Managed Funds Leveraging into Navrainvest for kids

Hello everyone,

My 12 yo daughter is coming up to $1000 in her savings account so its time to invest. I've mentioned shares (Navrainvest) and shes very excited

Can anyone advise if I buy $1000 in say Navrainvest aussie shares for her can I leverage her into $1000 of the US fund. Is there a company which doesn't have high fees and would be suitable?

 

On that note (kids) I've seen a few posts about the place regarding purchasing shares or into a fund for children, what's the process for either as its something I've thought of recently as well?

 

Hi Muz

Check out the savings plan option - my son started with $5k in Aus retail fund, was able to get $8k margin loan with LE, then he puts in $200/month and LE puts in $300/month.

The result is that he has virtually doubled his $5k investment in 12 months.

Rgds

Kevinb

 

Leveraging for kids

Hi Kevinb,

Thanks for the info, much appreciated, but my daughter doesn't get enough pocket money to save $200 per month

Have found by searching on infochoice that LIFT capital do not have a minimum lend, so have requested their pds so I can check out fees etc to see if its doable.

Thanks everyone ,

 

let us know how you go..

I seem to recall Buffet or someone buying shares with thier father when they were a kid, is this still viable (i.e a small portfolio for the kids in thier name, rather than say a dollarmite account?)

 

For much better returns on your kids' money (while saving to invest) check out the Bankwesst Account (kids bonus saver) returning 10%.

David

 

David I reckon that account is an excellent way to start off and build an investment stake. However, once your child has sufficient amounts to invest in shares, well...historical 11-12% pa growth plus franked dividends will even beat that account

I agree with Sim though. If you have a trust just invest their funds through the trust and notionally maintain a separate "account" for their assets.

Cheers
N.

 

Like Sim I thought smallest margin loan was $20k. Our daughter has currently 16,943 units in navra retail and is doing the savings plan. I have explained the margin loan to her and had it in our mind to borrow $20k when she reached $20k.

She is 23 and this money will be spent on deposit for a home asap. My concern is that if there is a market downturn at the time she wants to purchase property that her loss will be compounded by margin loan. So in her situation - to margin or not to margin, that is the question.


cheers
Jenny

 

Hi Jenny

Sharemarket investments should have a minimum 3-5 year timeframe according to investment theory to allow you to ride out exactly the kind of volatility you've mentioned.

If your daughter wants to use the funds within that time period to buy a house (and can't afford to have a substantial drop in her funds during that time) then I'd suggest the share market is not the place to keep the funds.

But of course your daughter should get specific financial advice taking into account her circumstances.

Good luck with it
Best regards
N.

 

Exactly Nigel. Start off with savings - minimum $25 per month (learn to pay yourself first). Then when it reaches a viable amount (arguably $1000) invest in a growth asset.

 

Leveraging

Hello everyone,

A quick update.

Well, daughter finally hit the $1000 mark and I contacted LIFT Captial today who said they are no longer accepting margin loans into Navrainvest

So have searched infochoice again and looks like Bank of Queensland may be the go.

Shall pop in and see them in the next day or two and let everyone know how I get on.

 

wouldnt the fees for setting up a trust for a child as well as the tax return be to much to make it viable? if they have 10000 invested and get a 5% distribution, you would get $500 and only slightly be over the kids threshold of ( i think ) $463, with franking credits on the 500 you should still pay no tax. Not many kids will have the ability to save $10,000 by the time they turn 18. I imagine no one under 18 could get a margin loan anyway, it would need to be in the parents name...

 

Kids. Thinking about how to invest for them...

This is the first thing I would be thinking about for a kids investment, the kind that would last decades instead of years. And I have done some thinking in this area before I read this thread.

Is the investing vehicle going to be around in decades as opposed to years?

A nice robust investment vehicle such as... ahem...

1) direct property (That Jan Somers is onto something)
2) Index funds....... (sorry)

Probably other things as well.

Banging this drum again I am.. But I just look at the investing record of all the hopeless share pickers I have known in my life (including myself and my Dad god bless him) and ask what I would do for a bottom of the drawer investment for the future. My choice would be the country of Australia, as opposed to very small concentrated bets on a few companies.

There is this issue of survivorship bias which needs to be considered, beats me how you could have reasonably chosen to invest with Warren B way back when using anything other than blind chance, and there are precious (really precious) few fund managers who have delivered alpha over decades.

Take a random selection of managed funds from X years ago and find out how many are still around.

I will in the future consider managed funds for myself and my family, but they would be playing a distant second fiddle to a core of index offerings.

 

Andrew,

Any idea what index fund has the lowest MER? Streetracks? Vanguard?

 

On a quick note - I've invested funds for my son (via a trust). If I distribute money to him (under $1000) in the financial year does he have to have a tax file number?

 

There was a good article in Wednesday's Australian about these funds and their MERs, wealth section page 5.... From that article... 'Most retail index funds have MERs of 0.75 to 1.4%' With the State Street Global - Aust Index Equity Trust being the lowest at 0.15 (State street issue Streettracks)

I think the Index ETF's such as Street Tracks have the lowest MERs of all the products I have seen, was surprised to see how high the MERs of the Vanguard products were when I checked out their website.

On a personal note I was ready to invest in such an ETF a few weeks ago and only stopped when I found out how much it cost to set up a margin loan in my silly (and still waiting for a purpose) HDT. My idea was to buy and hold forever with reinvestments with a view to using the dividends for income in the future, something I will likely do in my own name once I start making an income again.

Also this article mentions the excellent core/satellite idea which I really like and have borrowed.

** edit.. Though there were a couple of area for investigation mentioned by Travis Morien in that article.

I noted these 2 for future research.

1) Dimensional fund advisors funds
2) Macquarie True Index funds

Both of which I'm not sure how the retail guy gets to. The Macquarie product looked interesting as it's an actively managed (they just can't help) product where they guarantee!? the index returns. I have this strange fear of all things Macquarie however based on the magic they spin with their derivatives dealings, I just wouldn't feel comfortable investing in their products for a bottom of the drawer thing, probably an irrational fear though.

 

I think the best investment for kids with low income but enough to get super has to be an after tax contribution to super. A govt guaranteed 150% pa return. And the cost to get maximum benefit is about the same as 1 pizza home delivered a week.