Why the progression from Exchange Traded Funds to Individual Stocks?

Investments made through Nucleus Wealth are made through separately managed accounts (SMAs). There are a number of benefits to this type of investment account; including the ability to apply custom ethical and investment screens, personalised tax treatment and all assets being held individually in your name, as opposed to by the investment manager.

One of the features of these types of accounts is that investments are held in your name. A drawback of this feature, however, is that in order to achieve a diversified international portfolio, you need to invest quite a significant amount ($200,000 in our case) in order to make sure that you will always hold at least one share in each of the stocks in our portfolio. This is because some of the international stocks, like say Alphabet (Google) are priced at several thousand Australian dollars per share. 

After much feedback requesting lower minimum investment sizes, we created a solution. If you invest over $200,000, you will be invested in our full portfolio of stock, bond and cash (including foreign currencies) holdings. With a portfolio less than $200,000, however, we approximate our exposure to different asset classes (international equities for example) using either Exchange Traded Funds (ETFs) or concentrated share portfolios (e.g. 30 international shares, instead of a full portfolio of 60 international shares). This allows clients with lower balances to get access to our investment portfolios, while minimizing transaction costs.

As your balance increases, your portfolio progresses to individual stock and bond holdings in place of ETFs, allowing for more tailoring, such as excluding exposure to Australian banks, or fossil fuel producers.