Why I Choose Direct Investing: Lessons from Experience 

Over the last 20 years, I’ve shaped my investment philosophy and business around one central idea: direct investing. Rather than relying heavily on managed funds or exchange-traded funds (ETFs), I focus on investing directly into Australian and international businesses—companies we know and use every day, such as Microsoft and Meta (the parent company of Facebook and Instagram). 

This approach wasn’t something I decided on overnight. It grew out of personal experiences, early lessons in my career, and a desire to offer something that felt fair, transparent, and effective for my clients. Let me take you through the journey that brought me here. 

The Lesson of the Margin Loan 

In 2003, as a young financial adviser, I took out my first margin loan of $80,000. It was March—right at the bottom of the dot-com crash and just before the second Iraq War. Timing-wise, I couldn’t have been luckier. Within a few short months, the investment had grown significantly, and I held it for quite some time. 

But then came the surprise: a hefty tax bill from the ATO. What had happened? It turns out that the managed fund I had invested in carried unrealised capital gains from years prior. When the fund realised those gains during the financial year I became a unit holder, I inherited the tax liability—despite only holding the investment for a short time. It was an expensive lesson in how trusts operate and why tax outcomes can become a hidden cost in managed investments. 

The Stockbroker Conflict 

Around the same time, another experience shaped my thinking. A stockbroker who handled my parents’ and business partner’s portfolios called me with advice to sell Woolworths, citing limited growth prospects. Within two weeks, that same broker called my family to recommend buying Woolworths. The clear conflict of interest was impossible to ignore: the broker’s income depended on generating commissions through frequent transactions, regardless of what was truly in our best interests. 

Why Direct Investing Works for My Clients 

These lessons led me to design a direct investing approach that prioritises transparency, tax efficiency, and alignment with client goals. Here’s why I believe this method works: 

1. Greater Tax Control 

Direct investing eliminates the risk of inheriting someone else’s tax liabilities. For example, if a company in your portfolio undergoes a takeover, we can manage the tax implications by selling portions of the holding across financial years or offsetting gains with losses in the portfolio. This level of control simply isn’t possible with managed funds. 

2. Lower Fees 

Managed funds and ETFs come with ongoing fees that can eat into returns. While these products aren’t wrong—they’re often cost-effective for smaller accounts and superannuation—direct investing allows me to reduce fees for my clients. Saving $10,000 a year in fees might not guarantee higher returns, but it’s a tangible, consistent benefit that compounds over time. 

3. Transparency and Ownership 

My clients know what they own and why. They also have input into their portfolios, which builds confidence and understanding. This isn’t just a service—it’s how I manage my own money, and it’s the standard I’ve built my business around. 

The Challenges and Benefits of Direct Investing 

Managing direct investments is no small task. From share registries to administration, the back-office workload for my business is significant. But the benefits for my clients make it worthwhile. By investing directly, we: 

• Avoid conflicts of interest (no commissions are received for transactions). 

• Focus on high-quality businesses held for the long term. 

• Offer a tailored, personalised approach that aligns with individual goals. 

When Managed Funds and ETFs Make Sense 

It’s important to note that managed funds and ETFs aren’t wrong. For many investors—particularly those with smaller accounts or superannuation balances—they offer a simple, cost-effective way to build wealth. However, for non-superannuation entities and larger portfolios, the tax and fee advantages of direct investing can make a significant difference. 

Final Thoughts: Built by Experience, For the Client 

My direct investing approach wasn’t born out of theory—it came from real experiences, hard lessons, and a desire to offer something I’d be happy with as a client. Over the past two decades, I’ve seen the benefits this method provides, from tax efficiency to greater transparency and control. 

If you’re considering how to invest your wealth, remember: no single strategy is right for everyone. But by focusing on what aligns with your goals, values, and financial situation, you can make decisions that serve you well over the long term. 

The information provided in this article is general in nature only and does not constitute personal financial advice.