Managed Funds My first investment - I would appreciate your advice :)

Hi investEd ,

I am in my early twenties. I have been working my butt off, renting and living cheaply for many years now and I have managed to save $100k so far, with an additional $1k each month left over after rent and living expenses. I have realised that earning money this way is hard work, and I would really appreciate your advice to invest it. I plan to continue renting for the foreseeable future, so I am looking for a long-term investment.

I don't have any confidence or knowledge to invest in individual shares, and I want to avoid the huge organisational effort of buying and selling property. I just discovered managed funds and I have been reading your forum. They look like a good fit for my circumstance (please correct me if I'm mistaken). I just regret that I did not discover them a few years ago because the returns have been phenomenal! No point dwelling on missed opportunities though, I need to decide what to do now.

I am planning to use investsmart.com.au to buy their popular / top performing funds like Macquarie - Small Companies Growth Trust and/or Perpetual WFI Perpetual's Geared Australian. Assuming that managed funds are the most sensible option for me, my biggest questions are:

1 - Is there a web site where I can see graphs for the past performance of managed funds (to try and identify a good time to invest)?

2 - Is *right now* a good time to invest my savings in a managed fund, or with the current world financial tremors should I wait?

Any other advice is also appreciated! Thank you.

 

I would also suggest that you study up on margin lending, to see if it fits with your objectives.

Tailcat

 

Hi Sim,

Thanks for your advice, esp. re: small co. and geared funds. Also great site, I look forwards to when you can add the other funds!

I don't want to spend the money for a minimum of 5yrs, more likely to be at least 10yrs. Could you give a sensible, but of course hypothetical example of a large, well known ungeared (or low geared) blue chip fund which can be bought through investsmart?

Also, do you have a maximum amount of money that you would put in one fund? I assumed that two or three unrelated funds would be adequate diversification.

Obviously, if your crystal ball were working, it would be advantageous to get out at the top of the market and get back in at the bottom. I guess my crystal ball is not working either. Keeping in mind that I'm in it for the long term, is "let it ride" regardless of big dips (and presumably recoveries) a valid strategy, or would this be unusual?

Thanks again, Anthony .

 

Pinkeye you've obviously worked hard to get where your are. Congratulations on your efforts to date.

May I suggest however that you now invest some of that hard earned effort on learning more about investing. Education and understanding your goals is the key to investing.

May I suggest you start with Rich Dad, Poor Dad, Ed Chan's How to Achieve Wealth for Life and then perhaps some of the property gurus books after that. The more you understand the more comfortable you will feel investing in different strategies.

 

Great stuff Pinkeye.

Wished I had been as switched on to investing at your age, and for working out that investing is something you need to do so that your savings aren't stolen from you via the inflation tax.

Read, read and read and do stuff.

Just cos I thought of it and I'm a shameless borrower of wisdom I will present Melanie McDonald's 7 rules of success, I also think they are pretty good rules.

1) It is better to know nothing and do a lot than to know a lot and do nothing.
2) Everyone falls over, it's how you react to falling that's important.
3) Do not blame another person, circumstances or yourself, just learn.
4) Don't burn your bridges, bomb them.
5) Be wary of gurus who advocate getting a passive income.
6) You don't have to be an expert on anything!
7) The secret to success = Try stuff. Some works. Some doesn't. You learn and try more stuff and have fun.

From the Capitalist Hippie.. A lesser known Aussie book but a pretty good read for wealth creationists I reckon.

100k in savings.. wow... nice effort

 

Oh.. and my previous post will be much more useful than this one possibly..

But read up on chasing performance, It's an issue I would be concerned about based on what you have written.

Other than that I would suggest the wisdom of Bogle, Buffet and Taleb (they all kind of agree on one thing when you research them) when it comes to investing in shares; would be a place I would suggest to myself to start if I was early 20's again.

And don't forget to read Jan Somers books. Property rocks as an investment in this country when done well, and some times when done badly as well.

 

Pink Eye,

Well done on your effort to save $100k!!!! Remember any quality investing is based around good saving, and regular investing combined. So you can't cut out the hard work! If you commit to a regular savings plan and regular investment of your money over the next 10 years, you should have well over $1 million to show for it!

I recommend you call Freeman fox and ask for their free DVD 'welcome to wealth' I attend their seminars, although don't use their services. The information they offer is very good.

Also remember there is nothing wrong with paying for quality advise. You have a large sum of money, so its something you may not be willing to make a mistake with. I like Freeman Fox's methology, so I would be confortable to recommend their financial advise. For the cost of $2000 a detailed plan may be worth it for you.

Also I suggest employing gearing.. ie borrowing money to invest. The best way to do this is using a margin loan. So if you put in $100,000 into managed funds, the bank will give you another $100,000, giving you $200,000 worth of exposure. Alternatively you can invest into geared funds, which borrow internally to magnify gains and losses. If you have a 5-10 year time frame, gearing is excellent.

The keys to success is invest regularly, ie each week/month, gear your investments, and diversify in various asset classes. Write down a plan, and a goal and stick to it! Don't get scared during the up's and downs of the markets.. 10 years time it wont matter. EDUCATION, read books, attend seminars etc o and last, START TODAY!

I would also be warey of funds with large 1 year returns.. stick to funds which show more consistant year in year out returns.. Sims website shows the actual gains for the year... not averages like published on most other sites.. I tend to look at funds with 5-7 year returns avaliable..

I'm like you on direct residential property.. far to costly to keep and transact.. plus putting all your money into 1 investment isn't a good idea I think.. plus if you need some of your funds, you can't just sell a kitchen! Property is good due to its gearing, but you can also gear shares/funds as well..

 

by the way.. I found this to be a GREAT READ!!

The keithj Interview - Somersoft Property Investment Forums

 

one more thing.. Compleks asked the same questions over the last month or two as he also started out... similar age as well.. have a read through his threads he started..

 

I didn't get that one either! Isn't the idea of building up a investment portfilo to get a passive income from it?

I guess someone may have a different goal for the money, like a Mc Mansion?! or a trip to the moon? lol

 

If you are going to do something, really go for it, don't leave the option of playing it safe around. Don't burn the bridges, bomb them, being careful not to hurt the bystanders of course.

Building a passive income isn't easy, it's tough work. Be wary of people who tell you otherwise.

To quote as closely as I can her ideas.

 

She may mean that in the beginning don't focus on income investments, but rather growth ones.

 

Haha, yeah. I harassed these guys constantly for quite a while (hell, I'm still doing it). Although I was starting with alot less capital, all the advice I got was absolutely awesome, and would apply to anyone starting out.

You also seem to be starting with alot more knowledge than I had (and probably even have now). So I'm sure that you will be successful if you set yourself some goals, and take action.

Taking action was the hardest step for me, but it's a huge relief once you do.

Cheers.

 

your post count is already 164

 

Not bad for a noobie, ay?

 

Wow, thanks to everybody for all the advice, too many contributors to name!

After reading for just one day, I think I understand "chasing performance" and I can see that my fund choice is not going to be as simple as the "most popular" or "top performing" funds from the investsmart site.

I am planning to start off without margin lending (for several reasons), however I will consider buying a geared fund. It looks like it would be easy to introduce margin lending later, once I have more of a feel for how things work.

I have been reading many other threads on this forum, including Compleks (who looks to be in a very similar position to me). I think for my conservative position, I will put a majority of money in blue chip / property. I may also put smaller amounts in small company / asia, with high hopes, but mostly as an experiment or a learning tool rather than a serious investment.