BetaShares AAA ETF (ASX:AAA)
The BetaShares AAA ETF provides investors with exposure to Australian cash, without the need to open a bank account or have capital locked up in a term deposit.
This free report is issued by Best ETFs Australia, a division of The Rask Group Pty Ltd. It is not a recommendation. Speak to a financial professional before relying on this information and please read our Financial Services Guide (FSG).
AAA ETF Fast Facts
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BetaShares AAA ETF (ASX:AAA) key information
|Ticker code: AAA||Exchange: ASX||Yearly fee: See ETF list|
|Geography: Australia||Sector: Cash – Australian||Distribution frequency: Monthly|
|DRP: Full or partial||Domicile: Australia||Issuer: BetaShares|
|Registry: Link Market Services||ISIN code: AU000000AAA3||IRESS code: AAA|
AAA: Analyst Warning
We apply a generic risk warning to all ETFs and funds that may not have another, more obvious, risk warning applied to them.
At Best ETFs Australia we apply this warning to all ETFs and funds regardless of their structure, exposure, fees, sector and strategy/type. We want to remind our thousands of readers, clients and members that investing is risky and no ETF or fund is a risk-free investment.
You should always read the Product Disclosure Statement (PDS) and/or speak with a qualified financial adviser before investing in an ETF, product or fund that you do not completely understand. There's a reason we call it "investing" and not "saving" -- that reason is risk.
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Cash – Australian sector
The Best ETFs Australian Fixed Interest sector includes ETFs, managed funds and index funds which cover Australian bonds ranging from Government treasuries to Corporate and Hybrids; right through to Cash Management Trusts (CMTs) and simple Term Deposit ETFs.
This sector may also include cash or bond products from foreign Governments or companies issuing their debt (bonds) or cash products here in Australia.
Over the ultra-long-term, we expect the Australian bonds and cash sector to perform with low amounts of volatility (ups and downs) but equally low capital gains. Moreover, we believe investors should expect the income return produced by high-grade bonds and cash to remain low for the foreseeable future as inflation and Australian interest rates remain well below historical levels.
One of the unique features of the Australian term deposit market -- it's a legacy of our time during the Global Financial Crisis (GFC) of 2008/2009 -- is the Australian Government Guarantee on deposits.
Before buying a cash ETF, we think you should learn more about this relatively unique protection mechanism for Australians who deposit up to $250,000 in an approved bank. It may offer more security than buying a cash ETF. You can learn more about the Australian Government's deposit guarantee by clicking here.
We think you should consult a licensed, independent and trustworthy financial adviser if you need help understanding the guarantee.
What exactly does Cash – Australian invest in?
The BetaShares AAA ETF invests in a number of deposit accounts from Australian banks or APRA approved ‘ADIs’ (Authorised Deposit Institutions).
Australian cash ETFs provide investors with exposure to a pool of money that is typically invested in term deposits at major Australian banks and, occasionally, a small amount is invested in short term government bonds (often called 'enhanced cash' or 'cash plus' ETFs).
Here are some of the general risks (it's not a complete list):
- No guarantees. Unlike some Australian traditional term deposits, cash ETFs do not entitle ETF investors to the $250,000 per person per ADI Australian Government deposit guarantee. You can learn more about the deposit guarantee here.
- Concentration risks. Oftentimes, small or sub-scale cash ETFs invest all of the cash inside the ETF in just one or two banks. This lack of diversification could expose investors to the risk that their money is allocated to just one bank. We prefer to see the cash invested at multiple banks with high credit ratings and regulatory oversight.
- Counterparty risks. It's important to check the Product Disclosure Statement (PDS) and any marketing documents on the ETF issuer's website to make sure you're comfortable with the types of banks, the regulatory oversight of those banks (e.g. APRA in Australia, various authorities in the US) and how your cash ETF is monitored.
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What you need to know about BetaShares
BetaShares is one of Australia's largest ETF issuers, by number of ETFs issued on the ASX. At the end of 2018, Betashares had $6.1 billion of money invested in its ETFs.
BetaShares was founded in Sydney by a group of finance professionals who have a venture capital (VC) business called Apex Capital Partners. BetaShares was an 'in house' investment for Apex but grew quickly as ETFs took off.
Betashares is part-owned by Mirae Asset Global Investment Group, a specialist ETF business which manages nearly $130 billion.
$6b+ invested in BetaShares ETFs
BetaShares launched its first ETF in 2010 but has grown its ETF count rapidly to have around 50 ETFs in the market today.
Potential allocation for AAA
This ETF might be used as part of a 'tactical' or 'satellite' allocation in a diversified long-term portfolio because of its unique strategy, costs, risk-reward profile and the expectation of long-term returns.
What is The Core-Satellite Approach?
A core-satellite approach puts investments into two 'buckets' depending on the expected risk and returns.
Bucket 1: Core Investments
The 'core' is the larger part of an investment portfolio and could be reserved for more conservative investments. For example, this might include diversified, low-cost and easy to understand funds, bonds, shares or ETFs.
If you're new to investing, the core is a good place to start.
Core ETFs might include:
- Australian shares (index strategies)
- Australian bonds and global bonds
Bucket 2: Satellite/Tactical Investments
The 'satellite' or tactical bucket is the smaller part of a portfolio (e.g. 0% to 30% of your entire portfolio). In this section, investors might decide to take more risk, invest in unique or unproven strategies, buy fast-growing individual shares, etc.
Tactical strategies could be higher risk, higher cost and more complicated strategies that are used in the hope of outperforming the averages (e.g. ASX 200, S&P 500, etc.).
Tactical ETFs might include:
- Australian shares (rules-based strategies)
- Global shares (rules-based strategies)
- Commodity ETFs
- Currency ETFs
- Cash ETFs
- Hedge funds
Typically, what is AAA used for?
The interest rates earned from AAA can be higher than what you’d get with most savings accounts or term deposits. However, the main benefit of the AAA ETF versus a term deposit, is that AAA provides greater flexibility for essentially the same interest rate. Taking your money out of a term deposit early can mean losing all interest, whereas the AAA ETF can be bought and sold like shares and pays a monthly distribution.
How do I invest in the Australian High Interest Cash ETF ETF?
The easiest way to buy an ETF is through your online share brokerage account. Just search for the ticker code and buy it. The following podcast explains how to buy shares and ETFs for the first time.
Meaning, you can follow the exact same process for ETFs as you do for shares -- both can be purchased in one account.
Australian Investing 101
Don't have a brokerage account for ETFs?
Read our tutorial on understanding how share brokerage accounts work.
Is AAA a good ETF?
We believe that knowing whether or not to invest in an ETF requires a lot of research, even for an ETF like this one. ETFs are long-term investments, so it's important to do the right amount of research into the ETF before you invest, and consider how it fits with your risk profile, strategy and the other investments in your portfolio.
Where you can go to find more research on this ETF:
Reports like this one on the Best ETFs Australia website were built to help you understand ETFs and to provide free access to news and research across all Australian ETFs, index funds and selected managed funds.
This report is the free version of our ETF reserach and it contains general information and should not be considered as a recommendation or personal financial advice. If you want to receive personal financial advice and have someone tailor the ETF research to you, you should speak to a financial adviser.
If you don't want to pay a financial adviser, here's what you can do:
- Before doing anything, you should always read the ETF's Product Disclosure Statement (PDS), which should be available on the ETF provider/issuer's website. The PDS explains some of the risks, the fees and other important information.
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Disclaimer: Any information contained in this report is limited to general financial advice/information only. The information should not be relied upon because it has not taken into account your specific needs, goals or objectives. Please, consult with a licenced and trusted financial adviser before acting on the information. Past performance is no guarantee of future performance. Nothing in this article should be considered a guarantee. Investing is risky and can result in capital loss. By reading this website, you acknowledge this warning, having read our Financial Services Guide (FSG) and agree to our terms & conditions available here. This article is authorised by Owen Raszkiewicz of The Rask Group Pty Ltd.