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Noob MF Questions

Discussion in 'Managed Funds & Index Funds' started by Bez, 17th Dec, 2007.

  1. Bez

    Bez Member

    Joined:
    30th Nov, 2007
    Posts:
    8
    Location:
    Newcastle
    Hey guys, I know very little about MF's and have a few questions

    * How exactly do you make income from MF's ? is it from the dividens ?
    If so how dose a MF differ from buying shares ?

    * If you wanted to make some decent income from MF's do you need to have a lot of money invested in them ?
    If I start with $2000 and contribute an extra $250 a month, I wouldnt expect much money comming in right ?

    * Would it be a dumb idea to borrow $50k-$100k to invest in a MF ?
    Asuming the return was above the interest costs?

    Thanks guys :)
     
  2. samaka

    samaka Well-Known Member

    Joined:
    30th Sep, 2007
    Posts:
    308
    Location:
    Sydney
    * Generally dividends. However some funds (such as Navra) make money by trading shares (buying low and selling high). A lot of people invest in MF's for growth though. They expect the value of the shares to go up over a long period of time. So it's not about how much money I get every month, but what I'll have in 5 years.

    * People generally talk about income in terms of percent. Using Navra as an example again, they try to return 10% income annually. So on your $2000 you'd get $200. If you had $20,000 you'd get $2,000. If you starting with a very small investment - you should be looking at growth (a high investment value in the long term) rather than income (regular payments every month or quarter).

    * It's not a question of dumb. If your borrowing money, and you know that the return will be more than the interest costs, then it's always a good idea. The problem is you can never know how the market will go. If the investment goes down - can you afford to invest more money to avoid a margin call?

    If you can give us an overall picture of your current situation and your goals - you can get some better detailed advice. :)
     
  3. Bez

    Bez Member

    Joined:
    30th Nov, 2007
    Posts:
    8
    Location:
    Newcastle
    Thanks for the reply Samaka..

    Well im on a very low income, $34,000..
    I currently have 1 IP, which costs me about $60 a week after rent etc..
    Purchase price was $125,000, loan is $109,000..
    So not much equity..
    Current savings is only about $1000 (dam christmas time)

    I dont have any other debts, I am renting tho..
    Out of my $550 a week I can afford to invest $200 of it..

    Im looking for ways to increase my income/cashflow. My goal would be to double my income with in a few years or less :).

    Please no "why not get a higher paying job" replys :)
    Thanks.