Managed Funds Investment plan.

Sorry guys, I don't want to be any more of a pain in the ass around here, but I'm looking for some more guidance (as usual).

I thought I would re-post this in a new thread because I know some people won't be following my other topics.

Basically, at this stage I have $5,000 invested in Colonials "CFS 452 - Australian Geared Share Fund". That is about the extent of my investing experience.

Anyway, this is what I was planning to do next.

Taken from this thread:
http://www.invested.com.au/7/cfs-property-funds-18041/

Any comments, criticism, advice etc... would be great. I'm still very much a beginner, but would like to start my journey in the right direction.

Cheers.

 

I try to stick to the 40/40 10/10 rule.

40% into shares (australian and international)
40% into property (again, australian and international)
10% say global resources
10% into say Asia fund

You could squeeze 10% into global infrusture as well... something worth considering anyway.

 

452

Hi Compleks,

Colonial only have the 452 funds available in FirstChoice and not as a MIF.
As I said before in the other thred FC has 91 available funds vs 15 in MIF.

Good luck!

Dan

The above information is available on the http://www.colonialfirststate.com.a...mes=&SearchProdIDs=&Redirect=1&DirectAccess=1 website and is purely factual, not advice to invest in any investment product. Speak to your FPA registered financial planner, accountant or tax adviser before making a decision.

 

Sorry Dan, I'm still not sure I understand completely.

I currently have $5000 invested in the 452 geared share fund. Does that mean I would have went through the First Choice platform for that investment?

I'm still not sure I understand the difference between the two. They are both owned/operated by Colonial, right? But the First Choice system allows you to invest in some 'outside' funds (not managed by Colonial)?
Is that right?
Is First Choice just another way of investing into managed funds, or is it technically a different type of investment?

What is Colonials selection criteria for the funds they will allow you to invest in?
What's in it for them? Will I be paying commission to Colonial for that service?

Do you believe I can do better than the CFS property fund I linked above?
I had a look at the other property funds available with the First Choice feature, and I really wasn't particularly impressed with what they had available (not that I'm in a position to pass any serious judgment with my limited knowledge).


My head is spinning. Why couldn't they teach this stuff at school, instead of wasting our time with all those other pointless subjects...

I'm excited about getting my portfolio set up properly, so I can start to make 'regular' contributions, then sit back and let them do their thing.
Hopefully by that stage I'm ready to move on to the next level of investing, whatever that might be.

 

Probably 1, look at your statement. If it is through the FirstChoice platform it will have the name somewhere on it. Probably 2, 452 is a fund manager, so it's not a Colonial managed fund. 452 was named as such after the number of runs Don Bradman's best was (or something like that, there will be more information on 452 Capital).

No, CFS is Colonial, 452 is a separate fund manager who is only distributed by Colonial, a bit like AXA distributing Bernstein funds in Australia, hence calling it AXA/Bernstein global value fund.

Yes, the First Choice system (let's call it a platform) allows you to invest in outside funds (which it looks like you may have done).

FirstChoice is a platform which is owned and run by Colonial.

Good question, don't know. Possibly in the PDS...

Colonial will get paid an administration fee, which will be disclosed somewhere in the PDS.

Who knows, I don't! There are alot of managed funds out there all promising to be the best. It does make it quite hard.

Yes, I agree. The stuff they teach in school is pointless, I've never had to use any of the freaky (x+y)squared stuff.

Awesome! It's a very exciting field to be interested in.

Good luck

Dan

The above email is only general information available to the public. Before making an investment decision speak to your FPA registered Financial Planner, Accountant or Tax Adviser.

 

Thanks mate, I really appreciate the time you (and everyone else here) have taken to help me.

 

Dude, I'm gonna sound like a broken record again. But this time I'm going to put you on the spot.

You're suggesting a managed fund, which has a 1.4% MER and a buy/sell spread of 0.4%. It invests in Westfields, Stocklands, blah blah blah.

I'm going to recommend an exchange traded fund. It's like a managed fund but there's no marketing budget, no fund managers margins, and no fat for financial salesman (err I mean financial planners).

So I recommend opening up a Comsec account (free) and buying the code "SLF" (about $30). It has an MER of 0.4%, no buy/sell spread, and invests in Westfields, Stocklands blah blah blah.

You're in your early 20's from memory so this saving could evolve to tens of thousands of dollars in 25 years time..

So why retail managed funds dude?

SPDRs
http://www.streettracks.com.au/filing/upload/upload/factsheet_LPT.pdf?rand=814490

 

Thanks Glebe, I appreciate your alternative point of view.

I've never heard of exchange traded funds before, but from what you posted they seem like something I could use.

What are the main differences with these funds compared to managed funds?
They seem to be very similar, but without having to pay MER's and commissions. Why haven't I heard them mentioned more often?


I would still like to get a managed fund portfolio up and running. Nothing huge though, just a few select funds which I can contribute too.
If I were to invest into exchange traded funds aswell, would I count them separately to the managed funds?
For example, if I were to try and follow crc's advice with the 40/40 - 10/10 rule, would I count an exchange traded property fund towards my 40% balance on property?

I guess it probably wouldn't matter too much. I will still try to get my managed fund portfolio up and running, sort of like a 'back up' which will always be there. Something I can forget about and treat like a bit of a safety net.

I'm really interested in what Glebe has posted. If anyone has more information or opinions on exchange traded funds, I would be glad to hear them.

Thanks Glebe.
I might open a comsec account later today (I've always been apprehensive about this, because it seems a bit out of my league), just to get a feel for things and have a look at what I can do.

Cheers again.

 

You should do a search in the usual places before asking for explanations etc, but anyway:

http://www.invested.com.au/7/goodbye-managed-funds-hello-lics-831/

How Exchange Traded Funds work on ASX

Have fun!

 

Thanks Glebe ... for that interesting post on SPDRs.... newbie myself and clearly shows how much is still to be learned.

Presumably, you have had many successful years investing in the SPDR Property fund...any other information that you can provide ?

Compleks ... this may provide a greater understanding

SPDRs

Cheers

 

Thanks!

I'll remember to search before asking next time. I was in a lazy mood, and you guys are too helpful

Just when I thought I was making progress, I learn something new... now I'm confused again as to what I should do next.

 

Id agree with Glebe
You cant go too wrong with a portfolio
of AFI, ARG and SLF
add say vanguard international hedged or unhedged
Mix it to your liking

This is very easy to setup
low cost
and better than average

I went all sophisticated and tried to buy individual shares, managed funds
but I always kept some afi and slf
In the end these have been some of the best performers

For the beginner, or the advanced investor
Its a great way to go

 

Hi Compleks,

Personally I don't think these exchange trades funds are for you at this stage. My reason is that you carry a small investment, and the saving of 0.5% on say $5000 is only $25.

If you plan to contribute on a regular basis, you will be charged brokerage of a share trade, which usually is $30 in and $30 out up to $10,000.

Plus exchange traded funds are at the mercy of the market. If you need to get out, you will need to accept what someone else is willing to pay, although the fund might be worth more. If you redeem directly from a fund, they will pay you the unit price of what the fund is worth.

I would suggest looking at these funds, but for simplicity, it would be easier to stay within your colonial platform. Then each time you contribute, colonial allocate your funds automatically, and there is no brokerage charge to do so, so you can contribute small amounts to take advantage of dollar cost averaging.

Something for you to think about anyway!

By the way, you happy with 452! today market returned to its peak!! you must be making some money now!

 

LIC/ETFs

Hi,

I do agree with CRC. There is no point wiping out your saved fee by spending it on brokerage.

I also think that focussing on the fees is a waste of time.
If you want cheap fees put your money in a bank account but then don't expect any great returns! You don't buy a porsche at beetle prices!

Also do you want to follow the market with an index fund (SLF)?

You go to a dentist to fix your teeth don't you? Or do you just attack them with the tools in your shed?

Same thing with investments, you can use a fund manager as they are the specialists.

Cheers,

Dan

 

We're talking about a 1% saving on MER, not 0.5%. Additionally, the fairly small-fry saving now will add up to a massive saving in the long term. A famous phrase is 'start with the end in mind'. If I was Compleks at age 50 I'd rather have my money in a tight ETF rather than a retail fund. By this stage, that 1% saving will not be $25 or $50 p.a., it will be thousands.

That's true, Compleks will have to take that into consideration.

That's incorrect, I think you're referring to LIC's here. LIC's trade above/below Net Asset Value. The unit value of an ETF is worked out the same as a managed fund (NAV/number of units).

Indeed, something to think about. But I stand by my position that he'd be better off with ETF's and LIC's than retail managed funds. He'd probably be better off still actually buying shares in Westfields, Stocklands etc but that's for another day

 

That's a pretty useless post filled with dodgy analogies. I've read some of your posts ASX Broker, you're smarter than that.

There are some fund managers out there that are capable of producing alpha returns and justify their fees. Most do not. Most charge you for underperformance. Have a look at the research produced by Burton G. Malkiel about the effects of active management on investor returns.

 

Thats the thing, he may has well buy direct stock in westfields etc if he is worried about the MER...

but as I said, with his small holding, the fee saving of 1% or $50 per year will be quickly eaten up by brokerage fees. So is he saying? In his situation maybe not.

 

In every industry 80% of the people are doggie, 10% are good, and 10% are excellent.. you need to fund the 10% who are excellent.. just like you look for a good doctor or motor mechanic, same applies with fund managers..

Most retail funds deliver poor performance, so even though they have low MER, their results are also below average.

You pay peanuts, you get monkeys..

I'm not saying ignore MER, but to fucus on the cheapest is also not the best thing to do.

 

I'm not good at analogies...What I'm trying to say is that fees aren't the be all and end all, other factors need to be taken into account.

I 100% agree with CRC for the peanuts and monkeys as it's a favourite quote of mine.

What I'm trying to say is that if an investor pays a fund manager hopefully they will outperform the index through achieving alpha.

Unfortunately, statistics tell us that only halve of investors are going to perform better than average and the other halve are going to perform worse than average. This is regardless of whether they are individual or institutional investors.

Naturally, you don't want to invest with a fund manager that has a high turnover because they are going to burn any profits made very quickly through brokerage. Also you don't want a fund manager who gouges you with Management Expenses though sometimes they can outperform well. Though the higher the cost, the higher they have to outperform to at least achieve market results (basically making themselves coming out even to the index returns).

Picking fund managers can be like picking stocks (get out the dartboard) as there are some quite bad ones. To confuse the retail investor there are many many more managed funds than there are stocks in Australia.

I would name some bad ones but I'd probably get sued...

If an individual investor has the resources (time and money) to study different listed options this is great. If they make a profit, even better.

Some investors do and some don't. The investors who don't have time leave it up to the "professionals", who hopefully will add value. The investors who do have the time can have a more fulfiling experience when they are investing by doing it themselves, who also hopefully add value.

Cheers,

Dan