[scorpioxy]

Oh I agree. They're a good deal considering the alternatives but they also carry a lot of risk. Less risk than individual stocks of even specialized baskets but a lot of people throw the term around as if its magic. Several source I've read also assume that you'll constantly be putting money into the market and never withdrawing it to actually buy that house you start this whole thing for. Withdrawing the money means your rate of return depends on which cycle the market is in when you do it and to get the best rate, you need to withdraw when its peaking. That's timing the market. That's misleading...

But overall, I agree with your analysis. It's a great vehicle for people who either lack the time or knowledge required for investing. If you decide that stock investment is the best way forward for you...

[spoonie]

So if your time horizon is short buy bond index funds instead. The context of recommending index funds is almost always when saving for your retirement. Don't invest 100% in equities unless you're very young and can stomach the volatility. Your asset allocation should tilt more towards less volatile assets like bonds and cash as to get older. You slowly enter the stock market as you save up, and slowly exit it into other assets as you age.

[scorpioxy]

Yep, I'm aware of the recommendation to use your age as a rough percentage to how much you need to have invested in more secure vehicles. Solid advice I guess.

I still haven't looked at the numbers to see if it's worth it. In Australia, we're expecting a market correction to happen initiated by the real estate bubble finally busting. Which means that bonds would gain while the market loses. Of course people have been expecting that for many years now and statistically speaking it will have to happen at some time... Knowing this, I am still not sure whether to just invest and deal with the consequences if and when they happen or keep my money in my sock drawer.

[spoonie]

Don't forget the opportunity costs! Money sitting in a sock drawer is losing value to inflation. That's years of dividends and growth you could be missing while you try to time the market. If you are really conservative, try 60/40 bonds/equities. Or invest outside of Australia. I'm Canadian, and Vanguard has "all world, excluding Canada" funds, I'm sure they have something similar for Australia. That way you can hedge against risks in your local market.

[scorpioxy]

I have a 6.5% interest rate savings account I still have back home so I guess you can call that some form of investment. Definitely one that beats a 4% inflation rate. Our currency is also fixed against the US dollar. But I don't believe this is sustainable.

I also don't believe this is going to last more than a few more months until the bank has attracted as much cash as it needs. Of course that's also a third world middle eastern country and so lots can go wrong there which I have no control over. Thus my interest in moving it here. Vanguard is looking more interesting by the day. And yes, they do have a similar option.

[Kaizyn]

The credit managers at one of the Big Four Australian banks are waiting for the real estate market to burst before they swoop in and buy investment properties. It would be better to wait on any sort of real estate based investments or other stocks that move with real estate.

I am starting to think the best investment possible is in your own business/company. That way there is a direct correlation between what you can control and what you put in to what you earn back out. Obviously you can't predict what the future will hold, but you at least can manage your endeavor prudently so as to better minimise damage in the face of bad circumstances.