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How you would suggest an SMSF invests an initial $45,000 in the stock market?
The fund already has direct property and small fixed interest investments.
Not sure whether to follow, say, your growth model portfolio given the amount to invest, i.e larger spread of smaller shareholdings or smaller spread with larger holdings with a view to building on diversifying spread.
The fund has still approximately 13-15 years of accumulation phase.
A: Thanks for the question.
Transaction costs, in this case brokerage, are certainly one of the factors you need to consider with any investment. Depending on your intended holding period, this will be more or less relevant to the ultimate investment return.
In regard to the growth portfolio, if you can only invest around $50,000, the brokerage on some stocks is going to be quite high. For example, if you are paying $19.95 or $29.95 brokerage per order, on a circa $1,500 transaction size, this will equate to a brokerage rate of 1.33% to 2.0%.
While I wouldn’t suggest that you cut out too many stocks or sector exposures, you could take these steps to reduce the number of transactions:
a) in the banks, where arguably ANZ, CBA, NAB and Westpac are pretty similar, buy 2 banks rather than 4 – for example, do CBA and NAB;
b) with the major retailers, again amalgamate Wesfarmers and Woolworths – so just purchase Wesfarmers;
c) cut out totally South32
Hope this helps.
