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Super Hammered - CFS Geared

Discussion in 'Managed Funds & Index Funds' started by rx2, 5th Mar, 2009.

  1. rx2

    rx2 Member

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    Hello,

    I currently have a CFS Wholesale Super product where I have invested in:

    * CFS Australian Shares Geared
    * CFS Australian Shares Core
    * CFS Global Shares Geared
    * CFS Global Shares Core
    * CFS Australian Property

    I can't remember the exact allocation from the top of my head - but the Global+Australian geared funds equate to about 60% of the portfolio.

    I am not planning on retiring for another 20 years, so have time to weather financial storms. The portfolio mix I have at the moment is for high growth. I am still contributing my 9% from my salary each month.

    Looking at my super recently it has taken a hammering from its highs of $120K down to currently $60K. As I expected the biggest falls have been in the geared funds.

    I am prepared to weather the storm, but I am now wondering if I should do something to the portfolio mix to preserve some more capital, or weather I should just wait. My main concern is around the geared funds. Since Q4 08 I decided to start making extra monthly contributions to my Super above the 9% to take advantage of cheaper unit prices.

    So my question is:

    1. Would you just sit and wait it out and continue making extra contributions?
    2. Move the geared funds to fixed interest. Wait until the market is entering positive territory and buy back in?

    In hindsight, I should of moved out of the geared funds early on into fixed interest. But oh well. Btw I am not looking for financial advice. I am just analysing my current situation and would be welcome to some thought provoking ideas and suggestions.

    Cheers
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Note that this is not advice - I am not an advisor. Just my personal thoughts.

    I suggest you keep contributing as is - take advantage of the lower unit prices and ride it out.

    While the geared funds have been hardest hit in the downturn (due to their internal deleveraging), they will also recover the strongest once the market turns around and starts to regain some of the lost ground. Over long periods of time, the geared funds always show better average returns due to the leverage they use.

    I think now is completely the wrong time to be changing your strategy - unless you are sure that the investments you currently hold will not serve you well over the next 5 - 10 years (and you can find something better to put them in!). Just stick with what you have - you have plenty of time for things to recover.

    Of course, as you get closer to retirement, you want to be taking an increasingly cautious approach to preserving your capital. Get some professional advice on this.
     
  3. Chris C

    Chris C Well-Known Member

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    I, like Sim, am not an advisor, but if I was you I'd definitely stop gearing in, I don't think this is the sort of market you want to gear into, and I would definitely "consider" moving "some" of your portfolio into fixed interest assets.

    I just think this is a highly volatile environment where the downside risks far outweigh the upside potential, meaning gearing into this market is very dangerous, but that's just my opinion.
     
  4. Billv

    Billv Getting there

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    To tell you the truth I've lost confidence in the markets so
    my first priority would be to ensure that the capital is preserved.

    If it was me I'd move away from the more risky options.
    of if your stomach can handle the bumps you could leave things as they are and perhaps only direct your new contributions into fixed interest for a while until you see the market turning.
     
  5. seaview

    seaview Well-Known Member

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    Why lock in horrendous losses now when the market is probably getting close to bottom?
    If you do not need the money for a while, I would let time do its work. In fact we have some super in CFS geared shares and prefer not to look at how low it has gone as we have a long time frame. It has had stellar growth for many years and as Sim said, is likely to do well in future years.
    My 2 bobs worth anyway.
    Cheers
     
  6. Chris C

    Chris C Well-Known Member

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    And how many people have said this over the last 18 months and been very wrong!?!

    It sounds to me like you are talking from the belief that the market HAS to go back up. If this is the case I'd love to know what you know that I'm missing...

    The only thign that is certain is that we are closer to the bottom than we were yesterday because the market fell again today. That's all, and that alone is far from a reason to invest.

    Risk vs reward I think is important to note. Gearing is great in a booming bull market, but right now we are in the futhest thing from... and all the gearing in this market gains you is the oppurtunity to be completely wiped out.
     
  7. AsxBroker

    AsxBroker Well-Known Member

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    Hi,

    People love geared funds when the market is running well as they just pick the fund with the highest return. They understand that those big returns are based on last years returns.

    Cheers,

    Dan
     
  8. NickM

    NickM Co-founder Staff Member

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    Love the conflicting arfuments, they are all valid

    Unfortunately my crystal ball is in for repairs but in my personal view any of the following could occur
    1. markets could stay flat for 1,2,10 yrs
    2. markets could keep going down and eventually the entire global banking & corporate systems would be destroyed and we could all end up in total financial ruin. Anarchy would be rife
    3. markets could gradually recover after bottomoing out whenever that may be - past or future
    4. Markets could skyrocket at some stage
    5. take the "experts / commentators" views with a grain of salt as they have all been wrong to some extent over the past 18 mths

    these comments probably dont help but might be worth conducting a poll ?
    Nickm
     
  9. rx2

    rx2 Member

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    Thanks everyone for your thoughts and perspectives. As Nick previously mentioned peoples responses have been a mixed bag. In the previous post, Nick sums up the situation pretty well on what the possible outcomes may be. While some of them are a little worrying ie. if entire financial system collapses and anarchy breaks out - you need to assess the probabilities in some logical manner.

    With the losses I have incurred so far, and the fact that I am not wanting to retire anytime soon I am going to continue with my current strategy which is to weather the storm and increase contributions to take advantage of lower prices.

    In my mind I don't imagine any sort of recoverly happening until next year. I look at the ASX as a rudimentory benchcmark and it has nearly lost 50% from its highs over a year ago. It may have some further losses to go; but I can't imagine it will go over 75%.

    Once again thanks for peoples thoughts and perspectives.....
     
  10. Chris C

    Chris C Well-Known Member

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    I'd give it a 20% of losing more than 75% from its 2007 highs.


    This is a REAL possibilty, it's definitely not likely, but is a definite possibility, and I don't think enough people are weighing it into their calculations.
     
  11. alexdent

    alexdent New Member

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    I know this is an old post.. but i thought id throw in my two cents in.

    In regard to the above quote, the reason why you would lock in horrendous losses is to lock in those massive capital losses for the 08/09 fin year. this can be used to offset cap gains in the future and having a big capital loss up your sleeve is VERY handy come tax time in future yrs

    good to see everyones got an opinion, thats what this site is for and good arguments too everyone