Managed Funds Value of holdings down

Thanks for the input. I agree with all of you- I was just wanting to see what others opinions were. I can probably cope with no distribution given the last one anyway.
And thanks for the heads up Rick, I'll pick a copy up for myself.

Sim, its OK I can still sleep at night. Just been thinking lately that one of the downsides with having invested with Steve is getting lulled into a false sense of security by expecting returns every quarter at 2.5%+. I know...past performance is no indicator of future performance...
cheers

 

It's possible for the fund to provide 2.5% distributions per quarter and have the unit price fall. The unit price reflects not only a trading profit account, and a cash account, but also the value of the underlying shares in BHP, CBA etc.

Mind you, if the unit price were to continually fall, you'd be receiving 2.5% of a smaller amount

 

Warren Buffett said something along the lines of, "If you can't stand to see your shares decrease in value by 50% the day after you bought them - don't invest in the stockmarket". Now, 50% is obviously a large decrease and not too many people would be happy about it, but the point is - it is possible. However, over the longer term, it will be a blip on the radar screen, assuming you have bought into a fundamentally sound company that has increasing profits; it would not apply to a lousy company that has no earnings and is all pie in the sky. (Think some dot-coms) In fact, in Buffet's case, he would buy more of the stock as he had already determined that it was an undervalued company - he would now be getting even better value!

 

From investors (long term) point of view 50% drop in share value is scary but may be O.K for some with deep pocket
But if we take Telstra as an example...Was it a sound strong company 6 years ago - and where is today ??

The only people who lost money during the dot.coms era were long term investors (moms, dads ect).
A lot of players (traders not investors) made a killing buying and selling dot. coms at the time.
As a investor/trader you have to be prepared to loose sometimes but as long as your overall portfolio is making profit, you are in the money.

 

I've actually been increasing my holding in the Navra fund as of late, seems like a good time to buy.

With the high volatility I'm still expecting a reasonable distribution this quarter.

 

Remember, it is Buffett philosophy I mentioned. This means he is a value investor and that he has a wide margin of safety. It doesn't just mean a long term investor. There is a big difference. You can be a long term investor in very mediocre or particularly crappy companies - time won't help you. Time is the friend of strong companies but the enemy of poor companies.

I don't know if the above could be said as a universal truth. I personally know traders who lost a hell of a lot in the dot com boom. They bought, had success, so they bought more, had more success...the cycle continued until...you know how the story ends But once again, I don't know of any true value investors who would have purchased shares in companies that had no earnings and rather feeble business plans. I know Buffett didn't.:[/QUOTE]

Agreed

 

Remember, it is Buffett philosophy I mentioned. This means he is a value investor and that he has a wide margin of safety. It doesn't just mean a long term investor. There is a big difference. You can be a long term investor in very mediocre or particularly crappy companies - time won't help you. Time is the friend of strong companies but the enemy of poor companies.

It's nothing wrong with Buffet philosophy but not everyone can follow it.
Problem with strong companies is still the same. Some of them look O.K on paper but not in the "real life" ( Telstra, Enron etc...).


I don't know if the above could be said as a universal truth. I personally know traders who lost a hell of a lot in the dot com boom. They bought, had success, so they bought more, had more success...the cycle continued until...you know how the story ends But once again, I don't know of any true value investors who would have purchased shares in companies that had no earnings and rather feeble business plans. I know Buffett didn't.:[/quote]

Correct...Not every trader makes it. I know few who made more that 1 mil in 6 months, also a few who lost quite a bit.
But the point is that dot coms were not disaster for everyone. Also, buying shares in companies with good earnings etc...does not guarantee success.

 

Never suggested that dot coms were a disaster for everyone, however, by most accounts, it was a time when fortunes were made and quickly lost. Additionally, I didn't say that anything guarantees success...in fact, the one thing I can guarantee is that there are no guarantees Having said that, there is more probability that a fundamentally sound company with increasing profits will be at the less risky end of the spectrum compared to a speculative company that has not had a cent of profit. That does not mean it is not possible for the spec company to eventually do well if its product is successful - it's just riskier, that's all; but it becomes a bit of a gamble. Some would argue that you may as well go to the casino and put your money on red or black.

Cheers

 

O yes.....I agree. From investment point of view spec companies are riskier.

"...in fact, the one thing I can guarantee is that there are no guarantees".

I like that !!

 

How's the stress levels going now Jeddi ? Wondering if you took the chance of a couple of week's rest then got a pleasant surprise when you checked the last Unit Prices ? Hope so

 

Yep, thanks for asking. I'm still hanging in there. Had a look at my last LE statement this morning and compared it with the current one online, which certainly shows some improvements.
Great to see the 150 mil FUM mark passed too!
cheers

 

Hi again all.

Was going to ask this question in a separate thread but think it sort of ties in here with my original post.

Ok, I'm having trouble trying to work out the answer to this scenario.

For those of us that take the distributions as a payout (i.e do not reinvest) to service the shortfall of negatively geared I/P's, are we going to eventually run out of funds?!?!

Here's what I mean. Let's say for every $100K invested into the fund we get 5% growth and 10% distribution. Wouldn't that put us in an annual position of $105,000 (100k invested + the 5% growth) less the 10% disribution of $10500, leaving a balance of $94,500 (and compounding every year).

If the distribution figure is higher, it even makes the figures look worse, and to complicate the equation even more, what if there is a period of nil growth (similar to current conditions), and we are still receiving distributions, wouldn't that be getting us to a position of negative equity before too long?

I'm sure there is a logical explanation to my concerns and was hoping someone that has been in the fund for a few years can run some figures past me to put my mind at ease.

Once again, I'm not trying to be negative or find fault with this system, otherwise I wouldn't have invested into it in the first place. Just trying to put to rest this demon thats biting away at me re this scenario.

 

Ah, I see. My figures weren't allowing for the addition of the distribution (trading profits?) to be added to holdings before being allocated.

Yep. Things look somewhat clearer now.

Thanks Sim