Fund-loving investors
WHY ETFS ARE MORE ATTRACTIVE TO OLDER STOCKHOLDERS
Following a year of increased volatility on share markets, older investors are gravitating to exchange traded funds (ETFS) for their investment portfolio. Recent research from Investment Trends and Betashares found investors across all age groups 35 years and above have increased their exposure to low-cost ETFS throughout 2022.
ETFS are more in favour than traditional managed funds, receiving higher inflows in four of the past five years, with the latest research showing that about 1.9 million Aussie investors now hold an ETF investment.
From just two ETFS listed on the ASX in 2001, there are now more than 320.
As a result of their growing popularity, Betashares forecasts the Aussie ETF industry will have $150bn worth of funds under management by the end of the year.
Furthermore, more self-managed superannuation funds (SMSFS) continue to add ETFS. The number of SMSFS holding the popular investment vehicle now stands at 400,000.
Betashares CEO Alex Vynokur says market volatility hasn’t deterred most ETF investors from sticking to their investment strategy.
“Even despite recent market volatility we have seen ETF investors stay the course on their investment strategy and continue to invest in ETFS providing access to Australian and international equities, fixed income and long-term growth potential sectors like global cybersecurity,” he says.
WHAT’S THE ATTRACTION?
Vynokur says investors from all walks of life are using ETFS to make progress on their financial goals.
“Over the past few years, we’ve seen investors – both young and old – increase their allocation to ETFS,” he says.
“These investors are using ETFS to help reach their financial dreams like building a nest egg for a comfortable retirement, save for a house deposit, or even provide a little help to their children or grandchildren.”
COST EFFECTIVE
Vynokur says the popularity of ETFS can be put down to their diversity and cost effectiveness.
“For a growing number of investors, the key benefits of ETFS – namely convenience, liquidity, transparency and cost-effectiveness – continue to resonate as more investors allocate greater amounts of their portfolio to ETFS,” Vynokur says.
Another ETF issuer is Global X, whose Australia head of investment strategy, Blair Hannon, says there’s a lot more education around investing now whether through podcasts or share trading platforms.
“We’ve found a lot of the education starts around the ETF space, so it gives investors’ confidence,” Hannon says.
“Investors know what they’re getting with an ETF because of their transparency and they’re generally reasonably low cost.”
Hannon says over the past five years investors have become much more comfortable using ETFS because they’ve seen them perform in different markets,” Hannon says.
He says SMSFS have particularly used ETFS to diversify and build a portfolio of international investments.
SAFETY NET
With a background in finance and now a teacher of business studies at secondary and tertiary level, Adelaide father of three Shane Wise has been investing in ETFS for more than seven years.
He says there are a “shopping list of reasons” why Australian investors, particularly older ones, are probably gravitating more and more towards ETFS. “You can invest in a core index ETF, such as the top 200 companies on the ASX through an ETF or a more thematic ETF which is of interest,” Wise says.
“I have a leaning towards modernisation so themes such as robotics, cybersecurity, electric vehicles as an example.
“My approach is you can create quite a vanilla core and then you can have satellite investings and it doesn’t have to be an either or.”
Wise says ETFS can give you access to markets that may otherwise be difficult.
“You can get access, for example, to Chinese companies where it would
be more difficult to acquire direct individual shares,” he says.
Wise says ETFS reduce the dilemma of individual stock picking, which can be quite risky, and instead track an index.
However, he says investors still need to do their homework like with every investment, with some ETFS being better prospects than others. “You still have to know what you are doing and your fundamentals,” he says.
“I think the parachute or safety net is you can quite easily build diversification and replicate indexes so if you’re new to investing you’re not straying too far from the crowd.”