Managed Funds Investment plan.

Discussion in 'Shares & Funds' started by shouldisell, 20th Sep, 2007.

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  1. crc_error

    crc_error The Rule of 72

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    Compleks, I personally wouldn't count the Resources fund as a 'international fund' I would place it more into the 10/10 part of the 'rule'. As Sim pointed out, Resources can be quite high risk and can move around quite a lot. Plus your putting all your money into one global sector.. ie resources rather than a generic fund which invest globally in many sectors.

    Also don't get caught looking at past performance as your only reason for selection. Yes use past performance to pick the 'best' fund in a specific sector, but to discount the sector due to lower performace may not be a good idea.

    The reason why most international funds have performed 'poorly' is not that the fund itself isn't doing well, but because the Australian dollar is going up and has been for the last couple years. So as the fund makes money, the gain is lost in the conversion back to australian dollars. Only a couple years back the aussie dollar was falling, and went from 70 cents down to 45 cents, and since its gorn up to 87c.. thats almost doubling in value! So the funds assets have to double in value, just for Ozzies to break even! You don't know what our dollar will do in the next 5 years, it could keep going up, or it could stabilize, or even go down.. It largely depends on US interest rates which are currently falling. Once the US economy picks up again, and they raise interest rates, our dollar will come down again. thats if our rates don't continue to go up which some are predicting.

    If your worried about currency risk, invest into a HEDGED international fund. I think CFS does have one from memory.. Hence you don't loose if our dollar keeps on going up.. but you wont gain if our dollar falls. If Labor comes in and scews up the economy again, maybe this will happen lol.

    Other funds you might consider for the 10/10 part is a Asia fund, and global infrustrue. use the 10/10 part for 'specialized' funds which invest only in one sector/class. Use the 40/40 for more broad funds which move money around not just stick to asia or resources.

    International Colliers Property fund would be a broad fund, as they invest globally in property, not just in say asia.. A property fund which invests only in say Japan would be a more risky concentrated fund.. which I would consider in the 10/10..

    Once you get more experiance, and then you feel a sector like Asia, Technology etc is going to boom, you may want to increase exposure in that area.. but if you get it wrong, you could lose!
     
  2. shouldisell

    shouldisell Well-Known Member

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    Thanks again.

    I'll probably steer clear of the resource funds for now, and keep looking for a more generalised share fund.

    This is probably top of the list now.
    Fund Details - CFS FC Inv - AXA Global Equity - Value - Colonial First State Investments Limited - Direct Access Australia

    It seems to have good growth to income ratio, a reasonably competitive MER, and good exposure to some large company's.

    Would this fund be suitable as my first international share fund, sticking with the 40/40 rule?

    Of course any opinions on this fund would be appreciated.
     
  3. crc_error

    crc_error The Rule of 72

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    Here is a suggestion which you can mold into something your comfortable with. It is perhaps more complex than you require but it can give you some ideas.
     

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  4. crc_error

    crc_error The Rule of 72

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    Yes it would. Read the PDS, and if you like what they offer.. go for it!

    Some people feel that international funds are more 'risky' than australian shares.. especially if its not currency hedged.. so you may want to adjust your allocation to say 50/30 30 for international and 50 for australian.. just a thought. I personally think international shares are just as important as ozzie shares.. spreads risk a bit more...
     
  5. Simon Hampel

    Simon Hampel Founder Staff Member

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    Here's a sneak peek of some of the data from my new website (attached)

    Note that the Growth/Income percentages in the tables are calculated based on unit price changes, and don't necessarily represent the actual distributions paid (I don't have data for that yet). I'm still working on that part of the analysis.

    Note also that quartiles are not that accurate for small sample sizes (eg yearly returns).

    Everything is still very much a work-in-progress!
     

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  6. shouldisell

    shouldisell Well-Known Member

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    Is that your personal graph, crc?

    It's interesting to see how you guys approach and manage your investments. I kind of wish I had payed more attention in school when they tried to teach me how to use Excel.

    I just sealed up the envelope (application) for the CFS Property Securities Fund.
     
  7. crc_error

    crc_error The Rule of 72

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    Nice Sim! I think alot of people would find it interesting to have the ACTUAL return for each year rather than potentially misleading average returns!
     
  8. shouldisell

    shouldisell Well-Known Member

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    Wow, Sim.

    You obviously have put alot of effort into that. It looks fantastic.

    Graphs tend to confuse me fairly easily, but those were all pretty clear.

    Do you think the recently poor performance was due to the collapse in the market we just experienced?
    Do you think the fund will recover?

    Should I avoid this one, or do you still think it's worth considering?


    I hope everything is going well with the web site. Sounds like it's taken alot of hard work, but I'm sure it will all pay off.
     
  9. crc_error

    crc_error The Rule of 72

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    My graph is a little different. Although based on that graph.

    Although I haven't yet invested into Global resources and infrastructure. I'm looking at making my next investment into infrastructure. As I think toll roads, airports bridges tunnels etc are solid cash business and important to have exposure.
     
  10. crc_error

    crc_error The Rule of 72

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    Sim and I differ in opinion here. Sim has a system where he watches funds, and trys to enter when the fund changes direction and goes up.

    I personally don't think you can pick these things accurately and using a dip in price is a good opportunity to top up into a quality asset.

    Was reading someone elses posts on this website quoting some study which said that 'traders' need to time things and get it right 80% of the time to BREAK EVEN to a 'buy and hold' stratergie..

    So I take my chances and hold through good as well as bad times.. as you saw recently, when the market falls, it falls quickly, and can rebound just as quick.. if you used the down as a 'sell' trigger, then you could get out at the worst time, and by the time you 're-enter' you can miss most of the up swing!

    In saying that SIM did get out of global property before it fell to the current levels.. question is will he pick the up swing before it goes above his exit point!
     
  11. crc_error

    crc_error The Rule of 72

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  12. Simon Hampel

    Simon Hampel Founder Staff Member

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    Exactly the reason I wanted to build this site ... I got caught out in the past and it was only once I started looking at the real data that I realised my mistake.
     
  13. crc_error

    crc_error The Rule of 72

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    Quote:
    There was actually a study conducted by Sanford, Bernstein and Company that looked at the US market from 1926 – 1993. That’s a period of 67 years, or if you prefer 804 months. The study found something really interesting: 80 – 90% of investment returns were generated over a 2 -7% timeframe.


    That means that out of 804 months being invested, 90% of the money was made in 16 to 57 months. In fact the returns of the 60 best months averaged 11% per annum, which means around 7% of the time you made 11% per annum. Interestingly the remaining 93% of the time the return was only one 100th of a percent.


    So the simple fact is that the biggest returns on an investment portfolio happen over a relatively short period of time. The problem we face is trying to work out when these periods will happen.


    William Sharpe is a Nobel Prize winning economist. William developed the Sharpe Ratio, which is simply used to show the total return of an investment portfolio in relation to the risks undertaken. He discovered something VERY interesting....

    After extensive research, he found that that when you compared a 'buy and hold' strategy, to a 'market timing' one, the market timer had to be right 82% of the time JUST TO BREAK EVEN with the buy and hold strategy.
     
  14. shouldisell

    shouldisell Well-Known Member

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    Good point.

    Where do you guys search for information like that. Because the averaged returns/distributions can be very misleading. If it weren't for that one month, then I probably wouldn't have even seen that fund in my searches.
     
  15. shouldisell

    shouldisell Well-Known Member

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    Now you guys are scaring me.
     
  16. crc_error

    crc_error The Rule of 72

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    Most fund managers post average returns, you get their daily unit prices for the last few years and make your own spread sheet.. This is why what Sim is doing, I think will be very useful.

    Point is, you need to be in the fund for a few years... so you get a good average return.. And this is why I don't like these 'one hit wonders' who return 80% one year, and this result skews the 5 year average making it look like they consistently are returning 20%+ when really one big year is responsible for the result.
     
  17. crc_error

    crc_error The Rule of 72

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    Nothing to be scared about.. this is why its important to have a mix of assets, so it smooths out the ups and downs.. not all of them will grow at the same rate, some may be static during a period, while another is running hard.. and visa versa.

    Even though one fund may not be doing much now, its important to stick it out, as you might get out just before it has a strong run!
     
  18. Simon Hampel

    Simon Hampel Founder Staff Member

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    The market doesn't always fall quickly - sometimes it drifts sideways or downwards for an extended period. My system copes with these quite well.

    Unfortunately it doesn't yet cope with sharp falls (still developing a strategy there!) ... but as you said, you don't want to miss the bounce. The unfortunate part about holding through a correction is margin calls (which are usually avoidable with a conservative LVR) ... if you get a margin call, it will be at or near the bottom, and you'll then miss out on the best of the bounce *sob*.

    I'm still refining the system - particularly the sell side ... but the general principal is still to hold long term - the costs of churning the investments are too high to do it frequently. My system is more of a portfolio re-assessment tool than a fund "trading" tool.

    My argument is that for the 9 months when that sector basically did nothing, I've made X% on some other sector. With margin loans at over 8% (and inflation as well), you need to be seeing good positive returns on your investments or else you are going backwards quite quickly.

    For non-margined investors, these arguments don't hold (only the inflation bit), so it's not as critical to be seeing positive returns.

    I'm thinking of putting some additional rules into my system, such as being allowed to sell only once per quarter (to force you to avoid reacting to short term fluctuations) ... but that will be very difficult to do in reality - especially for the daily portfolio watchers amongst us :rolleyes: ... and I'm not sure how much risk that would add (or whether it would even defeat the purpose).

    ... as I said - I'm still developing and learning!

    (PS. just got my SMSF rollovers in place so I have cash to invest there too now - but I'll be taking a buy-and-hold long term approach to that money ... although it will get regular reassessment to ensure the investments are still appropriate).
     
  19. crc_error

    crc_error The Rule of 72

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    Sim, I think we are all learning, and thats why good discussion is great! There is no 'correct' way and 'wrong' way to invest. The wrong way would be to do nothing!

    Just a question, do you invest in residential property Sim? What are your reasons to do so or not to do so?

    Tom
     
  20. Simon Hampel

    Simon Hampel Founder Staff Member

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    Definitely - I currently have multiple IPs in Adelaide (I'm originally from there) - all purchased more than 5 years ago (and have done very nicely thankyou!!). Once we manage to buy a PPOR in Sydney, I'll definitely be looking to buy more IPs.

    I like residential property because it is easy to get cheap leverage and it comes with its own income source (although that may be negative in the short to medium term). Finance is fairly low risk (no margin calls), and property gives you a very solid asset base for other investing activities.

    I believe in holding BOTH residential property and shares / managed funds. I think they work well together.