I've recently finished uni and started working and am looking to start investing. Now seems a great time to start investing for the long term with the share market the way it is. I was, however, worried about the volatility and thought it could be a good idea to invest in managed funds to take advantage of the increased diversity. Does anybody know any good funds or the best way of getting started?
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Looking to Invest
- Thread starter hudson22
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I agree with you that managed funds are a very good way to start. It is a more passive approach and allows you to get appropriate diversity without investing a lot of money. I would suggest looking at managers with a strong record of outperformance, over an extended period. One I'm looking at at the moment is Perpetual Industrial Share fund, Ausbil Dexia also have a very strong performing Australian Share fund. I'm sure there are plenty of others also.
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Well you could do.
But my belief is that fund managers exist to make money for fund managers.
But my belief is that fund managers exist to make money for fund managers.
There are actually some very well performing funds out there. You should do your own research and find some which you feel confident investing in. If you are happy to make your own investment decisions there are some companies which will give back half their trail commissions to you if you dont actually need financial advice.
I agree with you to some extent, but equally executives of companies work for their own financial benefit. I look at it as I'm paying someone to watch them, so that I don't have to. I used to invest exclusively in direct shares, but the fact is if you don't actively manage, over the longer term you can miss opportunities to buy or sell out.
If the manager consistently outperforms the overall market over an extended period, its worth employing them to look after some of my money. This leaves me to watch the overall performance of the fund, but not have to worry about reading the Financial Review or business pages, which are very very boring.
- Thread starter
- #6
Thanks for the feedback, how do i find the companies that pay trailing commissions back to you? Do you know of any and which are the best?
- Banned
- #7
Managed Funds rarely outperform the index, and when they do its usually luck.
Still, there are worse ways to invest (i.e. putting it all in one share or one property).
Try an Index Fund, unfortunately, the best ones require you to go through a financial adviser.
Still, there are worse ways to invest (i.e. putting it all in one share or one property).
Try an Index Fund, unfortunately, the best ones require you to go through a financial adviser.
Indeed.
Do not even think about managed funds. You have super, why spend more on useless fees?
If you don't want the risk with individual stocks, but want exposure to stocks for the long term, try an index ETF.
The ticker code STW is probably your best bet. It tracks the ASX 200, and is yielding close to 9% I think...
You can access managed funds including index funds through numerous non advice services, you dont have to use a financial advisor. I use www.rebatefinance.com.au but there are a number of others such as Investsmart, which is owned by Fairfax. These services don't charge any upfront fees and rebate some trailing commissions.
- Banned
- #10
That website link is to a financial advisors. They may market themselves as something else but they're still recieving a commission.
Most planners have rebate structures if you don't want to use the actual advice, and just reuqire them to do your admin and establiishment. That particular company just focuses on marketing that aspect of their business.
Personally, if it were my money I'd be following Chops' recommendation. Most managed funds don't outperform the index, and cost more to invest in than the index does.
I invest a small amount on a monthly basis. To my knowledge you can't do that with listed investment companies without putting in a fair amount of money each time.
- Banned
- #12
You can do it with any managed fund, if you have the right structure. Its called dollar cost averaging and its used to minimise risk over the long term (i.e. you aren't putting all your money in at a single price, so you're not as exposed to volatility).
Like I said though, Managed Funds are generally not going to outperform the Index (and by generally, I am referring to about 99% of them). So why not invest in the Index? Its cheaper.
Below is an interesting article on ETF's vs unlisted index tracking funds. It's a bit old but still worth reading
By Peter Freeman, Money Magazine, July 2007
Investors sticking to mainstream stocks have done well from the market's charmed run — and using an index fund has made it even easier.
One decision, more than any other in recent years, has determined whether you have been an investment winner or an investment also-ran. It's about how much money you have invested in Australian shares, either directly or through managed funds. While some sharemarket investors have done better than others, all those who have put a big emphasis on investing in mainstream shares have done extremely well.
"The strength of local shares continues to surprise a lot of our clients, but there is no real sign that the market is about to slump," says Laura Menschik, a director of financial planning group WLM Financial Services.
Significantly, among the sharemarket investors who have done particularly well are those who have taken one of the easier routes into the market — a route open to everyone irrespective of their investment skill. Instead of trying to buy shares directly or, sifting through the competing claims of high-profile, actively managed share funds, they have opted for so-called index funds.
These funds don't try to pick and choose among all the different shares on offer. They simply buy the shares in a particular sharemarket index. The two main index fund alternatives for investors in Australian shares are the unlisted Vanguard Index Australian Shares Fund, which follows the S&P/ASX 300 index, and the listed streetTRACKS S&P/ASX 200 exchange-traded fund.
The latter was recently rebadged as the SPDR S&P/ASX200 Fund, the name taken from the SPDRs (short for Standard and Poor's Depository Receipts) index funds that trade on the American Stock Exchange. These are colloquially referred to as "spiders".
The questions are whether to use index funds and, if so, whether to opt for the unlisted or listed version?
Donald Lobo, technical manager at Bridges Personal Investment Services, says index funds, listed or unlisted, market themselves to small investors using three main features: low fees, tax-effectiveness and easy diversification. "Tax is often overlooked by investors and this is one area where index funds usually have an edge," says Lobo.
Overconfidence
These funds also avoid one of the main pitfalls that occasionally engulfs active fund managers — hubristic overconfidence about their stock-picking skills. A high-profile example was the performance slump by BT's Australian share funds at the start of the decade due to overly aggressive stock picking.
When it comes to choosing between listed and unlisted index funds Susan Darroch, head of the global structured products group at State Street Global Advisors, puts the low annual cost of SPDRs at the top of her list of reasons why they are better than their unlisted rivals.
"Essentially the fee structure is set for big institutional investors, but everyone pays the same, no matter how small your investment," she says. And there is no doubt SPDRs are cheap, with SPDR S&P/ASX200 charging just 0.286 percent a year.
In contrast the Vanguard Index Australian Shares Fund charges 0.75 percent on the first $50,000, 0.5 percent on the next $50,000 and then 0.35 percent on every dollar above $100,000.
This, of course, is a lot cheaper than the annual cost of investing in actively managed funds, the bulk of which charge between 1.5 percent and two percent a year.
While these fees will be cut for those who use a master trust or wrap service, by the time the cost of this service is added, total annual fees are likely to be over two percent.
Robin Bowerman, head of retail products at Vanguard, acknowledges that SPDRs are cheaper, although he warns that when you need to sell quickly you may be hit by a big spread between the selling and the buying price.
He also points to the fact that investors in listed funds have to pay brokerage when they buy and sell, whereas there are no entry or exit costs at all when investing in the Vanguard funds.
As for Vanguard's sliding fee scale, this can definitely benefit larger investors, such as many self-managed superannuation funds.
For example, the average annual fee on an investment of $200,000 would be just under 0.5 percent. But while low, this is still well above the cost of SPDRs.
One criticism sometimes levelled at exchange-traded funds, such as SPDRs, is the potential problem of finding buyers in a turbulent market, when prices are falling.
Not surprisingly, Darroch rejects this suggestion, arguing that the structure of SPDRs means investors should have little trouble selling at a price that reflects the underlying value of the shares that make up the relevant sharemarket index.
A point she can't counter, however, is Bowerman's observation that Vanguard offers a much wider range of index funds.
Whereas State Street has just two other SPDRs listed in Australia — the S&P/ASX50 Fund and the S&P/ASX 200 Listed Property Fund — Vanguard has 11 index funds, including a hedged and unhedged international index share fund, and a number of diversified index funds.
What, finally, can be said about the comparative performance of the Vanguard Index Australian Shares Fund and the equivalent SPDR? Not much really, other than the fact both funds, as should be expected, have closely tracked their respective indices and, as a result, delivered strong returns to their investors.
For the period ending May 31 the Vanguard fund delivered, after all fees, a return of 31.16 percent for the year, 26.82 percent a year over three years and 17.51 percent a year over five years.
As for the SPDR 200, it generated total returns of 31.08 percent for one year and 17.08 percent a year over five years. As noted at the start, the big difference among investors is not what index fund they invested in but whether they have been exposed to the sharemarket.
For those who haven't been in the sharemarket but who are thinking of taking the plunge, there is little doubt both the Vanguard fund and SPDRs provide a low-cost, tax-effective, and diversified way to do so, with the latter having the edge when it comes to cost.
But remember, if the market falls so will these funds — they track an index down as well as up. So they are best suited to long-term investors who can ride out the inevitable turbulence suffered by all sharemarkets.
By Peter Freeman, Money Magazine, July 2007
Investors sticking to mainstream stocks have done well from the market's charmed run — and using an index fund has made it even easier.
One decision, more than any other in recent years, has determined whether you have been an investment winner or an investment also-ran. It's about how much money you have invested in Australian shares, either directly or through managed funds. While some sharemarket investors have done better than others, all those who have put a big emphasis on investing in mainstream shares have done extremely well.
"The strength of local shares continues to surprise a lot of our clients, but there is no real sign that the market is about to slump," says Laura Menschik, a director of financial planning group WLM Financial Services.
Significantly, among the sharemarket investors who have done particularly well are those who have taken one of the easier routes into the market — a route open to everyone irrespective of their investment skill. Instead of trying to buy shares directly or, sifting through the competing claims of high-profile, actively managed share funds, they have opted for so-called index funds.
These funds don't try to pick and choose among all the different shares on offer. They simply buy the shares in a particular sharemarket index. The two main index fund alternatives for investors in Australian shares are the unlisted Vanguard Index Australian Shares Fund, which follows the S&P/ASX 300 index, and the listed streetTRACKS S&P/ASX 200 exchange-traded fund.
The latter was recently rebadged as the SPDR S&P/ASX200 Fund, the name taken from the SPDRs (short for Standard and Poor's Depository Receipts) index funds that trade on the American Stock Exchange. These are colloquially referred to as "spiders".
The questions are whether to use index funds and, if so, whether to opt for the unlisted or listed version?
Donald Lobo, technical manager at Bridges Personal Investment Services, says index funds, listed or unlisted, market themselves to small investors using three main features: low fees, tax-effectiveness and easy diversification. "Tax is often overlooked by investors and this is one area where index funds usually have an edge," says Lobo.
Overconfidence
These funds also avoid one of the main pitfalls that occasionally engulfs active fund managers — hubristic overconfidence about their stock-picking skills. A high-profile example was the performance slump by BT's Australian share funds at the start of the decade due to overly aggressive stock picking.
When it comes to choosing between listed and unlisted index funds Susan Darroch, head of the global structured products group at State Street Global Advisors, puts the low annual cost of SPDRs at the top of her list of reasons why they are better than their unlisted rivals.
"Essentially the fee structure is set for big institutional investors, but everyone pays the same, no matter how small your investment," she says. And there is no doubt SPDRs are cheap, with SPDR S&P/ASX200 charging just 0.286 percent a year.
In contrast the Vanguard Index Australian Shares Fund charges 0.75 percent on the first $50,000, 0.5 percent on the next $50,000 and then 0.35 percent on every dollar above $100,000.
This, of course, is a lot cheaper than the annual cost of investing in actively managed funds, the bulk of which charge between 1.5 percent and two percent a year.
While these fees will be cut for those who use a master trust or wrap service, by the time the cost of this service is added, total annual fees are likely to be over two percent.
Robin Bowerman, head of retail products at Vanguard, acknowledges that SPDRs are cheaper, although he warns that when you need to sell quickly you may be hit by a big spread between the selling and the buying price.
He also points to the fact that investors in listed funds have to pay brokerage when they buy and sell, whereas there are no entry or exit costs at all when investing in the Vanguard funds.
As for Vanguard's sliding fee scale, this can definitely benefit larger investors, such as many self-managed superannuation funds.
For example, the average annual fee on an investment of $200,000 would be just under 0.5 percent. But while low, this is still well above the cost of SPDRs.
One criticism sometimes levelled at exchange-traded funds, such as SPDRs, is the potential problem of finding buyers in a turbulent market, when prices are falling.
Not surprisingly, Darroch rejects this suggestion, arguing that the structure of SPDRs means investors should have little trouble selling at a price that reflects the underlying value of the shares that make up the relevant sharemarket index.
A point she can't counter, however, is Bowerman's observation that Vanguard offers a much wider range of index funds.
Whereas State Street has just two other SPDRs listed in Australia — the S&P/ASX50 Fund and the S&P/ASX 200 Listed Property Fund — Vanguard has 11 index funds, including a hedged and unhedged international index share fund, and a number of diversified index funds.
What, finally, can be said about the comparative performance of the Vanguard Index Australian Shares Fund and the equivalent SPDR? Not much really, other than the fact both funds, as should be expected, have closely tracked their respective indices and, as a result, delivered strong returns to their investors.
For the period ending May 31 the Vanguard fund delivered, after all fees, a return of 31.16 percent for the year, 26.82 percent a year over three years and 17.51 percent a year over five years.
As for the SPDR 200, it generated total returns of 31.08 percent for one year and 17.08 percent a year over five years. As noted at the start, the big difference among investors is not what index fund they invested in but whether they have been exposed to the sharemarket.
For those who haven't been in the sharemarket but who are thinking of taking the plunge, there is little doubt both the Vanguard fund and SPDRs provide a low-cost, tax-effective, and diversified way to do so, with the latter having the edge when it comes to cost.
But remember, if the market falls so will these funds — they track an index down as well as up. So they are best suited to long-term investors who can ride out the inevitable turbulence suffered by all sharemarkets.
nokiacasio
Team Captain
If you think the market will go up a lot soon then a margin loan maybe appropriate.
Most index funds don't beat the index either. In fact they always underform the index because of fees. THe way to best track the index is to buy individual shares in the same propertion as the index and when you buy each lump of share to buy many at once to minimize costs.
Most index funds don't beat the index either. In fact they always underform the index because of fees. THe way to best track the index is to buy individual shares in the same propertion as the index and when you buy each lump of share to buy many at once to minimize costs.
- Banned
- #16
Absolutely, but not really feasible if you're a young bloke 'looking to invest'
Get on physical gold for next year.
You can buy the stock STW , which is basically buying the ASX S&P 200. Cheapest way to get the index.
If you were looking long term at the moment you could dollar cost average into a geared Aussie stock fund.
- Banned
- #19
Is that similar to DJW?
No, DJW is a listed investment company (LIC). STW is an ETF, exchnage traded fund, which composes purely the index.
