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Managed funds may unlock the deposit door for first-home buyers

Emma Rapaport  |  28 Jun 2018Text size  Decrease  Increase  |  
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Younger Australians are struggling to get a foot in the property door. A median apartment in Sydney now fetches nearly $600,000, which means first-home buyers probably need to come up with $120,000 for a 20 per cent deposit, and that’s before the myriad costs associated with buying property. A titanic ask, even for the best savers.

There's no substitute for sticking to a well-crafted savings plan but there are several ways you can put your money to work by investing it as you continue to save. A managed fund is an ideal starting point.

Look for one that takes the needs, time horizon and risk tolerance of first-home buyers into account. You might want to look for one that is:

Diversified: meaning the fund holds different asset classes, including shares, bonds, property, diminishing risk if one asset class nose dives.

Balanced: meaning the portfolio will split its holding 50/50 with higher-risk growth assets such as shares with lower-risk growth assets, typically cash and bonds.

Using the Morningstar Fund-Screener, we identified three funds that meet these criteria and assess their merits. All the funds mentioned are members of the 'Morningstar Multisector Balanced' category meaning that they invest in several sectors have 41 per cent to 60 per cent of their assets in growth sectors.

housing first home deposit article

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Remember: if your savings are on track to allow you to buy a home within the next five years, then investing your cash is probably too risky. The market could crash, and your investments would have too little time to recover. Most balanced – moderately risky – investment strategies have at least a five to 10-year time horizon.

Vanguard LifeStrategy Balanced Fund

The Vanguard LifeStrategy Balanced Fund is worth considering if you're a first-home saver because it gives investors access to a range of sectors, at minimal cost, and strikes a balance between income assets like fixed interest and growth assets such as shares. This means your investments will be less exposed to market fluctuations. The fees are competitive and total returns compare well to similar funds.

Morningstar has given this fund a Gold Rating, which means analysts are confident in the fund’s ability to distinguish itself across the five Ps: process, performance, people, parent and price.

Read the analyst report

FirstChoice WS Multi-Index Diversified

The FirstChoice WS Multi-Index diversified option is enticing for first-home buyers because of its straightforward approach and low cost. Compared to its peers in the multisector balanced category, the fund has outperformed on average five-year total returns and charges below-average fees.

Morningstar has given this fund a Bronze Rating, meaning that analysts think highly of the fund and expect it to outperform over a full market cycle of at least five years.

Read the analyst report

Pendal Balanced Returns

The Pendal Balanced Returns fund, formerly BT Investment Management, is a fine choice for first-home buyers looking to supercharge their savings. The fund is actively managed and has a diversified portfolio of assets, slightly higher weighted to growth assets than defensive assets. The fund has returned above-average total returns for the past five years. It does, however, have a higher minimum investment amount, so only consider it once you've saved more than $25,000.  

Comparison 

housing first home deposit article

 

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Emma Rapaport is a reporter with Morningstar, based in Sydney.

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication

 

is the editorial manager for Morningstar Australia. Connect with Emma on Twitter @rap_reports. You can email Morningstar's editorial team editorialAU[at]morningstar[dot]com

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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