UNDERSTAND WHAT YOU’RE GETTING INTO

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.