Ask an Adviser - What is a safe managed balanced fund to invest $250,000?

Top answer provided by:

David Dall

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Dear Sue

Generally speaking, for a client in that situation, and satisfying the mentioned criteria, one smart idea would be to invest $250,000 across a number of Exchange Traded Funds weighted according to the asset classes of a typical ‘Balanced Investor’.

To recap, exchange traded funds (“ETFs”) are open-ended investment funds, similar to traditional managed funds, that are traded on a stock exchange – just like any share. Generally, ETFs aim to track as closely as possible the performance of a given index or asset class. Because ETFs aim to track the performance of an index or asset class, there are no in-built ‘active management’ fees to worry about. As such they’re generally significantly more cost-effective than comparable traditional managed funds that are actively managed.

In constructing such a portfolio we would carefully blend asset classes including bonds, cash, commodities and Australian and International equities using a range of cost-effective, transparent, ASX-traded ETFs and other exchange traded products.

In providing this answer, I have assumed you would be looking to invest for the long term, can accept volatility and seek a broad mix of investments (e.g. Australian and international shares, cash, bonds, property etc.) to provide income and achieve capital growth.

You have not mentioned your specific investment needs (e.g. income and/or growth), your investment timeframe or if you can tolerate volatility, all of which are important considerations. In addition, the use of the word “safe” may mean you prefer to invest in regarded ASX50 rather than speculative shares or perhaps this indicates you are unwilling to tolerate negative market returns.

A carefully constructed portfolio of ETFs should provide an attractive risk-adjusted return over time, subject to a level of overall return volatility suitable for investors considered to have a “medium” risk profile in accordance with the Australian Prudential Regulation Authority’s (APRA) “standard risk measure (SRM)”. The approximate management expense ratio (“MER”) of such a portfolio may be as low as 0.27% plus applicable brokerage.

It is important to remember share market investments are not risk free and selecting the right ETF’s is important to minimise risk and maximise returns. I therefore recommend you talk to a suitably qualified financial adviser to further discuss your situation who in turn would base any recommendation on your specific goals and objectives.

David Dall CFP® commenced his career in August 1997 with Macquarie Private Wealth. Eighteen years later David left Macquarie and has now been an Senior Investment Adviser with Shaw and Partners for almost four years. Shaw and Partners is one of Australia’s preeminent investment and wealth management firms with $16 billion of assets under advice. I welcome you to Shaw and Partners - your partner in building and preserving wealth.

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Article by:

David Dall

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