Money Australia — May 2017

INVESTING ETFs

If it’s good

enough for

Warren ...

W

hen it comes to pinpointing the ideal
investment,itishardtogopast
broad, indexed exchange traded
funds(ETFs).Theyarelowcostand
liquid and offer access to a diverse
range of asset classes.
For Warren Buffett, the legendary head of investment
conglomerate Berkshire Hathaway, there is no better
investment for most people than Vanguard’s S&P 500
ETF. He extolled its virtues in his annual letter to
shareholders this year.
ETFsareahugeglobalinvestmenttrendandworld-
wide investors have poured $US3.5 trillion ($4.6 trillion)
in 4849 ETFs.
Australians – who started investing in ETFs in 2001,
abitlaterthaninvestorsinothercountries–arecatch-
ingon.Afurther63,000putmoneyintoETFsover
the12monthstotheendofJanuary2017,takingthe
totalto265,000.Ofthesepeople,70%areconsidering
re-investing in ETFs in the next 12 months, according
to research by Investment Trends on 9000 investors
and 592 financial planners.
“The conversion rate to ETFs is quite high,” says

STORYSUSAN HELY

Recep Peker, the research director of Investment

Trends. “It highlights the positive experience people

have with ETFs.”

AnadvantageofETFsisthattheyaremucheasier

to research than managed funds, according to Michael

Elsworth, general manager, specialised research, at

Lonsec. Transparency is generally easier. “You can

access what you are getting exposure to,” he told the

S&PDowJonesannualAustralianETFMasterclass

thisyear.“Therearefewermovingparts.Youdon’t

havetoworryaboutthekeypersonwalkingoutthe

door,” he says, referring to the high turnover of staff at

managed fund groups.

ButwithsomuchtorecommendETFs,itissurprising

that they are missing from the investment menus of

some major platform providers. For example, Austral-

ia’s biggest platform, Colonial First State FirstChoice,

runbyCommonwealthBank,hasalmost$80billion

under management but there is not one ETF on offer.

Over 10,000 financial advisers use the CFS FirstChoice

platform and there are 840,000 investors.

There are other platforms that do not have ETFs and

it is worth checking with your platform to see if ETFs

Afteraslowstart,Australianinvestors

are pouring their savings into exchange

traded funds

“You don’t

have to

worry

about the

key person

walking out

the door”