Investing for kids

Minors cannot directly hold shares. Instead, investments are held on behalf of a child with an adult acting as trustee (this is not a formal trust). When setting up an investment account with InvestSMART or a brokerage service the account is set up as MRS JOAN CITIZEN <JUNIOR CITIZEN> or with two adults as trustee MR JON CITIZEN + MRS JOAN CITIZEN <JUNIOR CITIZEN>.

We cannot provide tax advice; your individual circumstances will determine who is responsible for the tax. The adult(s) acting as trustee can provide their TFN(s) or provide the child’s TFN.

Please note there are tax implications for minors, so it is always best to check with your accountant or the Australian Tax Office before making your decision. 

This link will take you to the ATOs page for chidrens share investments.

Even though people under the age of 18 cannot hold shares directly, you can start investing on behalf of them from day one and when it comes to investing, time is your best friend.

Time allows for the magic of compounding to take affect and we always advocate for getting started sooner rather than later. Saying that, the number one rule of compounding is to not interrupt it unnecessarily. This means you should ensure you have your day-to-day expenses and an emergency fund for those unexpected expenses. This will give you a comfortable cushion and mean you can sit back and let the investment compound for years and decades to come.

When a child turns 18 you are able to transfer the ownership across to them. Depending on how you have structured the investment you may (in your own name) or may not (your name as trustee for child) have capital gains tax upon the transfer.

Turning 18 does not mean you must immediately transfer control. The trustee can continue to control the assets until a point when they are ready to transfer ownership. 

With an InvestSMART Professionally Managed Account (PMA) we request a signed letter from trustee and child. The child must then open an account in their own name in preparation for the transfer.

A child cannot hold the account directly but an adult can invest using Fundlater on behalf of a child just like any other InvestSMART account.

InvestSMART aims to make building and maintaining your wealth easy. The best investing is done slowly, almost forgotten about in the background and a great way to ensure you continue to grow your wealth is to use the InvestSMART automated account settings.

Growing your wealth

• Regular contribution plan: Turn on a regular contribution plan to have a minimum of $100 per month direct debited from your bank account into your InvestSMART account.
• Automatic dividend reinvstment: The default setting for your InvestSMART account is to automatically reinvest the distributions. Instead of just going straight back into the ETF they came from, they are reinvested across your portfolio to maintain balance.

Maintaining your wealth

• Automated income settings:
  • Income sweep: Every month we scan your account to see what dividends have been paid. They are bundled up and transferred out to your bank account. Clients living off the proceeds of their portfolio make use of this setting.
  • Regular withdrawal plan: Have a preset amount withdrawn from your portfolio each month. The InvestSMART team will ensure your portfolio maintains the right balance whilst providing you with regular funds.
  • Adhoc withdrawals: Withdraw funds as and when you need to fund your lifestyle or take advantage of market highs.

InvestSMART is a digital wealth platform and despite being digital its success lies in its human touch. Your relationship with money is deeply personal, from how we earn it to how we spend, save and invest it. And so, with the individual in mind, we designed our service. 

Support: When you need to speak to a person you can

We are a digital wealth platform that uses the "digital" aspect to enhance our human support. There is always a knowledgeable real person to help you when you need, through our content, help centre, webinars, on-site chat, dedicated client only inbox and old-fashioned phone calls. It's not by accident our support is mentioned more than anything else in our reviews.  

Fees: Your money is working for you not anyone else

It is unusual for a financial service provider to make a song and dance about its fees. But when you are the first provider to introduce a capped fee, instead of being a negative, it becomes a positive. 0.55%pa is a low management fee compared to the average and we take that a step further and cap it at $550pa. What this boils down to is more of your money generating growth and income for you.  

Returns: Your returns fund your lifestyle, make sure they're working efficiently

You'll notice the InvestSMART portfolios are all compared to peers. This means the average return of all other funds that are aligned to the same industry standard benchmark as our portfolios. Why? Because these are viable alternatives that you could invest in. We aim to outperform the average of our peers by the differential in our fees. You'll notice the gap to peers at the start is small, but if you compound that difference year after year, you will notice that gap grows significantly. We keep our costs low, keeping more in your account compounding for you.    

Independence & Trust: The best investment options for you, regardless of the ETF provider 

Our Investment Committee is 100% independent of product issuers and have built careers in markets over decades and they distill that experience into our service. Their independence sees our portfolios hold the best ETFs to meet our clients' needs, regardless of who issues the ETF. 

Security: Peace of mind that your assets are securely held 

You are the legal owner of your investments with InvestSMART. All accounts have their own HIN in the client's name. Additionally, two-factor authentication is used for any portfolio changes. 

The core investment philosophy at InvestSMART focuses on the principles of diversification, low fees and investing for the long term. Exchange Traded Funds (ETFs), in comparison to unlisted managed funds, provide a cost-effective method to ascertain these goals. They also have liquidity benefits, being easier to buy and sell at short notice.

ETFs provide broad diversification by only needing to purchase a small number of securities. In contrast, when buying and holding hundreds of individual securities to achieve a similar level of diversification, greater costs are incurred in brokerage and fees – imagine the brokerage to buy 200 individual stocks!  

ETFs are also great for managing risk. When you invest in an ETF, you lessen individual company risk and sector risk. By holding a basket of individual stocks, you are not limiting your exposure to individual sectors of the market. 

In using ETFs, InvestSMART has the capacity to pass on these lower costs to the investor in the form of capped fees and low-cost investing. As fees compound over time, even a slight increase in fees can result in substantial differences to your return. 

You can read more on ETFs here.

We can't tell you what portfolio to choose as we can provide general financial product advice only about the products that InvestSMART offers.

We cannot provide any personal financial advice and you should consider your own financial objectives, financial situation and needs before making an investment decision and submitting an application.

We have a number of tools you can use at InvestSMART including the Portfolio Manager and online calculators.

You will notice a common thread throughout the guides, the investment time-frame. We recommend investors look at the suggested time-frame associated with each portfolio to see if it aligns with their investment goal.

Here is a list of tools and guides to help select the right portfolio:

• InvestSMART's statement of advice
• InvestSMART's guide to growing your wealth
• InvestSMART's guide to investing in retirement
• InvestSMART's investor pack
• Wealth savings calculator
• Saving to buy a property calculator
• Saving for kids education calculator
• Saving for retirement calculator
• Target Market Determination for the InvestSMART Professionally Managed Accounts

Additionally, we have InvestSMART Bootcamp which is a comprehenisve investment course designed to get you started on the right foot. Click here for further details.

When clients ask if their investment is safe with InvestSMART there are two main categories they are referring to; investment risk and the security of their investment.

Investment risk:

When you invest in anything other than a term deposit, you are taking risk. Investing is not about avoiding risk; it is about balancing risk with return and having an understanding of the risks associated with each asset class.

The InvestSMART team build investment portfolios designed around different risk profiles from conservative through to high growth. These portfolios hold the same asset classes and ETFs, but the weighting allocated to each asset class varies depending on the risk profile. The portfolios are designed to wear the bumps of the market.

Additionally, we recommend this article on how ETFs can help you manage risk.

Security of your investments:

We take the security of our investors accounts seriously and have built our service around this:

• All client's investments are CHESS sponsored. They are held on a HIN in the client's name. This means the client is the legal owner of the shares and not a beneficial owner.
• Clients are able to transfer out their holdings.
• Investors can enable two-factor authentication for account login.
• Two-factor authentication is required for all account changes.
• Bank level web security keeps client information safe and secure (that's our 256-bit SSL/TLS certificate).

What can investors do?

Investors can give their investments the best possible chance by selecting a portfolio in line with the same timeframe as their goal and risk appetite. Additionally, the best defense against volatility is time. Sit tight and allow your portfolio to recover. All investing comes with volatility and occasional uncertainty but, as the famous investor Charlie Munger says, never interrupt your compounding unnecessarily.