Question 1: Like the rest of the pack, I’m seeking a higher return for my super fund with calculated risk. Prudent first mortgage companies appear to be the best bet (maybe there is better?) but I’m unable to find out much about these companies, as I just can’t get past the promotion to find any history. I’m unable to check out these companies on the internet or anywhere, and those big ads don’t count! I’d like to deal with companies who have survived the GFC, not the ones who have sprung up in the meantime, as I suspect when and if the next big recession hits, the newbies will be first out the door. What can I do?
Answer: Firstly, I would be a little more circumspect about investing in first mortgages or mortgage funds. They are not always what they seem – and that is why the interest rate can be so high! It can be very expensive to take possession of a home, and in the case of a development/construction, defaults typically occur in the middle of the construction – and it can be very costly, and take many, many months, to finish the construction so that you can sell the property and realise the security.
If you are planning to invest in a mortgage fund, read ASIC’s paper on these and the benchmarks they have developed to assists investors (see https://www.moneysmart.gov.au › media › investing-in-mortgage-funds)
In relation to choosing a manager/fund, I agree that you want someone with track record and history. Most of the bigger ones will have a rating from a research house. While these are of limited value, it does suggest commitment on behalf of the manager and an intent to be there for the long term, so demand to see this report first. If they haven’t got one, then be even more circumspect.
Ask for a copy of their audited accounts, preferably the last several years’ worth of accounts. If they won’t provide these, take this as a “warning” and don’t invest. Alternatively, you can purchase this information from one of ASIC’s licensed vendors
Keep asking questions…and if you get a sense that they don’t want to answer, run away. Talk “up” rather than “down” how much you want to invest – they will show more interest if they can see the potential of your investment.
Question 2: I am tossing up between investing in Commonwealth Bank PERLS and Commonwealth Bank shares. What is your view?
Answer: These are very different investments and I don’t think it should come down to a toss-up. I classify CommBank PERLS as part of my “risky fixed interest” allocation and CommBank shares as Australian equities.
While on paper you have the same sort of downside risk (in a worst case scenario), CommBank PERLS have absolutely no upside. You will never get back more than the $100 you invest. On the other hand, you might get considerable capital growth over the long term in CBA shares. This, after all, is one of the key reasons why you invest in shares – for capital growth.
Invest in PERLS if you want to increase your allocation to fixed interest style assets, or invest in CBA shares if you want to increase your exposure to Australian shares.
Finally, don’t invest in PERLS unless you understand the product. ASIC’s MoneySmart website may help, go to go to www.moneysmart.gov.au
Question 3: On waste management companies, Cleanaway (CWY) vs Bingo (BIN)? Which is worth buying? Or avoid both?
Answer: Avoid both. As for the brokers, according to FN Arena, Cleanaway has 4 buys and 2 neutral recommendations. Target price is $2.13, a 15.9% premium to the last market price of $1.84. For Bingo, 1 buy, 3 neutrals, target price is $2.43, a 1.5% premium to the market price of $2.39.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.