Join our investing community

Best Oz wholesale funds?

Discussion in 'Managed Funds & Index Funds' started by sharejunky, 8th Nov, 2008.

  1. sharejunky

    sharejunky Well-Known Member

    Joined:
    19th Oct, 2007
    Posts:
    56
    Location:
    Gold Coast
    I'm currently looking at Colonial First State's FirstChoice Wholesale Australian Share Fund - anyone have an opinion, maybe know a superior fund please?
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    What is your purpose for investing ? What is your investment timeframe ?

    Will you be gearing ? Have you considered an internally geared fund ?
     
  3. sharejunky

    sharejunky Well-Known Member

    Joined:
    19th Oct, 2007
    Posts:
    56
    Location:
    Gold Coast
    I didn't even know there were geared funds :)
    No, I play internet poker for a living and currently have about 600k in
    various funds, Platinum Asia and Japan, AXA Wholesale Global Equity Value Fund, Advance Asia Fund and Hunter Hall Value Growth Trust. I've got a few hundred k's more in cash looking for a new home, and the Oz market
    is starting to look increasingly attractive. Timeframe is long term :)
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    If you aren't gearing externally (eg margin loan), and would like exposure to ASX200 stocks and are looking for long term growth, and can deal with short term volatility, then consider the CFS W/S Geared Share fund. It is relatively expensive, and is quite volatile - but long term performance is higher than just about everything else due to the gearing.

    Difficult to accurately compare it to non-geared funds ... but if you want high performance and don't want to be bothered managing your own gearing levels, then this fund is a good way to outsource that process.
     
  5. sharejunky

    sharejunky Well-Known Member

    Joined:
    19th Oct, 2007
    Posts:
    56
    Location:
    Gold Coast
    Thanks very much Sim! I'll check that one out...
     
  6. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    I would probably advise against gearing. Gearing can wipe you out in the case of a market correction/crash. ie a 50% fall in shares, = a 100% loss when geared at 50%

    Select some quality australian share funds, and invest into them.

    It also seems like your investing a large sum of money, you might want to consider some professional advise from a financial planner. They can draw up a plan for you, set goals on where you want to go, and coach you through your investing journey.

    Alternatively if you prefer to learn yourself, I suggest going to the investing section of a bookshop and grab some books.

    In your case I would suggest a financial plan, as if you make a mistake, then you can loose everything.. the couple thousand dollars a plan may cost you will be well spent.

    I think your choice of FirstChoice Wholesale Australian Share Fund is a good one, and you wont go wrong with it over the long term. There are no right or wrong answers in selecting managed funds.
     
  7. Waimate01

    Waimate01 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    157
    Location:
    Sydney
    I had a few hundred in that fund from 2001 until just recently. The thing that motivated my exit was getting clobbered with tax. CFS churn the portfolio, so at the end of the year you'll get a statement from them saying "your $X is now worth $X+y, congratulations. Oh and by the way, you have to send $60k to the tax man".

    The effect of this is not to be underestimated, as the gain is a paper gain, but the tax expense is real cash. I just got so sick and tired of getting big tax assessments that were not related to any profits I'd actually seen -- I don't mind paying tax on shares I've chosen to sell myself, and for which I've received the proceeds -- but the CFS churning feels like an unrealised capital gain but is taxed as a realised one. Sucks big time.

    I sold down my CFS Aust Wholesale and bought STW.
     
  8. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    Waimate01, thats a good point. unfortunatly not many fund managers consider churn as much as they should. This is why I think a more passive fund may be a better choice in some cases.

    The other option for the OP is to buy a news letter like the rivkin report.. they have a blue chip portfolio in it currently which is high yielding top 100 companies x 10.

    Its a buy and hold stratergy in top australian companies. there is nothing wrong with buying direct shares over managed funds.. at least the MER will be 0%!
     
  9. benbegg

    benbegg Active Member

    Joined:
    18th Mar, 2007
    Posts:
    32
    Location:
    Brisbane, QLD
    Does the STW fund churn much or are the distributions pretty much just income with a small amount of franking? Also I would have thought STW would have been fairly tax effective as they would have sold those shares held for more than 12 months in preference when there is a profit to be realised to minimise capital gains.
     
  10. Waimate01

    Waimate01 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    157
    Location:
    Sydney
    STW is an index fund, so there tends to be very little churn.

    Interestingly, CFS has a wholesale index fund, but they manage to churn it. Not as badly as their non-index funds, but still way more than an index fund should.
     
  11. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    STW doesn't buy or sell shares unless it has to when the index is rebalanced (which happens quarterly I think). It tracks the index pretty accurately.

    Most income is from dividends collected throughout the year - there would be relatively little realised capital gain. Decent levels of franking too - although that depends on how much franking the underlying shares offer ... there are 200 of them and not all pay fully franked dividends.

    It is relatively tax effective compared to high churn funds.
     
  12. benbegg

    benbegg Active Member

    Joined:
    18th Mar, 2007
    Posts:
    32
    Location:
    Brisbane, QLD
    yes well I suppose CFS have to justify their fees don;t they. If they did nothing but sit on the portfolio (as they should in an index fund) then there would be no need for a fee. I like the STW set up though especially since I can control what price I buy the units at so there are no surprises.
     
  13. sharejunky

    sharejunky Well-Known Member

    Joined:
    19th Oct, 2007
    Posts:
    56
    Location:
    Gold Coast
    Actually I like the sound of CFS's internally geared fund - anyone know if much churning happens in that one?

    Re the Rivkin Report, I thought Rene topped himself - who is
    running that now?
     
    Last edited by a moderator: 10th Nov, 2008
  14. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
  15. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,619
    Location:
    Sydney, Australia
    There is a reasonable amount of churn ... here are some real stats from the annual tax statement I received:

    2006/07 year: 61% of distribution was realised capital gain
    2007/08 year: 82% of distribution was realised capital gain

    Just make sure you understand that this fund is very very volatile.

    If you had invested $10,000 in each of the CFS W/S Geared Share fund and STW on 1st July 2005 and reinvested all distributions, then by the 1st November 2008, your CFS fund holdings would have been worth nearly $26,000 (160% gain) while your STW holdings would have been worth just over $17,000 (70% gain).

    However, as of yesterday, your CFS holdings would be worth just under $11,000 (< 10% gain), and your STW worth just over $11,000 (> 10% gain) ... so all of that gearing amounted to nothing over that period.

    Compare Funds

    Naturally this isn't a fair comparison - comparing a geared fund vs a non-geared fund.
     
  16. Cherry Pro

    Cherry Pro Active Member

    Joined:
    18th Jul, 2007
    Posts:
    44
    Location:
    Sydney, NSW
    STW and ARG what are the differences pls ?

    Can someone please educate me ?

    Know one is an ETF and the other an LIC ...but in terms of long term performance / returns / capital growth how would these compare or can you not compare as apples with oranges ?

    I'm looking to get into the market with a small sum .. say $1000 ...and then regularly feed through ..I would buy either through Commsec or Etrade ..
    how would these compare with each other ?

    Thanks
     
  17. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    and amounted to far greater risk and volatility to gain the same result.

    If we have a flat period which many suggest, all that gearing will just cost you interest.