Exchange Traded Funds

Exchange Traded Funds (ETFs)

No, these are not some sort of Extra Terrestrial being.

They are an investment option which; 

  • Is similar to an “open ended” unlisted Managed Fund
  • Trades like a Share
  • Reflects the performance of a chosen Market index.

The Global Market for ETFs is expected to exceed US$2 trillion in 2011. They are now trading in the Australian market.

An ETF seeks to reflect the performance of a chosen market index through holding a diversified basket of securities. They do not reflect any stock selection skills i.e. there is no Manager Expertise employed.

There are many advantages of ETFs such as;

  • Diversification
  • Liquidity and
  • Cost effective

Are ETFs for every investor?

This obviously depends on the Risk Profile, but also personal preference may be to own Shares directly.

We think there is a good argument for ETFs as a “core” part of client International Equity exposure.

In subsequest newsletters we will provide further information on the available ETFs and how they fit in a portfolio.

Grant Hodgins - Director