Exchange-traded funds (ETFs) – what are they again?
I recently was one of three presenters on this topic where we discussed the exponential growth of Exchange Traded Products in Australia and in particular some of the investment themes that are available now to both retail and institutional investors
To get a sense of how the Australian Exchange Traded Products market has grown the graph below gives a clear picture over the last 20 years.
An ETF is an open-ended investment fund, similar to a traditional managed fund, which is traded on the ASX.
Most ETFs aim to closely track the performance of an index or underlying asset, and seek to provide the returns of that index or asset – less any fees and costs. ETFs provide access to a range of bonds, shares (both domestic and global), or other asset types (such as commodities or listed property)
Buying and selling an ETF is very straightforward. ETFs trade exactly like shares, so if you are able to buy and sell shares then you are able to buy and sell ETFs. Like shares, ETFs can be bought and sold during the ASX trading day
Thematic Investing with ETF
Thematic investing is when an investor tries to identify long-term transformational trends and the investments that are likely to benefit if those trends play out.
Thematic investing is an approach that resonates with many investors, as it taps into economic changes they can see and hear taking place around them every day.
Explicitly forward-looking, often tapping into economic changes investors can see taking place around them, disruptive technologies, changing demographics and consumer behaviours.
The rise of cybersecurity is a good example, driven by rapidly increasing global spending by governments, corporations, and individuals to prevent cyber-attacks, data theft, industrial espionage, and other hacks
Other choices include Asian Technology, Australian Technology, Cloud computing, Global Cyber Security, Climate change innovation, Crypto innovators, Global Robotics and Artificial intelligence.
Ethical investing has started to gain real traction of late and not just because of COP 26 conference. Markets have created many opportunities to embrace this theme. Both here and globally high-quality funds exist to help you express your personal morals and values through these investment decisions.
There are a few different types of ethical investing, encompassing subcategories like sustainable investing, impact investing, responsible investing, and ESG investing – which can have some overlap in definitions.
Interpretations of ‘ethical’ can vary widely and investors need to be mindful of how ‘ethical’ is defined, which is generally best illustrated by the screening processes that the fund manager employs.
Ethical investing and the use of ethical ETFs benefits investors, as it can enable people to facilitate change in the world.
Having gained significant traction in recent years, ethical investing also has the potential to effect social or environmental change in the long term by essentially rewarding the companies that operate responsibly and helping them to grow.
A common myth associated with ethical investing is that people invest responsibly at the expense of financial performance. However, studies have revealed that companies with ethical credentials may perform