ETF Exchange Traded Funds (ETFs) 2015

Discussion in 'Shares & Funds' started by The Falcon, 21st Jun, 2015.

Join Australia's most dynamic and respected property investment community
Thread Status:
Not open for further replies.
  1. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    4,752
    Location:
    Here!
    I thought so. Thanks!
     
  2. radson

    radson Well-Known Member

    Joined:
    4th Jul, 2015
    Posts:
    1,563
    Location:
    Upper Blue Mountains
    I was curious about this too.

    http://www.smh.com.au/money/investing/investors-flocking-to-etfs-20140318-34ymn.html

    Perhaps the most striking difference is that an ETF must trade at exactly the value of its holdings whereas for years after the 2007 sharemarket peak, LICs traded at a discount. Many are now at a premium, making them hard to justify as an investment.

    How can that happen? Because LICs depend on the market mood at the time, while ETFs have a special mechanism to keep them in line.

    Sure, an ASX-linked ETF will drop as the market drops, and by the same amount, but it can't drop further.

    The secret is market makers who make their money by exploiting any difference in the underlying and traded value of an ETF. They're even commissioned by the issuers of ETFs.

    But what if they go AWOL? They can't because their presence is a condition of listing. If that doesn't sound altogether convincing, remember it's profitable for them. Ah, that's better.

    "Market makers are in the business of providing liquidity. They clip the ticket on every transaction on both sides," says Alex Vynokur, managing director of BetaShares.

    They don't even have to speculate. It's a one-way bet for them - the fact somebody is buying or selling is all that counts. ETFs are open-ended so market makers know stocks will be created or redeemed for them. So for them just doing something is enough.

    That said, ETFs aren't all sweetness and light. Unless they reach and hold a critical mass they can be delisted as some investors have already found to their cost (see Vish Teckchandani's case).
     
    filipw likes this.
  3. filipw

    filipw Member

    Joined:
    25th Jun, 2015
    Posts:
    22
    Location:
    central coast
    That said, ETFs aren't all sweetness and light. Unless they reach and hold a critical mass they can be delisted as some investors have already found to their cost (see Vish Teckchandani's case).[/QUOTE]

    A question, do people sell their etf when they become bearish about the index, or do they hold and $averaging ? In the article an example was given of someone who sold high and bought back in later after a 20% drop. This was an agricultural etf, so I would say rather volatile anyway. Hindsight is a wonderfull thing. But for example an etf which track resources and industrials. Would it not be that now is a good to time to buy them with all the oversupply ? Or even the etf which follow the banks ? I was thinking to start -finally- $ cost averaging into my STW, but maybe there are better opportunities ?
     
  4. Ouga

    Ouga Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,100
    Location:
    "Trying is the first step towards failure" Homer
    A question, do people sell their etf when they become bearish about the index, or do they hold and $averaging ? In the article an example was given of someone who sold high and bought back in later after a 20% drop. This was an agricultural etf, so I would say rather volatile anyway. Hindsight is a wonderfull thing. But for example an etf which track resources and industrials. Would it not be that now is a good to time to buy them with all the oversupply ? Or even the etf which follow the banks ? I was thinking to start -finally- $ cost averaging into my STW, but maybe there are better opportunities ?[/QUOTE]

    Doing this is trying to time the market. There is nothing wrong with that, however you have to know what you are doing otherwise you will loose out. If you have to ask the question, then the answer is you should not attempt this as you will get burned. The whole idea of an ETF that tracks the index is to have a passive approach. If you want to trade in an out, you could do that with specific stocks you know about. Not to mention tax considerations (CGT) of selling when the market turns bearish.
     
    filipw likes this.
  5. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    4,752
    Location:
    Here!
    Yes good point, if you want to do this, why not just buy regular shares instead?
     
  6. radson

    radson Well-Known Member

    Joined:
    4th Jul, 2015
    Posts:
    1,563
    Location:
    Upper Blue Mountains
    Funny I have been topping up my agricultural ETF (QAG) as it has been dropping. You can 'invest' or speculate on Agricultural commodoties, Singapore Stock Exchange, sentiment towards emerging markets (. Cant do this with single shares.

    Despite this, I like to think of my most of my ETFs as long term accumulation investments to top up in the dips.

    For me a lesson learnt with ETFS was EFTCRN. It had no liquidity whatsoever Need to make sure people are buying and selling the EFT that takes your interest. The more new and obscure ETFS often have less liquidity.
     
  7. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,438
    Location:
    WA
    some obscure ETF?

    A question, do people sell their etf when they become bearish about the index, or do they hold and $averaging ? In the article an example was given of someone who sold high and bought back in later after a 20% drop. This was an agricultural etf, so I would say rather volatile anyway. Hindsight is a wonderfull thing. But for example an etf which track resources and industrials. Would it not be that now is a good to time to buy them with all the oversupply ? Or even the etf which follow the banks ? I was thinking to start -finally- $ cost averaging into my STW, but maybe there are better opportunities ?[/QUOTE]

    Warren Buffett has said that “investing is simple, but not easy.” You need to have a strategy going in that you stick too
     
  8. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,438
    Location:
    WA
    Which ones though :D

    Here's a couple that would have been nice to have over the last year

    [​IMG]
    AJX vs. AORD

    [​IMG]

    SEN vs. AORD

    [​IMG]

    IPD vs. AORD


     
  9. filipw

    filipw Member

    Joined:
    25th Jun, 2015
    Posts:
    22
    Location:
    central coast
    Would do you guys think of a portfolio consisting of 1 broad ETF for Australian shares like STW, 1 broad for international, like VGS which is unhedged, and LIC 's like AFI and WAM (WAM for the dividends). Strategy : long term, don't sell.
     
  10. Bunlee

    Bunlee Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    96
    Location:
    Sydney

    Falcon & others

    Very interesting thread & I am learning quite a few different perspectives. Thanks for the great input.

    regards
     
  11. radson

    radson Well-Known Member

    Joined:
    4th Jul, 2015
    Posts:
    1,563
    Location:
    Upper Blue Mountains
    No-one here I guess knows your investment profile and hey.. you will sell some time in the future..its just a matter of when.

    If I may suggest, have a read of this blog. For me, its for me one of the most sensible blogs I have read on investing:

    http://awealthofcommonsense.com/

    As for your picks. I dont see anything majorly wrong with your picks. From my understanding you will be far more diversified than most Mum and Dad investors who have picked up some TLS, BHP and CBA over the years.

    At the risk of muddying waters, have a think about:

    VGE - Emerging Markets
    VAP - Aussie Commercial Property
    DJRE - International Commercial Property

    Also consider having a bond component. Bonds are something that Aussies dont think much of. Do some research and you will be surprised at the yield of some Bond ETFS like ILB etc (>6% p.a)

    At the risk of fighting tomorrows wars with the last wars tactics, one of the most devastating aspects of the GFC was the strong broad correlated drop in diversified equities and commercial properties. Having some bonds may give your portfolio some defensive properties.

    Lastly, to completely muddy the waters

    https://en.wikipedia.org/wiki/List_of_Australian_exchange-traded_funds
     
    Last edited: 5th Jul, 2015
    orangestreet and filipw like this.
  12. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,438
    Location:
    WA
    I'm not a fan of emerging markets when compared to developed markets, plus even emerging markets seem to spend on brand name western products..must be the Hollywood effect

    Agreed, keep some gunpowder dry to buy low again should buying opportunities, surprises or a potential correction arise

    Diversifying a portfolio with low cost exchange traded funds - with a portion in an Australian stock ETF, a portion in an U.S. stock ETF and a portion in an Australian bond/fixed income ETF is a simple and easy strategy with a home country bias in the vein of the Bogleheads 3 Fund portfolio you could of course add an international (ex US) ETF or even investigate a core-satellite approach
    .
     
    Realist35 and filipw like this.
  13. Jack Chen

    Jack Chen Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    480
    Location:
    Sydney
    My portfolio consists of 1 broad ETF for Australian shares VAS, 1 broad for international VGS, and the remaining are LICs with a sprinkle of direct shares. Strategy is ultra long term buy and hold, live off dividend stream, and have been prioritising the LICs - AFI ARG MLT BKI.

    Preference for simplicity rather than over-optimisation
     
    KJB, filipw and Ouga like this.
  14. Jack Chen

    Jack Chen Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    480
    Location:
    Sydney
    Just picked up some VAS...LICs are trading at a hideous premium to NTA still.
     
    radson and filipw like this.
  15. filipw

    filipw Member

    Joined:
    25th Jun, 2015
    Posts:
    22
    Location:
    central coast
    wow, I'm sitting on the sidelines and see what the fallout is of the Greek drama. The market reaction was not as severe as I thought it would be. More to come I think.
     
  16. Jack Chen

    Jack Chen Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    480
    Location:
    Sydney
    If so look forward to picking up some more :)

     
    filipw and The Falcon like this.
  17. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,438
    Location:
    WA
    VTS vs VAS over the last year

    VTS closed at $149.24 and VAS closed at $71.91 yesterday
     

    Attached Files:

  18. Jack Chen

    Jack Chen Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    480
    Location:
    Sydney
    Time to double down on VAS?
     
  19. filipw

    filipw Member

    Joined:
    25th Jun, 2015
    Posts:
    22
    Location:
    central coast
    The good return on VTS has alot to do with the tanking exchange rate. RBA wants it to be around the 0.70 mark, which is another 5% drop from the 0.74 it is now. But I would think the exchange rate will settle after that, which means the bonus gains are over. Don't forget to sell out if the tide ever turns and the Aud start rising again. Easy come, easy go.
     
  20. radson

    radson Well-Known Member

    Joined:
    4th Jul, 2015
    Posts:
    1,563
    Location:
    Upper Blue Mountains
    Yeah, I am wondering if I should off load some of my VTS, IXJ, IJH which I bought close to parity. They have performed well, wondering when that merry go round will stop. I suspect AUD will drop further but also wondering what the market over reaction will be to Yellen's slight interest rate hike due later this year.
     

Not all tax advisers are property focussed specialists and DIY errors will always cost you. We know property taxes and will advise and get it right. Even a second opinion. Contact us for an obligation free initial consult (conditions apply).

Thread Status:
Not open for further replies.