ETF Exchange Traded Funds (ETFs) 2020

The only way is try,the worst that can happen is you become successful..

 

I'm comfortable, got VAE and 30% super weighted to international.

Just curious as to reunification on my etf value if a big company on the asx fell. I guess we will all find out one day.

TB

 

@Tofubiscuit

Rather than just not being there one day, a company would likely tumble down the list as it lost market share/cap and eventually exit the ASX300

 

AMP (Large CAP) would be a good example of a decline. March 2015 $6.55 to $1.87 as of yesterday. In VAS it is now ranked 59th. Not sure what it was 5 years ago, guessing top 20.
Did anyone notice the decline in their VAS performance

 

One of the risks with investing in the ASX index is the top heavy weighting. Although the probability of a top holding going bankrupt is very very low, it is not impossible. You may lose up to 7% of your investment. This is what may be lost in a bad month on the market. A market crash is more probable IMO and you could lose a lot more. Investing in individual shares is where you open yourself up to the risk of losing 100% of your investment. That is a valid option for those with the ability to accurately value and monitor the companies in which they invest.

The other issue with ASX for Australians is the tendency to overweight ASX. Logically this would be due to franking making the total return superior to investing anywhere else. Illogically, people forget that their home, job etc are also in Australia so investing in the whole world is a good hedge against a localised recession. Regardless, ASX is 2% of the world market and an allocation above 40% should be fully understood by the investor.

In summary, the chance of a big ASX company going bankrupt should not be a factor in deciding whether or not to buy the ASX index, but it definitely should be if you buy an individual company. Australians should be sure to invest enough in non-ASX investments to significantly reduce risk without significantly impacting return.

 

Lost me on that one

You're worried the ETF provider ie Vanguard may go bankrupt or go into a trading halt?

There's a chance you could smash the ASX300 look at FMG over the year



However, who know's which company will do similar over the next 12 months

Here's FMG over 2015 vs ASX200/STW

 

Not concerned on Vanguard going bankrupt.

If the VAS ETF fund has $100 in capital invested in the index and has X100 units @ $1 each. What happens if the number 1 company declares bankrupt suddenly. so $10 of the $100 disappears but the index (i.e. ASX200) will still have a higher value as a new #200 company will join the index. Where does the capital come from to rebalance into it.

I think you answered my question earlier though as the more likely scenario is that it will slowly tumble down and out of the index.

On direct holdings, I guess I have a portion of my investment in direct shares. Though I always buy well established and dividend based investment. So the FMG 2019 return is something I have never experienced

Have a low 6 digit share portfolio with dividend grossed up yield of 6% (overwieght bank atm)

TB

 

12 months

It took a while to breach 7'000 but when it did...



Among the top 200 companies, 13.5 per cent are currently trading at one-year highs

 

Bloody depressing by looking at it from a different viewpoint.

Oh well, take a percentage of a large number, add it to the large number and get an even larger one.

My guess is dividends/distributions will either remain flat or reduce slightly unless earnings increase. Costing more to buy an income. The way of it. Can only hope it tanks. Selfish attitude there but my location dictates that.

 

Decision making time for a lot of investors! Wait and try and time and buy income cheaper down the track maybe..... or just keep on keeping on buying income at a higher price and taking it as it comes over the long term!

 

@SatayKing

Here's one you may like

Should a 20 year old investor prefer scenario A or B?

A: The markets are paying a 3% dividend. Then the markets fall by half, and remain at that level for 40 years, while the investor reinvests dividends

B: The markets are paying a 3% dividend. Then the markets double, and stay there for 40 years, while the investor reinvests dividends.

Scenario A gives a 6% dividend yield (like the markets averaged from 1965 to 1982) while scenario B gives the market a 1.5% yield.

And of course, over time, dividends increase in both scenario A and B.

Scenario A would be more profitable over time.

 

Lucky I went all back in below 7000. Looks like a good decision today. Unless the market goes in reverse soon. Then it wont look so good.

But honestly I feel better being all back in then when I was sitting around waiting for a drop to buy back in. Its funny when I was considering buying back in and the market was hitting the 6800 highs I was like dam it at least go back to 6600-6700 so I can buy in just under the high. Now at 7100, 6800 doesn't look so high. Funny how perception of what's high or low changes quickly.

Not that long ago the market was 10% below what it is today. I didn't think that was a bargain at the time. Give me 10% discount today and I would be seriously considering another lump sum buy.

 

Profitable in the sense of TSR or greater divvy income of A v B?

Ya see somebody's defintion of profitable may differ from another's view.

 

I'm sticking to my plan and just buying when I have the money.

Bit annoying when it took longer than usual for my funds to transfer and I watched VAS going from $88 something to over $90 but then I worked out my total parcel was only going to cost about $300 more. Not going to lose any sleep over that.

 

10 most traded ETFs

 

Trending this week

 

Why ETFs may be better for self-managed super funds

Self-managed superannuation fund (SMSF) trustees have never had it so good when it comes to investment choices. The ability to invest across asset classes, countries and currencies is within reach for most SMSFs.

As the investment landscape evolves and enhanced investment options become available, the start of the year is a good time to reassess your SMSF investment strategy and ensure your fund is taking advantage of what is available.

 

The popular “120 Years of Historical Returns for Australian Sharemarket” has been updated MarketIndex site with data for year 2019. The overall average annual return just slightly increased to 13.2% per year since 1900.

The following graphic shows the historical annual returns of Australian stocks from 1990 thru 2019:

The returns shown below are total returns (i.e. share price returns + dividends).




Link

 

So from what we can see above over 119 year period total return has been negative 40-50% only once in 2008 nearly once in a century type event. And between negative 20-30% 3 times. Last time that happened was in 1974.

Ofcourse one thing above chart doesn’t show is multiple consecutive negative year returns can cause much bigger drawdown than seen above.

But still worrying about market downturn is usually not necessary and continue to regularly buy is sure proof way to invest in equities for best results.

Cheers
Oracle

 

Had some free time so decided to do a small exercise based on the table of percentage returns. It’s gonna be long post but hopefully some interesting lessons learnt by end of it.

When looking at total return percentages for each calendar year and thinking about consecutive double digit negative returns two such occasions stand out

1) 1973 (-23.3%) and 1974 (-26.9%)
2) 1981 (-12.9%) and 1982 (-13.9%)

What gets missed is what happened in prior years and if $100 was invested few years back what that $100 looked like.

Please note for this exercise I have not factored in tax payable and other brokerage type costs. Just using raw number percentage applied to $100 investment.

Let’s say you invested $100 at start of 1966. By end of 1972 that $100 would be grown to $283.84 resulting in compound annual return of 16.7% over 7 years.

Now, comes the first period of double digit negative returns. By end of 1973 the $283.84 would be down to $217.7 and by end of 1974 it would go down again to just $159.14. Pretty gloomy.

But what happens next is most interesting.

By end of 1975 $159.14 would jump to $259.24.

By end of 1976 it would have surpassed $283.84 reached in 1972 to reach $327.81. Yay!

Wait 3 more years and by end of 1980 it would have grown to $872.65.

Amazing…but we just hit the next period of double digit negative return 1981 (-12.9%) and 1982 (-13.9%).

Cut long story short the $872.65 would drop to $654.4 by end of 1982. Fear not next year 1983 would be a bumper year and you would recover everything lost and some more J

By end of 1983 your humble $100 in 1966 would have grown to $1091 (10 bagger)

I thought I would do similar exercise of more recent period covering GFC even though it didn’t result in double digit negative returns for consecutive years.

Let’s start with $100 again but this time you invested that at start 2003. By end of 2007 just before GFC hit that $100 would have grown to $264.16 compounding at rate of 21.44% over 5 years. The last part is worth repeating. The 5 year period from 2003 to 2007 returns were 21.44% compounded annually!!!

2008 comes and GFC hits you badly and $264.16 is now worth only $157.44.

So how long did it take to surpass $264.16? About 5 years by end of 2013 the $157.44 would have grown to $286.05

Some will argue I cherry picked the start year for $100. May be so, but so do people who constantly scare others by pointing out it took more than 10 years for ASX to surpass its previous peak reached in 2007 and conveniently disregard dividend returns and strong double digit returns in previous years before GFC hit. They just assume everyone invested their entire networth at the peak.

Told you it was going to be a long post

Cheers,
Oracle.