I have been investing in properties for the past few years and accumulated a handful of IPs. However, because some of them are -ve geared I can’t live off the rent as soon as I would like. I have been looking at the manged funds lately and some of them returns 20%+ pa for the past 5 years. I am thinking if I put $700K into managed fund and if it returns 7% (net of all costs) income and 10%+ capital growth, I would be happy as larry and none of the hassle that come with IPs. It seems too good to be true and wondering if other people have experience with managed funds.What do you think ?
The simple answer is no it isnt, read cashflow quadrant by RK
Get passive income from business then invest in property, shares, its too hard to just using job income.Property should be used as one stream of income, not the only one, its quite slow esp in the current market but is good for the long term and to create stability in your portfolio.
Most property is pretty rubish for cash flow. However perhaps you need to think beyond selling and switch asset classes.
Why not borrow against your existing properties and buy shares/managed funds. These can then be margined to buy more.
Selling property means giving up the CG forever (as well as incurring a whole lot of extra costs).
the advantage of property is gearing and captial security
managed funds and shares are very significant wealth creation vehicles – read peter spann – but just my personal opinion and I sure it will get shouted down – i would not put 700k (unless this represents less than 30% of your total equity ) of cash into equities at the peak of the cycle – maybe 12 months in a fixed income fund or cash heavy investment may serve you wellI Buy Property http://www.cashflowproperties.co.nz
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I put a few grand in colonial first state managed fund and it’s been going really good. i got my quartely statement back the day before yesterday and it has gone up another $700 (from $5,800 to $6,500). that’s a 12% increase in 1 quarter. it goes how the market goes. if the market is going good, then the fund goes good. most managed funds have an entry fee of 4%. so if you put $10,000 in a fund they’d take 4% of that ($400) straight off the bat.
ofcourse there’s all other kinds of managed funds. did you get steve’s email about a new real estate one? about how westpac bought $100 million dollars worth of defense force property? if you didn’t and you’d like it i can easily send it to ya.
don’t believe the lies, find your own truth
Originally posted by DLPP:the advantage of property is gearing and captial security
managed funds and shares are very significant wealth creation vehicles – read peter spann – but just my personal opinion and I sure it will get shouted down – i would not put 700k (unless this represents less than 30% of your total equity ) of cash into equities at the peak of the cycle – maybe 12 months in a fixed income fund or cash heavy investment may serve you wellI Buy Property http://www.cashflowproperties.co.nz
Before you get shouted down, I will say that I wholeheartly agree with everything you have said. No offence to anyone who is a bit younger in years or investing experience, but the last 5 years or so have probably seemed like a money making party in both property and equities. Well.. the property party is over for the time being and opinions are very mixed on equities.
So much could be said on this topic it probably deserves it own sub forum, which won’t happen here as it is purely property.
My advice to ttman would be to have a good look at informed opinions on the equities market, check out other investment forums where people who are actively in equities discuss various strategies, and make your own mind up from there.
Expert opinions vary from “correction coming soon” to “party will go on forever”. Right at this moment I am grappling with all of that.
The last thing I would do is drop $700K into direct equities/managed funds right now… UNLESS… you are looking long term – you only lose money if you sell.
If you are after a quick short term gain on the basis that what has happened in the recent past will continue indefinitely, then I would have a really serious think/ research before committing.
One method… again only if you are looking look term is “‘Dollar Cost Averaging”‘ ie buy in at $X per month or put 50% in now ,hold your breath, watch the trend – if it continues up, well your happy because your 50% in and infront. In this case its up to you when and whether you put the other 50% in.
If things head south, and your in solid blue chips/managed funds for LONG TERM, well watch it go down and pick a point to committ the other 50%. Your average cost per share/unit is lower. ‘
Don’t try and pick the top or bottom of a run – you won’t get it right. Experts are paid mega bucks to do that and more often than not get it wrong.
Anyway.. thats enough from me.. gotta go and pick the kids up from ballet
Originally posted by servant: most managed funds have an entry fee of 4%. so if you put $10,000 in a fund they’d take 4% of that ($400) straight off the bat.That is true, however a discount broker will allow you entry with a 0% upfront fee. No catches.
Mine has been doing it for years.
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The beauty of property is the gearing. If you could gear as high to invest in managed funds without the threat of margin calls…. Heres the rub. Dividend imputation and liquidity makes the managed fund potentially a better investment, but the margin call threat means prudence dictates lower gearing for managed funds unless you secure the debt another way. Also there’s Rich Dad’s Prophecy. Still a few years away, but managed funds are a worry at that time if he’s right.
Folks much appreciate the responses. The reason for the thread is I would like to quit the job and do something else with my life. But the net return from the properties is not enough and sometimes may be less due to vacancy & expensive repairs. I am thinking to shift some of the equity to shares & managed fund so I can have a steady income, but just wondering if there are traps that I should watch out for. Once again thank you all very much for the kind replies.
Hi there,
I always believe that we are better off going for multiple sources of income. The more we diversify the better and avoid putting everything into one basket. Not just in shares, unit trusts, managed funds, investment properties but also in commercial properties, cash deposits, bonds or even setting up an ebay store to get some income (caution, fraught with danger!!). It all depends on your risk profile, if you have a low risk profile, go in any venture very, very cautiously. Lots of spruikers out there especially in the internet webstore world. Unfortunately there is no short cut to wealth, it takes time, you need to do lots of trial and error and wealth often comes with hard slog, unless you are surrounded by expensive advisers !
The only way to juggle all of them is to educate yourself as much as possible, and to get into the deep end and learn by doing it. True, negative gearing can put you in an ever decreasing circle of losses, but it is fantastic for its tax effectiveness, its high gearing ability and for capital growth. I like it because it helps me move my income from being lazy into working hard for me. But negative gearing is not an income stream. If you want an example of a stream of income, visit the ASX website and accumulate knowledge on shares / warrants / options without paying a cent.
All in all, it is a juggling game of managing money, and the fun is in finding out how to move them around the ferris wheel led by the economy, which is largely out of the control of small players like us.
warm regards
crouching tiger [thumbsupanim]Managed funds are just a structure that holds assets. Remember the performance of a managed fund depends on the performance of the underlying assets. And a property fund will perform differently to a share fund.
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I might be the odd one out on this forum, but I am focused on creating financial freedom mainly via the share market and related investments. It will give me the greatest of pleasure when I achieve it and tell people it can be done. I have hardly ever invested in property – never directly (other than a block of land I lost on years ago) and only in a minor way through property trusts. I maintain an interest in property though, because it may well have a part to play in my investment portfolio in the future, mainly for diversity.
Over the years I have worked, saved and invested (sometimes poorly) to create wealth. It is only in the past five years that I’ve had any real commonsense in investing because of the amount of study and trial and error I have done. During that time I haven’t had to work full-time which has allowed me the time to concentrate my study. I now work part-time on contract to supplement my share investments and boost my progress.
With some further luck, good management and good investing I’m not too far away from my goal of making it via the share market.
(As one of the other posters said, if you invest in managed funds always use a discount broker so that you get your upfront fee refunded)
Wez.
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