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LOE Margin loan drawdown

Discussion in 'Managed Funds & Index Funds' started by lorrimer, 2nd Dec, 2007.

  1. lorrimer

    lorrimer Well-Known Member

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    Brisbane, Queensland
    I recall reading on here sometime ago about a LOE strategy that involved holding growth funds and simply drawing down cash from the margin loan as required.
    The more I think about it, the more it makes sense in my personal situation.
    Not only could I drastically reduce my tax bill but I may also become eligable for some Family Tax benefit which would be very useful.
    The question is are there any funds out there that fit the bill. Something conservative such as Navra, but that retains growth in the unit price rather than paying it out, would fit the bill.
    Has anyone come across such a fund or have any ideas?
     
  2. coopranos

    coopranos Well-Known Member

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    There isnt any particular fund you should be looking at, the idea you are talking about would imply that any growth fund would be "ideal".
    When you find one that is guaranteed to grow, please let us know!
    Also, I assume by Navra being "conservative" you mean it only trades out of the ASX200.
    I would think any Blue Chip Aus share fund would be just as "conservative"
     
  3. DaveA

    DaveA Well-Known Member

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    No becuase it holds 50% of its assets in cash....

    i think ull find most growth funds wont do this....

    what about an eft? Not that i know much about them but do they only distrubute dividends that they get, or do they run along the same rules as trusts (have to distribute net income?)
     
  4. samaka

    samaka Well-Known Member

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    99% sure ETF's (all of them) distribute dividends. My understanding is the whole point of an ETF is to replicate buying a whole heap of shares in a single purchase.

    EDIT: To clarify - there's no fund manager deciding whether to hold cash or invest, or re-invest dividends from the company. Any dividends that the ETF receives is held until the ETFs distribution date.

    I don't think the people running the ETF do anything with the dividends received until they transfer it to you. Whether they could or not (legally), I don't know.
     
  5. lorrimer

    lorrimer Well-Known Member

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    I think I'm right in saying that any income a fund generates from dividends or trading has to be distributed by law, as such reducing the unit price.
    I was wondering if there is a fund manager out there that had managed to find a loophole in this requirement and can retain all the growth in the unit price by not paying any distributions.
    If Navra could come up with such a product I'm sure it would be extremely popular.
    Perhaps there is an overseas fund that isn't subject to the same requirements, anybody know?
     
  6. coopranos

    coopranos Well-Known Member

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    When they do I will have a product that allows me to do the same with my employment income so I never have to pay tax.

    And in doing this it misses 50% of upside potential, and only starts investing when things start moving south. Some may consider this even more risky.
     
  7. bundy1964

    bundy1964 Well-Known Member

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    AGF if you only want growth, you rely on China still growing though.

    STW - ASX 200 index does pay dividends and has good liquidity.

    SFY - ASX 50 index pays a dividend and is not all that liquid ie no trades today at all.

    ARG - dividend and no set index.

    AFI - as above.

    MLT - ditto.

    SLF - ASX property index, pays a dividend.

    GOLD - no dividend but will it grow and is a one trick pony a good idea?