A Personal Anecdote Part 2: How did I invest, keeping it simple?

From managed funds and direct share investments to unlisted trusts and exchange-traded funds (ETFs) and everything in between, there are endless ways to make (and lose) money. In deciding where to invest our $1m lump sum, we began by eliminating some of the options. We didn’t have the time to manage multiple investments and we both hate paperwork. Investing in managed funds and direct shares was out.

We looked at a number of different investment platforms but the fees put us off. They looked small but were percentage-based and levied on everything from activity fees, administration fees, exit fees and switching fees.

This was a big consideration. The impact of compound interest is a good thing for your investments but not on your costs. I explained to my wife how even a small percentage fee compounds over the long-term, dramatically reducing returns.

After reading John Addis’s white paper ( How fees can destroy your wealth) on the devastating impact of fees and examining a lot of different options, she came around to my way of thinking.

Full transparency at this point - it was in the back of my mind to go with the InvestSMART Professionally Managed Account platform from the start. With fees capped at $451 a year for any investments over $82,000* this was an attractive option from the outset but we had to examine every alternative.

It’s her money as much as mine and I had the benefit of knowing the product from the inside out. I needed to give her the space to understand it in her own time and John’s paper really helped. In the end, there were six points that really resonated with her:

1. Choice:  With 11 different investment portfolios, we had access to Australian shares, international markets, bonds and property & infrastructure;
2. Expert management: Each investment portfolio is professionally managed by a team of experts;
3. Easy switching: Because all securities held in the portfolios are owned in our own name, if we don’t want InvestSMART managing them we can easily sell or transfer them into our own brokerage account and do it ourselves. And because the portfolios are very liquid, unlike having all our money in one investment property, it’s easy switching between them and changing allocations;
4. Everything online: This made it easy to open an account, add and withdraw money and set up an automatic contribution plan, which we did. There’s also 24x7 real-time reporting and online chat with a real person if needed;
5. No paperwork!: We both loved this, plus full tax reporting at the end of the financial year at no additional cost;
6. Low, capped fees: This was the clincher. Fees start at just $99 p.a. and are capped at $451 p.a. for any investments over $82,000*. These fees are for the platform, too. If we have one portfolio or 10, it’s still $451 per year.

We thought about seeking professional advice, which we have done previously to set up wills and insurance coverage when we had children but decided it was unnecessary. In the end, the platform made it easy to invest and manage our money and we didn’t need professional help, nor the additional costs it would entail.

I’m the first to admit that my wife and I investing $1m with a business I’ve been running for several years and in which I have a substantial shareholding could be seen as self-serving. I’m prepared to take the flak for that.

The reality is that my wife and I were in a situation many of our members find themselves. InvestSMART’s Professionally Managed Accounts were a cost-effective and useful solution to our dilemma. And I can tell you my wife would not have gone along with it if she didn’t think the same way.

This country’s financial landscape is plagued by unnecessary and greedy percentage fees and it’s nice to work in a business that is doing its bit to change that. But it’s even better to know that our $1m nest egg will not be eaten away by intermediaries picking away at it over the years.

Here are the links to the rest of the series:

https://www.investsmart.com.au/investment-news/a-personal-anecdote-part-1-why-our-ceo-invested-1m-at-market-highs/149961

https://www.investsmart.com.au/investment-news/a-personal-anecdote-part-3-where-my-wife-and-i-invest-1m-and-why/149973

https://www.investsmart.com.au/investment-news/why-our-ceo-is-investing-1m-at-the-top-of-the-market/149967

https://www.investsmart.com.au/investment-news/qanda-from-ceo-invests-1m-series/150003