Defensive/Low Risk Stocks

[JTLP]

Hi everybody.

I am heading overseas in about 6 months time, and was hoping to build a small portfolio of low risk/defensive stocks (as my title suggests), for a more longer term hold than my current portfolio.

I am NOT asking for financial/investment advice, I just want people to throw in some low risk stocks, with a bit of a reason why!

Thanks

 

[roland]

A reference I often use is to troll through a few of the Investment Fund Managers offerings. For example, I have some managed investments with Colonial First State (CFS).

CFS have funds covering all levels of risk/reward and you can review the fund profiles to see how each fund product is allocated. Hard to argue that a team of investment brokers wouldn't be as good as a guide than from other sources.

Hope that's a little helpful.

 

[Judd]

I'd just go for the low cost indexed funds either:

Exchange Traded Funds such as STW which tracks the ASX200
Exchange traded international index funds, eg IOO but note that they are unhedged
Vanguard International Indexed Fund Hedged

Or just throw the lot into an LIC such as AFI, ARG, TGG and then forget it until you come back

Alternatively sit in cash

Personally, I would not touch unlisted managed funds from the bigger players such as Colonial. They just churn the portfolio, take out a high management fee and leave you with capital gains to pay on the distributions. Their stated returns are also a bit suspect in my view.

In any event, it's all up to you.

 

[roland]

I'd just go for the low cost indexed funds either:

Exchange Traded Funds such as STW which tracks the ASX200
Exchange traded international index funds, eg IOO but note that they are unhedged
Vanguard International Indexed Fund Hedged

Or just throw the lot into an LIC such as AFI, ARG, TGG and then forget it until you come back

Alternatively sit in cash

Personally, I would not touch unlisted managed funds from the bigger players such as Colonial. They just churn the portfolio, take out a high management fee and leave you with capital gains to pay on the distributions. Their stated returns are also a bit suspect in my view.

In any event, it's all up to you.

Hi Judd,

Not that you specifically said that I was suggesting a Managed Fund - but I would just like to clear up that I said he could use thier choices as another place to grab some references.

More specifically on your comments regarding Colonial - you have me all worried now

Would you mind elaborating on why Colonial is not a good option. My wife and I both have managed accounts, are you suggesting that we haven't made a good choice here?

 

[Judd]

Sorry, roland. Did not intend to stir the possum. Colonial was just a name which sprung to mind.

My problem with these funds is that their returns are quoted on the basis that all distributions are reinvested. Ok, so what is the return if distributions were stripped out of the equation. I suspect it would not be all that flash.

I would like to see an exercise where someone, say seven or even ten years ago placed funds with a fund manager, took out the distributions as income, to see exactly by what amount the fund manager was able to grow that original capital.

Might do that when I get some time.

 

[reece55]

Hi everybody.

I am heading overseas in about 6 months time, and was hoping to build a small portfolio of low risk/defensive stocks (as my title suggests), for a more longer term hold than my current portfolio.

I am NOT asking for financial/investment advice, I just want people to throw in some low risk stocks, with a bit of a reason why!

Thanks

In times of market volatility, it is the stocks with low betas that outperform.

Typically, these are the infrastructure stocks i.e. MIG, BBI, MCG, BBW, etc..... However, in light of widening credit spreads, you need to be careful to pick the quality from the s&%t.

Otherwise, how about an absolute return fund.... EBI is our largest listed entity and is looking fairly cheap IMO (DYOR), otherwise HPA (HFA Accelerator Plus) has been a very good performer NTA wise throughout the downturn, however it hasn't been reflected in it's share price...

Cheers

 

[hangseng]

Sorry, roland. Did not intend to stir the possum. Colonial was just a name which sprung to mind.

My problem with these funds is that their returns are quoted on the basis that all distributions are reinvested. Ok, so what is the return if distributions were stripped out of the equation. I suspect it would not be all that flash.

I would like to see an exercise where someone, say seven or even ten years ago placed funds with a fund manager, took out the distributions as income, to see exactly by what amount the fund manager was able to grow that original capital.

Might do that when I get some time.

I agree Judd.
I selected CFS Aus share fund for part of my super in 2002, you would think this would have had an exceptional return over this period. WRONG!

I am really disappointed with the fund and will be removing exposure to it completely once my SMSF is setup. If not for my very high contributions the fund would look very ordinary indeed. I would have done far far better to just invest direct into the ASX, BHP, RIO or any of the banks.

 

[Judd]

hangseng, I may have found part of the answer. On 2/1/2002 the entry price was $2.1806 and on 21/2/2008 the exit price was $2.0621. Looks like all the fund you have mentioned has really done is distribute income in various forms and if it is reinvested it looks OK but take that out then over 5 years the growth has been 3.9% and over 7 years the growth has been 0.79%. And all that for a management fee of 1.76%. Bet that bought a few executive Mercs.

 

[vishalt]

Low risk AND defensive, you're asking for a bit much!

Apparently LPT's and banks were once upon a time - "Defensive". They still are imo if you're a long-term holder.

If I were you I would just buy stocks that people need for everyday living regardless of recession.

Maybe AGL? I know it slumped from $16 to $11 or whatever but these things happen and regardless people need gas and electricity (unless they're cool with caves).

Woolworths is unstoppable but expensive at the moment, and you really can't go wrong with the big four banks no matter how much they've been hit.

 

[Bill M]

and you really can't go wrong with the big four banks no matter how much they've been hit.

I agree with you there, in the future this will be one of those blips that people will say "gee I wish I bought the banks back in Jan 08".