INVESTING
More than a single-asset journey
Exchange-traded funds covering a single asset class or theme are very popular among SMSF trustees, but James Kingston notes the use of multiasset ETF offerings can provide greater flexibility and efficiency to better manage your SMSF portfolio.
JAMES KINGSTON is head of wealth solutions at BlackRock Australasia.
Exchange-traded funds (ETF) are listed funds that typically invest in asset classes such as stocks and bonds. They aim to provide access to several securities in one single trade, enabling investors to gain access to a diversified pool of assets that can cover a broad range of sectors and geographies by tracking the performance of a representative index (such as the S&P/ASX 200 for Australian stocks). While single-asset-class ETFs provide exposure to a particular asset class, multi-asset ETFs provide access to multiple asset classes in one fund to manage risk, or potential loss, and achieve long-term growth. Professionally managed by an investment house, they determine the optimum mix of assets to achieve investor risk and return goals, investing in Australian as well as global securities to gain international diversification. Investing with multi-asset ETFs can present a compelling case for investors who: 1. want to use it as the core part of their portfolio and then hold other investments (such as stocks) to personalise their remaining investment strategy, and 2. want to start their investing, savings or SMSF journey with the purchase of a single ETF.
Using multi-asset ETFs as a core portfolio holding For the investor who wants a well-managed investment portfolio, but also wishes to benefit from an allocation to other securities, using a multi-asset ETF as a ‘core portfolio’ holding may be a consideration. iShares offers two quality multi-asset ETFs to help cover more bases cost effectively within an SMSF – the growth-orientated iShares High Growth ESG ETF (ASX: IGRO) and/or the more balanced option, the iShares Balanced ESG ETF (ASX: IBAL). Let’s consider this approach for two different investors and why it might be beneficial, in particular for an SMSF trustee. Investor 1: Abigail is starting an SMSF and wants to use a multiasset ETF as a foundational exposure, which she will supplement with some of her own stock ideas. She is a long-term investor looking for a minimum investment timeframe of at least five years, with a medium to high risk/return profile, and so is interested in a growth multi-asset ETF such as IGRO. She also wants to invest in the top five stocks on the Australian Securities Exchange Continued on next page
20 selfmanagedsuper
