Passive Investing Makes Sense – Here’s Why You Shouldn’t Go It Alone

Investors may sometimes reasonably ask: “If you are passive investors, why don’t I just invest in passive funds and ETFs directly myself?” Let us explain the benefits of choosing a discretionary wealth manager like Netwealth to manage your money for you.

Actively managing passive investments

The goal of our investment approach is to build portfolios thoughtfully and efficiently so that we can maximise returns for a given level of risk. So, in creating the right asset mix we take a long-term view, while proactively anticipating changing economic and market conditions.

Saving valuable time and energy

Replicating our strategy might be manageable for some savvy investors, but even the most financially-literate clients rarely have the time, inclination or discipline or to stay on top of their investments day after day. Our clients prefer the reassurance that, for a small charge, an experienced team is watching the screens so they don’t have to.

Helping to overcome behavioural biases

When individuals invest for themselves, it is easy to fall prey to the many human biases that all people face. These thinking traps (which can include loss aversion, overconfidence, familiarity bias and herd behaviour) can have considerable effects on investor outcomes – which can be better overcome by a watchful and objective team with all the necessary experience to make informed decisions about where and how to invest.

Cost-effective diversification

DIY investing may well be cheapest – but it’s not always the most cost effective. For personal investing, individuals can invest in a single equity index-tracking fund at a very reasonable cost – say for 0.2%. But holding more than one strategy (by diversifying) is usually worth it. Owning funds also requires a platform or a wrapper to host the investments, which will usually be another 0.1 to 0.2% a year at a minimum.

Hiring a wealth manager like Netwealth lets you roll all of your ongoing portfolio management, administration, custody, trading and reporting costs into one straightforward fee, clearly explained upfront and quoted including VAT.

We manage your money… and offer more

Our clients choose our experienced team to help them meet their varied financial goals and to make life easier – and less stressful – than going it alone. We can also support their needs beyond the state-of-the-art analytics that clients use to oversee their investment portfolios: our team of advisers are always on hand to help clients with formal advice if and when they need it.

So, while passive funds may be a cheap and attractive investment option for a DIY investor, being a passive investor is rarely a better option when the Netwealth team is ready to be an active investment manager on your behalf – at a truly competitive cost.

This article is an abridged version of a more detailed piece which you can read here.

Please remember that when investing your capital is at risk.