Invest my equity in Managed Fund?

[Goin' For Broke]

Ok, first timer here. I have 50K in equity available to invest. I already have two crappy houses (negitive!) and I want some positive cash. I know jack about shares. I saw in a magizine a managed fund getting 40%pa! Plus distributions of 19%. Is this possibly true? It's a geared aussie share fund. I want to 'buy and hold'. Should I take the plunge or what? Sounds too good to be true! Help! (please). I really don't want to do my own trading yet, hence the managed fund idea. (I always thought they were supposed to be a rip off, with all the profits going to the fund managers) Thanks in advance.

 

[wayneL]

Ok, first timer here. I have 50K in equity available to invest. I already have two crappy houses (negitive!) and I want some positive cash. I know jack about shares. I saw in a magizine a managed fund getting 40%pa! Plus distributions of 19%. Is this possibly true? It's a geared aussie share fund. I want to 'buy and hold'. Should I take the plunge or what? Sounds too good to be true! Help! (please). I really don't want to do my own trading yet, hence the managed fund idea. (I always thought they were supposed to be a rip off, with all the profits going to the fund managers) Thanks in advance.

Past performance is not a guarantee of future performance, particularly where funds are concerned.

 

[The Once-ler]

There are not many stocks left now that an investor could positively gear into. And definitely no quality ones. They were a dime a dozen 2.5 years ago though. At the height of the property boom! Funny that...

A managed fund that has returned 40% is not unusual in the present boom times. Especially a geared one. But, how much higher can the market now go? I think not much, but then your post may be a glipmse into the future. ie. Desperate property investors looking for a quick buck, and the herd piles in. If that happens, like in early 2000, and mid 1987, the market could go a lot higher. And I would exit!

I wouldn't recommend anyone gear into a managed fund and expect a positive return. It could well be negative. And a geared fund, in a bad time would give a very bad result. Even worse, in a bad time, gearing into a geared fund would...... You know the story.

I can see a lot more value in shares now than property, but that's not hard, as there is virtually no value in property now.

Good luck.

 

[tech/a]

There are not many stocks left now that an investor could positively gear into. And definitely no quality ones. They were a dime a dozen 2.5 years ago though. At the height of the property boom! Funny that...

Dont know that I agree with that there are still good opportunities in the ASX 300 and those stocks in our portfolio are still travelling well.
Everyones talking up a top.Frankly I cant understand why.The emerging economies like Chine (4 x USA Growth estimated next year) India (around the same) Japan (Just re emerging) and Asia.There is no sign of inflation in Australia and we are in a very strong position to meet some of this renewed demand.

I can see a lot more value in shares now than property, but that's not hard, as there is virtually no value in property now.

Good luck.

There is contradiction in your post.As a property developer there are certaintly great opportunities in property.Hi density cheap($220-280K) community title developements are selling off plan quite quickly.
I still like both shares and property as investments.
Trick is to get out of the non performers and find and stay in those performing.

As for Managed funds--manage your own.

 

[bullmarket]

Hi GFB

Ok, first timer here. I have 50K in equity available to invest. I already have two crappy houses (negitive!) and I want some positive cash. I know jack about shares. I saw in a magizine a managed fund getting 40%pa! Plus distributions of 19%. Is this possibly true? It's a geared aussie share fund. I want to 'buy and hold'. Should I take the plunge or what? Sounds too good to be true! Help! (please). I really don't want to do my own trading yet, hence the managed fund idea. (I always thought they were supposed to be a rip off, with all the profits going to the fund managers) Thanks in advance.

Firstly I don't think there is any need to rush into the share market atm. The last published headline inflation number was close to 3% which is near the top of the RBA's target 2-3% target range before they start seriously thinking about raising interest rates. The RBA also said recently that the next move in interest rates is more likely to be up rather than down. But whether the next move comes in Jan (unlikely imo) or in 6-12 months time is anybody's guess atm. I still think the DJIA in the US will struggle to get past 11000 if retested. All of the above will tend to keep a lid on our mkt for the next 12 months imo. I'm still thinking XJO (ASX200 index) will trade in the ~4300-4900 range for at least the next 6 and possibly 12 months.

Since you say you are new to share market investing, if you haven't already done so I suggest surfing around at least the ASX site http://www.asx.com.au where there is heaps of information on how the stock market works and on technical and fundamental analysis. Maybe also consider going through a book store or library and pick out a few books on investing in the stock market. The new Smartinvestor monthly mag is a good read too imo.

Before even buying into any managed funds, I would suggest doing at least some of the above to help you better gauge which funds meet your investment style, objectives and risk tolerances.

Good luck and hope this helps

bullmarket

 

[Goin' For Broke]

Thanks for that. All I've been reading for the last two years is money books and how to get rich in property. Now it looks like I have to study up on the share market (sigh). It really does seem awfully complex. But say i dumped my money in this managed fund for now, isn't that some really great returns? Surely a managed fund that is investing in large australian companies is going to go up (long term) just like houses (or better). I feel my equity is just sitting there being wasted. I am willing to just let this money sit somewhere for 20 years (for my retirement). Then while I slowly build up more equity, I can be learning all about shares for next time! What d'ya think of that?
PS what does IMO mean?

 

[tech/a]

Past performance is not a guarantee of future performance, particularly where funds are concerned.

IMO
In my opinion.
GFB
Without appearing too rude it seems you arent looking for help but more confirmation.

 

[Goin' For Broke]

Confirmation is exactly what I'm looking for. But if I am really being stupid and am likely to lose all my money, I am looking for someone to tell me so. I gather you can't give specific advice, but is this plan of mine hairbrained or a reasonably good idea?

 

[tech/a]

While I may not be able to give advice I can express an opinion.

Firstly if I have money stagnating anywhere then I would want to do something with it.That includes equity in housing or shares.

In my view 40% from a managed fund is amazing,particularly based upon ASX Blue chips--not impossible but improbable.I've noticed through life that those things I'm not involved in that look amazingly out of the norm,dont stay there to long.If every other managed fund is struggling with 10-15% (They have rooms full of analysts too) could it be that this 40% was made up of 1 or 2 home run trades not likely to appear again??? (This is normally the reason for out performance well above the industry average!!)

I would be loath to place all funds in one spot.

If you have 2 negatively geared properties would the $50k make at least one positive?
I'm selling buy and hold property now and over the next few years.If I had anything negatively geared I would be selling property and positively gearing those in areas of high consistant growth. (I specialise in esplanade or up to 2 streets back).

Again using myself as an example I had $30K 3.5 yrs ago and made up my own portfolio and traded Margin---leveraged at around 2:1.Thats now well in 6 figures.I wasnt in a rush to invest and took 6 yrs to turn a good consistant profit.

Keeping excess funds intact is more important to me than finding a place to invest them.The best opportunities hit you in the face and are TRANSPARENT.

 

[Goin' For Broke]

Thanks very much, that's what i want is your opinion. I agree my money is just stagnating. I feel it would take my a long time to learn about this whole investing thing. Isn't a managed fund diversified anyway so it's not really all in one place? Spread the risk. Maybe a few different managed funds all investing in different areas is better? I just don't have the time right now to know the market inside and out to do it myself.
How does puuting my 50 k on one of my houses make it positive? I still have to pay interest on this money where ever it is. I don't get it.

 

[tech/a]

I presume they are investment properties.
So they are rented.

They are negatively geared if the rent return doesnt cover all costs like interest---rates---out goings like maintenance etc.

If you paid $200K for a property and your Interest is 7% thats $14000 a year (Interest only),If rent and outgoings are $12000 a year then your $2000 negative.Placing $50k against the house would then save $3500 a year so you are then $1500 positive geared.
You of course gain tax relief from the interest you pay on a rental property.
Seems you need the help of a good Accountant.
Thats Accountant not financial advisor.

Make time it will be worth it.
Before we know it life's gone---Just ask Packer!
(I mean this in a positive way) all to often we work In the things we feel important rather than on them.

If I havent time to do things----then my life is too cluttered with minor things I shouldnt be involved in!

 

[Happy]

Same 2 bedroom flat gave $50 pw in 1984 now (2005) $150 or more, flat didn’t move prices did

 

[Julia]

If you don't have the time to do the research on direct share investing on, say, five of the companies in the top 100 on the ASX, where are you going to find the time to do the research which will allow you to choose the right managed fund? Last year's results are often no guide - a fund which has done well this year, may dive next year.

If you put your $50,000 into a managed fund, you don't actually know what your money is doing or where it's invested at any given time. If you bought $10,000 worth of five good companies listed on the ASX (say perhaps a major and a regional bank, property and/or infrastructure trust, and a major retailer like Woolworths) you can see what your investment is doing all the time, and receive the dividends and franking credits, and over time obtain good capital growth and reasonable income with tax credits.

All the best with whatever you decide to do. Just don't throw $50,000 just anywhere because it may take you a few hours of considering the options to work out what will be best.

Ask yourself this: how would I feel if next year the ASX rises by 20% and my managed fund, after fees and charges, nets me 10%? There are plenty of instances where this has happened.

Julia

The above does not constitute advice.

 

[Smurf1976]

Suffice to say that it IS possible to lose a lot of money through managed funds, especially if they're leveraged. Been there and learnt the hard way in 2000 when I found out that the funds manager had indeed spread the risk around and diversified - into a wide range of dot com stocks most of which rather famously crashed that year.

Don't invest anything before doing proper research is my opinion. In the meantime, put any surplus funds towards paying off debt to save interest. Better to gain 7% per annum than lose the lot by rushing in to the market. Learn first, then invest.

If you must invest in something now then do it without the leverage IMO.

 

[Goin' For Broke]

Thanks to all you guys for your feedback. The more I look into this whole thing the more I realize I do need to do the homework. Can't count on just dumb luck. I will talk with my accountant. I reckon I will just do some much needed maintenance on one of the properties (only $4000) and put the rent up $10p/w and I'm in front there. Plus I'll add value to the house of at least $10K. These properties are only slightly negitive so I'm not worried about that. Work on my debts while I work out what to do next.
What about a financial adviser that picks my shares for me and tells me when to sell? Any of you guys ever used them? Any good? I know, I know I'm looking for the easy way again, can't help it.

 

[tech/a]

Dont get me started on financial advisors!!

Most just hold "Proper Authority" from a licience holder and are limited to making available product from the licience holder as an example Zurich.

Most are trying to get themselves in a financial position similar to their clients,(In otherwords most clients with excess funds are better off than the advisor).

90% of advisors arent licienced to tell you what to buy and sell on the market.
One I know that is is Nick Radge,and he can tell you what to buy and when to sell.He has written books on the topic.

You can reach him through his Bullitin Board here.I have met him and listened to him speak.He is a genuine successful Family man and above all a professional in his field.

http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi

Good investing.

 

[bullmarket]

Hi GFB

What about a financial adviser that picks my shares for me and tells me when to sell? Any of you guys ever used them? Any good? I know, I know I'm looking for the easy way again, can't help it.

Re financial advisers (aka brokers ) I've copied and pasted an extract of my reply to a similar question in another thread:

"I was a client of JB Were for quite a few years and I recall some of my advisers occasionally mentioning they owned a particular stock. Without thinking I always assumed it was in their own names and not via a spouse, another family member, trust, private company etc etc.

I was happy with my advisers at JB Were but after I retired, and so had time to do my own research etc, I transferred all my CHESS holdings to Comsec and now use them as my broker. I still call my old adviser sometimes (off the record) if I need a second opinion on something. In case the underlying motive behind your question is whether one can trust brokers, my best advice would be to shop around until you find one you can trust and relate to. Like in all professions, there will be good ones and bad ones. Finding a good one is the hard bit. Whenever I was given a new adviser for whatever reason, I always asked for a face to face meeting asap with them so that I could put a face to the name when talking on the phone to them in the future and it also made it easier to ensure they knew what my objectives and risk tolerances were so that we didn't waste each others' time.

But if you have time to do your own research, fundamental/tech analysis then a reliable online broker is well worth considering. "

Happy New Year GFB and to anyone reading this and best wishes for 2006.

cheers

bullmarket