Managed Funds Best Managed Fund

Property forum yes I know but I also know there are very smart people on here!
Is Vanguard the best managed fund available on the ASX?
Thank you!

 

Good question! I suppose lowest risk with best return ( isn't this what everyone wants lol )

 

Vanguard isn't a fund. It has many, many funds.

 

I have no debt probably a lump sum for now...no real goal just something that is going to make me more money than it sitting in the bank
10k would probably be my starting point

 

how 'risky' is Vanguard conservative managed fund? how does it compare with banks' term deposit? I know return Vanguard is higher but what worst can happen in their conservative fund?

 

With Vanguard's all in one funds, the words growth and high risk (and balanced and conservative) don't have the same meaning as those words do in regular conversions.

In investing, shares are called high risk because short and medium term price goes up and down so much that you have a 'high risk' of (potentially massive) short and medium term loss. But in the long term they come good and provide a strong return.

On the other hand, bonds have very low short or medium term risk since the capital is returned on maturity.

So in all-in-one funds, they call funds with a higher proportion of shares "high risk" or "high growth", and those with a higher proportion in bonds conservative, and those with 50/50 "balanced".

But over the long term, bonds return much less, so even though they have less short term volatility (ie what they call risk), they give you a much bigger risk of not earning enough money that you need to last the long term in retirement.

Those words risk and balanced and conservative are very misleading.
I thought the same as you until one day I read an article that explained it.

The Vanguard conservative fund is nothing more than 30% in high volatility high growth assets, and 70% in low volatility low growth assets. Doesn't mean anything more than that.

Make sure that anything you put into growth assets (which all of the funds contain in varying proportions) is something you can leave there for long enough to ride out the volatility. If you are not prepared for that you should not be investing in them.

 

Thank you @Anthony Brew for always been insightful. my scenario is bit similar to the OP, looking a better way to park fund than just in the bank, while trying to find an IP. I am not trying to time the market, but just want to see hows the housing market going next year or two..

Thank you for clarifying the definition too.. I think the Vanguard conservative fund is less volatile in short term and offer a better return than the bank. The plan is to let the fund sit there for a while, as I am still hunting for an IP..

 

If you have the money earmarked for something, for instance property, within the next say 3 years, then definitely stay out of equities entirely. It is completely conceivable that equities drop 50% and you are forced to crystallise those losses when you take it out to buy your property.

In order of preference:

1. Offset against PPOR is ideal
   Although if this is available, probably best to put it in a redraw and then redraw it out to use as a deposit to recycle your non-deductible debt into deductible debt. Talk to an accountant soon if this is the case, it could be a serious amount of free money for you.
   
2. Offset against IP next preference if no PPOR loan to offset.
   
3. High interest savings account like RAMS or ING if neither of the above 2 are available.

 

true... I looked into the ING and currently they offer 2.9% term deposit and 2.8% online thing with 1k monthly deposit. Compare this let say with vanguard conservative (70% bond/fixed 30%shares) return 5-6% within 2-3 years which is double than what the banks currently offer. doesn't bond/fixed interest does not go the same way as shares (one drop the other one rise) hence the risk can be minimal? Once again thank you @Anthony Brew

 

Here is a historical chart
S&P 500 Index - 90 Year Historical Chart

In 1929, the previous 2 years had truly massive returns. If you put your money in based on the previous 2 years, you would then have lost 75% of your money.
In 1936 after some recovery, same thing, massive run up in previous years, you would have lost 65% of your money.
1972, half your money gone, same in 2000, 2008.

The previous 2 years are meaningless going forward. In fact, often after a long upward run (which the past 10 years has been one of the longest runs), there is a drop. The only time there is no drop is when you take your money out expecting a drop. The market will find one way or another to screw up your plans, that's the unpredictable nature of the stock market and why it is called 'risk'. No one rings a bell to say take your money out now because there is going to be a massive drop. You only know when it's too late.

They always come back though. Sometimes in 3 years and sometimes in 15 years.
If you don't have the time to leave it in there to recover, it's not worth the risk.
Not everything is clear cut in investing, but I have never seen anyone argue the side of investing in shares when you have money earmarked for a specific purpose within the next few years. Sorry to harp on, just trying to help.

 

You might find this Podcast useful: The Stupidest Thing You Can Do With Your Money - Freakonomics

Great show and in this episode they interview the founder of Vanguard.

 

no actually thank you for elaborating further, very much appreciated @Anthony Brew ... my only concern for putting the fund in the bank is, the flexibility... TD offer higher rate but will lock me in for a period of time, while online saver rates actually fluctuate.. hence my initial reasoning of considering putting into Vanguard conservative, possibly almost double return than what bank offers and flexibility....but you are right and again thank you for highlighting the possible risk in it too..

 

Yep, that would be my question also and I was about to post it when I saw Simon had already.

Always a case of risk vs reward as many have said in various ways. You can't change that natural law unfortunately

 

I need to learn more about ETFs and LICs but just want something simple. Looking at approx 30k to start but as we may need to pull this money for property in the next few years maybe its best to put in the highest interest account we can find from a bank.....

 

I agree. The sharemarket is no place for short term money.