Indexed fund "bank account", does it exist?

Discussion in 'Money Management & Banking' started by spludgey, 26th Nov, 2020.

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  1. spludgey

    spludgey Well-Known Member

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    So, my wife and I want to start a bank account for our 3 year old, but then I got to thinking that having money sit in a bank account at zero interest for at least a decade is probably not a financially prudent idea.
    I was wondering if there's something that works like a bank account, where I can make deposits, but it buys an indexed fund automatically?

    Obviously it would need to have very low transaction fees to make sense, given that deposits are likely a few hundred bucks at a time.

    If there isn't a product like that yet, I think there's a business opportunity here!
     
  2. Lindsay_W

    Lindsay_W Well-Known Member

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    I suspect there is a reason one does not exist, bank accounts need to be very liquid and verrry low risk.
    Could you just invest in a low cost ETF or similar and 'save' into it?
     
  3. spludgey

    spludgey Well-Known Member

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    I agree they need to be liquid, but why do they need to be very low risk?
     
  4. Momentum

    Momentum Well-Known Member

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    I thought the same thing so I buy NDQ every month using CBA Pocket for $2 a pop
     
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  5. spludgey

    spludgey Well-Known Member

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    Awesome, thanks for that!
    I assume you can link it to a CBA bank account that I'll make for him?
     
  6. Shogun

    Shogun Well-Known Member

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    You need a Comm bank account to use Comm Pocket
     
  7. Lindsay_W

    Lindsay_W Well-Known Member

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    Because the whole idea of a bank account is you can access your money whenever you need to and your not expecting it to be tied up in an investment. What you're talking about would be classed as an investment product not a bank account to my understanding.
     
  8. spludgey

    spludgey Well-Known Member

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    Sorry, but that argument is about liquidity to me, not about stability.

    There are bitcoin bank accounts, why not index fund ones? Fiat currency, crypto, the ASX, are all just derivatives. Sure, some might be more stable than others, but really, they're not that different in what they are.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    watch out for the tax consequences of children earning income like this - after $416 in earnings the tax rate jumps to 66%
     
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  10. Lindsay_W

    Lindsay_W Well-Known Member

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    Bitcoin is a form of currency isn't it? Not an investment product, could be wrong on that depending how you view it. Sits in a 'wallet' until you convert to a fiat currency into a traditional bank account.
    Point was if you put $500 into a bank account, you expect at minimum to get that out when you need it, not that it becomes $200 due to a market dip, one probably doesn't exist as there's a distinction between a deposit product and investment.
    Could just open an ETF or similar and deposit into it like you would with a traditional savings account, would that work for what you propose or is the key issue the brokerage fees with that option?
     
    Last edited: 27th Nov, 2020
  11. Redwing

    Redwing Well-Known Member

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  12. Big A

    Big A Well-Known Member

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    Why does the account have to be in your kids name?
    My young fella is learning about investing along side me and wants to invest all his pocket / birthday money. So I go through the different investments I hold and he chooses what he wants to invest in. I take his money and allocate him the equivalent in shares from my holdings. We then keep track of what’s his via a simple excel spreadsheet.
    Simple and no extra fees or accounts.
     
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  13. Redwing

    Redwing Well-Known Member

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    Spaceship is up about 53% YTD

    Investing though, as opposed to saving

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