Join our investing community

Good time to buy into Managed funds ?

Discussion in 'General Investing Discussion' started by johk, 6th Oct, 2008.

  1. johk

    johk Member

    Joined:
    15th Aug, 2008
    Posts:
    12
    Location:
    brisbane
    Hi,

    I heard of the great wine (someone told me that he heard on the news  )that we should not invest in shares now. I would think that it is a great time to jump in and buy some managed funds. The shares might drop more but you will still get them at a discount price. Am I completely off track here and should I take my money out of the bank and run?

    Also, me being a QLD’er and have my money with Suncorp – should I move them to another bank? I read that they might be bought up by one of the bigger banks. I am still not sure why – is it that Suncorp has hit the bottom or is it that Suncorp is considered being a bargain at the moment. But why is that they would want to be bought up – are they going that badly?

    Thanks
    Jonas
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,570
    Location:
    Sydney, Australia
    I wouldn't just jump in and buy something without doing some due dilligence first.

    The market is arguably quite cheap now - but you do need to consider your timeframe and goals when investing ... if you are after short term returns, you may well be disappointed - the markets could continue to move sideways for an extended period without any real gains.
     
  3. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    If you have a mortgage, I would suggest putting money into that. Its a 12%PA pretax guaranteed return. (If the place is a PPOR)

    But if you have a 7 year time frame to invest, now is a great time to gradually enter the market. I wouldn't dump my life savings into it now, but slowly position yourself in.

    As I predicted earlier this year http://www.invested.com.au/79/87-crash-here-31351/, I expected the all ords to come down to 4000, where it will find support, and comes back to its longer term uptrend. We are almost there now. I would be avoiding resources, but stick to stocks with higher dividends, not stocks with "future earnings" priced into them.

    I'm still sticking to my monthly contribution into my selected managed funds.

    I would also avoid gearing at this time.

    Warren Buffett is buying now! he is in a spending spree!
     
  4. Dan

    Dan New Member

    Joined:
    19th Jul, 2008
    Posts:
    4
    Location:
    Brisbane
    I'm gradually buying up managed funds over the next few months, but are avoiding gearing at this stage until the future is a little clearer.

    The fact Warren Buffett is on a spending spree at the moment is encouraging.
     
  5. voigtstr

    voigtstr Well-Known Member

    Joined:
    24th Jan, 2007
    Posts:
    679
    Location:
    Hobart
    I'm of the same opinion, until the financial markets sort themselves out, I'd be avoiding margin loans. Every month I buy another $160 of CFS geared share. Once some savings goals are out of the way, I'll be buying Navra retail pretty regularly as well.
     
  6. Norak Bastiat

    Norak Bastiat Well-Known Member

    Joined:
    16th Sep, 2007
    Posts:
    66
    Location:
    Melbourne
    If shares were, say, $100 and it fell to $50, then $50 is cheap compared to $100 but how do we know that $100 is the right price? Maybe the true price if $2. If the latter is the case, then $50 is overvalued.
     
  7. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
  8. C3PO

    C3PO Well-Known Member

    Joined:
    28th Feb, 2008
    Posts:
    102
    Location:
    Adelaide, SA
     
  9. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    3900 is the support line, 3400 was the next support time. I expected the market to bottom at 3900, but 3400 would be the absolute worst result. Good thing was we saw the 3900 broken and then the market quickly retracted back above this point. Its not uncommon the the market to overshoot or temporary break support lines. This is why one needs to wait to see if the broken support point is actually confirmed, not a suckers rally or fall.

    October is typlically a bad month of the year, so this makes it a great time to buy.

    I have been buying all through octoer, as I don't expect to pick the bottom, but knowing the market should bottom around 3900 gives me a piece if mind that things should not get much worse from here.

    We can now see the markets OS trending up now. The orginal 10% gain in the US has been supported by follow up gains, so it wasn't a dead cat bounce.

    This is what I meant, when the market see's light at the end of the tunnel, the initial recovery leg will be sudden, and those waiting on the side will miss out.. 10% gain may be a siginificant part of the recovery, and from that point we may only see mild upside. We are also seeing report that australia may avoid recession, RBA is also suggesting its rate cut campaign wont be as agressive as first thought, costello said the worst has been past, so this indicates we are at or near the bottom.

    I really believe if you buy quality blue chip stock NOW, you wont be dissapointed in the comming years. You will enjoy great yield, and with the potential of capital growth as well. I wouldn't gear, so forget the margin loan.

    I say follow the leaders, not the herd, the herd is selling, but the leaders - Warren Buffett - are buying. Although Sim will argue Warren buffett can't be compared to the normal investor, I disagree with this. Even the Rivkin report is also singing the same song.. and various other reports I read.

    I would also look at high yielding LPT's. There are some great ones out there with low debt yielding 20%+ PA.

    I only wish I had more money to spend now!! Since I spent a good part of it earlier this year on a IP, I now have limited funds to buy with today!
     

    Attached Files:

    • xao.jpg
      xao.jpg
      File size:
      84.6 KB
      Views:
      12
  10. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
  11. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,570
    Location:
    Sydney, Australia
    No - actually I argue that you can't just trot out Buffett's latest words of wisdom and use them in every situation.

    I wasn't suggesting that Buffett is wrong - I was suggesting that your continued claims about "this is what Buffett is doing" is inappropriate without understanding and explaining WHY he is doing them. You've done a much better job in your recent post.

    I was complaining about your one-line posts that claim "Buffett is buying" or something to that effect - I think you need to put it into context and understand the bigger picture.

    If you are buying for the long term (as Buffett is), and you have the ability to choose good quality stocks which should see good earnings growth over the long term (as Buffett does), and you are not highly leveraged (I assume Buffett isn't), then I think you should do well by buying now and holding for 10+ years.

    It depends on your goals and your timeframes for investing. One strategy does not suit everyone - so you need to qualify your comments to explain (in general terms) what your strategy is. In your case (and Buffett's) it is buy and hold long term - so I have no problems with what you suggest ... just make sure you understand that not everyone has the same approach or the same goals.

    If I was saving a deposit on a house I would not be investing that money in the market right now!
     
  12. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    Hi Sim, I have always suggested buying stock over the longer term. 7 years plus. Thats my time frame for investing. I don't consider myself as a trader, or short term speculator. Generally these type of trades I have lost money far to many times. I also don't believe I personally can achieve better results trading, than longer term quality buy and hold. Once you consider the additional CGT paid, and brokeage, I think most investors will be better over the longer term if they buy and hold.

    But yes, your correct, each person needs to determine what their time frame is, and what they plan to do with the money over the short, medium and longer terms.

    My goal is to accumulate enough assets which will give me a nice dividend income stream to support my lifestyle over the longer term, so I actually never plan to sell.

    This is why I will maintaine my regular investment plan, and encourage anyone who isn't in the market to seriously consider getting in NOW.
     
  13. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,570
    Location:
    Sydney, Australia
    Why now ? Is it because you think the market has bottomed ?

    Isn't that timing the market ?
     
  14. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    If you were trying to time the market, you would have got in when I called the bottom last month. Which seems it could be proved to be a close call to the bottom.

    IF you think your confident in picking the bottom, then yes TRY to time the market.. but the fact remains a regular monthly investment plan through all climates will be a more practical choice for many people.

    Just because the market is falling, stopping this regularly investment journey, or even selling up during these times usually proves to be a very costly mistake for amateur investors. Usually because they fail to re-enter the market until its to late.

    I didnt try to time the market, I continued to hold/build my investments all year, but was not scared to buy more in October.

    The world isn't going to end!!

    But yes, if I held out and tried to time the market - and was successful, I would in a better position today..

    But I would like to know if anyone here did time the market and re-entered at the right point when the knife was falling?
     
  15. Apocalypto

    Apocalypto Member

    Joined:
    17th Dec, 2007
    Posts:
    9
    Location:
    Melbourne
    How do you find stocks that don't have 'future earnings" priced into them?
     
  16. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    stick to higher yielding stocks.

    But I would say most of the market now would have reduced the future earnings expectations.. even resources which typically were quite expensive and factored lots of future earnings.
     
  17. samaka

    samaka Well-Known Member

    Joined:
    30th Sep, 2007
    Posts:
    308
    Location:
    Sydney
    Yeah! Smart people like me did that end of calendar year 2007 :(
     
  18. Neil_Salkow

    Neil_Salkow Member

    Joined:
    6th Nov, 2008
    Posts:
    22
    Location:
    Melbourne, VIC
    If you have the time frame for it, NOW is always the best time to buy

    If you have the right time frame (although I tend to agree with crc_error - I hold my investments for life as I dont intend on using the capital of my investments for future needs, just live of the divs), then the best time to get in the market is NOW.

    When I say NOW, I dont mean now that the market has dropped (crashed). If you had asked me this question 2 months ago, 2 years ago or 20 years ago; the answer remains the same - Invest NOW. - Why?

    Because the reality is that you cannot consistantly time the market, and the fact remains that share prices always reflect the information known by the market (perhaps in a weak form efficient market this may take some time, but after transaction costs and additional risk of getting it wrong, its not worth looking for arbitrage oppurtunities).

    Are shares relatively cheaper now than they were 2 months ago? I would say that all shares are priced accordingly - HOWEVER, you may find some companies that are reflecting a 'value' proposition to investors when you compare them to others based on a price to book ratio.



    I have not taken into account your personal circumstances and this should not be taken as formal financial advice. Consult with a financial professional before making any financial decision.
     
  19. C3PO

    C3PO Well-Known Member

    Joined:
    28th Feb, 2008
    Posts:
    102
    Location:
    Adelaide, SA
    Sorry but I can't agree - I think the idea that "now" is as good a time as any to invest is a dangerous one. There are very few people who can invest with an unlimited time horizon. I prefer to think of investing simply as trading with a 10 to 20 year time horizon.

    Whatever class of asset you invest in, markets are cyclical and there are better times to get involved and worse times.

    I wouldn't advise anyone to get into managed funds at the moment is because I believe that we are only part of the way through the downward phase of the current cycle.

    It strikes me as a risky strategy for an investor to enter the market now. Personally I don't see much up side for some time yet. Why take the risk of a reduction in the value of your investment when you can put the funds towards your mortgage or something else, and wait for this phase of the cycle to be over?

    I'm not talking about trying to pick tops or bottoms here, just taking a step back and understanding that timing can be very important in the sense of what point in the cycle it is that you get on board.

    Clearly buying now is better value than buying 6 months ago. Personally, however, I'd wait another 12 or 18 months as world economies do appear to be going into recession and that's not an ideal environment for investing in managed funds.

    Then again, I come from a trading background, where dollar cost averaging is a mortal sin :)
     
  20. Neil_Salkow

    Neil_Salkow Member

    Joined:
    6th Nov, 2008
    Posts:
    22
    Location:
    Melbourne, VIC


    C3PO, this is a debate that the finance world will continue to have in perpetuity (IMHO). Is it better to time the market and pick stocks (ie active management) or is it better to accept volatility and market returns with a passive approach and a long term view.

    Its down to your investment time frame and investment philosophy.

    Academic studies have shown that the vast majority (90%+) of returns variance is determined by asset class selection and only a small portion is determined by market timing and security selection.

    With this in mind, a long enough time frame and the reassurance of dollar cost averaging, now would be the time to start (or continue) investing in capital markets.

    I also agree though that if you have a home debt or are saving for an event within 10 years, you would need to consider volatility.

    By stating though that you will wait around for about 12 to 18 months before getting in - that's timing the market my friend.