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simple beginners funds ?

Discussion in 'Managed Funds & Index Funds' started by TheCamel, 8th Oct, 2007.

  1. TheCamel

    TheCamel Active Member

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    So, I'm after suggestions or advice for a simple beginners fund, where the investor wuold contribute between 2-5K upfront, and say an extra 250$ per month for an ongoing basis.
    No particular time frame, but let's work on 3-5 years.

    There is a low risk threshold on this one.

    Basically looking for growth, to better assist in retirement.. the person in question has very little superannuation and no assets.. i'm worried about the upcoming years... as the super they have, is barely enough to pay the rent for an entire year.

    Any suggestions ?
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think when it comes to risk - you need to look at what the expectation of return is.

    If you can get 6.5 or 7% from a high interest savings account that is pretty much guaranteed ... why would you put your money at risk aiming for only a couple of percentage more in return ?

    I actually think it may well be worth investing for the maximum gain with quality investments ... something like a geared blue chip share fund.

    For example ... if you look at the historical returns from the Colonial First State Geared Share Fund over the past decade, there are only two years it showed negative return for the year (2001/02 and 2002/03).

    So even if you invested at the beginning of the 2001/02 financial year ... you'd still have been way ahead after 5 years.

    The trick is that during these periods there were drops of at least 25% ... and some people can't emotionally cope with these things - and if timing is critical (ie you need the money back on a certain date), then you may also want to be cautious of such an approach.

    Just a thought.

    Really though ... for such a small sum of money - if that is all they have and they can't afford to lose it ... I'd just stick it in an ING or BankWest high interest account.
     
  3. AsxBroker

    AsxBroker Well-Known Member

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    Hi Camel,

    I'd be more worried about strategy for this person.
    Depending on their age,eg, under 65 or working up to age 75, they can contribute to a super fund. If they are working and over age 55 they could possible benefit from transitioning to retirement.

    I'm a bit confused, you say their is a "low-risk" threshold but you are looking for growth...Which one are you looking for? Low risk or high risk? Low risk = low return, high risk = high return...

    To keep it simple I'd look at a multi-manager approach, eg, conservative, balanced or growth style fund.

    The full Age Pension is approximately $11,000 pa.

    Cheers,

    Dan

    PS The above is general information not investment advice. Speak to your FPA registered Financial Planner, Accountant or Tax Adviser before making an investment decision.
     
  4. TheCamel

    TheCamel Active Member

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    I haven't had much luck so far convincing her to put money into ING or similar, while I recognise it's probably a good thing to do... she wants a bank she can walk into more or less.

    This is probably a reason why shares/managed funds aren't such a good idea though..

    She won't go term deposit, on the off chance she may need the money...
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    If there is a chance she may need the money - I wouldn't be investing in shares at all.

    Where does she currently do her banking ?
     
  6. crc_error

    crc_error The Rule of 72

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    Then what is it you want us to recommend? If she wont even invest into a term deposit or ING.. then really there isn't much more to discuss!

    What does she need the money for anyway? Will she one day decide to buy a plasma TV and she want to have cash at hand for this?
     
  7. Smartypants

    Smartypants Well-Known Member

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    What about a LIC such as AFI or Argo?
     
  8. TheCamel

    TheCamel Active Member

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    credit union, returning 0.25% interest on basically any balance figure.

    can't bank elsewhere, as employer will only pay into a bank account at this particular credit uniion, or via cheque.
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Well if she won't even consider ING Direct, I don't see how she would cope with investing the money anyway.

    A bit of a lost cause without a change in attitude I'm afraid.