Geared Funds
- Thread starter Ageo
- Start date
Been using Colonial ASX200 geared funds within my SMSF for 2 years now. Currently not doing so well, but one was up over 40% last year, so you take the up with the downs.
My logic runs like this - IF you think the stock market is the place to be for the long term then you should gear. Of course when you are wrong like over the past 6 months you get a double hit and probably about twice what the market is down. Over the longer term gearing makes sense to me. The maths suggests that if you are comfortable that the market will go up by more than the cost of wholesale funds then gear as hard as you can.
Would be interested in hearing the other side of the coin.
Well my investment time frame is long term 5 yrs+(and if its doing well ill leave it in there to compound for many yrs).
So if you dont mind me asking what return are you sitting on at the moment since the 2yrs?
I like the fact that they gear you at 50% LVR (dollar for dollar) and you dont need to use a margin loan (at individual rates compared to institutional rates used in the fund).
I'd have to check my SMSF in July for the end of year, however if you go to the colonial web site and search for geared funds - there are about 5/6 - you can put in a start date and it will display the total returns.
There are distributions every so often - basically tuned to a tax advantaged situation. You will need to read the blurb on exactly why they do this, but it results in almost zero tax and reduces the capital value for CGT reasons.
I'm in the wholesale funds so no upfront or ongoing commissions are deducted.
Over the long term I think this is the best cost/ diversification/ reward for a large chunk of my SMSF. Time will tell! It may or may not be suitable for you!
I do not give financial advice to anyone in any form.
I'd have to check my SMSF in July for the end of year, however if you go to the colonial web site and search for geared funds - there are about 5/6 - you can put in a start date and it will display the total returns.
There are distributions every so often - basically tuned to a tax advantaged situation. You will need to read the blurb on exactly why they do this, but it results in almost zero tax and reduces the capital value for CGT reasons.
I'm in the wholesale funds so no upfront or ongoing commissions are deducted.
Over the long term I think this is the best cost/ diversification/ reward for a large chunk of my SMSF. Time will tell! It may or may not be suitable for you!
I do not give financial advice to anyone in any form.
For you to be accessing wholesale funds with no commissions means that you either have a fee for service adviser or you are an adviser. Judging by your smiley face at the end I would suspect perhaps the later
.TheRage; said:For you to be accessing wholesale funds with no commissions means that you either have a fee for service adviser or you are an adviser. Judging by your smiley face at the end I would suspect perhaps the later
No, on both counts
http://www.colonialfirststate.com.au/producteducation/managedfunds/investprods.aspx?menutabtype=pe
Select Download PDS - page 7 for fees. There are management fees, as with any fund, but there are no incoming, or ongoing fees. I think this is normal with wholesale funds, or at least with Colonial.
The only issue is that to access wholesale funds you will need minimum starting figure. It may be $50k or $100k with Colonial. Some fund managers want $250k, and others will go as lower. You will need to check out any particular manager.
For the record, I'm a fully qualified but non-practicing financial planner. However this means I have a level of knowledge that anyone with the time and commitment could achieve. It does not make me any better at identifying a 'good thing' than anyone else.
No, on both counts
http://www.colonialfirststate.com.au/producteducation/managedfunds/investprods.aspx?menutabtype=pe
Select Download PDS - page 7 for fees. There are management fees, as with any fund, but there are no incoming, or ongoing fees. I think this is normal with wholesale funds, or at least with Colonial.
The only issue is that to access wholesale funds you will need minimum starting figure. It may be $50k or $100k with Colonial. Some fund managers want $250k, and others will go as lower. You will need to check out any particular manager.
For the record, I'm a fully qualified but non-practicing financial planner. However this means I have a level of knowledge that anyone with the time and commitment could achieve. It does not make me any better at identifying a 'good thing' than anyone else.
Thats the only thing that has sorta threw me off is the starting capital (50k plus) is alot of cash to have lying around. Thats for the most popular funds, there are others that have a small amount only but seem more risky.
I plan to invest often via installment payments (monthly) so if i can strike up a deal with the fund they might accept.
I think you will find that most funds have a much lower threshold is a regular payment plan is in place.
There are also 2 alternatives - that I would consider.
A) use a broker that rebates all of the upfront fee e.g. CommSec- saves up to 4%. They will still nab the ongoing annual fee, but you should be able to transfer to a wholesale fund as soon as your assets reach a reasonable value. Negotiate this with the fund manager up front.
B) negotiate directly with the wholesale fund manager - if you are somewhere close, say $20k, and intend to put in another $10 PA, I'd try and twist their arm a little and see how far they will bend. The reasons for the minimum are varied including not wanting to deal with thousands of very small investors on $10 a month plans. However a secondary reason is not wanting to destroy their direct selling divisions by offering no fee service to smaller investors e.g. they are under pressure from their internal sales teams to keep the minimum as high as possible.
Especially at this time of year when all fund managers are under pressure to increase their funds under management, I'd be calling up Colonial direct and asking to speak to a senior manager with your proposal. You worst that can happen is you get a NO
I think you will find that most funds have a much lower threshold is a regular payment plan is in place.
There are also 2 alternatives - that I would consider.
A) use a broker that rebates all of the upfront fee e.g. CommSec- saves up to 4%. They will still nab the ongoing annual fee, but you should be able to transfer to a wholesale fund as soon as your assets reach a reasonable value. Negotiate this with the fund manager up front.
B) negotiate directly with the wholesale fund manager - if you are somewhere close, say $20k, and intend to put in another $10 PA, I'd try and twist their arm a little and see how far they will bend. The reasons for the minimum are varied including not wanting to deal with thousands of very small investors on $10 a month plans. However a secondary reason is not wanting to destroy their direct selling divisions by offering no fee service to smaller investors e.g. they are under pressure from their internal sales teams to keep the minimum as high as possible.
Especially at this time of year when all fund managers are under pressure to increase their funds under management, I'd be calling up Colonial direct and asking to speak to a senior manager with your proposal. You worst that can happen is you get a NO
Thanks CAFA, i actually intend to add about 30k or so each yr but i just dont want to wait a yr before investing.
Ill speak with them and see how i go, thanks again
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