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I am trying to put together a portfolio for my self-managed super fund and would like some help. I am 40 years’ of age and want to be my own fund manager to avoid the fees you pay to funds. Could you explain why some experts advise that you buy the company not the stock. Aren’t they the same?

Let’s talk about the fees issue briefly. Industry funds can be around one per cent and other super funds can be more expensive but when you run your own fund you do have costs – accounting, audits and brokers’ fees. If you have $200,000 to invest and you fork out $2000 on costs, then your fund’s fees are one per cent. Some people will wear this to do the learning and then as the fund grows in value this costs falls.

Obviously, if you only have $100,000 in your fund, the cost is two per cent and that makes industry funds attractive on a cost basis.

In terms of putting together a portfolio, you could look at model portfolios on well-known financial websites, which can be a cheap way to go. You could also pay a broker to do it who will probably charge you around one per cent but some are cheaper.

An alternative could be to use term deposits at banks and ETFs. These exchange-traded funds have many different forms and you can even get one that gives you the top 20 stocks on the ASX. Some people might like to have them bundled up into one product where you get the dividends barrelled in and you pay a fairly small price. For example, you can get an ETF for the US market’s S&P 500 index for nine basis points and that’s cheap. Someone with a $100,000 to invest could buy $40,000 worth of Aussie shares and $20,000 worth of US shares, $10,000 worth of Asian shares using ETFs, $10,000 worth of property via a REIT and have $20,000 in cash and term deposits. That would give a lot of diversification and at a pretty low cost.

As an alternative, you could go to an adviser who gets to know you and your goals and he or she could help you construct an ideal portfolio which you track and tweak or you could get them to do it for you. Given your tendency to want to do-it-yourself, I suspect I know how you will go.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Wednesday, February 16, 2011

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

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