How shuld I invest half a million?

Hi

I am another beginner here and wanted to know how you people (now experts … at least experts to me ..) would invest if you were in my seat.

I was feeling rather hesitant to ask for free advice from you people but Sim wrote me back that I can post such a message on this forum and people are free to share their experience.

I believe that I will get the tips and tricks based on hands on experience from this forum.

I read the LOE article and I decided to try it out.

Today I got a sanction for 350k of LOC on my home. And I went to ANZ for advice on investment. They further told me to gear another 200k (margin loan) and go into ANZ funds.

That adds up to more than half a million which is over and above my current IP loan of 350k.

These numbers are really scary to me but I am slowly gaining the courage to talk and handle these numbers (step one in the LOE article.)

The financial advisor at the bank has come up with few funds for me to invest. The estimated cost will be around 4% in the first year (0.5% for managing services, 2% entry fee and 1.5% ongoing cost) and 2% in every subsequent year. This amount looks high.

I am rather busy with my work and still treat all this financial engineering (my vocab is improving) as a hobby. So I am looking for a reasonably automated solution for investment. I am looking at a moderately agreesive strategy as there is no cash flow problem to me in the near future.

Thanks in advance for your comments.

By the way, I am here in Perth and could not contact Narva people.

Punter

 

Good post Punter, we like you are in a similar position having received advice to take out an LOC against PPOR and couple of IPs and then margin loan with numbers a bit bigger than what you are considering. We also find the numbers a little scary but are adjusting. Would appreciate thoughts on diversification. We have invested in the Navra retail fund for a couple of years but in a small way and have a lot of faith in Steve Navra and his investment philosophy. Considering investing much more seriously in the fund (Navra Retail) but would like to hear thoughts of others re diversification.
Moonbeamzz.

 

Thanks for the reply Sim, you are up late. Our split is something of the order of 2/3 rds Navra Retail and 1/3 rd cash and other funds primarily Asia. Looking to use Navra dividends to balance up more toward a 50 50 split between Navra Retail and cash/Asia funds. Have an LVR of about 40% (according to our Margin Lender - Leveraged Equities) so guess we are conservative. However still get a tad nervous on occasion (understand your feelings Punter) with borrowings over the magical $1 mill which Steve Navra does allude to in his LOE articles. That figure seems to be a psychological barrier. Doesn't cause us to lose sleep at nights but do reflect occasionally on whether or not to be more diversified.
Moonbeamzz

 

Reading the various posts on this site frequently causes me to reflect on my own lack of knowledge (financial) compared to the insightful and informative comments made by many others, also makes me very shy to actually contribute. However that aside it does pose the question, why are there no unbiaised training packages out there for us 'mug punters' to educate people in financial knowledge. I know there are heaps of people out there willing to educate us while pushing their own product (I guess Steve is one of them). But for something which seems to consume a heap of our thoughtpower there seems to be little in the way of practical educational training. The Unis, TAFE colleges and business colleges don't, though they often are big on impractical theory. Sites such as this are extremely helpful but don't fill the gap I am referring to. Any thoughts anybody??
Moonbeamzz

 

Punter,

I recommend you look at some of the Listed Investment Companies or Exchange Traded Funds - basically both are investment companies/funds/trusts which invest in a range of areas. Usually they have no entry fees - you just pay for brokerage, have a very low ongoing management fee - as low as .2% compared to 2% and you can sell at anytime during trading hours and have funds in your account within 3 working days.

A good place to start is the ASX website and do a search on both of those terms (LIC or ETF). Ring a few brokers for their 2c as well

OSS

 

Some Options you may want to consider

Dear Moonbeamzz,

Let's just confirm your situation.

1. You are taking out LOC on your home. What is the interest rate?

You may already be aware of this, but if LOC is around 7.5% you have to invest your money somewhere that is going to producee more than 7.5%(compounded, calculated daily).

2. What kind of investment do you want? Income based (more than 7.5%) so that you can pay off your interest and pay off undeductible debt? Or do you want capital growth only because you can afford to pay interest with your own pay and you don't want to pay tax on the growth? Or do you want a combination of both?

3. If you use tradingroom.com.au or smartinvesting.com.au you do not have to pay any entry fee for the managed funds. But they receive trailing commission. So you probably do not need to go through a financial adviser to pay for his commission. Just get the list of funds that he recommends and see whether it is offered by trandingroom or smartinvesting.

4. You should also note that managed funds that are heavily hedged have higher management fees but if the fund performs well it magnifies your returns.

5. Is buying an investment property an option for you?

Regards
hiflo

 

Financial advisor necessary??

Hi,
This might seem like a pretty stupid Q to some, but I currently have no investments in MF, only property and direct shares.

Q. Do I have to go through a financial advisor to purchase Navra units? ie. Can I just download the PDS from the website and return the form with my cheque?

Thanks for the help, Chris

 

Hi Chris,

You can download the PDF and invest directly. Thus saving you costs.

 

Yes. No FA needed.

 

Hi hiflo, thank you for your response yesterday (Wed), we are getting 6.87% LOC with CBA and then have a margin loan with LE on top of that at 8.65%. Our original question was regarding diversification. Have just calculated our position and have about 58% of investment with Navra Retail and remainder in cash, other funds (Platinum) and super. On reflection that may well be sufficiently diversified though we intend to grow our funds outside the Navra Retail fund. To date are very happy with that fund and trust Steve's investment/trading methodology though being a bit conservative we are not entirely comfortable with having too many eggs in the one basket - even the Easter Bunny has been known to stumble.

 

Hi Moonbeamzz
Adding to Sim's excellent and balanced response, I empathise with your frustrations here and agree that there needs to be that independent course or class that can at least start you on the journey of understanding both the underlying principles and terminology of investments in general.
However, as Sim has so eloquently stated, everyone is different so catering to all would become simply another "Basics of Investment" workshop or two from which you wouldn't really derive much satisfaction.
Far better to ask questions that apply to your personal situation and progress from there. After all, that's what this community is here for

 

Hi Jacque, what you say (and Sim said previously) is spot on. Yes, Invested is a very informative and educational site so guess its just a case of take note of what is on here and on sites such as SomerSoft and learn from those.
Cheers
Moonbeamzz

 

And read as much as you can as well! To give you some idea of the extent of my passion for property, I have some 65 books on investment that encompasses property in some way and I revisit some of them on a regular basis to remind myself of some fact or tip or great idea that I read.

As well as being informative, there are some very inspiring stories out there

 

That's amazing Jacque!

Must say you appeared very switched on when I heard you at the SIG last week..

 

Why didn't you introduce yourself Glebe? I would have really enjoyed meeting a fellow forumite

Please do so next time!