Two people can invest in similar assets and earn similar returns but end up with different after-tax outcomes simply because their investments are held in different ways.

Let's look at the difference between an Industry Super Fund and an ETF portfolio held through a wrap platform.

Most Industry Super Funds invest using what's called a pooled fund.

Think of it like a large swimming pool.

Thousands of members put their money into the same pool, and professional investment managers invest it on everyone's behalf. Instead of owning the individual investments directly, each member owns units in the overall fund.

This approach has many benefits, including:

• Professional investment management
• Diversification across many investments
• Simple administration
• Competitive fees

For many Australians, Industry Super Funds are an excellent solution.

Because everyone's money is invested together, the buying and selling activity of other members can affect the fund.

For example, if many people withdraw money or switch investment options, the fund may need to sell some of its investments.

Those sales can create capital gains within the fund, even for members who haven't sold anything themselves.

This is simply how many pooled investment funds work—it's not necessarily a disadvantage, but it is something many investors are unaware of.

Exchange Traded Funds (ETFs) also invest in many different companies and assets, but they are generally structured differently.

When ETFs are held in your own investment account through a wrap platform, you own the ETF units directly.

One advantage of this structure is that capital gains are often deferred until you choose to sell your investment, rather than being influenced by the actions of other investors.

This may provide benefits such as:

• More control over when capital gains are realised
• Potential tax efficiencies
• Greater transparency
• More flexibility when managing your portfolio

While ETFs can still distribute capital gains, they are often considered more tax-efficient than many traditional pooled fund structures.

The longer your money stays invested, the more opportunity it has to grow through the power of compounding.

If less tax is paid along the way, more money can remain invested and continue working for you.

Over many years, even relatively small tax efficiencies may make a meaningful difference to your long-term wealth.

A wrap platform, such as HUB24, is an investment account that lets you hold different investments in one place.

It makes managing your investments easier by providing:

• One online account
• Consolidated reporting
• Easy administration
• Access to diversified ETF portfolios
• Professional portfolio management
• Ongoing financial advice

Many investors like wrap platforms because they provide greater visibility and control over their investments.

CARE portfolios are professionally managed portfolios built using a range of diversified ETFs.

They invest across:

• Australian shares
• International shares
• Property and infrastructure
• Fixed interest
• Cash

This approach aims to provide:

• ✔ Broad diversification
• ✔ Cost-effective investing
• ✔ Transparent portfolio construction
• ✔ Potential tax efficiencies
• ✔ Professional investment management

Industry Super Funds continue to be a great option for many Australians.

They offer:

• Simplicity
• Professional management
• Diversified investments
• Competitive fees
• Insurance options within super
• Very little administration

ETF portfolios also have their own strengths, particularly for investors who want greater flexibility, transparency and control.
The best option depends on your personal goals, financial situation and investment preferences.
There is no one-size-fits-all answer.

At NetGrowth, we believe that successful investing is about more than simply choosing the right investments. It's also about understanding the structure in which those investments are held and how that structure may impact your long-term outcomes.

While investment returns will always play an important role, factors such as tax efficiency, fees, flexibility, transparency and the power of compounding can significantly influence the wealth you accumulate over time.

There is no single solution that is right for everyone.

For some investors, the simplicity and convenience of an Industry Super Fund may be the most appropriate option. For others, a professionally managed ETF portfolio may offer greater flexibility, transparency and control.

The key is understanding the trade-offs and selecting a strategy that aligns with your personal goals, time horizon and financial circumstances.

Our role is to help you cut through the complexity, understand your options in plain English, and make informed decisions that support your long-term financial wellbeing.

This article contains general information only and does not take into account your objectives, financial situation or needs. Before making any financial decision, you should consider whether the information is appropriate for your circumstances and seek personal financial advice if required.

Source: Passive Investing Australia – The Problem with Pooled Funds. [passiveinvestingaustralia.com]

Note: Past performance is not a reliable indicator of future performance. Any examples provided are for illustrative purposes only and do not represent actual or expected investment returns.