Investing Strategies

I've been thinking about this lately, and was curious to hear some strategies from other people.

Who here has actually thought about their personal investing strategy?
Would you mind explaining it briefly?

I've only recently began investing, and haven't really thought alot about my long term strategy. At the moment, I have been getting alot of good advice from members on this forum.
Using that advice I have opened an account at Colonial First State, and have invested in three managed funds thus far. The short term plan is to open 4 funds, which will give me varied market exposure (Australian property / shares & International property / shares). Each fund will be opened with $5,000. I'm currently saving up some money to open my fourth fund (International Share Fund). Two of the four funds are internally geared.

Once I have the funds open, I plan to make contributions spread evenly across these funds whenever I have spare cash available.
This is about as far as my planning goes.
I guess in the long term I intend to keep the funds, and hopefully have them earn me a nice flow of passive income.

I'm not sure what other steps I should be taking once these funds are up and running. Part of me wants to save as much as possible and continue to grow these funds. But I would also like to branch out into some other forms of investing (maybe direct shares, or property, further down the line).

Anyway, I'll leave it there for the moment.
It would be good to hear what you guys think, if you have any advice. Or if you just want o share your own plans for everyone to learn from.

Take care.

 

Might be a good time to top up on Monday!

 

Hi Compleks,

Strategies are means of implementing your financial plan.

My strategy includes growing assets and income by diversified sources at my time in life.

The plan also includes insurance for contingencies like illness, death & being sued. Also money for personal spending on lifestyle, education of kids, retirement etc...

Your 'investment strategy' of purchasing investments over time as money become available is fine. This way you spend maximum time in the market to benefit from compounding growth. Also, this way you average out volatility of buying into the market during highs & lows etc.

Likewise, choosing diversified securities with different market exposure reduces protfolio risk.

Internally geared funds mean that returns look spectacular compared to ungeared, but you can easily gear in your own name to get this effect. Also, ungeared funds have higher net assets and so generally a higher cost base, all those tax-deferred distributions don't end up giving you an assessable capital gain quite so soon (CGT event E4).

Just some ramblings ....

Cheers,

Rob

 

Thanks Rob, that wasn't rambling at all (unlike myself).

What do you mean by this?
Are you expecting a rise in the market?

 

I think this is referring to the DJIA dropping 366 points over night. The SPI 200 Futures Index had a corresponding 155point decline. Hence we can expect the Australian sharemarket to be significantly down on Monday - providing buying opportunities if you have a medium to long term bullish outlook.

 

Unless it keeps dropping??

 

Any specific funds or shares you'd speculate on?

 

looking at buying MAP, and depends on what LGL does, but gold went up, so LGL prob wont go down!

 

Compleks,

The guys are discussing a completely different strategy of timing acquisitions based on expected price movements.

Its generally not a good idea to mix strategies with the same assets. After a while you might set aside some funds for 'speculative buying' for super-normal growth ?

However, if you would have been interested in a particular security anyway - and for some reason you believe it an opportunistic time to acquire - then it can't hurt to bring forward the purchase (but watch borrowing costs).

I would urge caution to not borrow for speculative acquisitions without doing some fundamental research. This is because you will need to be right far more often than neutral or negative to cover transaction and borrowing costs.

Gearing in my opinion is better suited to diversified holdings to offset somewhat the risk which has been introduced by borrowing.

Cheers,

Rob

 

Thanks Rob.

I'm still saving for my next fund, so I probably won't be making any additional contributions until I have this fourth fund open.

 

I am also a novice investor like you with two years of investing under my belt, but have not progressed much in terms of (1) increasing net asset (2) investing knwoledge for a number if reasons which include: (a) relatively low pay (b) more focus on increasing my job skills(=this will be my utmost priority for next 3-4 years, as I only started working 2.5 years ago and I want to have a good career and have increased pay in the years to come) (c) I don't think I can focus 100% on investment with such low asset base because I am not MAD about investments in general and I would like to identify myself with a "normal job" title at this stage of my life.

Due to the reasons above I have set very loose financial goals for next 2-3 years.

1. Learn about various investment products and strategies other people are using.

2. Buy an investment property (buy & hold) in strata complex because I want to focus on my career and not spend my time thinking about maintenance etc..(just go with the general flow with the owners corporation's decision re maintenance etc) but later on when my career becomes stagnant in terms of progression, I would like to become involved in development etc...

3. Buy my PPOR with more than 50% deposit and use LOC to invest in managed funds. (This is more for psychological satisfaction than anything else.)

4. Until I buy PPOR use manged funds and direct share investments to increase my net asset base.

And I have done exactly 1,2 & 4 and things have changed a little since I bought the investment property (which hasn't settled yet). Until the purchase of the investment property I have basically put 50% of my net income into managed funds/direct shares with some margin loan. After the purchase of 2, I have stopped putting monthly installments with my management funds except to make occasional additional investments (ie when I think it is a good time to get into it) and increased my cash savings, just incase I have trouble servicing the investment property after it settles. (This is just to feel psychologically comfortable so that I don't have to feel the stress when the cash flow goes tough and I can rough it out).

Once servicing the loan on the investment property starts and other ancillary bills come (council, water, strata, maintenance, landlord insurance etc) I will reassess my situation and decide what is my next step.

I know that my strategy is not the best strategy, but I believe that the most important thing about my investment is that I have to feel "comfortable" about the the whole structure and the above strategy sits very comfortable with me.

In the mean time, I still do property research and read about investments and think what is the best strategy for me.

 

Hiflo,

Nothing wrong with staying within your comfort zone.

The whole idea of investing is to risk your capital for reward. You choose your level of risk and then search for the best combination of investments that fulfil this.

The riskier, the greater potential returns - but the greater chance of loss of capital.

Interesting that you chose an IP before a PPOR. You must have done the maths and worked out you can rent/lodge/sponge very cheaply to free up income, combined with the tax situation as a rental property owner.

Others might go for the PPOR, pay down asap & redraw for investment.

Of course, direct property is a big 'chunk' of investment to take on. Others, invest via LPTs as the units are small and liquid - i.e. they can adjust their holding quickly. Later they might acquire direct property as they have accumulated equity and income producing assets.

Depends on your long term plan and personal preferences.

By the way, one of the best long term investments you can make is in your professional education. By working hard, studying and helping at work you can secure an early promotion plus further opportunities.

But don't forget to live a bit ... you need to have a well-rounded personality and get along with people to be management material.

Cheers,

Rob