Managed Funds Is now a bad time to invest in MF's? Your thoughts please...

Hi all,

I'm a long time lurker on these forums - first post in a good many months. I've sat on the investment sidelines for a number of years now, with a fair lump of cash (from a UK property sale) sitting in a savings account earning 6% (or thereabouts) pa. The main reason for not investing this cash elsewhere is nervousness, or rather the perpetual fear that my investments will tank - so I've sat on the sidelines and missed 3 or 4 boom years.

So I've finally decided to bite the bullet, with a $100k portfolio (80% managed funds, 20% direct equities) - $50k my capital and $50k margin loan - as much leverage as I'm comfortable with for now. I'm not looking to sell out of the portfolio in less than 7 years. I have done research myself, but have also had a lot of input from a financial adviser. I know that opinions vary as to the benefits of using an adviser, but all I can say is that I'm no professional when it comes to understanding the markets, the guy I'm using is via a word of mouth recommendation from a couple of friends, and he charges a flat 1% fee of invested funds (no commissions) so I'm comfortable that I'm getting reasonably objective advice. Proposed portfolio is as follows:

Property
RREEF Global Property (ex-Australia) Fund - $4k
Vanguard Wholesale Index Property Securities - $4k

Australian Equity Funds
Challenger Australian Share Fund - $9k
JANA Australian Share Long Short Trust - $9k

Australian Direct Equity
Westpac - $5k
Lihir gold - $5k
Wesfarmers - $5k
QBE insurance - $5k

International Equity
AXA Global Equity Value Fund - $10k
Hunter Hall Value Growth Trust - $10k
Platinum International Fund - $10k
PM Capital Absolute Performance Fund - $10k

Hedge
HFA Diversified Investment Fund (Hedged) - $10k

So two questions really:

1. Any thoughts/comments on the above portfolio would be appreciated
2. Do you think that I'm nuts (especially given that's it's my risk averse nature that has kept me on the sideline for so long) to be jumping in now, when the global outlook is so uncertain. Should I 'wait and see' for another 6 months??

Thanks!
Starkers

 

I won't comment on your particular fund choices, but if everything tanks in 6 months and you hold it for the 7 years as you stated above, do you think you'll still get a good return?

Do you need the income from the investment for other purposes (funding rental shortfalls or living expenses)?

If your purpose is to sit the money away for 7 years (just like you did in the bank) then I'd be confident that any 6 month drop would be recovered well within 7 years.

 

You've already waited 4 years. 6 months could easily turn into another 4 years if you let it go again. If you are concerned about putting it all in at the same time, then consider drip feeding the amounts in. For the smaller funds, buy one this month and the next one a few months later, and for the larger funds, put a third or half in now, and then feed the other amounts in over the next 6 months.

In my personal opinion, unless you intend on increasing your direct share portfolio in time, I wouldn't bother investing 20k in 4 different shares. It's kind of pointless, considering your ASX exposure funds will very likely have them anyway. But, if you are intending on eventually going more direct then go for it.

Another thing to consider (personal bias) is LIC's and ETF's.

BR

 

Take your pick:

a) Yes you're nuts because there's a good chance the US will enter a recession over the next year.

b) No you're not because China, India and the Middle East are going gangbusters.

 

Personally I chose option b. But given Starkers has been sitting on the sidelines through one of the best bull runs the ASX has seen, another 6 months of waiting through a volatile period probably woudln't hurt. At least then the implications of the sub-prime fallout will be known and you can act in an informed manner. That is, of course, provided that you do act in six months time and not look for another excuse as to why its all too risky.

Cheers,
Michael.

 

I agree with Michael re waiting out Sub prime to a point but I prefer the toe in aproach. My fist investment into MFs was 50K...then I waited 3 months to see how it went and then invested a further 50k...then waited and so on.

Over time you will develope a comfort level with your investments if you have some success.

If you dont have success you will have only invested smaller amounts that you can handle.

MJK

 

Thank you all for your comments/suggestions.

I don't envisage needing any of the investment income for any other purpose (rent, etc), and as I do intend to hold the investment for the long term (well at least 7 years) any drop in the short to medium term should be recovered - on that basis I think I'm going to go ahead as there is every chance that if I don't I'll find some reason to hold off for ever! I have, however, decided to invest $50k now and the remaining $50k monthly over the next 6 months - I can apparently set this up with relative ease via the 'wrap' (MLC masterkey custom) that I'll be using (I know this adds an extra fee overhead but gives me a good degree of flexibility and access to wholesale funds).

In regards to the direct equities - I'd like to think that in the long run as I learn more about the market this will form a larger portion of my portfolio - hence the 20% direct equity investment. Will see how I go and if I decide that stock picking is not for me will switch this into managed funds.

My next step on the investment ladder is to look at purchasing my first IP at some point in the next 12 months - but that's a discussion for the real estate forum!

Anyone have any specific comments on any of the MF's chosen for my portfolio?

Cheers

 

Congratulations Starkers.

Good decision