When buying ETFs, do I need to buy the entire unit?

Hi AC, great question. There are a few options that dictate the answer here, so I’ve outlined them below based on the different ways you can invest in ETFs.

ASX listed shares and ETFs:

1. Own HIN (how Pearler Shares works) where you buy on the ASX via a broker. You are the legal and beneficial owner, the HIN is in your nominated name. Right now, it is only possible to buy whole units or shares this way, so in your example, yes you’ll need to buy the entire IVV unit.

2. Custodial or comingled HIN (How some other low cost brokers work) where you buy on the ASX via a single HIN alongisde other investors. The HIN is legally held by the broker/platform, usually in a special purpose trust and they maintain the ledger of names and holdings. They are the legal owner and your are the beneficial owner. This is fairly typical overseas but due to some issues in the past (google Halifax or Opes Prime collapse). Right now, it is only possible to buy whole ASX listed units or shares this way, so in your example, yes you’ll need to buy the entire IVV unit.

3. Managed funds (like Pearler Micro, RAIZ or Spaceship) where you buy units in a retail managed investment scheme that has a PDS and special purpose custodian that is generally separate to the manager. In Pearler Micro’s case, the fund is legally held and administered by an unrelated company that only does this type of thing for us and other retail funds. It’s not exactly the same, but Super funds are a similar unit structure. Sorry for the tangent, back to your question. You buy a unit, this is what you own legally and beneficially, and it gets a share of everything in the fund for that unit class. So using your example, if the fund owns 1 IVV unit and you have $1 invested in the fund, then your $1 gets it’s tiny share of that IVV unit. For Pearler Micro, if you invested $1 into the American Buffet option (that invests in IVV) you get a $1 exposure to IVV. So if IVV then went up or down 1% your $1 would go up or down 1c

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Howdy A.C., I’ve heard from Pearler and guessing the only way this is possible is through Micro (see below). Otherwise, if an investor is planning to buy IVV on their own HIN they’ll need to cover the share price plus brokerage (again, see below)… 

In any case, I can offer some general insights on investing shares/ETFs.

Most of what I’m about to say comes from our educational blog on Rask Education: HINs & Custodians: What’s the Big Deal?»

Most investors have a few options (please note: I’ve tried to order them in terms of minimum investment):

A) Micro investments. These types of investments can be made with as little as a few dollars. The way brokers, apps or platforms (like Pearler) can make this possible is if it an investor’s money (e.g. $5) is pooled with other investors. This pooling can provide access to things that might otherwise be out of reach. The IVV ETF is found inside the Pearler «Core» portfolio. However, the one drawback is that the investments are typically held in a custodial model whereas…

B) investments on HIN. When an investor gets their own Holder Identification Number (HIN) it’s considered to be the safest option as every share (or ETF) is assigned to the individual investor. Your unique HIN gives you an extra layer of protection if your broker ever fails and goes into liquidation. Having a HIN also makes it easy to transfer your holdings between brokers. Note: you can think of a custodial model as kind of like a «mega» HIN. The custodian has one big HIN for all the shares/ETFs and keeps records on their end (they may use an external administrator to help with this), holding your investments under their “mega” HIN. There are other benefits to having your own HIN, like voting rights (at AGMs, reinvestment plans, etc.).

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