Managed funds - recommendations please

[Jac]

Have 200k for investment and retirement in 10 years time. Any recommendations/suggestions ?

[Placebo]

Avoid managed funds.[}:)]

Put half into fixed term interest-bearing account in a major bank. With the other half buy a couple of decent-yielding stocks preferably blue chips, such as CEN or TEL.

No I am not kidding.

[Halebop]

Hello Jac,

A difficult question to adequately answer without more information.

You wish to be able to retire in 10 years time. Will you be old enough to be eligible for National Super? i.e. Does the money need to support you in 10 years time for a period before your income is supplemented by government contributions? (I'm assuming you are in New Zealand too).

Have you got experience with investing directly in shares? Jumping in with $200,000 just 10 years before retirement could be an expensive learning experience.

You current tax status and income is also an important consideration for structuring the investments. If your income sets your marginal tax rate at or near 39% you might want to consider a company and trust structure to defer (potentially indefinately) the 6% difference between the company tax rate and your personal rate. The costs of setting this up and running it also need to be considered. Something closer to the opposite may apply if your personal tax rate is below 33%. Investment income also has the advantage of being structured to cater to income splitting. If you have a partner/spouse this can be a useful method for reducing income tax liabilities

I'm firmly in the DIY investment camp but some forms of managed fund are still useful for those who either don't have the time, knowledge or inclination to look after the funds themselves. In absense of further information I'd be inclined to have less cash invested and a more diverse share portfolio than Placebo's suggestion. Given your medium term horizon modestly valued, Blue and Green Chip high income shares with dividends reinvested are probably a good compromise between risk, reward and volatility. For a less active investor 2 shares are too few. A portfolio of 8 to 12 carefully selected shares would approximate the benefits of diversification while still allowing some upside for picking winners.

Exponants of diversification also emphasise geography as a consideration. i.e. Splitting investments by country or world-region. The benefits of this approach are beguiling within a portfolio mentality. However if you take the "pick winners" approach instead, 8 to 12 superior companies are not too difficult to find even in a poorly performing market. I personally invest mostly in Australia and New Zealand. While I do go further abroad to invest my knowledge of foreign markets is understandably restricted due to proximity, nuance, culture and language. Here again is where Managed Funds can be a benefit to less confident investors.

Finally Australian and New Zealand shares are not far off all time highs. Even over a 10 year time frame nobody knows where they will end up. Markets can keep dropping or remain static for numerous consecutive years, in the worst instances for far longer than 10. I personally am bullish on the demographics of Australia and New Zealand and feel their robust economic performance of the last decade could well be continued into the next. This normally would be translated into strong investment markets too. But that's just one opinion...

[Sky Tower]

I agree with Placebo - avoid Managed Funds

[cinnabar]

The purpose of the portfolio is long term growth. With a 10 year+ time frame you should be investing in global shares especially now with the NZD so high. This is plenty time to ride the volatility out -as long as you can stomach losses along the way. In fact expect -14% 3 years in 10, average return 8% after tax over 10 years- if market averages are anything to go by.

Tax status is important- in that if you pay it then you want to avoid income producing securities- again shares that have a higher capital growth component are more attractive for this reason. That means avoid high yield shares and certainly avoid term deposits. That, and I wonder whether it makes sense to invest in NZ shares when our interest rates are the highest in the world, making global companies in a relatively more advantageous position as far as company outlook.

Using a trust structure is fine- I would avoid the company structure as all capital gains would then be taxable.

It isn't about choosing a range of stock picks and hanging on - any broker can give you that advice- what is important is asset allocation and currency exposure. Get these right first as these have the biggest determinant on performance. You simply can't DIY when it comes to the specialist economics knowledge required to determine where in the world to invest in order to protect your capital from a global perspective.

Take NZ in 2002 for example- the NZ dollar was 40 cents against the USD. That was a time to invest in NZ as the currency appreciated- now is the time to head offshore again. No point being rich in NZD if the currency plummets 30% -you will notice this when you decide on an overseas holiday.

So - a diversified global growth portfolio seems the solution to me. Being diversified you won't lose it. Yes- avoid managed funds in the sense that they put you into their high fee and tax ineffective unit trusts - try a manager that will establish an individual portfolio - and one that takes no commissions or kick backs from product suppliers. One that repositions your portfolio along the way rather than leaves you like a possum caught in headlights while markets collapse. Gareth Morgan has a good website and articles on all this in the public folders -quite a good retirement calculator there as well.

[Winston001]

Good question. Most people here will bag managed funds - and rightly so. Few manage to perform well at all, and last years winners may be dogs this year. You really need a 10 year performance table to make an assessment - and that isn't easy to find.

However, people on this forum tend to be informed and active investors. Thus doing their own investing is exciting and sometimes profitable.

But for the vast majority of people, DIY is far too daunting. And risky. Todays bluechip is tomorrows fish and chip paper.

Personally, I'd suggest you look at the English investment trusts. Some are registered on the NZ market. Immediately you are using another currency and investing globally.

RIT and British Empire are my picks and I hold them. Also Caledonia and a Fidelity fund (can't remember which).

ABN Amro operate the START investment fund where you can drip feed money into these trusts instead of buying directly. I use it and the results are disappointing because the $NZ was at an all-time low when I commenced. But I accept that if our curency plunges back then I'm going to see a startling rise in value.

[cinnabar]

Quite right Winston001- listed investment trusts and direct shares are the way to go. As you are now aware however- whether to be invested in NZ or offshore is the bigger issue- and I expect you will do well going forward having taken a bath with the currency decision already. I like resource stocks- BHP, Rio Tinto, and exposures to the growing Asian economies especially China. NOT Chinese listed shares- but companies that feed off the government spending in those countries. Trustnet.com has the full list of investment trusts- just look for ones that are are possible buying opportunities either trading at a discount or spectacular track record.

Again though- good investment is NOT a selection of stock picks. It is about diversification and not losing it. That means anticipating global trends and positioning yourself accordingly. Another option for the unsure could be some exposure to a global index fund such as Tower Tortis. The problem with this is that you end up with a bit of everything- and miss out on concentrated commodities exposures for example.

I also wonder whether the costs (and lack of ongoing advice which you seem to have missed out on) of the AMRO platform outweigh using this. No doubt they make their money via above average brokerage costs, and admin costs. That said- for a small portfolio they may be OK- given the brokerage costs on small portfolios can be prohibitive to the DIY investor anyway. There are better options for larger investors.

[Halebop]

For a little bit of effort setting up online accounts brokerage costs are far from prohibitive, even in New Zealand.

[diesel]

Surprised no one has told Jac to buy gold or silver?

What tha.....

[duncan macgregor]

JAC, If you dont have a brain stick it in the bank. If you do have a brain invest it when you learn a bit. If you think that it is all beyond you give the money to charity you certainly never earned it so spread it about to people that do have a brain. For CHRIST SAKE GROW UP. macdunk

[Snow Leopard]

quote:Originally posted by duncan macgregor

JAC, If you dont have a brain stick it in the bank. If you do have a brain invest it when you learn a bit. If you think that it is all beyond you give the money to charity you certainly never earned it so spread it about to people that do have a brain. For CHRIST SAKE GROW UP. macdunk

Ooooohhhhhhh [:0]

JAC just go to the casino put the lot on red or black 50% chance of doubling your money or 50% chance of losing it put you out of your misery

[dingdong]

Consolidated Dung Holdings.

And anything the great Stolwykos recommends. Preferably the day before he recommends them.

[Snoopy]

quote:Originally posted by cinnabar


The purpose of the portfolio is long term growth. With a 10 year+ time frame you should be investing in global shares especially now with the NZD so high. This is plenty time to ride the volatility out -as long as you can stomach losses along the way. In fact expect -14% 3 years in 10, average return 8% after tax over 10 years- if market averages are anything to go by.


Currency speculation is a dangerous game. The NZ dollar is high compared to where it has been in recent years, but whether that makes it 'high' is another matter. If macro-market conditions change then you cannot expect the currency patterns of the past to be repeated. IMO you should ignore currency at the macro level.

As an interesting aside, if you put all your money in Telecom today, and the TEL share price went nowhere for 10 years then you can get a return very similar to the expected long term retun of global shares with much less risk. I'm not advocating that as a sole strategy, but it does make you think about the 'expected superior performance' of global shares.


quote:
Tax status is important- in that if you pay it then you want to avoid income producing securities- again shares that have a higher capital growth component are more attractive for this reason. That means avoid high yield shares


After tax return is important, and tax is one component of this. Unfortunately tax law can change. If Cullens new overseas investment tax rules come in you could be in serious trouble with a strategy described above. You will be unable to generate sufficient income to meet your tax requirements and you will have to sell your overseas shares.

You should generally avoid any investment strategy that is largely tax driven. Generally the reason investment strategies are advertised as tax effective is because the underlying strategy is no good. The only advantage is that it is good for tax and in the overall investment strategy soup this is insufficient.


quote:
and certainly avoid term deposits.


Yes, over a ten year timeframe these are almost certain to perform relatively poorly.


quote:
That, and I wonder whether it makes sense to invest in NZ shares when our interest rates are the highest in the world, making global companies in a relatively more advantageous position as far as company outlook.


I would tend to look at interest on a case by case basis. If a company has no term debt, for example, does it matter what the interest rate is?


quote:
You simply can't DIY when it comes to the specialist economics knowledge required to determine where in the world to invest in order to protect your capital from a global perspective.


No but you could buy a low administration fee index fund and outperform about 85% of all fund managers.

[quote]quote:
No point being rich in NZD if the currency plummets 30% -you will notice this when you decide on an overseas holiday.
</b

[geohay]

quote:Originally posted by Snoopy

[quote]quote:Originally posted by cinnabar


The purpose of the portfolio is long term growth. With a 10 year+ time frame you should be investing in global shares especially now with the NZD so high. This is plenty time to ride the volatility out -as long as you can stomach losses along the way. In fact expect -14% 3 years in 10, average return 8% after tax over 10 years- if market averages are anything to go by.


Currency speculation is a dangerous game. The NZ dollar is high compared to where it has been in recent years, but whether that makes it 'high' is another matter. If macro-market conditions change then you cannot expect the currency patterns of the past to be repeated. IMO you should ignore currency at the macro level.

As an interesting aside, if you put all your money in Telecom today, and the TEL share price went nowhere for 10 years then you can get a return very similar to the expected long term retun of global shares with much less risk. I'm not advocating that as a sole strategy, but it does make you think about the 'expected superior performance' of global shares.


quote:
Tax status is important- in that if you pay it then you want to avoid income producing securities- again shares that have a higher capital growth component are more attractive for this reason. That means avoid high yield shares


After tax return is important, and tax is one component of this. Unfortunately tax law can change. If Cullens new overseas investment tax rules come in you could be in serious trouble with a strategy described above. You will be unable to generate sufficient income to meet your tax requirements and you will have to sell your overseas shares.

You should generally avoid any investment strategy that is largely tax driven. Generally the reason investment strategies are advertised as tax effective is because the underlying strategy is no good. The only advantage is that it is good for tax and in the overall investment strategy soup this is insufficient.


quote:
and certainly avoid term deposits.


Yes, over a ten year timeframe these are almost certain to perform relatively poorly.


quote:
That, and I wonder whether it makes sense to invest in NZ shares when our interest rates are the highest in the world, making global companies in a relatively more advantageous position as far as company outlook.


I would tend to look at interest on a case by case basis. If a company has no term debt, for example, does it matter what the interest rate is?


quote:
You simply can't DIY when it comes to the specialist economics knowledge required to determine where in the world to invest in order to protect your capital from a global perspective.


No but you could buy a low administration fee index fund and outperform about 85% of all fund managers.

[quote]quote:<hr height="1" noshade id="q

[Dimebag]

I would recommend having a look at Platinum. In my opinion, they are one of the best Australasian based fund managers.

www.platinum.com.au

Platinum international fund would be a good solid fund. Depending on your appetite for risk, you may want to check out their Platinlum Asia Fund. Asia is going to be a booming region over the next decade, and offer plentiful opportunities. THe markets there are less competitive, and opportunities ripe for the proficient stock picker. Platinum has such proficiency. They have quite and impressive history of outperformance.

http://www.platinum.com.au/docs/pricing.htm

click the graph on the far right, second line down, for a quick view to historic performance. Historic performance is, or course, no necessary guide to the future, but it is as good an indicator as any. Investing in Asia offers greater potential rewards but also greater risk.

Cheers,
Dimebag (not affiliated with Platinum in any way)

[OneUp]

If you don't want to "do it yourself", but also don't want to pay fund managers fees + taxes, go here www.stockmarket.co.nz. Good newsletter with unbiased advice that earns subsribers above market returns. Possible to do better once one is confident in one's stock picking abilities.

[kittydashwood]

Closed country funds from Morgan Stanely are good.
Choose your region spread your risk, some offer great dividends.

[Lawso]

Put half of your kitty into Widespread Portfolios and retire a millionaire. See the WPL thread on NZX.

[bohemian]

RIT