Managed Funds Investing with Navra

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

 

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?

 

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

 

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

 

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....

 

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?

 

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?

 

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.

 

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?

 

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?

 

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"

 

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.

 

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 )