OK,
Back from the gym now so promised response forthcoming...
I've been in the NavTrade Retail fund since 14-Oct-2005. I was fortunate enough to buy in just after the October correction and have riden the subsequent recovery. To date the fund has returned me 6.62% in total growth over the 4.5 months to 27-Feb-2006. This represents a gross profit of $37,013 and profit after interest expenses of $22,225 as I am fully leveraged into this fund. So, in other words, had I NOT bought into this fund as I did on the 14-Oct-2005, I would now be $22,225 before tax worse off.
Having said that, you need to consider that this has been a nice little period of a strongly rising ASX market. To put this growth into context you need to consider alternative fund managers in this market and how they might have performed. The benchmark index for fund managers is the ASX200. i.e. Beating that index should be the stated objective of all Aussie fund managers, or else you'd just buy the index with an index tracker like StreetTracks ASX200 (STW), which has historically marginally beaten the index consistently.
So, when I compare the NavTrade Retail managed fund over this admittedly VERY SHORT timeframe which may not be representative of their long term performance, I get a less upbeat appraisal. In fact, over the same time period the ASX200 has gone up 11.66% representing an underperformance to the index of 5.04% by my fund. The "opportunity cost" of this underperformance is $28,153 after interest expenses (as these are fully absorbed in my original net profit). In other words, had I "bought the index" over this period my net profit would have been $50,378 instead of $22,225.
Ain't hindsight a wonderful thing!
That's not to say that you should rush out and buy the index instead, as Steve's fund is purported to do very well in flat or falling markets. Its just that it typically under-performs the indices in a rising market due to its trading methodology. So, you need to understand what the markets you are investing in are likely to do in the investment timeframe you are envisaging, and then buy the investment vehicle that best suits that environment. You also need to consider whether you prefer an income or growth fund and understand the tax implications of each.
I, for one, anticipate that the ASX as well as the other Asian markets will continue to be bullish in 2006 on the back of the prolonged resources boom. This suggests I should diversify my managed funds to some other growth or index funds. I am currently contemplating divesting a portion of my NavTrade units and diversifying into the StreetTracks index tracker I identified above as well as the
Platinum Asia fund. I believe this combination would give me diversification benefits of reduced variability of return as well as the potential for increasing my likely return.
The problem is that when you open the "which fund" can of worms you can get inundated with potential alternatives. I would stress that if you do nothing then your opportunity costs can be significant. If I had done nothing I would be $22,225 poorer today. So, once you have thoroughly done your due diligence, then don't delay your decision until you've found the "perfect" fund or mix of funds. I bought Navra believing it was a good fund and have been proved right by my recent profits. I am now tweaking my portfolio in the anticipation of even better returns.
I've attached a detailed spreadsheet showing how the NavTrade Retail fund has performed over the timeframe discussed in this post for my specific situation in case you're interested.
Best Regards,
Michael.
