$5000 to invest - seeking best investment option

Navra likes volatility, so now is as good a time as any to get in if you are planning on holding long term.

However, you need to think about what you are trying to achieve.

Are you looking for income or growth ?

Are you in a high tax bracket ?

The Navra funds are income funds - so they pay out a lot of income, which you will pay tax on in the year you earned it. An ETF will typically only pay out income from dividends recieved - the majority of the returns are from unrealised capital growth, which you won't pay tax on until you sell - which is a more tax effective position.

If you have investment losses from negatively geared property, then Navra is a good choice for helping to offset those holding costs (and tax becomes less of an issue).

The ETFs will track the market very closely (they are designed to do so), where the Navra fund aims to outperform it. If you believe that the Navra fund can do so consistently over a long period, and if tax is not a problem for you, then Navra may be the better long term investment.

Just some thoughts.

 

That's a good point - for relatively small investments the brokerage does add up.

Don't forget that you do effectively pay a fee when you invest in a managed fund - via the buy/sell spread. This is charged by the fund manager to cover costs of buying and selling shares in their portfolio as people buy or redeem units and is reflected in the unit price (ie the buy unit price is higher than the sell unit price - so if you were to buy units and then sell them on the same day for the same unit price, you would actually lose money - 0.3% across both transactions for NavraInvest (0.15% buy and 0.15% sell).

The question is - will 0.15% of your additional investment in a managed fund cost less than the brokerage for the same investment in an ETF ? You'd have to do the sums based on how much you would be investing and how much brokerage costs you.

 

The unit price falls on day 1 of the quarter (even though distributions aren't paid out until later).

If you invest towards the end of the quarter, you will receive part of your investment back as income at the beginning of the next quarter (and pay tax on it).

This actually happens progressively throughout the quarter, since the unit price is updated daily to reflect realised gains (although they may be lost if the trading activities lead to realised losses within the fund - so it's not an exact measure!) - the later you invest, the more you will receive back as income (in theory!)

We are only just past half way through the quarter, so it's still in that large grey area right now - and in the short term you may find that capital gains to be made in this recovering market (???) will more than outweigh any difference made by timing the entry.

If you are going to get in, I'd just get in now - or perhaps do half now and half again at the beginning of the next quarter ?

I wouldn't worry too much either way.