I think that investing in ETFs is a really effective way to grow wealth. I’m going to tell you a few points about why I really like exchange-traded fund (ETF) investing.
Over time I believe that more and more investing will be done through ETFs because of how easy it is.
These are some key reasons why I’m attracted to ETF investing.
Hardly takes up any time
The amount of time it takes to invest in an ETF isn’t much at all.
I don’t know if you’ve been through the process of trying to buy a property but it takes quite a lot of time to look for properties and inspecting them (plus the building and pest inspection costs). Even buying a property takes a long time (and add in all of the costs like stamp duty).
Buying an ETF is as easy as just putting an order through an online brokerage account and then that’s it.
Owning ETFs doesn’t take up much time either. There’s no tenants to deal with. No problems at the property that need your attention to fix. And so on.
If you don’t sell them then tax return time is pretty easy too – the dividend and distribution information is normally available from the ATO with prefill.
Usually good returns
Over the long-term, the broader share markets of Australia, the US and indeed the world share market have done well.
The average return per year is normally around 10% over long time periods.
These diversified markets can be accessed through ETFs like iShares S&P 500 ETF (ASX: IVV), Vanguard Australian Shares Index ETF (ASX: VAS) and Vanguard MSCI Index International Shares ETF (ASX: VGS).
There are also more focused or specialised ETFs and indices that have performed stronger such as Betashares Global Quality Leaders ETF (ASX: QLTY), VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT), VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO) and Betashares Cloud Computing ETF (ASX: CLDD).
Many index based ETFs have lower costs than active fund managers. It makes sense – fund managers and shareholders want some/a lot of money too.
Vanguard (essentially) isn’t trying to make a profit from its ETFs, and competitors have to provide a good price compared to Vanguard’s ultra low fees.
ETFs may be able to deliver stronger net returns than fund managers simply because of the lower fees – which is good for us as investors.