An Exchange Traded Fund (ETF) is an investment fund that trades on a stock exchange, such as the Australian Stock Exchange (ASX).
They provide exposure to various asset classes such as Australian shares, international shares, fixed interest, property, precious metals and cash.
In most cases ETFs are passive investments, in so far as they track an index rather than attempting to outperform the index.
The huge growth of the ETF market over the last ten years has come at the expense of actively managed funds, as people switch to low cost, passive index funds.
Research has consistently shown that actively managed funds fail to beat the market over the longer term.
Benefits of ETFs
ETFs have a number of proven benefits, including:
COST: the management fees of passive ETFs tend to be significantly less than actively managed funds as well as being more cost effective than attempting to invest in the same basket of individual stocks.
DIVERSIFICATION: ETFs provide diversification across a specific index or asset class with just a single purchase.
LIQUIDITY: ETFs are listed investments that can be traded on the ASX whilst Market Makers ensure the listed price trades at or around fair value.
TRANSPARENCY: the issuer of the ETF provides daily access to the list of underlying securities as well as a daily Net Asset Value (NAV).
At Collins House Online we offer the choice of 5 professionally managed, diversified portfolios ranging from Conservative through to Aggressive.
Each portfolio is made up of various ETFs covering Australian shares, International shares, Fixed Interest, Cash and Property. Each portfolio therefore provides exposure to over one thousand of the world’s largest companies.