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Discussion in 'Managed Funds & Index Funds' started by AndrewG, 4th Nov, 2007.

  1. AndrewG

    AndrewG Well-Known Member

    Joined:
    3rd Feb, 2007
    Posts:
    61
    Location:
    Adelaide, SA
    G'day guys,

    Over the past 6 months my situation has changed, to the point where I now can put some money into managed funds. My situation is that I have a LOC worth $200K which I have split down the middle providing 2 x $100K facilities with which to invest. My $100K LOC will be used to continue my R/E investing and will be used as deposits for future purchases. The other $100K loan (WBC - 7.52% var) will be used to invest in M/F.

    At this stage I am looking to put some money into 3 different funds, through InvestSMART using money from this $100K loan. Does anyone see any downside with using money from a loan/loc in this manner without going further into margin lending etc.? This way I am minimising risk by spreading the money through 3 different funds, and am using money at 7.52% (subject to rises/falls) as opposed to a higher margin loan facility. I understand this may 'limit' my exposure to gains also, but feel this is a nice "safe and comfortable" way for me to start out. I can then introduce margin loans if required later down the track if/when I feel more comfortable.

    BTW the 3 funds I'm looking at are Navra Retail (for income), BT Imputation (growth/income balance), and Macquarie Small Companies Growth (for growth). Looking to put about $20-$25K into each, so I have something left in my loan.

    Thanks,
    Andrew.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Location:
    Sydney, Australia
    How about some International exposure ?
     
  3. AndrewG

    AndrewG Well-Known Member

    Joined:
    3rd Feb, 2007
    Posts:
    61
    Location:
    Adelaide, SA
    Sim,

    Rightly or wrongly, I thought international funds came at a considerably higher risk?

    Andrew.
     
  4. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
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    Location:
    Sydney, NSW
    Hi Andrew,

    Once you take out foreign exchange risk, International is less risky than Australian shares due to the larger number of companies to invest in. Ie, Australia has about 1500 companies to invest in, Internationally there are tens of thousands of companies to invest in.

    Cheers,

    Dan

    PS This is general information, naturally speak to your FPA registered Financial Planner, Accountant or Tax Adviser before making an investment decision.
     
  5. AndrewG

    AndrewG Well-Known Member

    Joined:
    3rd Feb, 2007
    Posts:
    61
    Location:
    Adelaide, SA
    Something else to ask is this, if I invest say $20K into 3 or 4 different funds, and say I end up utilising a margin loan facility, do I need to have separate margin loans for each MF or can I just have one facilility (bit like a LOC) ??

    Another question. I would like to have the investments in my wife's name only, as she is a stay at home mum and fortunately won't have to worry about going back to work thanks to our IPs. Therefore she won't be earning anything for a long time (if ever again). The money I use from our loan is currently in both names as it is a split-off from my LOC against our PPOR which is in both names. Would I have to set up a separate account altogether in just her name? The same goes for if/when I utilise a margin loan, can it be in joint names or not?

    Thanks,
    Andrew.
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Location:
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    It's pretty much exactly like a LOC, except that (for most types of margin loans) the loan limit varies as the value of your assets vary. That means one facility for all your funds (or at least all the funds that you choose to refinance through the margin loan).

    Don't forget that it is the purpose of the loan that determines deductibility ... thus (regardless of whose names the loan is in), it is the ownership of the assets purchased with the loan that determines who gets to claim the interest. This means that if the asset is in your wife's name, it is only she who can claim the deduction, regardless of where the loan comes from.
     
  7. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi Andrew,

    Remember that with the Low Income Tax Offset an individual can earn $10,000 without paying any tax.

    Cheers,

    Dan

    PS Before making an investment decision speak to your accountant or tax adviser.