Investors use the InvestSMART service as a complete solution for their investment strategy or as a component within a broader more complex strategy.
The two most common ways we see investors use the InvestSMART service (as either a stand alone or with other investments) is through strategies known as Core & Satellite and the Bucket Strategy.
Core & Satellite investing: This investment approach sees a core component to a portfolio and typically a smaller satellite component. In a traditional approach to the strategy the core is made up of passive index tracking investments. The core is often used to achieve the index return, be it a single asset class index such as the ASX 200 or a multi-asset class index like a balanced, growth or high growth index.
The satellite component traditionally strays from the index approach and will use active management, either through picking individual stocks, ETFs or the use of specialist fund managers (e.g. small company funds) to provide a return that differs from the index.
As the InvestSMART portfolios use index tracking ETFs combined with a capped management fee for the service, the InvestSMART portfolios are often used as a core component in a core and satellite approach. You can read more on the strategy here.
The Bucket Strategy: This strategy is where you divide your total portfolio up into three components or buckets. These buckets play distinct roles in your retirement. The first is a bucket for your day to day expenses, the second is a medium term investment feeding into the first and the third is a growth bucket to provide for your needs well into the future.
InvestSMART accounts are used for this strategy because of the low fees and the ability to hold more than one InvestSMART portfolio in your account and have the capped fee apply at your account level, not the portfolio level. You can read more on the strategy here.