# SMSF direct share portfolio: Setting one up



## Dcalleja (7 February 2013)

Hi
I am new to investing and am setting up an SMSF. My super is with a super fund provider in a set of growth managed funds. Clearly the best thing to do is build a direct share portfolio to match the growth funds I have now in order to reduce overhead mgt fees.

My question is

What does a growth portfolio of direct shares look like ie what % of diversity (Aust shares, intl, etc)
Is there a tool that I can use to model this and indeed track performance of the portfolio
Are ETF's a reasonable approach to use for say Asx 200 and is the overhead reasonable
I also need to get an operating account for the SMSF. I see some specific ones in the market (CBA). Any advice here?

Thanks for any help in advance
Dan


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## RandR (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



Dcalleja said:


> Hi
> I am new to investing and am setting up an SMSF. My super is with a super fund provider in a set of growth managed funds. Clearly the best thing to do is build a direct share portfolio to match the growth funds I have now in order to reduce overhead mgt fees.
> 
> My question is
> ...




Hey Dan, I dont see the point at all in setting up a SMSF to purely use ETF or creat an 'Index' fund. As I know the fund I work for and quite a few others offer what is essentially ETF Index products as an investment option ...

Our custodian is State Street ... 

State Street have an ASX 200 index etf ...

We have an investment option that is the ASX 200 index ... with a management fee that is only .01% higher then State Street management fee if you invested through them in the market ...

I cant see how you could set up a SMSF to invest in such an index ETF for less then .01% ... and im not just saying that because i work for a fund .. just trying to be helpful!


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## RandR (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



RandR said:


> Hey Dan, I dont see the point at all in setting up a SMSF to purely use ETF or creat an 'Index' fund. As I know the fund I work for and quite a few others offer what is essentially ETF Index products as an investment option ...
> 
> Our custodian is State Street ...
> 
> ...




The point im trying to make is to make sure a smsf is actually going to be the cost effective way to achieve what you want...  Im not so sure it will be ...


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## robz7777 (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



Dcalleja said:


> Hi
> I am new to investing and am setting up an SMSF. My super is with a super fund provider in a set of growth managed funds. Clearly the best thing to do is build a direct share portfolio to match the growth funds I have now in order to reduce overhead mgt fees.
> 
> My question is
> ...




Hi Dan, 

If you are looking at setting up a fund for the sole purpose of managing your own share portfolio (and not to invest in property) you may want to have a look at AustralianSuper or Care Super which both allow you to invest in aussie shares, without the added complexities of a SMSF. Both funds still charge admin fees but may be cheaper than a SMSF once all costs are added in. 

If you are looking at setting up your own fund (likely with the help of your accountant) you need to consider the time involved, compliance risks (which fall on YOU) and whether your accountant has sufficient knowledge of administering your SMSF (or if they will just charge for administration but only do the tax returns). 

LICs such as AGO and AFI provide reasonable diversification across the market and have good records longer term. 

Cheers


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## Dcalleja (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



robz7777 said:


> Hi Dan,
> 
> If you are looking at setting up a fund for the sole purpose of managing your own share portfolio (and not to invest in property) you may want to have a look at AustralianSuper or Care Super which both allow you to invest in aussie shares, without the added complexities of a SMSF. Both funds still charge admin fees but may be cheaper than a SMSF once all costs are added in.
> 
> ...




Thanks for the responses
Direct shares was one element. We are also thinking of having a property in there. I am ok with with doing the work and putting in the time. I had thought though that getting rid of the super fund gives you back the admin fees and getting rid of managed funds gets rid of the MERs. 

What are LICs? 

Thanks


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## robz7777 (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



Dcalleja said:


> Thanks for the responses
> Direct shares was one element. We are also thinking of having a property in there. I am ok with with doing the work and putting in the time. I had thought though that getting rid of the super fund gives you back the admin fees and getting rid of managed funds gets rid of the MERs.
> 
> What are LICs?
> ...




Property is going to add additional costs re set-up of the loan & bare trust (if required) etc, so you have to ensure that returns still make the strategy worthwhile. 

Getting rid of the retail/industry/wrap super fund which you are currently in will remove the admin fees - these will be replaced by accountants fees (tax return) plus fees if you use an administration company to ensure the fund remains compliant. 

Managed fund MERs are likely to be in the range of 1-2% if using active managers or 0.2-0.5% for index funds. If you are going to be buying and selling within your portfolio you could compare the MER against these costs plus the advantage (or disadvantage if you look at it that way) of diversification that managed funds give. 

LIC = Listed Investment Company, such as AGO (Argo Investments) are essentially a managed fund with shares instead of units, the management fees and expense costs are much lower than an active managed funds costs (AFI was 0.17% in 2011) as they tend to trade less. Have a look at afi.com.au, explains LICs better than I could..


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## Julia (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



robz7777 said:


> If you are looking at setting up your own fund (likely with the help of your accountant) you need to consider the time involved, compliance risks (which fall on YOU) and whether your accountant has sufficient knowledge of administering your SMSF (or if they will just charge for administration but only do the tax returns).



There are accountants aplenty now who specialise in SMSFs and who will keep the client abreast of compliance issues.

Whether or not it's more expensive to use an accountant and a SMSF or a public fund will depend on the funds invested, unless the client is being charged on a % basis which would be unusual.
If there's a substantial amount invested, it's probably as cheap or cheaper to have a SMSF.
Always get written quotes from any accountant for the work they will have to do, including both tax return and audit, and clarify whether you want that annual payment to include incidental advice throughout the year.

It's popularly said that maintaining a SMSF is time consuming and arduous.  I haven't found it so at all.

A question, Dan:  you say you are new to investing and your initial question reflects this (no criticism intended), so are you intending to manage the investments yourself or have someone advise you on what/how to buy and sell?  If the latter, then bear in mind that the costs for this can be substantial.


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## Dcalleja (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



robz7777 said:


> Property is going to add additional costs re set-up of the loan & bare trust (if required) etc, so you have to ensure that returns still make the strategy worthwhile.
> 
> Getting rid of the retail/industry/wrap super fund which you are currently in will remove the admin fees - these will be replaced by accountants fees (tax return) plus fees if you use an administration company to ensure the fund remains compliant.
> 
> ...




Thanks for that. Yes aware of the additional cost for property and I will look at the LICs


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## Dcalleja (7 February 2013)

*Re: SMSF direct share portfolio. Setting one up*



Julia said:


> There are accountants aplenty now who specialise in SMSFs and who will keep the client abreast of compliance issues.
> 
> Whether or not it's more expensive to use an accountant and a SMSF or a public fund will depend on the funds invested, unless the client is being charged on a % basis which would be unusual.
> If there's a substantial amount invested, it's probably as cheap or cheaper to have a SMSF.
> ...




So the answer is sort of new to investing. I do have a small portfolio. My thought however was not to opt for expensive FP advice on what to buy and sell, rather to hold a diversified portfolio and manage myself. That's pretty much what happens in a managed fund (I know they do change underlying holdings from time to time) as I understand it. Also I was going to tie the portfolio makeup to track an index like the 200.

Dan


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## So_Cynical (7 February 2013)

Dcalleja said:


> My question is
> 
> What does a growth portfolio of direct shares look like ie what % of diversity (Aust shares, intl, etc)




In reality it probably doesn't look like what you or in fact many many well paid experts would think a growth portfolio should look like...problem is that a growth stock (according to the experts) tends to be a growth stock because it has grown (past tense) often this means nothing going forward, yet its very hard to include a stock in a growth portfolio when that particular stock hasn't grown much lately or has in fact lost allot of value recently.

A true growth portfolio should consist of mostly small and micro caps...but no fund manager or adviser would dare tell you that.


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