Exchange Traded Funds
The CSIRO, Australia’s national
science agency and one of the largest and most diverse research agencies in the
world, joined forces with four universities to research many aspects of our
superannuation system including investment practices. Their findings and the practical application
of the research can no longer be ignored.
As the exchange traded fund industry gathers momentum in Australia and new investors consider the benefits of ETFs, it is important to understand the most effective ways to invest in ETFs and avoid some simple traps. Here are the golden rules of ETF investing.
The ETF industry has come a long way since the early 1990s when there were only a handful of ETFs and virtually nobody used them. ETFs really came to the fore in the late 2000s and have since attracted hundreds of billions of dollars and driven a paradigm shift in investing. Fast forward to 2017 and the industry now surpasses US$3.8 trillion in assets and continues to go from strength to strength.
The structural trends in the wealth management industry such as fee for service, best interests duty and the perpetual debate about active versus passive performance continues to drive adoption of ETFs. Given this, we felt it was important to go back to basics and revisit the fundamentals of ETFs.
For some investors volatility is something to be
feared. Some thrive through it while
others deteriorate. There are many solutions
fund managers use in response to volatility and it is easy to get congested
with information overload. There is a
way to clear up misconceptions about the links between long term performance and
During George Washington’s presidency, a battle of words captivated the public as a series of back and forth essays (way longer than 140 characters) appeared in the press about executive power, debt and the central bank. The ‘trolling’ included personal barbs between Thomas Jefferson and Alexander Hamilton, Washington’s Secretary of the Treasury. Jefferson, when he became President, took on the press who he claimed had injured his reputation. The Supreme Court decision was split 2-2, which was a victory for Jefferson. The US economy flourished despite a quarrelsome executive and uncertainty about its powers. Over 200 years later, the war of words continues and markets are reacting emotionally. Remaining invested through turbulence is important and investors are better equipped today than they were 200 years ago.
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