The best low cost balanced fund is..
Super provider: HostPlus http://www.hostplus.com.au/
Fund option: Indexed balanced
|Administration fee||$78 per year|
|Fund Management Fees||0.04%|
|Funds under management (FUM)||$15 billion|
|Total members||1 million|
|Who can join?||Generally, anyone can join HOSTPLUS|
|Entry fee, exit fee, contribution fee, withdrawal fee, rollover fee and employer fee.||Nil|
|Buy – sell spread||Nil|
Firstly we have assumed that you are currently in the default ‘balanced’ option of your fund (80% of Australians are) and that you want to remain in the ‘balanced’ option.
The Index Balanced choice from HostPlus has a typical balanced split of 75% growth and 25% defensive assets.
Lowest fees wins
Just because a fund manager charges more in fees does not ensure they provide better performance over the long term. In fact exactly the opposite has been shown to be the case after fees and costs are taken into account.
As it’s name suggests the Indexed Balanced option is what’s known as an index tracking fund, why is this a good thing? Read on…
A managed fund is managed by a human fund manager. That is, a person chooses which stocks should make up the fund and when to buy and sell these stocks. The fund manager charges a fees of usually between 0.5% and 2% of your total fund size.
An index fund is managed automatically using an index rule and does not require a person to choose the stocks. For example the ASX 200 index is made up of the 200 biggest companies on the Australian stock exchange. As index fund simply tracks an index there is no fund manager to pay, so their fees are usually much lower than managed funds, typically around 0.1 to 0.5%.
Studies have shown that over 80% of fund managers fail to beat the equivalent index fund over the long term after deducting their fees. For this reason we think you will likely do better by simply following an index using an index tracking fund rather than a high fee charging managed fund.
Small difference in fees, big difference in retirement
|Average Super Fund||Index Balanced option from HostPlus|
|Fees||1.2%||0.04% + $78 per year|
|Cost of fees||$286,294||$21,649|
|Estimated balance at retirement age 67||$900,904||$1,165,549|
For Brett who earns $60,000 a year, switching his super to HostPlus Indexed Balanced will save him $264,645 by the time he retires.
See link below for more details on these calculations: http://mensmoneyhealth.com.au/superripoff/superripoffassumptions
Switching between funds is called ‘roll over’. Its easy to roll over your existing super fund to hostplus.
In under an hour you can earn your future self over a quarter of a million dollars!
Three simple steps:
1. Join HostPlus
2. Switch your old super fund over
3. Select the Indexed Balanced option*
All this can be done at the HostPlus online joining page at http://hostplus.com.au/super/join
* Assuming you consider the balanced option suitable for your situation ie. risk tolerance and time till retirement. See the HostPlus member guide for more details: http://memberguide.hostplus.com.au/docs/ShortFormPDS.pdf
Before acting on our recommendations, you should consider their appropriateness to your specific investment objectives, financial situation and needs. If you are uncertain as to what your objectives and needs are, you should contact a financial adviser who is licensed to provide you with personal financial product advice.
Mens Money Health bases recommendations and forecasts on techniques and sources believed to be reliable in the past but cannot guarantee future accuracy and results. Mens Money Health will not be liable for any loss or damages arising from the use of this information.
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