There is a range of platforms you can use to buy shares in your own name. But did you know you can buy direct shares in your super fund.
Many super funds offer a range of investment options – the standard pre-mixed investment options include:
Many of us choose to opt for one of the options above, however, through a wrap account, you have the ability to create your own ‘investment option’. In some cases, you may be able to purchase direct shares through your retail or industry super fund via their specific platforms.
The benefit of having an adviser is they are able to assist when it comes to choosing and building your investments inside super – normally through a wrap account.
A method to buy shares within your super account is through a wrap account which provides individuals with the ability to purchase a broad range of investments within their account. Below are some of the investments available in a wrap account (within Australia):
- Managed funds
- Direct shares
- Exchange Traded Funds (ETFs) listed on the ASX
- Separately Managed Accounts (SMA’s)
- Term deposits
It is important to consider the fees that come with holding an account of this kind. There are fees incurred from holding the investments held within the wrap account, and these are usually accounted for within the unit price of each investment. There also fees associated with using the platform as it enables you to buy and sell various holdings within your super account. These are deducted from the cash account held within the wrap account.
There are also costs of buying and selling the above investments. For the purchase of direct shares, there is a cost known as brokerage and it is payable each time a direct share or ETF is purchased or sold within the wrap account.
When purchasing managed funds and separately managed accounts, there is a buy/sell spread that is payable each time the relevant investment is purchased or sold. This is a percentage charged based on the amount that is being purchased or sold.
There are also risks associated with holding the investments within your super account. Retail and industry super funds have managers who are continually monitoring the market to ensure that your investment option fits the risk profile and is invested accordingly. Within the wrap account, there are risks that the managed funds invested in will not produce the desired returns. But like all investments in and outside of a wrap account, there are risks of the influences of stock markets around the world.
Some of the benefits of a wrap account are that the investment options you (or your adviser) choose may outperform the market. The investment option you tailor may outperform the market or index, but of course, there is always exposure to underperformance.
Additionally, many wrap accounts offer comprehensive reporting of your portfolio. Some providers give investors the ability to generate a rate of return over specific days – giving a clear indication of where your portfolio is and where it has been. Reporting also gives a comprehensive breakdown of the dividends received from your investment holdings and can give an analysis of the sectors where your money is invested – for example, your weight in Australian Equity against International Equity, Cash, and Fixed Interest.
If you would like to discuss a wrap account and if it is right for you, feel free to give the office a call on 02 8067 0590.
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