"You're too young"

Discussion in 'Share Investing Strategies, Theories & Education' started by Meggsy, 16th Feb, 2007.

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  1. Simon Hampel

    Simon Hampel Founder Staff Member

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    Again, it depends on your own goals and circumstances, but I am actively adding to my investments right now - focussing on those funds that are currently performing the strongest (based on short term criteria, not on longer term historic performance which is fairly meaningless going forward).
     
  2. iiinvestor

    iiinvestor Well-Known Member

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    Actually I made a mistake, it's more like five times more likely to see a negative return over 7 years than to see 20+%. :D

    Just to check out your gearing calculations too...

    I think I remember you saying you have $30k in funds. So let's just work on that to start with. I'll also assume 15% returns, 5 years and 9% interest.

    Without gearing:

    1.15^5*30k = 60341

    With gearing:

    (1.15^5*60k) - (0.09*30k*5) = 120681 - 13500 = 107181

    Consider the details and flaws with the calculation above. Firstly, I considered the margin payments as interest only and as simple interest. I haven't discounted the interest payments for time value because I'd have to make presumptions about inflation and opportunity costs. Also, I have assumed distributions would be reinvested and not used to pay off the interest. Lastly, I've ignored taxes.

    So like any good ol' financial calculation, it isn't precise and may be far from the actual outcome. :)

    However, it does show an increase of 47k and that will only go up with tax deductions for the interest. Considering the opportunity costs of the interest payments will bring it down though. But... you're regular instalments will boost it dramatically.

    If you really want, we could do a detailed example taking into account your marginal tax rate, a predetermined opportunity cost, regular instalments and then even do a sensitivity analysis on a range of gearing levels, returns and inflation. That's if you really feel the need for all of that :)

    PS. Other's please jump in if you think I've made bad calls here.
     
  3. Tropo

    Tropo Well-Known Member

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    "......but the whole "you only make a loss when you sell" mentality is what stops many people from becoming wealthly"

    SPOT ON !!!!!!!!!!!!!!!!. :) :)
     
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    Thankyou sensei.

    What is my next lesson ? :D
     
  5. Nigel Ward

    Nigel Ward Well-Known Member

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    Whoa! Slow down grasshopper. ;)

    Remember the phoenix can fly only when its feathers have grown... :D
     
  6. Tropo

    Tropo Well-Known Member

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    guess what....
    Sim is learning !!! = GOOD news !!!!....:D :D :D
     
  7. Chris.R_WA

    Chris.R_WA Well-Known Member

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    G'day Meggsy,

    I meant to post this earlier, but got distracted - sorry :)

    It is a spreadsheet that outlines the principle and effects of an installment gearing strategy, which I am following at the moment (with only one fund and with a trial amount).

    In my case, I input 250 a month, which is matched by 500 per month from my lender, and the total 750 is invested into the units (Navra). This is a monthly gearing at 66.6%, and the portfolio was started at an LVR of 65%. However, I have been reinvesting the distributions (all 2 of them so far!) as well as paying the interest monthly because it is such a trivial amount, and the LVR is now down to about 59%.

    Update the SS with your details in the green boxes, and also feel free to modify if you want (add in interest expenses etc).

    Hope this helps.

    Regards, Chris
     

    Attached Files:

  8. k23man

    k23man New Member

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    You're single? Sounds like we have a fair bit in common. If you'd like to chat on MSN sometime, send me a private message and I'll give you my address :p
     
  9. Meggsy

    Meggsy Well-Known Member

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    Thanks Chris, that is a handy tool. I'll put some numbers in :)
     
  10. reidy75

    reidy75 Member

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    In my view, if you have $2500 to invest now, and have an investment in mind that you've reviewed/researched and believe is worthwhile, why not do it now.

    As someone said earlier, if you now how to pick the right time to buy, please tell the rest of us. Whether it's shares or property, plenty of people (& I see it working as an accountant) are waiting for the market to drop before they buy. People were waiting for the property market to drop in 2000 in Melbourne, and have missed 30%+ growth. People have waited for shares to drop for the last couple of years, and missed consecutive years of 20%+ growth.

    If you invest today and the market drops, if its a good investment it will recover and time will make the drop insignificant. If its a bad investment, it doesn't matter what the market does!

    If you wait for a drop (& let's say we wait for a 5% drop), how do we know that we won't miss out on 10% growth before that drop happens? :eek:

    Lastly, and this is pure speculation, but there is going to be a lot of money flowing into superannuation over the next few years, in my opinion, and this has to go somewhere. If I was a betting man, I'd say supply & demand is going to see a lot more upward pressure on share prices than the impact the occasional correction along the way will have. I do still expect corrections, but I doubt we'll have consecutive years of negative returns in the short term.
     
  11. Thudd

    Thudd Well-Known Member

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    Old thread bump!

    After 18 months I'm curious to see how things have gone for you. Any chance of an update?
     
  12. Meggsy

    Meggsy Well-Known Member

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    Thankfully I didn't end up getting a margin loan. I did however increase my managed fund contributions to about $2000 a month for a while as I was promoted at work.

    I'm now almost finished uni and I was offered a job as an accountant earlier this year. I've put about 65k into managed funds but sadly it is only worth around 45k.

    I've stopped putting money into the Australian Unity, Macquarie, Goldman Sachs funds and now I just have a few Colonial ones, including some indexed funds opposed to trying to chase high returns.

    All in all I'm putting this money into the funds each month to buy a house in a few years time, so I'm not too worried with the current slump.
     
  13. crc_error

    crc_error The Rule of 72

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    can I ask you which funds are you putting money into?
     
  14. Meggsy

    Meggsy Well-Known Member

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    I havent sold any... so I own units in

    Macquarie - Small Companies Growth Trust
    Goldman Sachs JBWere Emerging Leaders Fund
    Aust Unity Property Securities Growth

    I'm putting money into:

    CFS FC Inv - CFS Imputation
    CFS FC Inv - CFS Indexed Australian Share
    CFS FC Inv - CFS Indexed Property Securities
    CFS MIF - Geared Share Fund
    CFS MIF - Global Resources Fund

    One thing that dawned on me last week, as although I tried to get a range of different areas with my selection... I heard last week that 75% of the ASX200 (I think it was top 200) companies are in the resource industry... So the index will match the resources to a certain degree.
     
  15. crc_error

    crc_error The Rule of 72

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    yeh well its the banking sector which is melting tonight! stay tuned!
     

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