Question:
Jarryd works with the local council as a parks services manager. He is aged 42, married with two young children and earns a salary of $75,000 p.a. Jarryd's wife is not currently employed. Jarryd would like to start investing into quality investments outside of his superannuation account to fund his children's education, to pay for a home extension that will be required in the next few years as the children get older, and to put some money aside to support his retirement.
Jarryd believes he has a moderate risk profile. He has little investment experience and is busy with his job and family .He does not have much of an interest in managing his finances. He is prepared to take on some risk in order to chase higher returns but would not want to borrow or invest into high risk products. He owns a few shares
in the Commonwealth Bank and has $10,000 in a cash account.
Jarryd will shortly inherit a sound investment portfolio from his grandmother consisting of $30,000 cash and $40,000 in three managed funds as follows:
Australian Share Index Fund $20,000 (MER 2.5%)
Australian Bond Fund $10,000 (MER 1.6%)
Australian Infrastructure Fund $10,000 (MER 2.7%)
Jarryd is looking to sell all three managed funds and invest the money into a share portfolio. He does not know anything about managed funds but believes he has the ability to successfully select and trade in ASX listed shares in order to make reasonable gains.
Required:
1. Determine the type of investments that an Australian infrastructure fund would invest into.
2. Would it be worth Jarryd holding his investments within a master fund or wrap account structure? What are the advantages and disadvantages of this approach?
3. Would you recommend that Jarryd sell the three funds in order to trade in direct shares?