Why are ETFs all the rage? Is this an investment I should consider?

By Greg Luscombe, Director, MB+M

Firstly, let’s be clear what we are talking about here – an ETF is investment jargon for Exchange Traded Fund.

It is not a specific investment category – it is simply an investment ownership structure.

An ETF is a way of investing in the normal investment areas, like shares, property or interest-bearing loans.

They have been hugely popular in the U.S. for many years and are now increasingly popular in Australia, with over 250 different ETFs to choose from, in industries like automotive, oil, and there are even immobilien reits etf real estate ETFs to be purchased.

What has made them so popular is that they generally have lower costs than the traditional Managed Fund investment. They are easy to buy and sell as they are traded on the stock exchange – so access to being able to cash in your investment takes only a few days, regardless of where the ETF invests your money. Or, alternatively, you could choose save your funds – this article has found the best ETF savings plans (ETF Sparplan Testsieger) so all you have to do is open an account with one of them and then you can start acquiring your ETFs.

They also provide a spreading of your investment dollar as you get exposure to a range of individual investments in the one product. You also generally get a greater visibility where your money is invested than in other pooled investment vehicles.

So, what do you need to be careful about before jumping on the ETF train?

Well, you need to appreciate that all investments involve risks, so knowing what basic investment type your ETF invests in is crucial. There are now a large range of ETF’s to choose from, and all are trying to do something slightly different to make them stand out from the crowd – so knowing what strategy the ETF is using is important to match it to your needs. Where the ETF has investments outside Australia, knowing how currency changes are dealt with is also relevant.

As always, it is important that you know what you are getting into when you make an investment.

As advisers, we are excited to be able to explain when and how it may be suitable for you to join the rage.

Additional Reading:
ASIC ETF Explained
MB+M Home + Services

Greg Luscombe CA – Director

Authorised Representative No. 268360
email: gregl@mbmgroup.com.au

Greg is an experienced, straight talking Financial Planner and Business Adviser whose focus is on ensuring that you enjoy a sound financial future. Greg has been a partner and Director at MB+M for almost 30 years.

Greg takes a holistic client approach and his extensive qualifications and experience both in financial planning and specialist taxation, allow him to provide rock solid advice on both fronts. Greg is one of the first ports of call at MB+M for specialist income tax matters and this, linked with his financial planning expertise, provides a unique skillset in our community.

Greg takes a holistic client approach and his extensive qualifications and experience both in financial planning and specialist taxation, allowing him to provide rock solid advice on both fronts. Greg is one of the first ports of call at MB+M for specialist income tax matters and this, linked with his financial planning expertise, provides a unique skillset in our community.

In his personal life, Greg enjoys extensive involvement in hockey and cricket, gaining many accolades in both sports. He is also Treasurer for GV Hospice Care. Greg’s greatest achievement is his family, with three children and his wife Kaye.