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Managed funds - best option for someone clueless about the markets?!

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qprjames

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28 February 2009
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Hi there, I have very little knowledge of trading shares and am the kind of person to leave it to the professionals, in the hope that they have my best interests at heart! So I am thinking of investing my money into shares. I have around 500-700k. I was going to buy an apartment (part investment property/part personal dwelling) but feel that the property market (for the area I want) is somewhat overheated and is due for a correction in the next few years (due to the number of new apartments being built).

I have always thought about investing, but have watched the share market go up and up over the last few years. Now however, watching it slide back down, I now have renewed interest in investing. I understand it could still slide further, but at least now might be a slightly better time to invest.

The problem I have is that I have no knowledge of share trading. So how should I consider parting with my money. I bank with comm bank, so the obvious choice was to just go to tHem and dump my money into a managed fund. Wave goodbye and go back and see them in a few years time (obviously meeting maybe a year to discuss the shares performance etc). I am a bit nervous about choosing an individual/private stockbroker as I am afraid I would choose the wrong person for the job etc.

So for a complete novice such as myself, who doesn't really want to get too involved and is happy to let the professionals do their job, should I sit back at and go for the managed find option, or is there another avenue I should look at pursuing?

Any feedback would be great. My term deposit matures this week so I am ready to make a decision with what to do with my funds.

Thanks
 
....oh and in case it helps, I am mid-30's so I am (and always will be) a low income earner. So I would like a bit of money coming in each year from the investments as well if possible. The 700 k was just earns out of luck on the property market years back.
 

Firstly...wow! $700k in cash is a pretty enviable position for someone who is mid 30s (let alone any age) so well done on this front.

Whilst nobody on here can give you specific investment advice, they can definitely point you in the right direction.
You can look at the performance of listed funds (AFI, ARG) as a starting point, or to stretch to the US you could always look at something like Berkshire Hathaway (they have a B share).

I've never invested in them personally, but I think if you were to go to a bank they would lick their lips at the prospect, most likely sell you something with a decent commission for them and away you go. The amount you have, you'd want to be pretty scrupulous about who you hand it over to!

Good luck
 

Hi Jtlp, thank you for your reply yes I got very lucky years back. Good timing in terms of housing market and exchange rate (never to be repeated I don't think). But given that, I will always be on a low income, I need to ensure this money works for me.

Is AFI a managed fund? And if yes, how would I go about investing with them (online or in person?). I went to see a stockbroker a few years back, but never felt comfortable, and didn't end up investing any money. I just want to know that I am not being ripped off and genuinely trying to get me the best return they can.

Yes I totally get that comm bank would be licking their lips. I just thought they would be just as safe to use as someone like AFI or ARG in terms of trying to get me the best returns possible?
 

AFI, ARG, MLT - all managed funds listed on the ASX. You can purchase them directly through an online broker.
Out of curiosity, who do you bank with? They should have an online system that you can sign up through and begin investing. Any of the majors do, or you can go outside of them to get cheaper brokerage.

I'd also suggest, this place is an absolute GOLD MINE for information, so keep trawling through the beginner's lounge and get some more info
 
Macro wise, the US is still the best horse at the glue factory....wait until there's " blood in the streets" then pick up some good US value funds....
 
Aside from that $700k, do you have much else in the way of assets? Do you have a wife and kids? Do you expect any inheritance at any stage? Depending on the complexity of your situation it might be worthwhile sitting down with a good adviser. Here's a starting point: http://top10financialplanner.com.au/

If the answer to the above is 'no' and/or you want to figure it out for yourself, this forum is a great resource.

Exchange-traded funds are a good place to start in my opinion - here's one of the major providers: https://www.blackrock.com/au/individual/ishares ...and LICs as others have mentioned.

Commsec do up to $600 free brokerage for new accounts, that could be a starting point.
 
OP,

I'm in similar situation to you. Mid thirties made some good money in property over the last few years and have a substantial amount sitting in a term deposit looking for a better return. Started researching over the past month and also looking at managed funds or ETFs. Problem is the market at the moment is looking shaky and I'm questioning wether diving into the market at such a Volitile time is a good idea. I'm thinking of sitting back for the next few months and see what the market does.
I actually have a meeting with the CBA private bank advisors next week and will be interested in there opinion and what they have to offer.
I will also be sitting with a private financial advisor in the coming weeks to also get there opinion.

Something that caught my attention as I have been property focused on my investments to date was a-reits. Problem is that they have had a great run over the past few years and it look like that run might be coming to an end short term at least.
I'm looking into a non listed a-reit called sentinel property group that appears to have some good solid investments with strong returns. This is an option if you don't need the funds short term and are looking for a good income.

I'll keep you posted on any useful info / opinions that I come across.
Cheers.
 
Big A, be wary of the CBA adviser. They are often restricted as to what products they will recommend (i.e. all CBA owned products) so may not give you the most impartial advice. What to look for is an adviser who considers strategy first, and products are only secondary.

If they are desperate to move around your superannuation just for the sake of it, into a more expensive product, this is a red flag. Or if they want you to buy a sh!tload of insurance without solid justification.

You sound like you're pretty switched on, seeing two advisers is a good move.
 

Thanks junior.
I'm only a month into my learning journey but I when I get into something I really like to immerse myself in it and learn as much as possible.
I was reluctant to go see the bank advisors as I'm sure there advice is bias, but they kept pestering me and I figured there's no harm I. Seeing what they have to say.
The way I'm seeing the current market it looks a safer bet to say that the market is more likely to experience falls this year than any significant gains. So unless something convinces me otherwise it might be best just to hold the capital and sit on the side line this year. If the market stays steady through out the year then I'll bite the bullet and dive in or if there's a significant decline at some point in the year then that would be the time to jump in I would think.
I'm have never been a gambler. Would loose to much sleep trying to play the market. But I think with the current market not offering many other decent return options there are going to be any like the OP and myself looking for options.
 
One of the more useful things an adviser should speak to you about is risk and tolerance to loss. You need to try and determine as best as you can, how much you feel comfortable losing. You can't really control how much you gain, despite how much BS you'll hear, we cannot control the future, but you can control how long you play. The longer you can play, the greater the chance that you'll realize a significant increase in an equity, fund, or other asset.
 

I don't feel comfortable loosing anything, much more comfortable making .
I'm happy to look at this as a long term thing. I'm still fairly young and earning good money. Mortgage paid of no other financial commitments.
So could afford to take some risk but at the same time am quite comfortable which makes me think why take risks. Could just play safe and collect my 3% interest in the bank with nothing to worry about.
I guess with more research comes more certainty on the best way forward.
 

At this moment there are families with Super and other equity investments looking at a loss of asset value between 10-20% due to the recent market sell off. You need to ask yourself, even as a long term investor, can you handle the pain? If you can, thats fine, your losses are only on paper, as you say because you will not sell and be in it for the long term. But....what IF the sell off deepens and you were one of the investors looking at a 50% loss, the news media is calling for 'blood in the streets', "sell everything, go to cash before its all gone!"....This is likely when most successful investors come out of cash and start buying with ears pinned back....and the weak holders are selling to them....

 

Thanks for your insight. That's what I'm thinking, wait till the market drops further this year then jump in.
 
Just going to illustrate a point with some data:

Rolling 20 year returns since 1926 in the U.S:

69 of 71 times it has made between 6% and 17% P.A.

Also let's say Australia has an extra 1.5% in Franking, and apply that to the data.

That suggests that if you use this data set as a guide to Australian returns in the future there's a 97% chance of making 7.5% to 18.5% PA over 20 years from one of main index ETFs (VAS, STW, IOZ all the same in nature).

However at some stage during most of those 71 periods there was a 40-80% decline.

So that indicates for this data to work for you and guide your strategy you'd need to - Believe it'll be a comparable sample to the future of the ASX, Buy and Hold and Reinvest Dividends for 20 years, and be ok with a highly likely 40-80% decline at some stage.
 
shouldaindex said:
Just going to illustrate a point with some data:
Click to expand...

Hi shouldaindex, here is some extra data for readers that might give them something to think about.

Generally, when it is a Presidential Election year in the USA, the S&P 500 does pretty well. Since 1928 there have been 22 Presidential Elections, only 3 have had negative results and the last negative result was in 2008. At the link here there is a table at the bottom of the page showing the results for the last 9 decades, cheers.

Link: http://moneyover55.about.com/od/howtoinvest/a/electionmarket.htm
 
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