Want to invest but don't have a lot of cash? Enter BT Go-invest
BT's new Go-invest online portfolios are aimed at those who want to invest on the stockmarket but want help to do it and don't have a lot of spare cash.
Four distinct portfolios, three built from exchange traded funds (ETFs) and one from Australian shares, are available for a minimum of $10,000 each.
"Each portfolio targets a progressively higher return with a corresponding increase in risk," says Anthony Potts, spokesman for the new product.
The three ETF portfolios (conservative, moderate and growth) target the Reserve Bank cash rate plus 2%, plus 4% and plus 5% respectively, before fees, costs and taxes. The annual fee is 0.5% and brokerage is $11, both to buy a portfolio and for transactions within a portfolio.
Starting portfolios all comprise the same eight ETFs, covering local and international shares and property, cash and fixed income, but in different asset allocations.
This raises the question of why investors would be willing to pay an extra fee when they could buy the same ETFs in parcels starting from $500 on the ASX.
"Not all ETFs are the same," says BT's Potts.
The eight chosen were considered by BT investment managers to be the best in each asset class for the Go-invest portfolios. And, he says, they are monitored and adjusted using BT's investment expertise to capitalise on market conditions. ETFs using derivatives or borrowings are excluded but if an investor wants to gear their portfolio they can do so with a margin loan up to 75%.
The fourth portfolio, local growth, comprises shares selected from the top 20 companies on the ASX and aims to outperform the S&P/ASX 20 Accumulation Index. The annual fee is 0.7%.
Unlike a managed fund, you are the beneficial owner of the ETFs and shares in your portfolio, increasing the potential for better after-tax returns, compared with traditional pooled managed funds, because tax payments are not deducted from your portfolio when assets are sold in other investors' portfolios.
And at tax time each investor gets a consolidated tax return summary, including franking credits and a realised gains summary for capital gains tax.
If you don't have the time or expertise to build and manage your own investment portfolios, it's worth investigating.
But three of the portfolios are invested in diversified listed products - cheap and easy to access - so you need to decide if it's worth paying extra for management expertise.