion in unrealised capital gains on its books.  They just buy and sit.  And sit.  And sit.

When they sell, it is sometimes a bit more than "adjusting" the books.  In 2007 AFI had Centro as part of its portfolio valued at $27M.  Had it for over 5 or more years.  Had not added any shares in that time.  By December 2007 it had got rid of the lot for $18.7M.  Seems obvious to me they knew what may be bad was going rotten and they dumpt the lot as fast as they could.  And before it went off a cliff.  Same with TPI and Alinta (means to me they did noyt like the B&B takeover)

Sorry for the long-winded stuff.

As for dividends, yes they pay those the same as any other company (not EFTs) listed on the ASX.

Finally, selling groceries is not too bad.  I just do it and go home.  The real bitch is trying to console very young girls who have received a foul diatribe from people who should know better.  I help women unload and pack groceries when they are pushing a pram around while carrying a young one.  It is the decent thing to do.


BUT BUT, elderly foul mouthed cretins who abuse the young lasses and lads who work with me.............I just wish to kick their walking frames out from underneath them.  They are trash.


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## Nyden (27 January 2008)

Judd said:


> OK, first I am not an expert, a tax specialist or any other form of person who can provide financial advice.  Let me make that very clear and I would also say that, after blowing up a margin account last year and costing my family heaps, I am the last person on the face of this earth you would ask "And what do you think about the share market?"
> 
> AFI and others like it are managed funds in my view.  But not as usually a managed fund is perceived.  They are actually established companies listed on the ASX in just the same way as BHP.  They are required to abide by ASX listing rules and various legislation which are applicable to companies.
> 
> ...




Heh, don't worry mate - wasn't asking for advice in any form  Just looking for facts that I can't seem to find in the FAQ!

So, am I to take it that yes - fees are automatically taken out of dividends? Not that you ever need to send them a cheque? :


Wow, I'm so sorry to hear that Judd about your unfortunate experience with margin lending. Surely this was with individual stocks though? Funds generally don't experience such fluctuations?

It certainly sounds like you're at least an honorable grocer! Helping to make a mother's day a little easier is in it's own a fulfilling career 


Once again, thank you for all the current information.


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## Judd (27 January 2008)

Nyden said:


> So, am I to take it that yes - fees are automatically taken out of dividends? Not that you ever need to send them a cheque? :




Cool.  Fees are expensed in the P&L statement (or whatever it is called today) before dividends are declared.  Dividends are after ALL expenses including directors fees, blah, blah have been take out.

And I am very kind to small animals and dumb children.


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