Managed Funds Navra fund outperformance of the S&P200 - #2

"..... to be where you were 4 months ago".

redrover,

Right now The Market (XJO) is trying to get back what it lost during Sep-Oct 05 pull back.
To do this XJO must hit/break 5049 level, and I am talking about this number for quite some time.

If we hit 5049 level, each point above this level will move us ahead.
Right now we are still in the "recovery" phase, and from today's high 4964.1 (my level is 4965) we need 84.9 points to hit the target !!.

 

"So I couldn't be happier with my structure but it's always worth examining to see whether it can be improved".

Gazza,

It is almost "mission impossible" to get good income + good growth and low risk in the one investment/fund.
BUT .... if you'll find one .... please let me know !.

 

Michael (and others),

1967 - 19.9%
1975 - 15.3%
1980 - 13.0%
1999 - 20.5%
2003 - 7.7%
2004 - 0.4%

You're probably wondering 'What the deuce?' Well, those figures are the years and - in percentage terms - that Berkshire Hathaway underperformed the S&P 500. That means that Berkshire made a return in those years that was *below* what the S&P 500 index did. Note that until 2001 Berkshire did not have a negative year. 2001 is the only negative year, incidentally.

Now, if you were invested in Berkshire in any of those years and you saw that the company underperformed the S&P 500 by that much, would you have pulled your money out of the company? Would you have considered other investments? Grnated, it's easy in hindsight to say 'No, of course not! What kind of fool would sell out of Berkshire?' Well, there are many more fools in this world than there are intelligent people.

The point I'm making here is: why on earth are people making a big fuss over one quarterly return? Wny? The standard line is to be invested in a fund for at least five years. Personally, I think a five year time horizon is far too short - but note that is my personal preference. That does not constitute advice nor do I recommend that to anyone else. Everyone's situation is different.

So back to five years. There are 20 - count them, 20 - quarters in a five year period. Fussing over one quarter and thinking about pulling some of your investments out of a particular fund to put elsewhere is quite silly, I think. Chasing returns is NOT a good strategy and it is certainly not investing! What happens if you pull some (or all) of the money out, put it into something that has been more successful over the last x amount of time (although why anyone makes investment choices based on past performance will never make sense to me) and it doesn't perform?

Pulling money in and out of investments trying to catch 'the next hot thing' leads only down one path: mediocre returns and almost certain failure. As I've said in the past, who here thinks Steve would be confident enough to charge fees ONLY on outperformance if he didn't think he'd be able to achieve that outperformance?

Investing is a game of patience, not hopscotch. Watching the fund performance on a daily basis is much akin to watching the movements of glaciers. By all means keep an eye on your investments, but panic is only going to be one thing to you - your worst enemy.

Mark

 

" why on earth are people making a big fuss over one quarterly return? Wny? "


Mark, it is "FEAR"!!!! Fear of loosing hard earned money.
Because it is in the nature of people. Some people cannot handle losses or smaller profits and expect others to do miracles for them. It is easier to blame others than themselves.That's why trading/investeing stock market is not for everyone. It is all about psychology!!!!!!!.

I guess a lot of people refuse to understand that Stock Market is two way street and they expect big return quarter in & quarter out.
It was said many times that past performance does not guarantee future performance but some people cannot comprehend this and they should put their money in the bank and forget about investing!!!!!!!!!!!!!!

 

Once again Tropo you and I see exactly eye to eye.

Mark

 

TryHard

You have no margin loan so makes a difference to your return obviously. The point which a lot of posters keep ignoring is Steve's methodology of "living off equity". You would seem to have put "cash" in - great. To access equity you need to get a LOC in place which is the purpose of this method therefore additional costs have to be factored in which means your return is going to be greater than those with borrowings, but hey that is valid and some of us are using Steve's strategy of borrowing to leverage into the fund therefore our returns will be smaller but potentially we have been able to buy more units!

To whoever asked have you been in from the beginning (or five years) - the answer is YES, but leveraged up big time six months ago. The fund has not been going for 5 years!

Tropo

I think you like numbers so here is something interesting to look at. Not the XJO itself but the 20 stocks that the fund is invested in. Figures are approx. from end Sept to yesterday, give or take a few cents.

AGL $15 now $18.50 STO $12.90 now $13.47
ANZ $24 now $24.50 TAH $17.40 now $15.20
BHP $22 now $26.63 WBC $21 now $23
BSL $10 now $7.90 WES $40 now $38
LNN $8.60 now $7.60 WOW $16.80 now $17.20
MBL $78 now $69 FCL $2.10 now $2.10
ORG $7.40 now $7.40 ORI $21 now $21.80
OST $3.90 now $3.80 CCL $8 now $7.72
PBL $17 now $16.40 WPL $36 now $46.70+
NAB $33.70 now $33.70 TOL $14/15 - now $11.50

PPX may have departed and TOL may be a recent inclusion.
The individual stocks are ahead for the most part and of course we dont know what proportions each stock was bought in at, how long held, when exited and re-entered etc., but overall they have performed well. The XJO may still be making up lost ground, but this selection has probably done well with the trading in and out!?!?

Redrover

 

Keep in mind that some of those opportunities may be getting close to realisation - the fund jumped almost 2% in one day, according to the YTD return percentage on the site.

 

Can someone please tell a share trading novice what "XJO" means? Looked up the Pedia but there's nothing there - maybe it should be opened up so that all members can edit it easily?

 

Xjo

Hey jscott

XJO is the ASX 200 (ie. about 80% of the overall market) - (I think from memory it replaced the "All Ordinaries" as a measure because the smaller stocks played havoc with the index too much - someone here will know

This link might help :
http://www.shareselect.com.au/showpage.asp?ID=The+Market+explained+-+Indices

and as you suggest, maybe Sim could arrange for someone to add the terms there to the Pedia Sim ? ;-)

Cheers
Carl

 

Interest vs. income ?

Sorry mate - I didn't explain properly. I have a Line of Credit and that's where I get the dough to put in NI. I rely on the income to exceed the interest repayments for sure. I haven't margined up because I am heavily invested in some property and need a redevelopment to be completed before I can gear up based on its equity. My point was someone with a margin loan would find the periods of lower performance tougher going, just as much as they'll be dancing a jig during times of high performance when they cream the income earned using Other People's Money.

It just seems to me a lot of people are posting a bit of panic and comparisons against other investments, XJO etc, all based on one 'ordinary' quarter for NI. But even the results for that ordinary quarter would pay the interest on a Line of Credit / margin loan at 8.x % p.a unless I'm missing something ?

I've got to sit down and do the "Living On Equity" series (http://www.invested.com.au/education/content/living-on-equity-part-1,
http://www.invested.com.au/education/content/living-on-equity-part-2, http://www.invested.com.au/education/content/living-on-equity-part-3) justice again, but I think any mention of margin loans in the Living On Equity examples assumes an investment timeframe a bit longer than 3 months ;-)

Cheers
Carl

 

Check this site : http://www.asx.com.au/research/indices/description.htm
It explains what the XJO is.

 

Tropo

I think you like numbers so here is something interesting to look at. Not the XJO itself but the 20 stocks that the fund is invested in. Figures are approx. from end Sept to yesterday, give or take a few cents.

AGL $15 now $18.50 STO $12.90 now $13.47
ANZ $24 now $24.50 TAH $17.40 now $15.20
BHP $22 now $26.63 WBC $21 now $23
BSL $10 now $7.90 WES $40 now $38
LNN $8.60 now $7.60 WOW $16.80 now $17.20
MBL $78 now $69 FCL $2.10 now $2.10
ORG $7.40 now $7.40 ORI $21 now $21.80
OST $3.90 now $3.80 CCL $8 now $7.72
PBL $17 now $16.40 WPL $36 now $46.70+
NAB $33.70 now $33.70 TOL $14/15 - now $11.50

PPX may have departed and TOL may be a recent inclusion.
The individual stocks are ahead for the most part and of course we dont know what proportions each stock was bought in at, how long held, when exited and re-entered etc., but overall they have performed well. The XJO may still be making up lost ground, but this selection has probably done well with the trading in and out!?!?

Redrover [/QUOTE]

Oh well....my projections are associated with numbers (levels) so I must use it.
I have got NO problems with figures which you attached.
They will get better with time = Do not forget that 1st quarter 06 has still 2 months to go.
Keep $miling !!.

 

Tropo,

I think you're a good guy and I reckon Mark's contributions have been great too, so I'll do you the courtesy of letting that one slide if it was in fact directed towards me. I think you'll know from my earlier posts that I am in no way governed by fear so I'll chalk that one up to a sweeping generalisation about investor psychology in general...

Mark, great points on how funds do not always ride a steady path. I'm completely aware of this and don't expect my current fund to beat the index in every period. I just wanted a couple of simple questions about fund underperformance answered without degrading the discussion into a pros and cons of various funds debate.

My questions were entirely brought about as a means of further educating myself as to the nature of my second biggest investment vehicle. Not out of fear, but out of good old fashioned self-interest. Anyone who doesn't want to understand how an investment vehicle with hundreds of thousands of their money invested in it is likely to perform in the short, medium and long term is not what I'd call an investor. These people are gamblers IMHO: "How's it work? I dunno, but it seems to be doing OK and everyone else is in so I better jump in too!" I, on the other hand, conducted significant due diligence prior to investing in NavTrade Retail and will continue to conduct my due diligence if I consider the fund to be operating below my expectations of it.

My questions were simple:

1. Is the under-performance locked in? Steve's answer seems to be yes with a "why do you focus so much on the index?" thrown in. OK, I can cop that. As I said, I don't expect to beat the index every quarter. However, earlier posts bu Steve suggested that this underperformance may NOT be locked in so I wanted clarification. So on to my second question...

2. Why didn't it beat the index, is it that the fund isn't suited to the current "straight up" market conditions? No answer as yet. I understand that the fund will do well in a falling market but it seems to be an underperformer in a rising market. But, once again, I'll reserve judgement until I get an answer from someone associated directly with NavraInvest...

The answers to these two simple questions allow me to better understand the intricacies of a very significant part of my financial strategy. If they demonstrate that the fund is a stellar performer in bad times but ho-hum in good times THEN I will talk to my financial planner about the benefits of diversification of my managed funds. I raised the question of diversification at my initial meeting but was assured that the fund has sufficient internal diversification. I'm just challenging this assumption based on actual evidenced performance.

I hope the answer to my second question is: We got stuck with some underperforming stock in this quarter, no biggie. We expect our performance to more closely match the index in subsequent periods. I do get slightly disenchanted with responses like "why do you care about the index, its only for calculating management fees?" I disagree with this completely as the ASX200 was created as the benchmark index for funds managers due to its equity and liquidity. There's a link to this definition of that index under the ASX website. It is fundamentally the yardstick against which all managed funds are measured. In the last period NavTrade Retail did not measure up to this yardstick too well.

I'm sorry if any of my commentary came across as being overly negative of NavTrade or based on negative emotions such as fear or doubt. I am still a strong advocate of the Navra group and of NavraInvest specifically as you'd no doubt be aware. However, I have an obligation to myself to ensure I am as informed as possible about the nature of such a significant portion of my strategic investment.

Regards,
Michael.

PS jscott, XJO is the abreviation used to represent the ASX200 on the ASX, as were all of the other abreviations identified against the indexes referenced in my earlier post.

 

Hi Michael

After speaking with Teresa at NavraInvest today about another matter (I requested and received a copy of the minutes of the AGM), if the above is a key concern I'd suggest making direct contact with Investor Services at NavraInvest ([email protected]). They have a committed service level / response time, and if they can't answer your specific questions, probably no one can

In addition these services are specifically for shareholders and unitholders, professionally focussed etc. Whereas the forum I guess is participate if and when there is time, so possibly not the best place to get answers to strategically important questions about your investment.

HTH
Carl

 

" Tropo,
I think you're a good guy and I reckon Mark's contributions have been great too, so I'll do you the courtesy of letting that one slide if it was in fact directed towards me".


Michael,

How do you know that I am a good guy ??????
That is not what I hear from my wife from time to time - hahahahahaaaaa
Anyway, Your compliment is very much appreciated !!.

- I am getting a felling that you are offended for some reason??.
Above post I addressed to Mark NOT to you and it was a general comment/answer to HIS question.
- On the other hand if you think that I am criticizing you WHY you are willing to do me a courtesy ?? Any specific reason for that ?
But if you insist = permission granted !!!!
Keep $miling...

 

I'll take a stab at this one.

Navtrade is a black box, and whilst we can question it, and try to understand it to a certain degree, we'll never really understand it. We will never see the code or be worked through the algorithms. And nor should we - Steve has a great deal of intellectual property at stake.

But despite my limited knowledge of Navtrade, I would have thought that over a "straight up" market, there would be limited buying opportunities due to no reactive purchases of 'undervalued' shares. There should therefore be limited trading, lots of holding - with strong capital growth because Navtrade would be holding appreciating assets. So I can only fathom that Navtrade underperformed this period because it held underperforming stocks. That happens, I've lost quite a bit of "opportunity cost" dollars also, but that's life. Whilst the ASX20 certainly didn't underperform, has anyone crunched the returns on the stocks that Navtrade held?

Because he's a good bloke and he's giving you the benefit of the doubt, which I think you deserve. Just be careful with your wording next time

 

Everyone beat me to the punch...but there is a page on the Pedia dealing with sharemarket indices

http://www.invested.com.au/pedia/Glossary:Index_%28Shares_and_Managed_Funds%29

click on I then click on "Index".

We should add their ASX abbreviations though too. Good point...I'll kick the lazy bugger who wrote that entry and get him to update it (ouch!)

Cheers
N.

 

Michael

Your comments are spot on. The person who cares most about your financial wellbeing is you and you would be failing in your due diligence if you did not continue to ask questions of your investments until you were satisfied with the answers. This should not be mistaken for ignorance or fear or inability to understand and I too feel there has been some alluding to people who ask the sort of questions you and I ask , as somehow falling into that category.

Gazza

 

Lots of holding? I would have thought in a straightup market there would be 'lots of selling' and an increased holding of cash.

I think one of the issues though could be you can only sell what you own(Although that's not even strictly true in the stockmarket either is it. But I digress......)

Even if a stock was bought at good prices, the particular stock or sector may rise way beyond what is considered fair value. The ASX200 doesn't care, it simply keeps track of the prices.

If the Fund bought such a stock and kept on selling it as it rose in price then theoretically you'll probably reach a point where you sell right out of the stock. However, the stock/sector may keep on going.......and going.......and going. Is the new value legitimate/sustainable? Who knows? But you've probably sold out(or hold very little) and will now be underperforming this 'rocket sector' and probably the overall ASX200. Resources such as BHP may be an example over certain periods?

I'm not saying this is an actual contributing factor in any particular fund as I simply don't know.....simply thinking aloud. Mind you, selling out earlier in the Tech Boom probably wasn't a bad idea in hindsight either.......although you probably underperformed at the time.