Can you please give us a summary of what ETFs are?
Exchange Traded Funds are an easy, cost-effective way for investors to either diversify a portfolio of stocks or target specific segments of the market rather than purchase shares in an individual company.
Index funds are a type of ETF that will aim to track the performance of a certain benchmark e.g. Vanguard Australian Shares index (Code: VAS) gives you exposure to the top 300 listed stocks on the ASX.
Certain ETFs focus on specific segments of the market, giving investors exposure to some of the largest companies in the same industry/sector/country e.g. Betashares Australian Technology (Code: ATEC) focuses on the top Australian Tech exposure or VanEck Australian Banks ETF (Code: MVB) holds a basket of banking exposure.
The process of buying, selling, receiving or re-investing dividends is the same as buying an individual company.
Do you have any preferred ETF providers?
Vanguard and iShares (Blackrock) are the biggest providers in the market which generally come with the lowest fee structure. Although this is a super competitive space, investors (especially long-term investors), should be mindful of the fee structures within each ETF.
Betashares are quite innovative with some of their thematic exposures including Electric Vehicle and future mobility ETF (Code: DRIV), Video games and Esports (Code: GAME) and Crypto Innovators (Code: CRYP).
Do you have any favourite ETFs?
Vanguard Australian High-Yield ETF (Code: VHY) could be at the core of any investors’ portfolio. The fund aims to achieve a superior dividend yield while having potential for capital growth.
Vaneck Australian Banks ETF (Code: MVB), some say, buy the bank you bank with. Why not buy them all instead? Buying a basket of banking exposure reduces specific company underperformance risk while achieving the average return of the sector. Current MVB weightings are ANZ 20.01%, CBA 19.94%, WBC 19.92%, NAB 19.67%, MQG 17.36%, BEN 1.85%, BOQ 1.22%.
Betashares Crude Oil index (Code: OOO) tracks the price of West Texas Intermediate futures in AUD. This is a useful vehicle for traders to gain direct WTI oil price exposure.
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