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Colonial First State Global Resources

Discussion in 'Managed Funds & Index Funds' started by imago, 20th Aug, 2008.

  1. imago

    imago New Member

    Joined:
    20th Aug, 2008
    Posts:
    2
    Location:
    nsw
    G'day--long time lurker, first time poster!

    I'm after some advice re: the Colonial Global Resources fund. I understand some basic concepts like risk and investment timeframes. However, I find funds that sit on the top of the Investmart performance lists, like this one, the Challenger China Share fund and the Australian Unity Property Securities Growth fund a little hard to analyse.

    How do you pick between high risk and excessive risk? From what I've read here, the AU Property fund looks like it may have been in the excessive risk category, especially after reading some of the comments regarding how they deal with customers.

    I'd really like to invest overseas--in a fund like Colonial's, and from the research I've done it seems ok. I don't mind a 7 year time frame for a fund like this.

    What I'm worried about is after the AU fund dropped, it seems like it may never recover, or it could collapse totally.

    What methods do people here use to define excessive risk? For me, at the moment it seems like the only tool I have is to avoid the top listed funds, as they generally suffer a pretty big crash. I've used the comparefunds site, which seems great...but what else is out there?

    Any general advice, or specific regarding this fund would be appreciated. I'm trying to learn more about risk before getting into margin loans.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    The resources sector has always been volatile - resources companies aren't just valued based on their ability to dig things up efficiently, people revalue them constantly based on commodity prices (because this has a huge impact on the profits of those companies).

    Hence, the volatility you see in funds like the Global Resources fund.

    If you are borrowing to invest via margin loan, highly volatile shares and funds are problematic, since they greatly increase the risk of margin call - forcing you to realise a loss, which may well have turned around into a profit fairly soon (volatility works in both directions - down and up!).

    Ideally, you want consistent performance over the time period you are considering - and if you are prepared to live with the volatility, then a higher risk/higher return fund will usually outperform much more conservative funds over a long period.

    However, the key thing to consider is your reason for investing. If you are planning on using that money at some defined point in the future (eg a deposit on a house, or converting it into a retirement income stream), the closer you get to that time, the more careful you need to be.

    Sure, you may have achieved 500% growth over the first 6 years, but if the market or sector then suffers a major correction and your investments drop 50% in a short space of time, then you will struggle to recover in time, and may well need to postpone your sale of the investment for years.

    I personally prefer funds which have a 5+ year history of consistent returns, not funds which just get lucky with one of their picks and have a stellar year, followed by less than average years (which is why 3/5/7 year rolling average return statistics are so misleading!).

    What other investments do you have? Will this be your only managed fund investment?
     
  3. imago

    imago New Member

    Joined:
    20th Aug, 2008
    Posts:
    2
    Location:
    nsw
    G'day Sim,

    I've only got Australian direct shares/managed funds. I wouldn't use a fund like this for a margin loan, I guess the main thing I'm after now is to increase my risk a little--at the moment I've only got fairly safe shares/funds. The idea would be to have around 10-20% in high risk, preferably overseas so I can diversify. From the comparefunds site, Colonial doesn't look too bad (going down at the moment, but so is everything). I've looked at their annual financial reports and everything looks OK at a basic level. I'd like to be able to access the fund in 5-7 years.