UN­DER­STAND WHAT YOU’RE GET­TING INTO

Money Magazine Australia - - INVESTING ETFs -

ETFs can vary widely. With 181 ETFs listed on the ASX, it is more im­por­tant than ever to get to the bot­tom of what you are in­vest­ing in. While there are plenty of broadly diver­si­fied, low-cost ETFs that track an in­dex, there are also ver­sions that are ac­tively man­aged or ones that are based on in­vest­ment cri­te­ria such as smart beta. For most in­vestors, stick­ing to the broad-in­dex ETFs is best. They are low cost and de­liver the in­dex re­turn – no more but no less. This is a good strat­egy be­cause Aus­tralia’s ac­tive in­vest­ment man­agers rarely beat the in­dex af­ter fees over long pe­ri­ods of time such as five to 10 years. One of the ad­van­tages of ETFs is that they are trans­par­ent and typ­i­cally much eas­ier to re­search than man­aged funds. You can ac­cess what you are get­ting ex­po­sure to and look into the share­hold­ings. ETFs that track an in­dex keep their in­vest­ments up to date in real time while there is a de­lay in ac­tive ETFs out­lin­ing their in­vest­ments to pro­tect their strat­egy from com­peti­tors.

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