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Complete novice - fund manager spread?

Discussion in 'Other Asset Classes' started by Bran, 30th Sep, 2015.

  1. Bran

    Bran Well-Known Member

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    Any feedback on this spread across fund managers? Im a complete novice and to be fair, this means almost nothing to me

    This is set up as the minimum possible contributions (which is where I want to start), moderate risk profile, medium/long-term. I'm largely using it as an exercise for some 'active learning', whereby if I'm in the market, Ill be interested enough to learn. I'm interested in something largely passive initially, where I can dribble feed and/or deposit extra cash along the way, and maybe later add in something a bit more active.

    Screen Shot 2015-09-30 at 7.16.20 am.png

    It's listed with AMP as thats where our super is, apparently reduces our management fees.

    FA fee is 0.5%, and is a (not close) friend, i.e., I still have no qualms talking turkey.
     
  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    What is the MER? What are the buy-sell spreads?

    So this is an AMP super fund? Not SMSF?
     
  3. Bran

    Bran Well-Known Member

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    No, nothing to do with super. AMP FLI (flexible lifetime investments) is just the platform to access managed funds run by (non-AMP) fund managers.

    Buy-sell spreads? What's this mean? I will just make regular (at this stage the minimum) contributions. No plans to sell. If things look bearish (as they do), then I'd broadly plan to put in more money.

    What's an MER?
     
  4. Simon Hampel

    Simon Hampel Founder Staff Member

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    MER = Management Expense Ratio - the percentage of fees that the fund manager collects for managing the fund.

    For an actively managed fund this is typically in the 1.5% - 2% range, although for some specialty funds, it can be as high as 4% - 5%.

    For passively managed (index) funds, it should be no higher than 1%.

    Wholesale funds typically have a lower MER than retail funds.

    Except for some types of fund, in general the fund manager will charge this management fee regardless of how the fund has performed - so if they are losing you money, they will still get paid no matter what.

    If you aren't looking to invest via super, why are you buying a heap of managed funds from the same platform? Why are you paying half a percent of your money to a FA?

    If you've got such a large spread of funds, you're only going to get average returns in my opinion.

    I don't recommend broad spreads like this - to me, there are only two good ways to invest in managed funds: 1) very active, or 2) mostly passive

    The active approach is to specialise and pick one or two funds you feel have a lot of potential and watch them very carefully (ie daily) - this is what I do (but not what I recommend for people new to managed funds).

    The passive approach (which most people would recommend) is to just invest (by yourself without a FA!) in a simple index fund or ETF ... Dollar Cost Average into it and hold it long term, reinvesting distributions or dividends - it's going to save you a LOT of money than the path I see you taking and I would suggest that your returns won't be worse than from the selections you've presented (indeed, you may actually be better off after fees).

    If you have hundreds of thousands of dollars to invest and need to protect your capital (eg at or near retirement age), then asset choice becomes critical and I might consider a FA. But with smaller sums over a longer term where you are primarily looking to learn - I say, do it yourself and start simple. Index fund or ETF.
     
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  5. Bran

    Bran Well-Known Member

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    Thanks Simon.

    I have all the fees and things outlines - my summary is that using AMP (who holds my super) waives the admin fee (as I have >100K in super). Based on holding super with AMP I also get a fund management discount of between 0.4-0.6%.

    The different funds (?is this the right terminology) have fees from about 1.5-1.85% - thus my overall fee will be about 1.55-1.75% of contributions.

    So, less than 2% for someone else to do everything for me - still too expensive?

    How would I do this myself? Like, in baby steps? I think I set up an ANZ E-trade account once...
     
    Last edited: 30th Sep, 2015
  6. Bran

    Bran Well-Known Member

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    PS Because you mentioned it, I will read the EFT thread.

    (At this stage, in my mind Eft is an acronym for Electronic Funds Transfer. That's all I know, and I know even that is wrong).
     
  7. Bran

    Bran Well-Known Member

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    Nope. Lost at the first post.
     
  8. The Falcon

    The Falcon Well-Known Member

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    nothing special going on here to warrant those fees. All beta type funds with lots of bonds and cash.

    This asset allocation long term you might look at say 6- 8% absolute tops total return...So, you will forgo approx 20% of your return (call it 1.6% MER in fees on 8% return). And it's worse than that...that capital, essentially lost can't compound for you in future.

    And a FA has got his hand in the pie for this.

    Use vanguards unlisted growth fund, with 100k they will let you access the wholesale pricing if you call and ask and they will charge you 0.36% pa.

    Then you can look for different ETFs / stocks / funds etc to supplement this core holding and chase some alpha if you like. Or not.

    Not advice, just my 2c :)
     
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  9. Simon Hampel

    Simon Hampel Founder Staff Member

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    Not EFT ... ETF ... Exchange Traded Fund ... it's basically a managed fund that is traded on the stock exchange.

    Some reading for you: https://www.vanguardinvestments.com.au/retail/ret/education/inv-library/what-are-etfs.jsp

    Perhaps forget about ETFs for now and instead just start with a simple Vanguard index fund like The Falcon mentioned ...

    Try this:

    https://www.vanguardinvestments.com.au/retail/ret/investments/funddetailASF.jsp

    Minimum Initial investment: $5,000
    Minimum additional investment: $100
    MER: 0.75% (first $50K); 0.50% (next $50K); 0.35% (balance over $100K)
    Buy-sell spread: 0.2% (0.1% buy cost, 0.1% sell cost)
    Establishment fee: nil
    Application/contribution fee: nil
    Withdrawal fee: nil
    Index: ASX 300

    ... so basically, you put your money in this fund and it should largely match the returns of the ASX 300. If the ASX 300 goes down 5%, your fund investment goes down 5% - and vice versa.

    If you choose to reinvest your distributions (dividends paid by the shares in the ASX 300 companies held by the fund), then you are effectively getting the returns of the ASX300 accumulation index (which includes dividends in the returns).

    This is a really easy and low-cost approach to learning how things work.

    Of course, I'm not giving you financial advice here - just trying to educate you on the options you have and give you some things to think about.
     
    Last edited: 30th Sep, 2015
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  10. Bran

    Bran Well-Known Member

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    Thanks guys.

    Funnilly enough, this was my original intention. But I mentioned something on a social media account and all of a sudden all my FA friends appeared :)

    Ill look into it - but I think SImon and Falcon, you both are nailing my intentions a bit better.
     
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