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Navra 3.4% for past 6 wks

Discussion in 'Managed Funds & Index Funds' started by Giddo, 15th Feb, 2007.

  1. Giddo

    Giddo Active Member

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    I note that Navra has produced 3.4% in their Aus Retail fund for the past 6 weeks.
    Annualised I suppose this would exceed 28%. More if as in my case you are margined up a bit.

    My question to the Gurus on this forum is this?

    Hypothetically, wouldn't an investor be better right now to take his profit by selling down his Navra investment?

    eg 100000 invested and margined to 200,000 in the Navra fund. assume the starting pouint is Jan 1.
    200,000 x 3.4% equals 6,800 profit, which is reduced by a margin loan at say 9%. This works out at about $1040 for the 6 weeks.

    Nett profit before tax would be $5760. Annualised = $49920.
    This works out at about almost 50% interest on an annualised basis.

    I doubt that this return will occur (ANNUALISED).

    This may be a silly qustion, but why not take the profit, and re invest later when a correction in the Navra system occurs. I I am sure the unit price will oscillate up and down .:) :confused:
     
  2. MrDarcy

    MrDarcy Well-Known Member

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    Once labelled, DCT of a DCT fund.

    First problem is in timing. It takes at least a few days to a week to buy and sell units when using a margin lender. The price count go either way in that time, and probably the wrong way :mad:

    Good thinking, but for me the time scale would be in buying/selling in months not weeks.
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    This pre-supposes that there WILL be a correction, and that it will leave the unit price lower than it is now. There is no way of knowing whether this will be the case - it is pure speculation.

    It comes down to you making a judgement call - and it could work either way.

    Don't forget that you will need to take the post-tax figures into account - if you realise profits now, you will need to pay tax on them, and if you have held less than 12 months, you won't get any discounts on your CGT either.

    I'm not in favour of trying to time the market like this - especially with a fund like Navra which is designed to take advantages of corrections !!! Sure, in the short term, your assets will drop in value, but the whole point of DCT is that the fund will capitalise on the opportunity to trade those movements. What's more, it does it by reacting to what the market is doing, not by predicting what it thinks it will do in the future - which is what you are suggesting.

    That being said, I have just sold off a small portion of my Navra holdings because it had grown beyond my target value for the fund ... I'm selling down about 5% of the holdings and reinvesting that into one of my other funds which isn't yet at it's target value. I do this with all of my funds, and I do it based purely on the numbers, not on any form of prediction about where the market will go.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I disagree ... DCT is fundamentally a reactive methodology - it acts based on what the market IS doing, not on what it THINKS it will do.

    You can't effectively do this yourself with managed funds because of the delays between buy and sell orders and lack of intra-day trading.

    Predicting the market is not DCT.
     
  5. MrDarcy

    MrDarcy Well-Known Member

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    Hmmm, the humour was obviously lost here. :rolleyes: But anyhow, who said that the trading of units would be done on predictions??? The value of the units represent the value of the underlying shares and can be traded the same as the shares. If anyone wanted to of course.

    Yeah, like I said.
     
  6. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Ah well, I applied the same logic and just sold my entire $600K odd worth of Navra holdings. I'm betting on a small correction back to around the 5600 support levels where I can buy back in. I also wanted to get the funds out of my wifes name and across in to the HDT. So now seemed to be a good time with the market at record highs and well above long term trend. Time will tell if I did the right thing or not.

    I'm also taking the opportunity to shop around with the margin lenders again for a better rate.

    Cheers,
    Michael.
     
  7. Nigel Ward

    Nigel Ward Team InvestEd

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    Giddo

    Annualising for any period shorter than 1 year ;) is at best unwise and at worst downright dangerous and misleading in my view. The shorter the period the more it becomes dangerous and misleading...

    I appreciate you seem to recognise that danger in your post...but want to do it anyway :p

    We can all fool ourselves with picking a short period where things have been
    performing well and project that onto an annual basis. Do it in the 6 weeks where your share or fund in question falls 3.4% and then you'll really scare the pants off yourself :eek: :D

    I know this doesn't go to your specific question, but I just wanted to look at what you're doing (i.e. annualising based on a very short period) if that's going to form part of the decision process.

    Just my 2.2 cents worth (or is that 803 cents worth annualised? :D )

    Cheers
    N.
     
    Last edited: 15th Feb, 2007
  8. Tropo

    Tropo Well-Known Member

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    Sometimes I wonder why people are trying to sell when market is strongly trending up...The best time to sell is when market reverses.
    Trying to predict market's next move is a wealth and health hazard.
    Last time when XJO broke long term resistance line around 5000 level (see weekly chart) market moved 400 points up....and pulled back.
    Those who sold around 5000 level (round number) missed on 400 points gain.
    Today XJO just hit and almost broke for the second time the same line again.... Does it mean that 6000 level is the end of the road??
    I do not think so...
    Market will pull back, but it does not mean that we face correction.
    Frankly there is no reason for correction as such, because other world's markets are doing reasonably well - so far.
    On the contrary.... if more "gurus" talk about correction, the higher market may go up (that is what happened last time).
    Caution should be always in place, but sudden bearishness only because the market hit round number is a bit silly and superstitious (IMHO).
    :rolleyes:
     
  9. bundy1964

    bundy1964 Well-Known Member

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    Some cleaver maths on my WOW shares would give me 520% return p/a not including dividends.

    It's a bit like dating a woman 20 years younger than you, grab it while you can but don't expect it to last ;)
     
  10. perky

    perky Well-Known Member

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    I am tempted to sell my Navra holdings - but will not be.

    Reasons:
    I correctly picked the correction last May - to watch the market drop by around 8% and Navra unit price drop by around 2% - I think I ended up 1.5% in front !!! This time around Navra has over 30% in cash holdings - they have underperformed for a while now - so when the correction does come it should finally outperform the market !! Well at least IMHO.

    The correction will come - but when? As Tropo said , it could be a while away. The US markets are still powering along , and we tend to follow them.
    I am still keeping a very vigilant eye on the markets though !!
     
  11. Group Hugs

    Group Hugs New Member

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    Interesting Perky,

    One quick question that springs to mind is, When you say.."This time around Navra has over 30% in cash holdings.." How do you know this? Where can that information be sighted.?

    Many Thanks in Advance

    Group Hugs.
     
  12. perky

    perky Well-Known Member

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    Right here , you will see that at the end of January they had 39.5% in cash. That must be some kind of record or close to it for the fund - to have so much in cash??
    Obviously the Navtrade system believes stocks are "overvalued" at the moment.
     
  13. redrover

    redrover Well-Known Member

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    Great safety margin. However how does it equate to have only 60% invested while servicing a LOC and margin loan as at 100% using the equity in property for the investment into the fund such as Michael had before he exited the other day. Even though the fund may be in cash you are still servicing the underlying debt to fully drawn so when a correction and upswing does come into play it will have to seriously outperform to cover the carrying costs. Is this right!!
     
  14. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Not sure I understand your point redrover ? The fund is currently averaging over 15% distribution per annum ... that's more than enough to cover the costs of being 100% leveraged !
     
  15. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Redrover,

    I think I get where you're coming from. The question is, why would I borrow money to invest in a fund that's going to hold a large portion of those invested funds (40%) in cash? The "invested" 60% would have to do jolly well to offset the nil returns from the cash component to beat my borrowing costs.

    True, but to answer your question you need to look at how the fund operates. Its a trading fund, so is holding cash disproportionately high now as it is anticipating a pull back and good buying opportunities. Its not a buy and hold fund so you can't expect 100% investment in the equities market at all times. It is this exact trading methodology that creates the value it extracts from the market and goes to getting the returns Sim posted above.

    I aim to buy back in as I'm fundamentally aligned with the strategy of this fund and to be honest I could really do with the additional cash flow. The only reason I sold out was to use this high valuation period to swap funds in to my HDT and get a better margin loan rate. I'm hoping to time my re-entry after a modest pullback of even 100 points to around 5800-5850. If I can't get that level then I'll buy back in even over 6000 because I still believe there's a lot of legs left in this market and want to be in it for a fair while yet.

    I'll probably also stretch my margin now too. I was at a 50/50 LOC to Margin Loan split before and am thinking of stretching that to 30/70 and taking my total invested amount from $600K odd to $1M odd. I aim to split the distribution payments to 30% re-invested and 70% distributed. In that way my re-invested dividends should offset the capitalised interest on the margin loan portion of the total borrowings and avoid any nasty margin calls. If I wanted to be more conservative I could re-invest 50% or even 70% assuming the fund will only match my borrowing costs in performance. That might all be a bit technical, but if you work it through you'll see what I'm doing.

    Anyone else take this approach with re-invested distribution percentages to offset capitalised margin loan interest? Or do you rely on that old Steve adage of 5% growth as well as 10% distribution as the funds goals. I'd rather not bank on that growth and would use part of the distribution to offset the margin loan interest.

    Cheers,
    Michael.
     
  16. MJK

    MJK Well-Known Member

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    What I do Michael is this...

    I have 50% of my managed funds invested in Navra and the othe 50% in various other funds ranging between growth shares to property trusts.

    I get the Navra income distributed to me for cash flow and reinvest the other distributions back into the Growth funds. The income and capital growth in the non Navra funds is easily enough to cover interest capitalisation.

    MJK:D
     
  17. AndyB

    AndyB Member

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    I have set up similiar scenario;
    • 2 funds Growth. This helps with margin loan interest capitalisation, as well any distributions from these also get paid into margin loan.
    • 2 funds Income. All distributions get paid into offset account.
    My goal is to generate extra cashflow to service IP holding costs. For last 12 months I set a modest target of $150/week after costs ie LOC interest. So far this has been achieved, so plan is to slowly ramp up total investment over the next few years.

    Regards
    Andrew
     
  18. perky

    perky Well-Known Member

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    I am currently 40% growth funds, and 60% income.
    I too am waiting for a pullback, so I can invest 200k into more income producing funds. I need it to offset my negatively geared properties - recently I have had to offload my last two wrap properties (so there goes that income).
    I have been thinking of MPIF and Colonial Prop sec fund - but will seriously consider putting more into Navra if "the price is right"....just depends on what sort of correction comes and how much it affects Navra compared to LPT's.
     
  19. AndrewG

    AndrewG Well-Known Member

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    Hi Andrew,
    Your target figure of $150/week is exactly the same as my own short term goal to achieve. You mention you have 4 funds to accomplish this, do you mind telling us what these 4 are?

    Andrew.
     
  20. voigtstr

    voigtstr Well-Known Member

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    When is navra's next dividend payment? do the unit prices generally drop just after a payment?