ETF Exchange Traded Funds (ETFs) 2017

Hi everyone,
I've searched for any insight on my question (to follow) but couldn't find anything.
I currently invest in ETFs, including a bond ETF (VGB) and of late I've been wondering if I would be better off allocating the bond portion to my home loan offset accounts. My reasoning is that it would be a guaranteed saving on interest. Is this thought process too simple or is there more to consider?
Thanks

 

The recent hot run on the ASX, which has added $100 billion worth of value over nine sessions and shattered a five-month trading range, has the potential to push higher, experts say.

It has been a frustrating period for local investors, who have endured listless sideways trading since May. But the recent break higher for the benchmark S&P/ASX 200 sharemarket index suggests the synchronised global expansion, that has seen Wall Street, the Japanese Topix and the German DAX hit record highs, has arrived on Australian shores.

After last financial year's bumper profits, Australian companies are expanding their business investment plans, buoying the mood among shareholders, said Hasan Tevfik, equity strategist at Credit Suisse.

"There is a newfound corporate confidence in Australia which is permeating through to investors," he said. "The recovery and expansion that we've seen in both China and the United States for the last few years has only come to Australia recently."

ASX's $100b rally looks set to roll on

The ASX 200 still remains below the record high of 6,851 achieved on November 1, 2007 though total returns are up

 

Hi Austing,

Yes. I have approx 28% international; 18% VTS, 10% VEU. So China for example is 0.57% of portfolio, Asia exc Japan about 2-3% of portfolio. I am looking to buy into VAE, get Asia ex J up to approx 5% or so. Maybe a bit more. Over the long term I like the flexibility it allows in rebalancing international, depending on performance of the different markets (additional buying into weakness, not through selling).

Similar idea to my Aus allocation holding VAS, older LIC's and QVE, allowing me options each time I buy in - the 'on sale' LIC, top up mid/small caps, or just buy the index? Though I want another mid/small cap option as well...come on MIR, drop the premium will ya?

 

Thanks for your thoughts.

 

Yes that makes a lot of sense unlike my initial comment. By the time VTS and local allocation is added along side VEU of course there’s very little Emerging Asia exposure as you say.

Hopefully as VAE FUM increases the fee will reduce. But it’s way lower than any active Mgr and will likely outperform most of them.

I agree with @dunno in that although VGE seems to be mentioned most VAE is a far superior product for the reasons give.

Great index ETF combination, looks great.

 

How do open-ended ETF deal with new holders coming in via the market maker, in terms of dividend per share? Are the units held by the market maker already counted in issued capital?

 

@Swuzz

See link below for info

ETF LIQUIDITY How ETF Units are Created and Redeemed

 

Does Home Bias Ever Make Sense?

Canadian based, but then again that resource rich country is similar to Australia in some ways

 

From Betashares Left in the dirt

Australian equities have tended to underperform the global benchmark in recent years, though the degree of underperformance does depend on how returns are measured.

On a pure price basis (i.e. before dividends), the S&P/ASX 200 Index since end-2012 has produced annualised gains of only 4.3% p.a. (to end-September), compared with 10.1% p.a. for the MSCI All-Country World Index on a local currency basis. Allowing for the fact Australian companies pay higher dividends, however, the difference in total returns is not as great – with total returns for the local market of 9.1% p.a. compared to 12.3% p.a. for the global benchmark. Allowing for franking credits on Australian dividends would further narrow this gap on a comparable gross or “pre-tax” basis.

That said, it’s traditional to benchmark local equity returns against unhedged $A returns from global markets – and on this basis, the difference again widens due to the decline in the $A in recent years. Indeed, over this period, for example, the $A has fallen from $US1.03 to US78c. Accordingly, in $A terms, the MSCI All-Country Index has delivered stronger price and total return gains over this period of 14.8% p.a. and 16.6% p.a. respectively.



wo distinguishing characteristics of the Australian market appear to largely account for its relative performance over time.

First and foremost is the market’s relatively large exposure to mining companies, and hence sensitivity to the price of Australian exports (i.e. commodity prices). As seen in the chart below, the Australian market tended to broadly track global performance over the 1970s to 1990s – when the terms of trade (price of Australian exports relative to imports) was also relatively stable. Australia then enjoyed a strong period of outperformance when the terms of trade surged during the commodities boom, though part of this outperformance has since been unwound as the terms of trade declined. Even more recently, Australia enjoyed a brief period of outperformance over the 2015/16 financial year due to the iron ore driven rebound in the terms of trade.

Continues...

 

From Cuffelinks

ETFs are not always simple index trackers

Exchange Traded Funds (ETFs) have existed in Australia since 2001, and have grown rapidly in popularity, now exceeding $32 billion in value. Within NAB’s online broking platform, nabtrade, which is heavily dominated by retail investors, ASX-listed ETF trades grew at an annual rate of 59% over the last four years, compared to 20% year-on-year growth for other securities. As investors discover the extraordinary range of exchange traded instruments on global markets, their preferences and trading behaviour are starting to shift. While ETFs may offer the world, they may not be just the simple solution to stock selection challenges that many investors expect.

Trends in the use of global ETFs

More recently, the top 10 international ETFs traded on the nabtrade platform has included Robotics and Artificial Intelligence, Aerospace and Defence, Biotechnology and Lithium and Battery Technology. As this list demonstrates, investors are using the ETF structure to access sectors and market positions that would otherwise be difficult or impossible to access in Australia. Of the top 20 most traded international ETFs, only one is broad market long only. The rest offer sector specific, short or leveraged options across a range of markets, instruments and commodities. It’s a far cry from the low-cost passive image ETFs may conjure.

 

Hi all, try to learn as much as possible in ETFs and LICs. The mid cap space or asx ex top 20 interests me. What are people's thoughts on something like MVE or EX20 ETFs. Small market caps and ex20 is only a year old. I take it there is risk with such ETFs?

 

I don’t invest in these but this might be of interest. Beware of marketing such as performance “before” fees and short term history etc.

Far from middling performance: How the EX-20 Index has outshone small and large caps | BetaShares

 

Thanks for that. After looking at the PDS I must admit it's hard to get a handle on the total fees which appear to be more than just the listed mgt fee. The fund is interesting to me but yes the short term history is a big concern for me and with only starting my journey into equities i should probably stick to more vanilla holdings

 

New Vanguard diversified ETFs. I like the look of the high growth one for my daughter as a long term investment, considering the MER is the same for all of the diversified ones.

Vanguard Australia - New Vanguard ETFs offer diversified portfolios in one trade

 

Brilliant find thank you.

 

No worries, I'm very excited about it too!

Just trying to confirm whether distributions are quarterly like VAS, has anyone found the info? I guess it's very new, but would be nice to know this.

 

Yes, quarterly (Distribution frequency: Quarterly)

 

I was given a hint by a PC member that vanguard were due to announce some changes to their diversified funds by years end but didn't expect this!

My partner loves the lower fees and no fuss save invest and then forget about it philosophy of these funds with the auto rebalance! Looks like more reading and researching on her behalf now! ​

 

Of course with listed funds one has to be aware of behavioural issues less likely to occur with auto BPay into unlisted product.

 

If one wanted simplicity, an Aus domiciled ETF, wide diversification even including International small caps / Emerging markets and having Vanguard making the decision on hedging it’s a very attractive option as a Core or just by itself.

Fee of 0.27% a little on the high side but overtime I think this will reduce with increased FUM. Again well worth it if simplicity is paramount.