Managed Funds Whats the difference between these fund managers?

Discussion in 'Shares & Funds' started by Frank Manno, 6th Apr, 2017.

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  1. Frank Manno

    Frank Manno Well-Known Member

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    I'm very new to investing in anything other that property so please excuse the newbie question here.

    I know nothing about other asset classes but want to invest some money that I can't afford to lose and can't afford to leave in the bank either.. I need some yield and growth. So I'm looking for what I think is a 'fund manager'.

    I really don't know which way to go and can't afford the time or in reading reading and more reading and then running a risk of buying assets/shares myself so I need the help of a manager of sorts..

    What is the difference between these types of companies..

    Switzer Financial
    Jacaranda Financial Services
    IT Financial Services.

    And these larger companies?

    BT Financial
    Perpetual
    Colonial First State
    AMP Capital Investors limited.

    Are they essentially the same thing and offer similar services? I'm not targeting the actual companies themselves that I have listed here, I just listed them as an example of 'types' of companies.

    Are the 3 companies at the top and 3 at the bottom a bit like dealing with small banks versus large banks?



    -Frank
     
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  2. Coolcup

    Coolcup Active Member

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    Hi Frank

    The best way I would describe it are that all of the companies you have listed provide financial services. The style and segment of the market they are appealing to may be different. For example, the last four are your "big bank" type of investment firm. They appeal to the mass market and control most of the assets under management. They are big, appear "safe" and generally have good IT platforms and marketing teams to sell their product. My personal view is that they are generally too large to outperform index investing on a long term basis but they can also be a one stop shop where you can access other managers via their platforms. They are usually good for simplicity, but they charge you for that service.

    The ones at the top of your list (I am only familiar with Switzer) are generally appealing to a different audience. Switzer for example, is focused on the more DIY mum and dad investor. Someone who, for example, invested with AMP or BT for a long time and got sick of underwhelming returns and high fees in exchange for glossy brochures and marketing appeal. So they attract a different audience and attempt to "demystify" investment for people who would love to get more actively involved with their investing but don't know where to start. They also tend to target SMSF investors who are generally looking to take control of their investment decisions rather than just park their money with a manager.

    Ultimately, all of the above are trying to sell you a service, it is just that they appeal to different types of people.
     
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  3. Coolcup

    Coolcup Active Member

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    In terms of this statement, be very careful. It is incompatible for you to have money you "cannot afford to lose" and also money that you "can't afford to leave in the bank". If you invest into anything other than cash or government bonds, you are accepting a level of uncertainty in your return (ie risk) which may mean you could lose money. It depends on your investment horizon, your objectives and your risk tolerance. None of the above managers would be able to guarantee that you won't lose money unless they put it in cash. Just because they are a brand name, doesn't mean they will perform or keep your money safe. If the market drops, it is highly likely you will lose money if you are exposed to the market and vice versa.
     
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  4. Frank Manno

    Frank Manno Well-Known Member

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    Thanks Coolcup for your response.. Very informative..

    Do you have any personal opinion on property v other asset classes? Do you favour one over the other in relation to risk? Am I being blind by thinking property is very low risk?

    -Frank
     
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  5. Coolcup

    Coolcup Active Member

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    I think it depends on your time horizon and expected return profile. And property is very location specific. I live in Sydney and think prices here are over-extended. I see lots of apartments coming online and can't help but feel buying might be less competitive in two to three years time. If you are happy to buy and hold through short term volatility and are sure you won't be forced to sell in the interim, then it might make sense for you. For me, though, I think interest rates aren't dropping any time soon, the banks are tightening on investors and offshore purchasers and supply is increasing - this doesn't sound like a recipe for success in the short to medium term. My two cents!!
     
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  6. Hodor

    Hodor Well-Known Member

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    If you are leveraged highly in property there is high risk.

    Can't afford to educate yourself, not have it invested or lose the money is a pretty tough ask. There is always some risk, especially if your horizon is short, so what is your timeframe?

    Index funds are the simplest and cheapest option. Eliminates management risks and the risk associated with high fees. You always get market returns, which means you will outperform 70-80% of investors, can't expect better than that IMO
     
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  7. Frank Manno

    Frank Manno Well-Known Member

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    Thank you everyone for your help so far..

    Basically, I need the invested funds to bring in a weekly income with some form of capital growth as well.. The timeframe is more or less for many years.. 20+ years. Unless I decide to pull the money out and use it for property at some point.

    I'm told that I can expect around 5.5% return if I want to be fairly conservative/balanced. Which I'm happy with 5.5%.. I can't get 5.5% in property not in Sydney anyway and Sydney is all I know.. Hence why I'm looking at other asset classes now.

    In your opinion and others here is it ok to just use a funds manager and give them their 1% commission on the total sum invested and let them worry about it? I'm worried about this because I lack understanding gin this area..

    I just want to sit back and collect some yield. Obviously I will educate myself as the time passes and keep an eye on the investments as much as I can.

    I'm worried about letting someone control my money. But I'm more worried about controlling it myself because I am simply not educated enough in this field to make investing decisions.


    -Frank
     
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  8. Hodor

    Hodor Well-Known Member

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    Nobel Prize winner William Sharpe - “Properly measured, the average actively managed dollar must underperform the average passively managed dollar, net of costs.”

    So I would avoid paying the 1% + performance.

    IMO Vanguard is a great place to start. The ETFs are cheap, diversified and avoid key person risk. VAS and VGS are two to look at first and could be an entire portfolio.
     
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  9. twisted strategies

    twisted strategies Well-Known Member

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    .

    might i suggest you should be the opposite ,

    'not educated ' is a myth ... if you can handle your normal bills ( and maths ) you have a place to start .

    big investment companies go out of business as well ... but if you go 'hands on' at least you can see what is going right ( or wrong ).

    every investing decision involves risk ( including do nothing ... inflation eats away your savings ).

    might i suggest ( since the market is currently high )

    education FIRST ( let some cash mount up in a term deposit or bank account that pays some interest ).

    check out Investopedia for some basics , here is pretty good , Cuffelinks.com.au is another free website .


    if you are not confident make smaller investments ( even in term deposits )

    try not to lose sleep from worrying .

    timing is very important ( even with property ) .

    find a good reliable person for financial questions ( and taxation advice ) .

    this investing is a tough game , you are unlikely to win all the time , so aim to NOT lose everything ( but don't be impatient or easily frightened ).

    ask yourself .. 'what is sensible for you ' ?? ( one size doesn't fit all )
     
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  10. Coolcup

    Coolcup Active Member

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    Hi Hodor

    What you seem to be saying (I am paraphrasing and don't intend this to be insulting):

    1. You want to sit back and earn a return
    2. You don't understand or want to really learn about what you are investing in. You just want someone else to do it for you
    3. You have limited knowledge to begin with

    I personally think this is a recipe for disappointment as you have no way to benchmark your expectation against reality. Let's say you give your money to one of the managers you have listed:
    1. How will you feel if you lose 10% in the first 6 months?
    2. How will you feel if you gain 10% in the first 6 months?

    If the answer is (1) bad and (2) great without much insight beyond that, I suggest you find yourself an adviser who can help you out.

    I honestly don't mean to be insulting, but I think the only way you can truly "sit back and earn a return" without risk is to put it in a bank account or invest in government bonds or high quality corporate bonds.
     
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  11. twisted strategies

    twisted strategies Well-Known Member

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    after Cyprus , not even banks nor sovereign bonds are totally safe from total loss ( not just capital reduction )

    please remember the government only guarantees a certain amount ( is it still $250,000 per ADI ??) in bank deposits .

    currently , i think there is comparative risk everywhere .
     
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  12. Hodor

    Hodor Well-Known Member

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    Was this addressed to me or Frank?
     
  13. twisted strategies

    twisted strategies Well-Known Member

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    but shouldn't the the investor still understand investing , even it delegating the cash to a fund manager ( so you achieve the preferred outcome ) ???

    i invest in LICs that use strategies i am not particularly skilled at , but i DO understand what tactics they use .
     
  14. Coolcup

    Coolcup Active Member

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    You're right - apologies. It was addressed to Frank
     
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  15. Coolcup

    Coolcup Active Member

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    I totally agree. Just giving your money to a manager without understanding the strategy they are putting it in or the benchmark they are seeking to outperform means there is really no understanding of the risk or expected return.
     
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  16. twisted strategies

    twisted strategies Well-Known Member

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    many a client has chosen unwisely ... i remember some of the quirks noticed in my employer run super fund , very interestingly the regulator was rather slow to query some things .
     
  17. Xavier Tench

    Xavier Tench Member

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    Well, There are thousands of managed funds you can invest in, so choosing the right one can seem a bit confusing. Choose a fund that invests in the industries or asset classes you are familiar with and is appropriate for your investment time-frame. As one of my friend was interesting in investing some money in the funds, So he was recommended by some useful sites to invest in mutual funds.
     
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  18. twisted strategies

    twisted strategies Well-Known Member

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    i am not a fan of mutual funds , but then my circumstances deviate from the average investor , but i do invest in companies that run mtual funds ( and most have been fairly profitable , for me ).

    given the uncertainty in the global economy , would one style be adequate ( rather than , say a conservative tilt and a 'balanced fund ' say split evenly for future contributions or the initial contributions and as you gain eperience and knowledge diversify then into shares or interest bearing securities ).

    i see the willingness to be flexible in future investments important at a time like this