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My new plans.

Discussion in 'Investing Strategies' started by Compleks, 3rd Jun, 2008.

  1. Compleks

    Compleks Well-Known Member

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    My situation will (hopefully) be changing soon.
    I'm looking for additional employment with a big gym. I will still remain self employed and work from my current gym, but I could use the regular hours and some more cash flow.

    As you may have gathered, I'm a serial procrastinator. So I have devised a plan which will hopefully put a stop to that.

    I just opened an account with Macquarie Prime/Cash recently. I will also be opening a super fund soon.
    What I want to do is set up regular contributions to both of these accounts (probably just $100 a week to start with).
    I'm also thinking of maybe investing in the Navra fund (need to research that a bit more), again with a regular contribution plan ($100).

    So, hopefully I can put away $300 a week into these facilities (shouldn't be a big problem). With the Macquarie account, I would let it accumulate to a decent figure and then invest it. I'm considering starting with a $5,000 investment in STW to get me going.

    I would also work to save the rest of my income to be used in other investments, or to add to any of my existing investments.

    Comments? Criticism? Thoughts? Anything?
    I just feel at this stage that automated contributions are going to be the best thing I can do for long term success. At least while I'm still learning.

    Cheers!
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I wouldn't bother putting much money into super at this point - you are very young still and are more likely to need that money in the short term. PAYG employees typically put a minimum of 9% of gross salary into super, so that's probably a good maximum to aim for. Don't forget that you can't get to that money until you retire - so don't put money in that you think you may need.

    I'm not completely sure I understand what you are planning on doing?

    Are you planning on investing in STW now? Or accumulating funds in something else (Navra?) before moving that into STW?

    Just remember that Navra moves with the market - if the market drops, so will the value of your invstment, and if it does so just before you plan to move to STW, you could be faced with having less money than you have put in. Depends on your timeframe really.

    I'd just pick one or the other (or both) and put your money in and leave it there (you can add to it as well - but don't plan on moving it for 5+ years).

    If you are thinking you'll need access to the money within the next year or two, just stick it in a high interest savings account ... 8% returns with practically zero chance of losing your capital is pretty hard to pass up in the short term!
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I agree - a plan like this is an excellent way to get started.

    Many managed funds offer this (I think Navra does), or you can do it with a some high interest savings accounts too.
     
  4. Compleks

    Compleks Well-Known Member

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    Thanks Sim.

    I was planing on using the automated transactions into the Navra fund (or something similar). I wouldn't be touching that money for 5-10 years. I hope to build it up gradually into a nice passive income one day.

    I would be using my other savings (from the macquarie cash account) to invest in shares/ETF's etc...

    As for the super, I figured that I could easily put away $100 a week without loosing any sleep. I could cancel the transactions anytime if money becomes an issue. I'm just slightly worried that in my line of work I probably won't accumulate much in the way of super. It's probably more of a safety blanket than anything.

    Do you think that $100 would serve me better in the long run if I were to put it elsewhere?
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Given that you don't have any other source of super contributions at this point - and given that super is very tax effective savings - it's pretty difficult to argue against it.

    It's all about balance really. The more you put in when you are young, the better off you will be in the future (more time for compounding to work its magic), but at the same time, if you put too much in, you'll potentially suffer during some of the most capital-intensive parts of your life (eg buying a house, buying a new car, getting married, etc).

    $100 per week is the equivalent of someone earning $60,000 putting away 9% of their salary. If you can manage that - you'll do well.

    I think automated investment into something like Navra is an excellent idea - you can reinvest distributions in the short term to compound your returns and then down the track you can choose to take the distributions as cash to help suplement your income if necessary. Just remember that you'll pay tax on the distributions in the year you receive them - but in the short term, that's not likely to be much of a problem for you being on a lower tax bracket.

    You may also want to consider doing the same into a growth fund if you can manage it - maybe something like CFS Geared Share fund over a 5-10 year period should (in theory) outperform most things (although with much higher risk and volatility).
     
  6. Compleks

    Compleks Well-Known Member

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    Awesome. Thanks mate.
    If I re-invest the distributions (from a Navra fund) are they still taxed?

    I also have money in 3 managed funds
    -CFS FC Inv - CFS 452 Geared Australian Share
    -CFS FC Inv - CFS Colliers Geared Glob Property Sec
    -CFS MIF - Property Securities Fund

    I've been neglecting them since I lost a bit of money. Do you think I should also contribute to each of these funds? Or should I just focus on building up the geared 452 Aus. share fund?

    I thought it would also be a good idea to take advantage of the super co-contribution scheme (if it's still in place?).

    Cheers.
     
  7. jrc77

    jrc77 Well-Known Member

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    Distributions are still taxed - even if you reinvest them.

    Regards,

    JR
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Definitely - forget the CFS Geared Share fund I mentioned if you already have exposure to the 452 fund - by putting money into a fund like this regularly, you get a "dollar cost averaging" effect, which sees you buying more when prices drop. Given you are taking a long term view with these funds, then having an automated investment into them will still take advantage of drops in the market.

    I'm pretty sure you can set up CFS FC to allow you to make regular investments and automatically allocate your money in a split between multiple funds - so your $100 per week might be split 50/50 between the two CFS FC funds (you get to choose how the money is split). That might be a good way of doing it.

    One thing to keep in mind is that if you ever sell some of your funds - by using regular investments you are increasing the complexity of calculating capital gains come tax time when you sell. However, if you are taking a long term view, I believe that the benefits of your plan outweigh these potential costs. Some good software will help you with that anyway (I'm actually planning on writing some software to help with this process after facing exactly this situation last fiancial year - don't hold your breath though, too many other projects on in the short term :rolleyes: ).
     
  9. Compleks

    Compleks Well-Known Member

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    Alright, this all sounds great.

    I'm only thinking long term at the moment, so everything I do has a minimum 5year time frame on it.
    What I'm still unsure of is how, or if to exit these funds. Once established do they also pay out distributions that I can take. I think I remember selecting the option to re-invest distributions, but I'm not 100% sure.

    Anyway, thanks for all the advice. I actually feel like I might begin making some good progress from here on.

    I just need to finish up my resume and secure myself another job :)
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You just need to measure these investments against your goals for the timeframe (5+ years in your case) ... do you think that these investments are still suitable to be holding over the next 5+ years?

    I would suggest that Australian shares are a good place to be in - and a fund which invests in largely blue chip shares (which I think the 452 fund does), is probably not a bad place to be. There may be short term volatility in the market, but over 5+ years that should be largely smoothed out I'd hope.

    Property is a bit more problematic. The property market has been hit hard by credit problems, a loss in confidence, and a slowdown in economic activity worldwide (except Australia - but the listed property sector here has been hammered too!).

    At the end of the day though, good quality property assets held via suitably conservative vehicles (without too much gearing) should continue to produce income - and income makes the world go round. If you believe that the assets the CFS property funds hold are accurately valued and have scope for future growth, then why not hold them and continue to add to your investment while sentiment is so low?

    The flip side to this argument is to identify whether there is somewhere better for your money over the next 5+ years. There loss in value of those funds has to be earned back in exactly the same way as any other investment has to earn its returns - so there's no point holding onto these if you believe you can get better returns elsewhere on what capital remains.

    That's the difficult part - do you buy resources because they are "hot" now? Or do you buy property because it is "not" now? That starts to become a philosophical debate!

    Personally I'd be looking very hard at the global property fund - and doing some research into the prospects for property securities worldwide. Otherwise, I think Australian property has been oversold (or is at least relatively fair value now compared to being overvalued last year), but still question how much growth we will see until interest rates start dropping again and credit eases up.
     
  11. Compleks

    Compleks Well-Known Member

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    Hmm... good question. I'm not sure.

    I hope so too. I probably have the most confidence in this fund, for some reason.


    Well I would like to think so, but I really don't have much knowledge on the fund, or the property market. :

    That's actually a really good point. Makes alot of of sense to me.
    I have been hanging onto them just because I bought in with the intention of holding them as a long term investment, and didn't want to make a loss by taking my money out. But I guess if I were to use the money in a more effective manner it would be wiser.
    I'm still not sure what to do about these funds...


    Thanks. Most of that is kind of over my head technically, but I understand what you are getting at.
    I guess I should be re-evaluating my situation and my strategy.

    My first mission is to secure some regular shifts with some reliable income.