Managed Funds Good growth funds

Discussion in 'Shares & Funds' started by eddyl, 4th Jun, 2008.

Join Australia's most dynamic and respected property investment community
  1. eddyl

    eddyl Active Member

    Joined:
    1st Jul, 2015
    Posts:
    33
    Location:
    Sydney
    Hi,

    I am interested in a fund which investment philosophy is for growth. I have a 5-10 year time frame. I would like good capital growth, and am not concerned about distributions, to the point where I would actually like to minimise these. I understand there is something called shared based insurance bonds which do this, but Im not 100% sure what they are, or how to invest in them.

    Any help would be much appreciated.

    Cheers
     
    eddyl, 4th Jun, 2008
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,414
    Location:
    Sydney
    Will you be borrowing to invest?

    Are you considering internally geared funds?

    Over the long term, internally geared funds like CFS Geared Share fund have consistently outperformed many other funds - but at the cost of much higher volatility (due to the gearing mechanisms).

    Such funds typically pay out less in the way of distributions due to their ongoing costs of gearing, but if they are have a high churn rate (ie buy and sell shares a lot), you may end up paying a lot in capital gains anyway - which is not always ideal.

    I don't know anything about these insurance bonds you refer to.
     
    Simon Hampel, 4th Jun, 2008
    #2
  3. eddyl

    eddyl Active Member

    Joined:
    1st Jul, 2015
    Posts:
    33
    Location:
    Sydney

    Ideally, I would want to minimise my MER. I understand that internally geared funds usually have a really high MER. Is this a safe assumption?

    Ideally I would be looking for something like:

    1. Low MER
    2. High capital growth
    3. Low distributions
    4. Long term investment, so I'm happy to accept volatility.

    If only I could buy STW with an dividend reinvestment plan, except dividends were not counted as income, but as capital growth!

    This is a link to those insurance bonds, maybe you will be able to recognise them now. It is not very explanatory.
    Share-based insurance bonds - moneymanager.com.au
     
    eddyl, 4th Jun, 2008
    #3
  4. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,414
    Location:
    Sydney
    Don't you actually want to maximise your returns?

    If investment A had an MER of 4% (ouch!) and consistently returned 30%pa+ ... and investment B had an MER of 0.4% and returned 15%pa, which would you be better off with?

    Naturally the above example doesn't take risk into account - but I hope it kind of proves my point - I think you want to be looking for the best net returns (after fees, and after tax), not necessarily the lowest fees or most tax effective.
     
    Simon Hampel, 4th Jun, 2008
    #4
  5. eddyl

    eddyl Active Member

    Joined:
    1st Jul, 2015
    Posts:
    33
    Location:
    Sydney
    Good point Sim!

    I guess I am slightly skeptical that any fund can outperform the market in the long run, unless perhaps its a massive hedge fund. I'm basing this belief of superfunds, where industry superfunds with no commissions to advisors and low fees, almost always outperform retail funds in the medium to long term. This after all is my time frame.

    Do you know of any funds which meet this criteria?
    Am I correct in assuming that if a fund pays distributions, but these are less then the MER, this difference is tax deductible?
     
    eddyl, 4th Jun, 2008
    #5
  6. voigtstr

    voigtstr Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    601
    Location:
    Hobart
    Last edited by a moderator: 4th Jun, 2008
    voigtstr, 4th Jun, 2008
    #6
  7. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    1,075
    Location:
    Sydney, NSW
    Hi Eddy,

    These are more commonly known as Investment Bonds or Tax Effective Investment Bonds.

    Cheers,

    Dan

    PS Before making an investment decision speak to a FPA registered Financial Planner.
     
    Last edited by a moderator: 4th Jun, 2008
    AsxBroker, 4th Jun, 2008
    #7
  8. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,414
    Location:
    Sydney
    No - any distributions you receive are net of fees (and are paid out of the capital of the fund) - there is no additional deduction for the MER.

    As for low fees - if you don't believe most funds can outperform the market, then just buy the market (index). If you don't want an ETF, then look at an index fund like those from Vanguard.

    If you then want higher growth than something like the ASX200, then it's more a matter of WHICH index you buy.
     
    Simon Hampel, 4th Jun, 2008
    #8
  9. eddyl

    eddyl Active Member

    Joined:
    1st Jul, 2015
    Posts:
    33
    Location:
    Sydney
    Thanks Sim. So I guess what your trying to say if there is almost no way of a fund aiming for just capital growth, with low distributions and a low MER...

    Probably because thats what everyone wants to achieve haha, thanks for your help!
     
    eddyl, 6th Jun, 2008
    #9
Self-Managed Super – Super your way

PFI provide our clients with the opportunity to purchase an investment property, together with performing equity investments from a wide range of ASX listed securities some providing monthly income. This is the value of advice.