Managed Funds Which conservative fund for my better 1/2?

I have been with my other 1/2 for a long time but our money is still very separate and think it will be this way for a while. She has come around to my way of thinking and is interested in "investing" some money rather than "saving". Because its her first venture I really want it to be fruitful for her, as this will give her confidence. An IP is not suitable for her at the moment.

She has about $15k sitting in ING at the moment which is ok for the short term, but is a risk over the long term. I'm looking at a funds that would be suitable for her and would like some advice and or suggestions.

Details

Time Frame - 3-5 years
Risk Tolerance - Very low (She doesn't want a small margin loan, yet pays alot of tax)
Somewhat capital secure
Looking for 10%-12% pa - Anything less isn't worth the risk, she might as well stick with ING

I know many people here will suggest Navra, but their fees are quite high. I'm also concerned that the sharemarket is at record highs. I will probably get her to wait until July 1 to see the effect of the new super rules. I'm concerned she will put her money into shares and the market will slump and she will lose faith.

Short listed funds at this stage

Vanguard LifeStrategy Balanced Fund which is 50% defensive 50% growth
Vanguard LifeStrategy Growth Fund 30% defensive 70% growth
Colonial First State Diversified
Argo LIC
AFI LIC
(Or a LIC combination?)
Navra (Don't like the fees though)

Look forward to your thoughts.

Grimey

 

Regardless of which fund you/both/she decides on, the fees re managed funds, are avoidable (barring the management fees) by using something like investsmart.

You can easily avoid the entry fee but the trailing commission is somewhat harder to avoid solely becasue of the small amount to be invested. Investsmart do rebate the trailing commission but this only becomes effective upon reaching $100k invested.

As you say the market is now somewhat high and this would indicate a higher risk of a correction then say 3 years ago but if she is prepared to leave the funds invested should be able to sit out any correction.

The LIC's are certainly possibilities but are very much tied to the market but the fees are minimal and easily traded.

Cheers

 

Hi Andy

Yep, I have used investsmart plenty of times before which works well. I more meant the high ongoing MER.

I think maybe a defensive Vanguard fund will be the most suitable for her.

Regards,

Grimey

 

the navra retail fund is conservative enough isnt it? My wife is parking some money there for a while. As long as your partner understands that on any given day it could be down 1 or 2 percent or could be up a few percent.

 

Yes.......looking at the latest figures posted on NavraInvest today, at the end of April they were holding 46% cash.

 

No way are they conservative in my book. (NI)

Loading up on the way down in individual stocks is what I view as an aggressive strategy, thankfully no leverage is used though. I would contrast this to doing the same in an index as you are immune from anything but the severest (market closed for business) market risk in this case.

Comes back to what you define as conservative though, it can be different for you.



5 and 10 year rolling nominal forward returns from the XJO accumulation index in the 1980's, which you can track these days for relatively low MER's, this is an eloquent argument for buy the farm (the lot) and hold in my opinion.

You really needed precise timing (a few months out of the decade) to return something other than what might be considered a decent 5 year return, note no negative 10 year periods.

 

Agree risk tolerances differ.

Precise timing? Yes that's what the fund's active trading methodology tries to achieve I guess.

Cheers
N

 

100%+ in 4 years

I've been thinking about this thread some more because a colleague asked a very similar question to the one Grimesy has posed.

Looking at the performance calculator for NavraInvest if you select from inception to today (i.e. from 1 May 03 to now) it shows a shade over 100% return over just over 4 years. That is you've doubled your money in 4 years.

If you leveraged that investment at say 50% your return on capital (after accounting for borrowing costs) would be even greater.

Bearing in mind that:

a) at times the Fund has been substantially (for example recently 46%) in cash; and
b) it invests in large cap stable companies with low debt,

then it really is quite a conservative fund (i.e. blue chips and cash fund). Arguably even more conservative than a lot of so-called balanced super funds for example, which spread across fixed interest and property as well as shares and cash.

Sure in the recent raging bull market we've had (and are still experiencing!) there are probably examples of funds which can top the performance I've noted above, I guess the question is twofold:
a) can that performance be replicated when the market returns to more typical peformance?
and
b) if there is a substantial correction/s how will such funds fare (particularly the long only funds with a mandate requiring them to be largely invested) compared with a fund that can go to (and is currently) substantially cash?

To be able in some quarters to beat the index when holding so much cash is, in my view, a testament to the performance of the NavTrade system. Bear in mind also that the distributions are locked in, i.e. even if the market tanks before 30 June, the realised trading profits will still be distributed to provide income. (And I suspect the fund being so far in cash would be both insulated to some degree from a market fall and in a great position to buy in at bargain prices ...but of course that's speculation at this time.)

So, is it a conservative fund? In my view, for the above reasons it is. It aims to provide an absolute return of high income and the fee charged for it is much lower than most absolute return and hedge funds...particularly fund of funds.

Insight and others, I'd be interested to hear your thoughts.

Cheers
N.

 

Aggressiveness is perceived by some people in the different way.
To me S.N trading style is not aggressive at all.

'a) can that performance be replicated when the market returns to more typical peformance?
and
b) if there is a substantial correction/s how will such funds fare (particularly the long only funds with a mandate requiring them to be largely invested) compared with a fund that can go to (and is currently) substantially cash?'

You hit the nail on the head

 

Hi Nigel

I feel very comfortable with the Trading Style of this MF. NB. I did have some previous issues with the financial viability of the company for a period, but this has also now been satisfactorily resolved.

Yes.......it will be interesting to see how the Funds Returns(Income + Capital Growth) alter in the inevitable future Market downturns etc.

It would be wonderful to simply throw a whole lot of variables in and back test it for extended periods of history. For example, in the last few years we have had quite good income and reasonable growth. If we were to backtest the system, it would be interesting to see an actual longterm history of what % Income and Capital Growth would have been achieved EACH YEAR for say the last 80 years or so. ie. what would have been the volatity of each of these items in periods of decades instead of a few years? Now THAT would be a fascinating Chart to see!