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Questions about my Watchlist of Managed Funds

Discussion in 'Managed Funds & Index Funds' started by Tronc, 15th Jan, 2008.

  1. Tronc

    Tronc Active Member

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    I would welcome some general feedback on my attached watchlist of my managed funds. These were chosen by a Financial Planner with the goal of income production as part of a LOC structure with my PPOR providing the equity. The income produced goes into the home loan, and as home loan is reduced, more is borrowed and invested across these funds. There is a margin loan in there as well, which generates some tax deductions which hopefully gets a good tax return which goes on the home loan as well.

    My questions are:

    What are the main contributors to the -ve performance of these funds, which have otherwise been performing so well the previous 2-3 years.

    When it says -10% for the last 3 months, does that basically mean that the value of what I bought 3 months ago ($1000) is now worth 10% less (so $900), or is it more complex than that?

    How does this relate to income that these funds may generate? Do -ve returns result in zero income?

    Do you just ride this down period out (or should I be yelling at the Financial Planner just yet?). These have only just been set up in the last month.

    Thanks in advance for any feedback.
     

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  2. crc_error

    crc_error The Rule of 72

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    those funds would have a long term view, so looking at a 3 month return isn't in line with your objective. If your not comfortable with the movement of the funds, then your planner has set you up in to risky funds.

    Currently the market has had a rough ride, so many returns have been subdued.
     
  3. Tronc

    Tronc Active Member

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    hey crc_error

    I agree completely about the long term outlook. I am familiar enough to realise that there are ups and downs, just looking for the 'why' behind the current stuff. Over 5 years, these funds have all returned between 15-20%. Still not sure about relationship with returns and income though.

    I guess I just got used to reading my Quarterly reports with a big smile over the past few years.

    Thanks. Tronc.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    We've had one of the longest bull runs in history over the past 3-4 years with very low volatility ... that's now coming to an end with volatility returning to more normal levels.

    The ASX200 is down, and thus most of your funds which are very much exposed to the ASX200 will also be down.

    Here's a chart for this financial year which includes the ASX200 for comparison ... as you can see, the funds largely track the index (even the Emerging Leaders fund, which is actually a small/mid cap fund).

    [chart=CC;XJO,AAP0104AU,RFA0818AU,PAM0001AU,PER0046AU;thisy;5;20080115]XJO,AAP0104AU,RFA0818AU,PAM0001AU,PER0046AU[/chart]

    All you are seeing now is your funds reaction to the wider market volatility ... it's all normal.

    Income isn't directly related to unit price or overall performance of a funds ... it comes from many sources - some of it from share dividends, and for the more active funds, a lot comes from realised capital gains.

    In a falling market, there is likely to be fewer realised capital gains to be distributed ... and if the market is falling because the economy is slowing (which it isn't - yet), then it may also be as a result of falling dividends due to falling company profits.

    Zero or negative growth does not mean zero distribution ... but remember that the total performance includes the distributed amount ... so if your fund returns -5% for the year and distributes 4% income, then the actual growth of the fund is -9% !!!
     
  5. samaka

    samaka Well-Known Member

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    What is the math that makes it -9%?
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Total return = growth + income

    -5% = -9% + 4%
     
  7. samaka

    samaka Well-Known Member

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    Oh doh.. yeah I thought you were saying -5% (growth) + 4% (distribution) = -9% return