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What fund to buy into?

Discussion in 'Managed Funds & Index Funds' started by S4OZ, 17th Jul, 2008.

  1. S4OZ

    S4OZ Member

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    Hi
    I am considering exiting the Macquarie Small Co Growth Trust where I have so far lost 40% value and buying into something that may recover faster.

    Ideally I would like to buy a fund that won't lose as much as the Macquarie one during whatever remains of the bear period and also recover faster.

    Which sectors are likely to perform better than Macquarie's Small Co Trust?
    And any suggested funds?

    Cheers, thanks.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Cash - or any ultra-conservative fund is likely to outperform pretty much everything in a downturn.

    Resources may still have legs - although too risky/volatile for me at the moment.

    Energy stocks have done well with a high oil price, but they can be extremely volatile.

    Financials are arguably cheap - but it still remains to be seen how much their income will be down as a result of bad loan write-offs, which may well see their performance continue to suffer in the short-medium term.

    Blue chip is generally better than small cap when times are tough ... but the financials are usually the blue-est of the blue chips, and they are down more than anything else (although again, this may present good buying).

    Even cash may be considered risky when you start to see bank collapses - only leave your cash with high quality institutions (although that doesn't necessarily guarantee risk-free).

    ... but the best returns in the short term in my opinion, is paying down debt, especially debt that is not tax-effective. A guaranteed 9%+ return on your money (more if you are paying down personal debt) is pretty hard to beat right now.
     
  3. Billv

    Billv Getting there

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    It's hard to tell which direction to take when all roads seem to lead to lower grounds.

    I think the resources and/or finance sectors are the least scary at the moment although the banks are not telling us their exposure levels to the US and there is a big risk that a potential problem with 1 of them could drag down the whole banking sector.

    IMHO
     
  4. S4OZ

    S4OZ Member

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    Thanks guys.

    Resources are the ones that are propping up my super fund value from getting decimated. My thinking was to go there too. Maybe I am oversimplifying, but even if there is a crisis, it's like toilet paper, you have to buy it no matter what.
     
  5. clayton4115

    clayton4115 Member

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    "it's like toilet paper, you have to buy it no matter what."

    or use soap and water like they do in Asia :p
     
  6. willy1111

    willy1111 Well-Known Member

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    I won't be buying back into the market until the XAO is back above its 52 Week Moving Average.

    We're in a downtrending market at the moment, who knows how far it could go, its much easier to swim downstream than exhausting yourself trying to swim against the current.
     
  7. crc_error

    crc_error The Rule of 72

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    agree.. I'll be entering the market again once the all ords hits 4000.
     
  8. crc_error

    crc_error The Rule of 72

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    yes, but resources are valued on their future earnings, hence their very low dividend yield. If these earnings aren't met, then the stock prices will fall back to their current earnings. Plus with global growth slowing, demand for resources will slow, hence revised future earnings!

    My view is the all ords will get down to 4000, and this will be mainly due to a correction in resources.. this is already unfolding..

    expect a further 20% fall in the market before things bottom out.
     
  9. Billv

    Billv Getting there

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    What if it doesn't hit 4000?
     
  10. crc_error

    crc_error The Rule of 72

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    it will!

    but if I did see some turn around, then I would consider gradually re-entering.. but I doubt we will see any good news in the short term..

    great to be earning/saving 9% interest in my offset account!