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.
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.
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