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Buying Managed Funds

Discussion in 'Managed Funds & Index Funds' started by Meggsy, 16th Aug, 2007.

  1. Meggsy

    Meggsy Well-Known Member

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    How does everyone choose their managed funds? Do you have a checklist of things to look for before purchasing units? Perhaps it is performance since inception or looking at the fund manager’s history.

    I’m looking to help a friend purchase some managed funds, I have a couple myself, however, I picked them by just looking at the sector/asset class and 5-7 year returns. I’m not going to tell my friend what to by as I’m only a novice myself, but I’d like to be able to give them some advice on what to look for in a fund.

    I did a search and have seen that a few of you don't pay too much attention to the Morningstar ratings but I’m sure you still have an extensive criteria for selecting a fund, if you were willing to share I’d be most grateful.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    First step is to have a clear goal for what you want in a fund ... is it for growth or for income (or a balance of the two) ? If income, is distributed (real) income important, or are realised capital gains acceptable (or preferable) ? Do you want imputation credits ?

    What markets do you want exposure to ? Australian shares ? Australia blue chip shares ? Australia small companies ? Resources ? Listed property ? Health and Biotech ? IT&T ? Bonds ? Cash ? International shares ? European shares ? Asian shares ? Chinese shares ? BRIC shares ? International listed property ? etc ?

    Do you want hedged investments ? Do you want active trading ? Do you want buy-and-hold ? Do you want index-hugging ?

    What is your tolerance for risk ? Would you consider internally geared funds ? Do you want consistent performance or extreme performance ?

    ... it's basically like a pizza menu - you have to choose what you want on your pizza, and THEN you get to choose where to buy it from :D
     
  3. Meggsy

    Meggsy Well-Known Member

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    Ok, I belive I know the answer to most of those questions, I suppose what I'm asking is, when you do a search on InvestSMART and you get a list of 10funds, how do you pick one. Do you look at the buy/sell price? The MER, Net Assets, etc.

    When I first picked my finds, I did a search, got about 5-6 funds then simply picked the one with the highest 5-7year return, obviously this isn't the best way so I'm curious as to what others look for.

    Hypothetically say I was after a growth fund, imputation credits would be an advantage but due to my lowish income they aren't mandatory. Mostly Australian shares, probably small companies. No hedged funds, I'd like to have a buy-and-hold with dollar cost averaging. Under the age of 25, so I can tolerate higher risk.

    I'm sure there are a few funds that would offer the above, how does one then decide between those funds?

    On a side question, I've thought about an index fund, rather than trying to out perform the market, simply try and match it. Perhaps a fund that attempts to match the S&P200 or something similar?
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I originally only looked at the 5-7 year returns, but got burned by funds like Platinum International and Platinum Japan which had a stellar year (or two) within that period, while the rest of the time was very average ... those stellar years bumped up the average returns and made the fund look a lot better than it really way (unless you happened to time your entry at the beginning of that stellar year !!).

    I look at the MER, the consistency of returns (quarter-by-quarter), the volatility of the unit price (ie how much it drops during a market downturn).
     
  5. Meggsy

    Meggsy Well-Known Member

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    Where do you get your qtr by qtr data from? Do you like at the price per unit or size ($million) of the fund?
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I work out the quarter by quarter data from the raw unit prices that I download from the fund manager website, although for some funds (eg CFS) where they pay distributions before the end of quarter, it's a bit more complicated.

    I don't consider the size of the fund beyond the fact that I won't consider a very small fund (eg less than $20m FUM).
     
  7. Meggsy

    Meggsy Well-Known Member

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    I thought this was a good read:

    travismorien.com/investment.ppt
     
  8. wilr

    wilr Member

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    I just stumbled across this tool at bloomberg:
    Bloomberg.com: Investment Tools

    You can search for the managed fund your interested in and chart its performance. You can also compare funds on the chart.
    It's the best way I've found to get up-to-date data on all my funds.

    If you look at the very peak of the Navra chart - that's where I bought in. Yeah!
     
  9. voigtstr

    voigtstr Well-Known Member

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    Have you found a way to have it display profit/loss on the portfolio view in Australian dollars?
     
  10. wilr

    wilr Member

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    No, unfortunately I don't think you can. Maybe in a future version.