Investment advice

General Gibberish Forums The Pool Room
41

Property is worthwhile looking at, but across a balanced portfolio of investments. Gearing has it's benefits but all investments have some sort of benefit as well. Aussie shares for example have imputation credits and CGT benefits after holding stock for 1 year. Gearing also has the ugly side with any investment of needing accountants. This is generally something overlooked.

 

Biggest risk in property is what if you had to sell in an emergency and also the upfront investment amount? It's not like shares that can pretty much be sold down in 24 hours or purchased in small lots.

 

Gearing is not just related to property. You can gear anything. You could borrow to invest in fixed interest if you like. The interest your paying on the loan is still deductible.

 

Where to find fund managers. Any fund manager can allow you to invest directly into their wholesale funds. Some of them have a very high entry point (Vanguard which is primarily in index funds have a $500,000 entry for example), while others may only have $5k or $10k. Retail funds cost more so avoid them where possible. The only difference between the two is that retail funds without an adviser is maxed out across all fees. Platform, MER, Buy/Sell, Adviser (yep they charge you the max fee if you don't' have an adviser), entry / exit fees etc... About 4% to 5%.

 

Our approved product list (i.e. as an adviser you were restricted to what you could give advice in) there were about 1200 managers to choose from! This is where a good adviser comes into play.

 

Colonial and Perpetual and two of the bigger players on the market. It's not a bad starting point as they have lots of free material to read as well. If you go back a page or two I also put some links to Platinum.

 

Also have a read of how a property fund manager works as well. They deal with industrial, commercial and residential purchases. Some of the items they invest in for example may be a site where Bunnings lives, a local shopping strip, an office block etc... If you have a broker you can also ask them what property listed funds are available. The biggest one people are familiar with is Westfield (or Centro if you were following their issues).

 

Lastly on fund managers you can also gear them like shares, but there are also those that internally gear. I.e. if the fund is $0 you don't owe them any more (as opposed to borrowing to invest, if the share value is $0 you still need to pay back the loan).

 

Again at the end of the day I don't push one thing over another. It's a matter of making sure you have a balance between all options and understanding in full what the potential risks and benefits are.

 

As usual this is not personal advice. You can't sue me.

42
 

Last last paragraph is correct but only relates to Australian shares and only relates to the ASX100. Index funds only try to replicated the top 100 shares without buying the top 100 shares so it will pick 25 / 40 shares in the top 100 and hopes it moves along with the index. They are cheap because there is no movement in them (i.e. it's rare they'll swap from BHP to RIO as an example) so there isn't much 'active' management.

 

Where the fund managers come into their own is not the blue chip but everything else or the specialised areas. Retirees want income so fund managers that look for good dividends are one example of a specialist. Then you also have small cap funds, overseas shares, specialised countries, ethical funds, healthcare, technology etc...

 

I appreciate you work in the FM / advisory industry, but the stark fact is that most active fund managers have little idea what they're doing, and on a risk-adjusted basis post fees they underperform. They're never going to go out of a job in a country where their flow of funds is guaranteed via superannuation contributions, but the reality is that a majority of them shouldn't have a job. Most wouldn't have a clue how to accurately value an equity - they can 'price' things on a relative basis, but performing a more accurate intrinsic analysis is beyond most.

 

Then, of the ones who do know what they're doing, some don't have the requisite integrity to be a trusted fiduciary. As the saying goes, i'd rather someone dumb and dishonest in preference to someone who's smart and dishonest.

 

Diversification is over-rated if you know what you're doing, which i'd accept is a small percentage of the population.

 

Ok smarty pants. Then where the hell doninstrt lookin for one of those...?


And a question while your at it. Doesn't the negative gearing and associated tax benefits, depreciation etc make housing, not to mention the ability to borrow 80% make it at least worth a look?
But love your input though.

 

The notion of negative gearing implies you're losing money (interest payments exceed rental income) and speculating on a capital gain. That's great, and you get a tax break for your troubles, but relies on the capital gain coming off. The parlance here is that you're backdating your return such that it's in your terminal value, which is largely indeterminable with any accuracy at the time of purchase. It's never struck me as a particularly prudent strategy, but a rising tide lifts all boats such that anyone who's attempted this in the last 20 or so years has probably made money.

 

My strategy is a little more boring, and less complex: buy long-dated streams of growing free cash flows in productive assets without leverage.

43

so, I'm locking in my home loan for a fixed term - 3 years.

 

To do so I'll lose my offset and be restricted on larger repayments.

 

I'm not great with these things so would anyone like to give me some suggestions about how I may win/lose this situation?

44

I've always taken the (inexpert) view that fixed-rate loans are for women and poofs.

 

I just can't see the banks offering you something that's going to cost them money. If it gives you peace of mind, then fair enough (see women and poofs line).

 

My brother and one sister took them 15 years ago...both lost substantially on them.

45

Twitter publicly listed a few days ago, tipping that will go up quick

46

I've always taken the (inexpert) view that fixed-rate loans are for women and poofs.

 

I just can't see the banks offering you something that's going to cost them money. If it gives you peace of mind, then fair enough (see women and poofs line).

 

My brother and one sister took them 15 years ago...both lost substantially on them.

So if it aint broke?

 

I am actually pretty happy how it ticks over at the moment and like the offset a lot.

47

Twitter publicly listed a few days ago, tipping that will go up quick

You reckon? Why wouldn't it be another Facebook? Where are they getting their revenue streams from?

48

 

 

Last last paragraph is correct but only relates to Australian shares and only relates to the ASX100. Index funds only try to replicated the top 100 shares without buying the top 100 shares so it will pick 25 / 40 shares in the top 100 and hopes it moves along with the index. They are cheap because there is no movement in them (i.e. it's rare they'll swap from BHP to RIO as an example) so there isn't much 'active' management.

 

Where the fund managers come into their own is not the blue chip but everything else or the specialised areas. Retirees want income so fund managers that look for good dividends are one example of a specialist. Then you also have small cap funds, overseas shares, specialised countries, ethical funds, healthcare, technology etc...

 

I appreciate you work in the FM / advisory industry, but the stark fact is that most active fund managers have little idea what they're doing, and on a risk-adjusted basis post fees they underperform. They're never going to go out of a job in a country where their flow of funds is guaranteed via superannuation contributions, but the reality is that a majority of them shouldn't have a job. Most wouldn't have a clue how to accurately value an equity - they can 'price' things on a relative basis, but performing a more accurate intrinsic analysis is beyond most.

 

Then, of the ones who do know what they're doing, some don't have the requisite integrity to be a trusted fiduciary. As the saying goes, i'd rather someone dumb and dishonest in preference to someone who's smart and dishonest.

 

Diversification is over-rated if you know what you're doing, which i'd accept is a small percentage of the population.

 

 

As always with any opinion, its a matter of weighing up what you can do vs what a professional can do. To use the car analogy again, if I could service my car better then i'd do it but if I can't I use them. If the average punter were better in picking shares and selling them at the right times then we'd all be millionaires.

 

The fees debate is blown out of proportion. Fees are black and white these days.

 

Oh, it's used to work as an adviser with an independent licence.

49

Twitter publicly listed a few days ago, tipping that will go up quick

You reckon? Why wouldn't it be another Facebook? Where are they getting their revenue streams from?
well it opened at $25 today and closed on 44.60. A lot of people made some very good money quickly, and increased their worth by 6bn
50

 

 

Twitter publicly listed a few days ago, tipping that will go up quick

You reckon? Why wouldn't it be another Facebook? Where are they getting their revenue streams from?
well it opened at $25 today and closed on 44.60. A lot of people made some very good money quickly, and increased their worth by 6bn

 

Unless they hold onto it for too long, then the decline as the hype goes, then they've made a loss! :P

51

so, I'm locking in my home loan for a fixed term - 3 years.

 

To do so I'll lose my offset and be restricted on larger repayments.

 

I'm not great with these things so would anyone like to give me some suggestions about how I may win/lose this situation?

Lock in a portion of it at a fixed rate to give you certainty of repayments over the next 3 years and leave a portion variable, that way you keep the redraw and ability to repay lump sums as well.

 

I'm in the AN10 court though......man up and stay variable, over 20 years you'll end up about even unless you stay right on top of it and I've got better things to do like lay on the couch.

52

 

so, I'm locking in my home loan for a fixed term - 3 years.

 

To do so I'll lose my offset and be restricted on larger repayments.

 

I'm not great with these things so would anyone like to give me some suggestions about how I may win/lose this situation?

Lock in a portion of it at a fixed rate to give you certainty of repayments over the next 3 years and leave a portion variable, that way you keep the redraw and ability to repay lump sums as well.

 

I'm in the AN10 court though......man up and stay variable, over 20 years you'll end up about even unless you stay right on top of it and I've got better things to do like lay on the couch.

 

I'm really of the same mind.

 

Rather do nothing and and just put money in when i need.

 

Its <200k so I'm never going to get a great deal either.

53

 

I've always taken the (inexpert) view that fixed-rate loans are for women and poofs.

 

I just can't see the banks offering you something that's going to cost them money. If it gives you peace of mind, then fair enough (see women and poofs line).

 

My brother and one sister took them 15 years ago...both lost substantially on them.

So if it aint broke?

 

I am actually pretty happy how it ticks over at the moment and like the offset a lot.

 

Im with AN10, I hate the idea of not having 100% offset and being limited in how much I can pay back... I olike the possibility to pay interest only too if times get tough.

 

I also think the banks are going to kick my ■■■■ when it comes to predicting what rates will do too.

 

In 3 years time I (and the wife) expect to have earned 2 more payrises each, hopefully a bonus or 2 each and maybe some back pay, all of which I'd like to be able to deduct from what the banks are charging me interest on. If it all goes to hell and we are out on the street, I'd like to pay interest only until the banks take the house.

 

I've done alright out of variable the last 5 years, I probably deserve to get bitten for being so greedy :)

54

I've always taken the (inexpert) view that fixed-rate loans are for women and poofs.

 

I just can't see the banks offering you something that's going to cost them money. If it gives you peace of mind, then fair enough (see women and poofs line).

 

My brother and one sister took them 15 years ago...both lost substantially on them.

I used to think that too but it is rubbish.

 

I locked mine in for 2 years just over 12 months ago. Even with the interest rate cuts the variable rate I would be paying now is 0.09 above what I am paying. So I've saved interest for the last 13 months.

 

So for me to lose before it converts back to variable interest rates will need to drop about 1% tomorrow.... so I'll call it now and say I win and did not lose.

 

It is all maths and is not that hard to figure out really. In 11 months I'll be reverting back to variable however.

 

If you are going well and can pay extra $10,000 payments off your homeloan throughout the year however, fixed does limit you, but then again, if you're in the position, who cares?

 

By the way, my father in law did the same thing in 2007 when Wayne Swan was spruiking the need to "put downward pressure on interest rates" as they were going to blow through 10%..while Peter Costello was warning about the crises about to occur in the US.

55

... also if being a man means paying the banks more money in interest and increasing their profits, then....ok then.

56

... also if being a man means paying the banks more money in interest and increasing their profits, then....ok then.

Well there's a bit to weigh up, we are aware that obviously people have different risk thresholds and financial circumstances.

 

I just bought a new place and am about to sell our current place. I want to be able to pay it off in full without penalties, which I no doubt would incur had I fixed the loan.

57

... also if being a man means paying the banks more money in interest and increasing their profits, then....ok then.

I suspect you're just lucky. The banks are making a bet on the future of interest rates, and they don't make $8bn a year making stupid bets. My siblings were substantially worse off because they locked in at about 12.5% when the rates dropped substantially. They had been up to as much as 17.5% in the few years before that.

58

 

... also if being a man means paying the banks more money in interest and increasing their profits, then....ok then.

I suspect you're just lucky. The banks are making a bet on the future of interest rates, and they don't make $8bn a year making stupid bets. My siblings were substantially worse off because they locked in at about 12.5% when the rates dropped substantially. They had been up to as much as 17.5% in the few years before that.

 

I completely concur in that the banks and woolworths/coles are the biggest profit-mongering companies in Australia, all the while doing it with smiles on their faces while claiming to be your 'friend'

59

The banks are making a bet on the future of interest rates, and they don't make $8bn a year making stupid bets. 

Not quite. 

 

Firstly, the borrower is also making a directional bet on the future of interest rates if presented with the choice to either leave the mortgage floating, or locking it in. Taking a fixed rate is just as much of a bet as having a floating rate.

 

Secondly, the banks aren't really betting on the future direction of interest rates by offering fixed terms - they lay off that risk via the swaps market to a counterparty who wants to exchange a fixed interest series of payments, for a floating series of payments. The banks make roughly the same amount of profit per mortgage whether you're on a fixed or floating mortgage, and the risk profile from their perspective on either loan is analogous. 

60

I think it may have been Walter Buffet who said, just do the exact opposite of the investment experts. He's turned out ok.

Is Walter any relation to Warren?