Managed funds have better returns than property?

The problem though with managed funds is that you cannot gear as high as property.

Yes I have been looking at managed funds lately. Some have returned above 76% pa in the past year. Some have even returned 26% pa on average for the last 7 years.

I am begining to think these are better than property – no stamp duty, no land tax, good liquidity etc and you can margin lend some funds at around 50% LVR.

Terryw
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Why not both in your portfolio?

Thats what I do.

Simon Macks
Residential and Commercial Finance Broker
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Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Hi Terry,

Can you say which funds you are considering? Or is that against forum rules?

Cheers, Nobleone [biggrin]

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Some of the best performing funds atm are actually the property ones. it is possible to put a bit of money into several different funds across several different classes. eg. Aussie shares, O/S shares, start up companies, commercial property, residential property.

But having said this, direct property is still attractive for a number of reasons such as the ability to buy undervalue, the ability to add value etc.

Terryw
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The Defense rests, your honour.

Great returns – everyone is raving about the great growth in them, but can't say which ones "just in case".

HMMMM.

Theres a number of reasons why I don't like managed funds:

1/     You have bugger all control over your money.

2/      The overall value of your investment can fall, and yet you still have to pay tax on it !

         Example 

         Opening Balance     $300,000
Add: Net Income                  $10,000   (This is what you pay tax on)
Less: Capital Losses       $35,000
          Closing Balance       $275,000

3.   Managed Funds have been known to engage in frequent "switching" of investments, just for the sake of charging more fees,
      rather than because it makes good investing sense.

Need I go on

Interesting to read people’s comments as I’ve investments in both property and M/Funds so I often look at their respect performance. Four years ago I purchased and renovated a commercial office for $320,000. It is currently rented for $34,000 per year. Based on a 7.5% return its value today is about $450,000. Given that the interest rate on the morgage has averaged 7% over the 4 years, it is easy to see it has been cash flow positve since I purchased it. As a property investment I cannot complain. However at the very same time I purchased this office, I also purchased some M/Funds ($50,000). Today the value of those funds is 2.5 times the original investment (dividends reinvested). I know there are the tax implications to consider but from a very superficial look at it, if I had decided against buying the office and put the $320,000 into the M/Funds, today it would be worth $800,000. Am I disappointed I didn’t go this way? No I am not as both have done well for me in their respect ways and we don’t know what the story will be in another 4 years time??

In regards to having no control over M/Funds, for me the control begins prior to investing the money. Do your home work on, who they are? what it is their approach?. For me, I look for fund managers who invest my money is companies that have healthy dividends. If and when there is a stockmarket down, these companies shares will rebound quicker than most as the share price is unpinned by “real earnings”. If you are looking for this approach check out peole such as “Investor Mutual Limited” or “Hunter Hall”. I think they are 2 of the best.

Hallg