Time is money – the real value of mFunds

Cash-rich cor­po­rate Aus­tralians are be­com­ing more time-poor with ev­ery year, which is hav­ing a big im­pact on a num­ber of ex­ec­u­tive’s long-term fi­nan­cial se­cu­rity and per­sonal wealth writes Andy Rogers, head of CMC Mar­kets Stock­broking.

Business First - - CONTENTS - by Andy Rogers

For some ex­ec­u­tives a high salary and ca­reer suc­cess re­sults in the ne­glect of per­sonal wealth be­cause there sim­ply isn’t enough hours in the day.

More com­plex still, most fi­nance pro­fes­sion­als are re­stricted from hold­ing di­rect eq­ui­ties due to the po­ten­tial for con­flict of in­ter­est. Un­der­stand­ing and over­com­ing these com­plex­i­ties, af­ter a high oc­tane week in the of­fice or a weekend of par­ent­ing, re­quires a good de­gree of stay­ing power for any ex­ec­u­tive.

Ask yourself, af­ter fam­ily com­mit­ments, travel plans, jug­gling projects and man­ag­ing staff would you go home and dive into the world of wealth man­age­ment, or would you rather re­lax and put it off to to­mor­row?

KEEP­ING IT SIM­PLE

For those for which to­mor­row never comes, here is my tip for achiev­ing a healthy in­vest­ment port­fo­lio that’s sim­ple to set up and easy to man­age, in­vest in an mFund and have a pro­por­tion of your wealth pro­fes­sion­ally man­aged.

Launched by the ASX ear­lier this month, mFund is a ground-break­ing web-based ser­vice that al­lows Aus­tralian in­vestors to use an ASX bro­ker to buy and sell units in un­listed man­aged funds.

Her­alded as the fu­ture of man­aged funds, the mFund ser­vice is com­pletely on­line and fully in­te­grated with a large range of funds and bro­kers, so in­vestors can buy, sell and switch funds by the click of a mouse.

mFunds should prove to be pop­u­lar with in­vestors be­cause they of­fer wide ex­po­sure to a range of as­set classes and in­dus­try sec­tors in in­ter­na­tional mar­kets (via spe­cific man­aged funds), which are other­wise un­der­rep­re­sented in the Aus­tralian share mar­ket.

They should prove to be es­pe­cially at­trac­tive to high net worth in­di­vid­u­als be­cause they are rel­a­tively has­sle-free, main­tained by a pro­fes­sional fund man­ager and as easy to track as on­line bank­ing.

THE ART OF SUC­CESS­FUL IN­VEST­ING

Most ex­perts will tell you that keep­ing costs down is the art of suc­cess­ful in­vest­ing be­cause the power of com­pound­ing in­ter­est means that any small sum grows ex­po­nen­tially over a pe­riod of time. In fact, aca­demic re­search shows it’s pos­si­ble to dou­ble an in­vest­ment over 10 years by re­duc­ing fees by just 2%.

You can achieve stag­ger­ing in­vest­ment re­sults by sim­ply se­lect­ing the low­est bro­ker­age com­mis­sions and man­aged funds costs, as these costs can sig­nif­i­cantly eat into your in­vest­ment re­turns.

For ex­am­ple, an in­vest­ment of $20,000 over a 40-year pe­riod of­fer­ing re­turns of 10% per year, can show wildly dif­fer­ent out­comes depend­ing on the bro­ker­age com­mis­sions or man­aged fund costs. For ex­am­ple, with zero costs, our in­vested wealth rises to $905,186, com­pared to $628188 af­ter 1% costs, and just $434,490 af­ter 2% costs.

My ad­vice to all in­vestors when se­lect­ing a bro­ker is to do your home­work. Be mer­ci­less when com­par­ing rates and plat­form tools and fea­tures, so you start off on the right foot for your in­vest­ment jour­ney. Look for bro­kers of­fer­ing low rates and re­ward your cus­tom by pro­vid­ing tools that sim­plify port­fo­lio man­age­ment and tax reporting re­quire­ments.

CANSTAR take the hard work out of the search for a bro­ker, who will help you lower the risk of eroded in­vest­ment re­turn, by pro­duc­ing a rat­ings re­port each year that helps in­vestors iden­tify the best value of­fer­ings with the best plat­form fea­tures and tools.

Cur­rently there are 47 man­aged funds avail­able through the mFunds of­fer­ing and it is ex­pected to grow sig­nif­i­cantly as pop­u­lar­ity in­creases. It is im­por­tant to re­mem­ber that each fund is dif­fer­ent. They may fo­cus on a par­tic­u­lar sec­tor of the econ­omy such as tech­nol­ogy, property or emerg­ing mar­kets.

SU­PER RE­TURNS

The mFund of­fer­ing will be par­tic­u­larly at­trac­tive to SMSF trustees look­ing for in­ter­na­tional ex­po­sure or try­ing to di­ver­sify their port­fo­lio away from hold­ing purely Aus­tralian as­sets. Cou­pled with low trans­ac­tion costs the mFunds of­fer­ing is a pow­er­ful in­vest­ment op­tion for SMSFs.

An­other ques­tion Aus­tralians who have opted for an in­dus­try scheme should ask them­selves is: When was the last time I opened my Su­per state­ment? And, Do I know the cur­rent and pro­jected amount of Su­per I will at­tain dur­ing my work­ing life­time?

If read­ing any of this makes you feel un­easy why not put a cou­ple of evenings aside this month to take a thor­ough look at your fi­nan­cial sta­tus and wealth man­age­ment po­ten­tial, so you can take con­trol of your fi­nan­cial fu­ture. One thing is for sure, in the fu­ture, you will al­ways be glad you did and it could quite lit­er­ally change your life.

Andy Rogers head of CMC

Mar­kets Stock­broking.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.