Question: My daughter is 24 and has a reasonably good job. She wants to invest a regular amount of her income. She has about $3000 to start with and then can invest about $600 per fortnight. Being young, she is after long-term growth. Can you suggest a suitable managed fund or approach?
Answer (By Paul Rickard): Most managed funds offer a regular investment plan (with periodic debit). If it is an Australian equities fund, I don’t really think there is much to choose between the active managers, so I would go with a low fee, index fund. She could try the Vanguard Index Australian Shares Fund. While the management fees reduce as the funds invested increase, they are still relatively high – 0.75% per annum up to the first $50,000.
A second option (not as easy) would be to buy an exchange traded fund – probably the SPDR S&P/ASX 200 Fund (STW) or Vanguard Australian Shares Index ETF (VAS). She will have to open an account with a broker and pay brokerage (on $3,000, this will be in the range of $14.95 to $19.95 or 0.50% to 0.67%). Management fees are typically 0.15% to 0.20% pa. There is no regular investment option – so she would need to save up her $600 fortnightly amount and reinvest by buying additional units on the market when the brokerage becomes economic.