With the cash rate now at 1.5%, the margin between dividend yields and interest rates is at historical highs. However, payout ratios are high and forward earnings growth is subdued.
Australian investors may be wary of the European share market with Greece and Brexit in the news, but there’s a good investment and diversification case, with access now made easier by Europe equity ETFs listed on the ASX.
The latest Exchange Traded Funds Report highlights the growing popularity and demand for ETFs from investors and advisers. It also flags an opportunity for actively-managed exchange traded funds in the coming year.
A global survey of ETF trends shows the products and distribution methods are changing, including for active managers, and the high growth rates are expected to continue.
Although ETFs and LICs are growing in popularity, managed funds are far from disappearing. The future of wealth management will likely include strong demand for all three investment structures.
This ease with which retail investors can now invest in Exchange Traded Funds should not disguise the need to follow some simple rules for better execution and improved prices.
In Australia, fund manager performance is most often assessed on pre-tax returns. But a low portfolio turnover can potentially provide better after-tax returns relative to a high turnover actively managed fund.
The empirical evidence in the active v passive investing debate favours index in most asset classes, but there’s a role for mixing the techniques if good managers can be identified – although that’s not easy.
The money in a bond fund never ‘matures’ as the manager automatically reinvests both interest and principal, whereas a direct investment in a bond comes to an end on maturity.
ETFs now offer a wide range of choices including equities, bonds, sector specific, smart beta, geared, commodities and currencies. This opens alternatives for both investing and trading.
We’ve asked two industry professionals to state their cases for and against these two investment types that are growing in popularity: Listed Investment Companies and Exchanged Traded Funds.