Managed Funds Question about these shares

Discussion in 'Shares & Funds' started by luckystar, 26th Dec, 2015.

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  1. luckystar

    luckystar Well-Known Member

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    Sorry i don't know a lot about them but I am reading and learning but I need I ask some newbie questions,

    I have 70k and am looking for some income over the next 3 years, big ask I know but I would rather not leverage into any more property equity if possible

    In particular I have been looking at this as an option ( only because it looks like high yielding)

    http://static.macquarie.com/dafiles...s/performance/hcf-performance-report.pdf?v=64

    image.jpg
     
    luckystar, 26th Dec, 2015
    #1
  2. luckystar

    luckystar Well-Known Member

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    image.jpg The fund returned 17% over the last 3 years and I can see that the fund has a mix of some big names in diversified industries but does anyone think this would be a silly 3 year buy?

    The fund says it distributes qtrly, so does this mean on average it was producing 3k a qtr if I bought 70k worth?
    70@17%\4( minus fees?)
     
    luckystar, 26th Dec, 2015
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No. Those are past figures which will be different to future earnings. It also probably includes growth not just income. Also check that the figures is an annual figure or total return over the 3 years.
     
    Terry_w, 26th Dec, 2015
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  4. johnpendlebury

    johnpendlebury Well-Known Member

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    I'd be careful chasing yield. I think a lot of the high yield stocks are quite overpriced as their demand has been driven up artificially by people looking for income in a low interest rate environment. All well and good to get a 7% yield, but not if it ends up costing you 20% of your capital.
     
    johnpendlebury, 26th Dec, 2015
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  5. Heinz57

    Heinz57 Well-Known Member

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    Some funds do outperform the index, but the majority do not. And check the fine print for fees and work that out as a percentage of your compounded 70k.
     
    Heinz57, 29th Dec, 2015
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  6. willair

    willair Well-Known Member Premium Member

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    You would want read as much as you can before dropping 70k on the investment table about the way it works,who are the major decisions makers?,what is in place for poor performance ?,plus the future earnings growth is very 50/50 dependent on who are major unit holders ,what% they control and the influence they can and will exert..imho..
     
    willair, 29th Dec, 2015
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  7. The Falcon

    The Falcon Well-Known Member

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    Stocks are a long term asset class. Don't invest with a short term (3 years) timeline. Cash or term deposits or if you are only looking at 3 years. And I'd be giving that MQG product the flick in any case.
     
    The Falcon, 29th Dec, 2015
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  8. twistedstats

    twistedstats Well-Known Member

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    You really have to assess whether the product is suitable for your circumstances...it's a high conviction fund so the manager would be taking quite concentrated positions and backing his/her skill. Looks like its done really well in the last year...21% vs 1.9% benchmark but as others have said..past performance is not indicative of future performance.
     
    twistedstats, 29th Dec, 2015
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  9. The Y-man

    The Y-man Moderator Staff Member

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    Don't invest in anything you don't understand - so it's good you are asking....

    But need to clarify exactly what you are asking - since your thread title is about "these shares" and your post seems to be about a managed fund o_O

    The Y-man
     
    The Y-man, 29th Dec, 2015
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  10. Big Red

    Big Red Well-Known Member

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    Hi Lucky Star if you can afford it get a financial plan done for yourself. Like property investing should be for the long term.

    If something happens to you in the short term you will not forgive yourself, also if you make money you might get greed and go all in and then potentially lose it.

    It is very important like Y-man said to invest in things you understand. This is where having a financial adviser will help because they will help you understand things better and tailor a portfolio to your risk appetite and goals. <- this is what I do for my clients.
     
    Big Red, 30th Dec, 2015
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  11. The Y-man

    The Y-man Moderator Staff Member

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    Hi Luckystar,

    To clarify a few things: the difference between a managed fund (or "mutual fund" in the USA) and "shares".

    Shares: this is where you directly own part of a business.
    You make money by

    1. the share price going up, because someone is willing to buy that share off you for more money then you paid

    -AND/OR-

    2. you get part of the profits the business makes as "dividends" (usually paid 2 x per year)

    As a general rule (but certainly not always) if the business does well, the share price goes up.
    Also, if the business makes more profit, you should get more in dividends too (but this is up to the board to decide).

    Ok, so that's shares.

    So what's a managed fund?
    Well, this is where a fund manager (like macquarie in your example) collects money from a group of people, and goes and buys/sells shares with it.

    So let's say they get 1,000 people with $1,000 each (that's a million total right?)

    They then go and select and buy $1m worth of shares.

    Let's say in a few year's time, the portfolio is worth $1.5m.

    You can (if it's a "liquid" fund) sell your portion i.e. $1.5m / 1000 = $1,500 less fees

    Also, any dividends the fund manager gets from the $1m, you would get 1/1000 of (less fees).


    So what's the risk with managed funds?

    1. you are hoping the fund manager knows what they're doing! (Don't laugh, there have been many who haven't)

    2. you pay fees to the fund manager on all sorts of things - often based on the amount invested (as if $100,000 costs more to manage than $1,000!!), the profits made, entry/exit transactions etc etc

    By the way - if you have super (NOT self-managed) - you are more than likely using a managed fund (through your "super" fund manager)

    So before you go investing more money into managed funds like the one you are looking at, some simple questions for you if you have super:

    1. are you happy with the fund manager you are using for super? i.e. in terms of performance and fees?

    2. what shares are they putting your heard earned money into?

    3. If you are happy with their share choice, could it be an idea to just go and buy the shares youself? (and save some fees?)

    The Y-man
     
    The Y-man, 30th Dec, 2015
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  12. luckystar

    luckystar Well-Known Member

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    Thanks for all your replies, the reason I chose this was that I was hopeing for something more liquid than property for a small income for a few years but obviously it's not a lot of money so not alot of choice for high return...and I was wiling to take on a but of risk rather than playing it safe with a 3%er
     
    luckystar, 30th Dec, 2015
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  13. The Y-man

    The Y-man Moderator Staff Member

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    What is your definition of "high return"?

    Assuming you are not after 20%+ pa, there are many options which are at least liquid and MAY provide more return that resi IP

    1. Managed funds (as you have already found) - minimum capital required about $1,000.
    2. direct shares in business (listed) - minimum captial required about $500
    3. Commercial property through an AREIT - minimum capital required $500 for liested, about $10,000 for unlisted

    That's without even going into hedge funds etc.......

    The Y-man
     
    The Y-man, 30th Dec, 2015
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