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Investing with Navra

Discussion in 'Managed Funds & Index Funds' started by Chomp, 14th Nov, 2008.

  1. Chomp

    Chomp Well-Known Member

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    I was wondering;

    If someone had a 300k LOC and wanted to invest in shares (not property) using the Navra technique of using your money 6 times (not sure if this applies).

    How could or would you leverage yourself to the maximum amount of money invested possible into their new capital growth fund?

    How much could you Margin Loan, Would a non recourse loan help increase your lending , would investing in the income fund help at all?

    I hope this isnt to messy a question:)

    Regards
    Chomp
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Steve Navra's structure is basically owning your own home, using equity in that to buy IPs, and using equity in those to buy shares ... with suitable cash buffers and protection / risk management along the way. Nothing overly complicated.

    The new growth fund is not a typical managed fund - thus most margin lenders won't let you borrow to invest in it.

    It is a structured product designed to be used with the loan products provided by BT/Deutche.

    They offer up to 100% leverage via a capital protected loan - which means that you can borrow as much as your servicability will allow ... that's basically infinite leverage. Loan has a 10 year term - and protection doesn't kick in until maturity.

    (Make sure you read the PDS documents for both the fund and the loan products before investing !! ... this is not a simple product, there are gotchas as with most capital protected loans).

    A non-recourse loan doesn't help increase your borrowing capacity in itself - although there is an argument that it doesn't affect your servicability ... but I doubt that to be entirely accurate in all cases. Note that the loan products available for the Navra Growth fund are NOT non-recourse loans.

    The income fund is a different beast - but if you are looking to improve your servicability, then investing cash into that fund will help.

    What is it you are actually trying to achieve ?
     
  3. Chomp

    Chomp Well-Known Member

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    Someone has a 300k LOC and thinks that exposing themsevles to the stock market in in the next 3 months or so would be the best time to do it.

    I guess Im thinking along the terms of If I bought an IP I would put down the minimum deposit required and pay LMI which would leave me a larger buffer for security. I always thought that putting down a 20% deposit was a no brainer because you didnt pay LMI.

    Which left me wondering what other ways you could you expose yourself to shares?
     
  4. Chomp

    Chomp Well-Known Member

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    Sim could you explain why Margin Lenders will not let you borrow to invest in the new growth fund?
     
  5. AsxBroker

    AsxBroker Well-Known Member

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    Hi Chomp,

    You'll find that this is a business decision by margin lenders to have a particular investment as Acceptable Security. If a fund or stock is new, it usually takes a while to get it on the approved list.

    Cheers,

    Dan
     
  6. Young Gun

    Young Gun Guest

    The strategy your pursing is essentially double gearing.

    Double gearing is great during a bull market as it really magnifies your gains. During a bull market the best strategy is to borrow to the max and invest in anything. But under current market conditions I'd be hesisitant to do it. In fact I'd be running a mile from anyone who suggests you do. As a few days of high volatility could wipe you out.

    Anyone who pursed this strategy 12 - 18 months ago would be sitting on massive paper losses and bleeding margin calls, they be screwed! (and frankly its not going to get better for them anytime soon).

    Whilst I think nows a great time to invest into the share market I'd only use the LOC that you've got and not worry about margining it up as yet, the risks are just too great. I wouldn't be buying an IP as that ship is already sinking.

    Fundamentally the strategy of buying an IP and using that equity to borrow into shares and then possibly margining them up again assumes that House prices will always go up and so does the share market. This is not the case anymore and whats work for the last 7 years won't necessarily work for the next 7 years.

    And with $300K + I'd be seeing my local stockbroker or using an SME rather than a mananged fund....
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It's not a normal managed fund - it's a structured investment. Very different beast.

    I'm not saying that margin lenders won't ever lend against it, but there are typically very few structured products like this that are covered by margin lenders, and only then usually where there is a deal struck between the lender and the fund manager.

    In this case, the fund manager (NavraInvest) has done a deal with BT / Deutche to offer 80% or 100% finance to invest ... so you don't need a margin loan.
     
  8. Chomp

    Chomp Well-Known Member

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    Thanks ASX that makes sense and Young Gun I agree with you I dont think I would start to put money in until the end of January but maybe even longer as this really is a big mess that we are in.

    I agree regarding the IP as well, I am thinking in around 2-3 yrs in NSW would be a good time to look at that,but for now not so good.

    Why would you not recomend a managed fund? I am sort of time poor (lazy!) and my knowledge of investing in shares is pretty limited, do younot think this would be the best way for someone like me to start?
     
  9. Chomp

    Chomp Well-Known Member

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    Thanks Sim, that makes things a bit clearer. I did do a search for structured investments but couldnt really find much showing the differences. Would you give me an outline of what I should know?
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You really need to read the PDS for the product to try and understand what it is and how it works. If you don't understand it - don't invest in it.

    It's a capital protected product - this protection kicks in after 10 years and there are costs involved in offering the protection and there are additional penalties for withdrawing your funds early (within the first 5 years). This makes it very different from a normal managed fund (there are other similar products out there though).

    If you have any questions about the specifics - just ask :D
     
  11. Young Gun

    Young Gun Guest

    Managed funds are great for people with small balances <$100K to get an adequate level of diversification and a professional manager to make the decisions for them. With larger sums you are generally better off managing it yourself. You get greater control over CGT, corporate actions and what you buy/sell/hold.

    If you lack the ability, time or passion to do it yourself most stockbrokers will put together a portfolio for you and manage it for a fee, some fin. planners managed share portfolios but it’s generally not their main skill set (I’d go a broker over a planner). You can also invest via a SME, an SME is like a managed fund but you own the shares.

    Alternatively I see nothing wrong with having a large portfolio of STW, ARG, AFI etc for a passive investor.
     
  12. OLI

    OLI Well-Known Member

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    I keep hearing about the record level of immigration, the tight housing supply due to developers staying out of the market and now with aggressive interest rate cuts how much longer can the negative sentiment delay a housing recovery? If we've still got another 2-3 years of flat property prices in NSW that's great because it will give me time to make my next purchase. :)

    On the other hand with Sydney set to lead the next property boom and with interest rates tipped to drop to 3.75% p.a by March surely this will bring buyers back into the market sooner rather than later?
     
  13. Chomp

    Chomp Well-Known Member

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    Thanks Young Gun I will take that on board.

    OLI, this is just my opinion and should be treated as such.

    With the current turmoil and people fearful of a recession do you think Immigration levels will stay as they are?

    Yes we have aggresive interest rate cuts but would you buy a house if you were worried about losing your job in a year or so?

    Do you think that current prices are too high at the moment for first time buyers to go into the market? especially on a single wage, more and more people are putting off getting married until later in life.

    With less credit around people cant borrow as much as they used to so I cant see how that wouldnt affect property prices in a bad way.

    Does anyone else feel the same way?
     
  14. Chomp

    Chomp Well-Known Member

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    Thanks again Sim, I read the PDS and Im not sure this product is for me.

    I was looking to go into shares and then withdraw some money to go into IP's when the market picks up again in a few years. The minimum withdrawl is 50k, and then I would be charged a rate on top of this which is quite high depending on when I withdraw.

    I really dont understand this "It's a capital protected product - this protection kicks in after 10 years"
     
  15. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    This product is designed for those people looking for a long term buy-and-hold growth fund ... it is largely an index fund (90% of funds invested) plus a 10% discretionary component for the fund manager to play with.

    The way it is structured, it is intended that you will hold for at least 10 years ... although you can get access to your money prior to that if you need to, but there are penalties for the first 5 years. The full benefits of the product (which you are paying for) do not kick in until you hit the 10 year mark (when the protection kicks in).

    If you expect to need access to your money within 5 years, I think you would be better off putting your money elsewhere.

    Okay - capital protected products use various forms of protection (think of it like insurance) to cover you in case the value of your investment falls below what you paid for it ... eg invest $100,000 ... but due to market crash in years 9 and 10, at maturity your investment is only worth $70,000 ... you will get your initial $100,000 back (minus costs you've paid along the way).

    This insurance is usually for a fixed term (in this case, 10 years), and doesn't mature until that time. That is, if you withdraw your money before maturity, you don't get any protection at all - even if your investment has dropped. The cost of protection eats into your returns, so you don't want to invest in a protected product unless you really intend to keep it for the full investment period.
     
  16. Chomp

    Chomp Well-Known Member

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    Thanks alot Sim that makes sense to me now, I just couldnt figure out why it kicked in after the ten years, but yeah its so you keep your (their) money invested.
     
  17. Redwing

    Redwing Well-Known Member

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    MQG and Spanns Capital Protected Funds that I'd looked at have gone south badly, so have Trepidations about these type of funds at the mo'...I've gone gun shy (are those clouds getting closer to the ground...looks up :rolleyes:)