Managed Funds Navra NO LONGER an Income Fund ?

Yes GSJ, to be fair I think you did flag the credit risk issue. I guess the diversification i.e. spread across approx 20 stocks is a difference with NI.

I suppose you could obtain the same by investing in a fixed income managed fund, but then there's no way you'd get anything approaching 10% after fees.

NFS has nothing whatsoever to do with NavraInvest except a common chairman.

 

I assume NFS going belly up would give Steve more time to spend on NI ?

PS Oops Nigel beat me to it

PPS is that a bit impolite calling Steve "common" Nigel ;-)

 

just to be faceious, that is only $2,800 after tax.
I understand what you are saying, but in reality it is not a fair discussion - how long would it take the average person earning $50k a year to save $40k?
Lets be kind and say 6 years (chances are more like 10 if at all).
That means over this persons working life, they end up with $26k a year. You argue it is insane to borrow $400k to make $4,000 a year. I argue it is more insane to work 40 years of your life and have $26k a year to show for it.
The only valid point to make out of this whole discussion is that leverage is a tool. I would go so far as to say that the only ways for the average person to really succeed financially are: business (including sales), leverage, lotto. Ignore lotto for obvious reasons.
Most businesses fail, or fail to produce the kind of income necessary to acquire enough assets. That leaves leverage. The smart use of leverage can turn the average joe into a multimillionaire within 10 years, without excessive risk. I know of nothing else that can do this consistently.
Using leverage, you arent just borrowing money, you are buying time. You cant just say "it is stupid to only get 1% net return on borrowed money". You get 1% plus the amount of time it would have taken you to otherwise generate that passive income (and growth if applicable). Perhaps there are ways you can generate more than 1% on your borrowed funds, and if that is the argument, no worries; but if the bank would let me borrow $5M tomorrow and I could make 1% off it, I would do it in a second. Sure if you had $500k invested @ 10%, you will make the same as me, but I am more than happy to let you work the 60 or so years it will take to save your $500k.

 

Coops is absolutely right. The only things I'd add are:

1) you can't save your way to wealth - who wants to just crack the millionaire when they're too old to enjoy it?!
2) apart from business, leveraging growth investments and lotto perhaps you could add "marrying well" or perhaps that should be "divorcing well"
3) As I said earlier. All investment involves risk, but generally the risk of making some growth investment is, IMHO, vastly outweighed by the certain cost of doing nothing.

Cheers
N.

 

I am all for leveraging - I'm geared to the hilt - I think people are missing the point of what I was trying to make in all this; I am just saying that leveraging is best done into an investment that, yes, generates income, but also at least moderate capital growth. Ie. high income, minimal capital growth is not good of you are leveraging. From the discussions in this thread, this NI income fund seems to be all about high income, with little focus on capital growth - even though it may be providing some capital growth at present - it is not really a significant part of the funds strategy.

And as I said before,

Sure if the income is very high, then everything above loan cost, can be re-invested, but if the capital base erodes, then the % incomes required to make this a justifiable investment in the long-term can easily become unsustainable.

GSJ

 

No, I am not saying this at all, you and a few here are really not quite following this - I would do this myself, but only if there was at least moderate prospects for capital growth - which don't seem likely in a "high income fund", or as I said, may be happening - but is not the main objective of the fund.

GSJ

 

That is the best way I have ever heard it described Nigel - I had been searching for those words for a couple of years now !

 

iiinvestor, you wrote...

But in the post you referred to, I had already stated:

I don't know how you see that you are saying anything vastly different??

We all believe we are doing that.

Cheers,

Steve P

 

This is all good stuff.

I see where GSJ is coming from; I think he's saying that an income only fund may be great at year 0, but as soon as inflation hits, your capital, and hence income, is eroded in relative terms. Then someone (I think Sim) said they didn't care because the loans they are servicing with the income aren't indexed to inflation and their growth investments make up for it anyway. Isn't this nice; different views with detailed explanations.

But how about this coincidence... a huge spread in this month's Smart Investor on high yielding investments. They go through stocks, LPTs, Bonds, Hybrids, funds, etc. It's a perfect complement to this and other threads. I read it on the way back to Syd tonight and it's a really good intro. So check it out if you get the chance.

 

GSJ, did you ever attend one of Steve Navra's seminars? This fund is designed as part of an overall investment strategy that includes holding property to provide the capital gains that you speak of. At no stage that I can remember did he suggest that one should basically throw all their money into this fund and leave it at that. In fact, I clearly recall him stating that this (or any other income fund) was ideally to be used to provide the cashflow to assist holding growth assets (property).

As Nigel stated in his normal clear fashion,

So...what I am saying is that you should NOT treat any one particular fund as an "investment strategy", but rather, as part of your overall investment strategy. I think this is what Handyandy described quite well.

I am not stating that you should not give due diligence to every investment decision you make, however, it should be made in the light of your overall plan.

Cheers,

Steve (I'm going to omit the P now that Steve N is no longer here)

 

Steve:

In retropect, I think that was all a big mix-up; due more to symantics than anything else. When coop explained what he meant, I realised what was going on.

 

Nope, and no intention of attending any future ones, especially after the recent de-thread.

GSJ

 

Aaaahhh...Well then, that may explain why you are so infatuated with the capital gains of the fund. Do you understand what I said in the last post? That might help clear this up for you.

Cheers,

Steve

 

As far as I am concerned the NI fund will always need to return a minimum of 5% above my interest costs PERIOD and mantain my initial investment capital.

If any fund gave you income but was eroding your capital then it would simply be turning capital into income, which I agree would be ludicrous.

[Unfortunately I am currently in the MAQ Newton fund which seems to be doing exactly this. A dollar in gave a distribution of 7 cents, end value was something like 94 cents, not an ideal situation. To add insult to injury they then kept a portion of the distribution a a reinvestment. After a year and a half its up to $1.02]

Why?????

You make a statement but do not support it.

Cheers

 

Yes, I too am seeing this. It is good to see people expressing differing opinions, but keeping the comments above board also.

What a classic set of comments!!! Well, who has the last laugh now, eh TryHard!? Well done!

Andrew.

 

Yep...I agree

Steve

 

In line with Tryhard's comment re the 20% return and Nigel's

Originally Posted by Nigel Ward
... All investment involves risk, but generally the risk of making some growth investment is, IMHO, vastly outweighed by the certain cost of doing nothing.

I have a friend who has 8 townhouses purchased for $800k (pre boom) loan of $600k current value $2.8 mil. For about 2 years now I have been try to encourage him to do something with all that equity.

Taking his LVR up to 80% would give him $1.64 mil investing this and getting a net return of just 7% would have given him an additional income of $114k. Even at a net return of 5% ( my expected rate) is still $82k. What did he get ZERO , nothing, zilch, nadah - how else can I say it. This is a guy who earns $40k working in the public service and hates his job. The numbers are just to big.

The problem now is that I can no longer keep encouraging him as the market risks are increasing with the market volatility on the increase.

He has not only missed out on the income but also failed to build a buffer that would allow him to remain in this sort of investment longer.

Cheers