Passive income investment choice?

Greetings,

I have read here on the forums that most people are intending to derive retirement income from managed funds. i.e Build capital through property, wait for it to grow, sell in the future and invest the cash in income producing managed funds.

My questions are:

1. What is the risk involved with such funds?

2. Banks rates are at 6.5% on funds over $100,000 and less risk.
What rate of return is there on a reliable MF?
And, what makes the additional risk in a mutual fund worth considering..also needing to take into account management fees etc?

3. What are examples of mutual funds one could invest in with reasonable safely to produce passive income after retirement?

I would be interested to know peoples thoughts and if you intend to invest in a mix of managed funds and also bank term deposits to provide your passive income after retirement?

Many thanks,

Scott.

Scott Graham said:

Greetings,

I have read here on the forums that most people are intending to derive retirement income from managed funds.

Click to expand...

I would have thought "some" but not most?

Scott Graham said:

I would be interested to know peoples thoughts and if you intend to invest in a mix of managed funds and also bank term deposits to provide your passive income after retirement?

Click to expand...

The "risks" you foresee would I believe be "volatility". In the case of funds, yes, they are definitely more volatile than cash. Whilst the more learned could provide the "volatility %" figures for you.

I would as a very general target aim for 8%~10% return on "stable" funds (eg commercial prop trusts), and 10~15% return on trading and derivatives funds.

And yes, I suggest if volatility is a worry, getting a bit of everything ("diversification") would be good for the SANF.

I might add that most "standard" (another generalization!) retirees roll their super into allocated pension funds which essentially have the same underlying funds. You might want to check sites like funds.comsec.com.au to see how funds have gone (with all the warnings re past performance is no indicaiton of future performance etc etc)....



Cheers,

The Y-man

Scott Graham said:

2. Banks rates are at 6.5% on funds over $100,000 and less risk.
What rate of return is there on a reliable MF?

Click to expand...

Ave rates of return since 1980 show term deposits are possibly the greatest risk investment available. The returns, filtered for CPI & tax, are often barely breakeven. For anyone on a higher tax bracket you could be merely locking in losses in real terms.

Hi Mofra,

Mofra said:

Ave rates of return since 1980 show term deposits are possibly the greatest risk investment available. The returns, filtered for CPI & tax, are often barely breakeven. For anyone on a higher tax bracket you could be merely locking in losses in real terms.

Click to expand...

Interesting, what then are the alternatives?

CPI and tax still applies to profits made on MFs so is the only benefit the increased return ( with increased risk )?

I still believe property is the best long term place to put your money but how do you turn those accumulated properties into cashflow?

Would love to hear peoples thoughts.

Scott.