Managed funds and why most stockies avoid them

[ferretbiter]

Just another noobie question by a noobie investor, have had my largest asset in a managed fund for the past year (westlawn investments) and its due to be freed up on the 19th of this month.Now in the past year Ive been looking into trading (and all other possible investments) and so am now not nearly as certain on the profitability of a managed fund.

So this is just a question to you more experienced investors,
Why do you avoid managed funds?Like to handle your own finances?Returns aren't good enough?Like more tax friendly returns?Don't like the risk involved?What is it that keeps you away?

Also ive heard that the latest rates of returns being offered by a hypothetical company are 6.3% for 12months compounding quart and 6.9% for 24months comp quart and 7.45% for 36 comp quart.Do you believe these are good returns?too risky?

This is not financial advice, but just a simple question, no one should use any replies to this thread as advice.

 

[McLovin]

First off, I had a quick look at Westlawn, if it was me I wouldn't be putting a cent in their unsecured notes when banks are offering similar rates in online saving accounts.

Secondly, what hypothetical company are you referring to? Those are pretty much bank term deposit rates, so yes it is possible, although as I mentioned above I'd stick with bank saving's accounts and avoid unsecured notes.

Also ive heard that the latest rates of returns being offered by a hypothetical company are 6.3% for 12months compounding quart and 6.9% for 24months comp quart and 7.45% for 36 comp quart.Do you believe these are good returns?too risky?

 

[So_Cynical]

I think there is a dislike for managed funds because on the whole they are not well managed...not much point putting money under management if its not going to actually be managed well...any idiot can manage to lose money.

Also there is a wider variety of funds available now with many investors preferring the unmanaged funds like index and commodity ETF's etc....or funds like the PTM managed funds that hold short index, stock and commodity positions.

 

[skc]

First off, I had a quick look at Westlawn, if it was me I wouldn't be putting a cent in their unsecured notes when banks are offering similar rates in online saving accounts.

Secondly, what hypothetical company are you referring to? Those are pretty much bank term deposit rates, so yes it is possible, although as I mentioned above I'd stick with bank saving's accounts and avoid unsecured notes.

I second that. The incremental interest so so small whereas you are taking on some unknown risk. Hardly worth it imo.

I think managed funds have a place in some circumstances. If you have limited capital, limited financial knowledge then it is the laziest way to be exposed to the sharemarket. Remember though managed funds guarantee exposure, not returns.

You will rarely find a fund that will consistently outperform the market, and most funds underperform the market after fees.

If you walk into your financial planner's office and he whips out this 30 year All Ords chart and show you how the market always go up in the long run, ask him to show you the same chart of the Japanese market for the last 30 years.

 

[notting]

You may also see the future of the developed world in that same chart.
We should be right mate oi!

 

[McLovin]

You will rarely find a fund that will consistently outperform the market,

And when they do they will usually become a victim of their own marketing department's success.

 

[ferretbiter]

First off, I had a quick look at Westlawn, if it was me I wouldn't be putting a cent in their unsecured notes when banks are offering similar rates in online saving accounts.

Secondly, what hypothetical company are you referring to? Those are pretty much bank term deposit rates, so yes it is possible, although as I mentioned above I'd stick with bank saving's accounts and avoid unsecured notes.

Well 7.45% for 36months wasn't too bad for westlawn I thought, and my uncle has been with westlawn for 35 years and they have actually never lost his money.So I guess they seem kinda safe.

Truthfully the only reason why I like the idea of managed funds is simple:I have no idea what im doing in the stock market, been trading for 5months and have a lot to lose.
So far have los more money then I have gained (first 3 trades were perfect average return was 28%, then got cocky after hiroshima and put a large amount into the wrong company and lost half of it.)

I think there is a dislike for managed funds because on the whole they are not well managed...not much point putting money under management if its not going to actually be managed well...any idiot can manage to lose money.

Also there is a wider variety of funds available now with many investors preferring the unmanaged funds like index and commodity ETF's etc....or funds like the PTM managed funds that hold short index, stock and commodity positions.

Any chance you could have more info on these funds? Maybe just some basic links to stable companies?My googlefu is failing me, nothing but advertisements, no real info.

I second that. The incremental interest so so small whereas you are taking on some unknown risk. Hardly worth it imo.

I think managed funds have a place in some circumstances. If you have limited capital, limited financial knowledge then it is the laziest way to be exposed to the sharemarket. Remember though managed funds guarantee exposure, not returns.

You will rarely find a fund that will consistently outperform the market, and most funds underperform the market after fees.

If you walk into your financial planner's office and he whips out this 30 year All Ords chart and show you how the market always go up in the long run, ask him to show you the same chart of the Japanese market for the last 30 years.

True, but I'm not really looking to outperform the market (it'd be nice) but I'm more looking for an investment that can pull around 7-9% per annum before inflation and has minimal risk.(obviously anything can have a small or large amount of risk when it comes to stocks, but you get what I mean).

And when they do they will usually become a victim of their own marketing department's success.

One thing I like about westlawn is it is a very small local investment company that investments into the local commercial property market and aussie stocks, which limits the overall risk imo(also limits the overall returns, but meh).

 

[notting]

EQT I baught too much of it yesterday. They manage very well and pay you handsomly to do it, Tax free!

 

[DocK]

Hi Ferrett,

Some people find that they can achieve similar or better returns than most managed funds through ETFs or LICs such as STW etc. There is a wealth of information (accidental pun) available on the ASX website http://www.asx.com.au/products/exchange-traded-funds-and-exchange-traded-commodities.htm

Buying direct shares in something like STW should result in very similar results to the XJO with brokerage being much cheaper than management fees, commissions etc through a managed fund - and has the benefit of being able to be sold at the click of a button, whereas most managed funds will take at least a couple of days to act on a redemption request.

Not advice - have a good read through the ASX research section - there are a lot of options available other than managed funds.

 

[McLovin]

Well 7.45% for 36months wasn't too bad for westlawn I thought, and my uncle has been with westlawn for 35 years and they have actually never lost his money.So I guess they seem kinda safe.

As safe as unsecured notes can be. Give me a bank account anyday over unsecured notes.

True, but I'm not really looking to outperform the market (it'd be nice) but I'm more looking for an investment that can pull around 7-9% per annum before inflation and has minimal risk.(obviously anything can have a small or large amount of risk when it comes to stocks, but you get what I mean).

Buy an index ETF.

One thing I like about westlawn is it is a very small local investment company that investments into the local commercial property market and aussie stocks, which limits the overall risk imo(also limits the overall returns, but meh).

Are you sure Westlawn invests in stocks? I'd be pretty dubious of a company that is borrowing money (issuin

 

[ferretbiter]

EQT I baught too much of it yesterday. They manage very well and pay you handsomly to do it, Tax free!

Judging buy the charts, it seems like a good time to buy either that or it will continue it's long and steady downtrend....I have no idea which would it's gonna be.

Hi Ferrett,

Some people find that they can achieve similar or better returns than most managed funds through ETFs or LICs such as STW etc. There is a wealth of information (accidental pun) available on the ASX website http://www.asx.com.au/products/exchange-traded-funds-and-exchange-traded-commodities.htm

Buying direct shares in something like STW should result in very similar results to the XJO with brokerage being much cheaper than management fees, commissions etc through a managed fund - and has the benefit of being able to be sold at the click of a button, whereas most managed funds will take at least a couple of days to act on a redemption request.

Not advice - have a good read through the ASX research section - there are a lot of options available other than managed funds.

Truly a great bit of info on the asx site, thanks DocK.I've been checking out SPDR,Vanguard and perpetual ETF's for a while, just at the time that didn't appear to be moving much....checking the charts now they appeared to certainly have moved...down,down,down, glad I didn't buy in.Still very tempted by the gold ETC's and the mining ETF's....hmmmm decisions decisions.More research needed.

As safe as unsecured notes can be. Give me a bank account anyday over unsecured notes.

BUt 35 years is a pretty good record, even if they were in the right market at the right time (australian property through out the late 70's and 80's).Yes, yes I know past performance does not reflect future performance.

Buy an index ETF.

Looking that way now.Maybe.



Are you sure Westlawn invests in stocks? I'd be pretty dubious of a company that is borrowing money (issuin

Got cut off there, but I'm certain they invest in commercial property and aussie stocks only.

Going to go do some more research.
Anyone with any history in ETF'/ETC's give me some history on their returns aka loss/profit, how much,things you would do differently etc?

 

[McLovin]

Still very tempted by the gold ETC's and the mining ETF's....hmmmm decisions decisions.More research needed.

I think before you start dabbling in commodity speculation you need to spend a lot of time reading and understanding what you are doing. Otherwise, I'd suggest a trip to Vegas, at least there you can get blind while you lose your money.

Got cut off there, but I'm certain they invest in commercial property and aussie stocks only.

According to their annual report they have an insignificant amount invested in listed Australian stocks and unit trusts ($800k on assets of $129m).

And according to their prospectus for the unsecured notes:

The purpose of this Prospectus is to raise funds for the operations of Westlawn, principally for our own lending to support the financial
needs of individuals and businesses in our area. We have almost 10,000 Noteholders/investors and some 4,000 loan customers.

I think you maybe mistaken as to what they do.

 

[ferretbiter]

I think before you start dabbling in commodity speculation you need to spend a lot of time reading and understanding what you are doing. Otherwise, I'd suggest a trip to Vegas, at least there you can get blind while you lose your money.

Of course, as always more research is needed before any decisions are going to be made.I think about blowing my money on hookers and coke (and coke filled hookers) quite often, those are some great returns to cash invested imo.

According to their annual report they have an insignificant amount invested in listed Australian stocks and unit trusts ($800k on assets of $129m).

Shows how much I know of where my money is invested.Then again this all just goes off of what my uncle and father told me, guess they didn't quite have their facts straight.

And according to their prospectus for the unsecured notes:



I think you maybe mistaken as to what they do.

Yep you are right there.
Considering in putting my capital into a health based index fund and a mining/resources based index fund at the moment, both are obviously quite cheap at this point in time, just is going to take a huge amount of balls to pull that much money out of a managed fund when I earn so little without its regular income.Plus I could completely screw my entire plans for the future over by picking the wrong ETF.

 

[Julia]

Yep you are right there.
Considering in putting my capital into a health based index fund and a mining/resources based index fund at the moment, both are obviously quite cheap at this point in time, just is going to take a huge amount of balls to pull that much money out of a managed fund when I earn so little without its regular income.Plus I could completely screw my entire plans for the future over by picking the wrong ETF.

Why do you feel obliged to do anything right now?

 

[ferretbiter]

Why do you feel obliged to do anything right now?

Truthfully julia it's because I will have access to 75% of my capital in 7days and the market currently seems to have most index funds/ETF's at quite low prices.
Now from what I've gathered you think the market is going to drop further because of some bad news coming out of Europe?I'm still not certain at this stage.It just seems that the prices are quite low and are the lowest they have been since 2008 and it would be a good time to buy in now, regardless of if its drops any further.

 

[McLovin]

Yep you are right there.
Considering in putting my capital into a health based index fund and a mining/resources based index fund at the moment, both are obviously quite cheap at this point in time, just is going to take a huge amount of balls to pull that much money out of a managed fund when I earn so little without its regular income.Plus I could completely screw my entire plans for the future over by picking the wrong ETF.

Dewd, chillax, you don't need to rush into things, and you don't need to suggest some other investment when you get told to slow down a bit. The market isn't going anywhere. The best investment you can make right now is education. If you want somewhere to park your money in the meantime just find a high interest online savings account.

 

[Julia]

Dewd, chillax, you don't need to rush into things, and you don't need to suggest some other investment when you get told to slow down a bit. The market isn't going anywhere. The best investment you can make right now is education. If you want somewhere to park your money in the meantime just find a high interest online savings account.

Agree.
Ferretbiter, I suspect you've become somewhat caught up in the general hysteria of the last several days. As a beginner, that is absolutely the last thing you should be allowing to happen.

So you have access to some of your capital. Won't it still be there in a few weeks' time? A few months time? In the meantime you can, as McLovin suggests, park it at call online for more than 6% while you get yourself some education.

There's some immensely useful stuff on the Beginners' Forum on this site, especially Sir O's thread and both the ASX and Etrade have easy to follow Education modules which you can work through at your own pace. (Probably other brokers have similar).

People lose money even in bull markets. To imagine that you will not lose money when you lack education and are floundering around in one of the most unusual markets for a long time is just being quite foolish.

I wish you well. One of the best things you can learn is when to stand aside and objectively assess the reality of what you know and how capable you are.

 

[ferretbiter]

Agree.
Ferretbiter, I suspect you've become somewhat caught up in the general hysteria of the last several days. As a beginner, that is absolutely the last thing you should be allowing to happen.

So you have access to some of your capital. Won't it still be there in a few weeks' time? A few months time? In the meantime you can, as McLovin suggests, park it at call online for more than 6% while you get yourself some education.

There's some immensely useful stuff on the Beginners' Forum on this site, especially Sir O's thread and both the ASX and Etrade have easy to follow Education modules which you can work through at your own pace. (Probably other brokers have similar).

People lose money even in bull markets. To imagine that you will not lose money when you lack education and are floundering around in one of the most unusual markets for a long time is just being quite foolish.

I wish you well. One of the best things you can learn is when to stand aside and objectively assess the reality of what you know and how capable you are.

My capital will be there for as long as I don't lose it, its just that I believe the correct thing for me to do at this point in my life is to invest in two indexed funds(one health orientated and one mining/resources orientated) as I'm not really up for short term trading yet, but I do think this is a good time to buy into some index funds.

Plan on putting a stop loss of 5% on them and then letting them ride, mading buying more when they drop and selling one I think that they are overpriced.Probably just leaving them for a while and raking in the dividends.

Sir'o thread is a wealth of knowledge that im slowly but surely getting through (its not an overnight read unless you want your brain fried to dust).Finally I know next to nothing and believe until the day I die I will know nothing.I will learn as much as I can in the mean time though.

Thanks for the help julia, you are a calming voice in the back of my head that tells me to sit back, relax and most of all THINK about what I am doing.