Question: We have a savings account for each of our two young boys (aged 16 and 7) and have over $3,000 in each bank account. I would like to invest their savings into a more long-term lucrative and safe environment. Can you advise of some preferred ETF (or other areas to consider)? I would like to either let that compound or, preferably, if earnings were deposited into their respective accounts, for that to go toward each of their next $3,000 investment.
Answer (By Paul Rickard): For your seven year old, I would recommend investment bonds (also called insurance bonds). Here is a link to a story I wrote on this a little while back. To the issuers, you can add Centuria.
With the 16 year old, you have more options (including direct investment), and possibly a shorter time frame (less than the 10 years you really need for investment bonds). If you don’t want to establish a portfolio of shares (you can purchase a share pack with brokers such as CommSec), consider one of the broad based listed investment companies (LICs) such as Milton Corporation, AFIC or Argo, or perhaps our SWTZ, or perhaps an ETF. Here is a link to an older article on investing in shares for your child.
Question: With Bill Shorten’s proposed change to refunds for franking credits, ETFs are often mentioned to gain exposure to overseas equities. If I buy an index fund, then the price equals the value of the index (I believe) plus a small buy/sell spread. But if I buy an ETF, how do I know if it is overpriced (or underpriced) as the price is determined by buyers and sellers? Like LICs, is there a NTA for ETFs?
Answer (By Paul Rickard): Yes, with ETFs, there is a net tangible asset value (NTA). Most ETF providers will publish a daily NTA (at the close of the previous business day), plus an intraday “indicative” NTA. Please check the manager’s website.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.
