Sub category: Superannuation
4 March 2016

Thinking of investing in ETFs? Here’s what you need to know

Exchange Traded Funds (ETFs) are a rapidly growing investment category, says State Street’s Shaun Parkin, and may offer a low cost way of diversifying your portfolio.

The use of Exchange Traded Funds (ETFs) by investors is continuing to gain momentum. In fact, research by Stockspot reveals that Exchange Traded Funds (ETFs) saw a 42% growth in funds under management to $21 billion in 2015 alone.

So what exactly are ETFs? Typically structured like managed funds, but listed and traded on an exchange like stocks, ETFs are flexible trading and investment vehicles that could help build your super balance over time.

The benefits of ETFs

Exchange Traded Funds (ETFs) often appeal to investors due to their many attributes:

Asset diversification: There are ETFs available in nearly every possible asset class, including Australian shares, international shares, fixed income, real estate and commodities.

Low cost:  One of the most common uses of ETFs by investors is to help them gain low cost access to a new asset class in a single trade or to further diversify an existing asset allocation to minimise concentration risk.

Ease of trading: ETFs trade all day long at their market price, just like stocks. Investors can buy and sell ETFs continuously throughout the day in real-time.

Transparency: The securities held within most ETFs are posted daily allowing investors to make informed portfolio decisions real time with prices capturing the precise movement of market at time of purchase/sale.

Weighing up your risk profile

Investing in ETFs represents fractional ownership in real companies and carries with it all the risks and potential rewards of owning any business.

In terms of the risk scale, ETFs generally lie on the riskier end of the spectrum when compared to other options such as cash, however they typically deliver stronger returns than cash.

Your attitude to risk, as well as your own unique circumstances, will play a part in deciding whether ETFs are the most appropriate investment option for you. For specialist advice tailored to your own unique circumstances, consider speaking to an independent Financial Adviser.

1 Stockspot, http://blog.stockspot.com.au/global-share-etf-growth-exploded-in-2015/ as of 21 January 2016.

The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Home and Contents Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.

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