Why I Like Australian ETF Investing

According to the latest report from S&P Dow Jones Indices, the “de facto scorekeeper of the ongoing active versus passive debate” shows that after fees 80% of large-cap equity funds failed to beat the S&P/ASX 200 over the 15 years to 30 June 2018.

To me, this explains why so many investors have increasingly been turning to ETFs and index funds. 

What is an ETF?

Index funds are passive investments which track an index, such as the ASX200. Exchange Traded Funds or ETFs are the ‘wrappers’ around the fund to make it easier to invest. An ETF can be bought and sold on a stockmarket such as the ASX.

An example of an ETF listed on the ASX is iShares Core S&P/ASX 200 ETF (ASX: IOZ), which tracks the largest 200 companies on the ASX and charges a management fee of 0.15%.

Benefits

Obviously, for a DIY investor it would be quite cumbersome and expensive to buy or sell every company in the ASX 200. Just imagine, 200 buy orders to try and replicate the ASX 200 would cost an individual investor at least ~$4,000 in brokerage fees alone ($20 x 200)! Even if you had $1 million to invest, the $4,000 in brokerage fees would represent an expense of 0.4% and even higher on smaller investments.

Pooling money with other investors to achieve economies of scale allows expenses to be significantly cheaper than doing it yourself. Plus, you don’t have the stress or burden yourself with trying to track an index and rebalance… which will incur more brokerage fees!

There are many benefits to EFTs including:

  • Low cost
  • Instantaneous buying/selling
  • Price transparency
  • Portfolio diversification
  • Able to see underlying holdings
  • Tax benefits

In future articles, I will elaborate on some of the benefits of ETFs such as portfolio diversification and tax benefits.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

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The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

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