Sick of picking stocks? Here's a way that's gaining in popularity.
It's a difficult time to be stock picking at the moment so many retail and professional investors are turning to buying into exchange traded funds, or ETFs.
I have family and friends who want to invest in the sharemarket but don't have the expertise to stock pick or don't have the time or inclination. So if you want exposure to the Australian sharemarket or even the US market without spending the time to pick individual companies, there is a way to do it and that's through ETFs.
ETFs first caught my eye years ago due to the low fee structure compared to an actively managed fund. This is because most ETFs involve simply replicating an index. Since you don't need many money managers to follow an index, fees are cheap. Recently, I've noticed that part of gold prices rising has been the record holdings in physical gold due to ETFs buying. ETFs actually hold the underlying asset.
I suppose what really sparked my interest was the ease in which I could get exposure to different markets. I'm still kicking myself for not investing in China years ago. To give you an example of the range of assets, you can invest in China, Switzerland, Germany or even specific sectors such as energy or healthcare. It's an easy way to gain access to a range of markets from a relatively small outlay.
I don't seem to be the only one with the idea of trading ETFs. In the last 12 months trading in ETFs has increased by 174%. It is an idea that is gaining in popularity.
If you are looking at investing overseas markets through ETFs just be careful of currency fluctuations. Generally, you want the Aussie dollar to fall while you are invested overseas so that currency movements work in your favour. Also like any investment, looking at the growth prospects and timing of your investment can be crucial.
There are many ETF providers in Australia, one of them being iShares. ETFs are traded on the ASX just like shares so you can trade them through your broker, like Bell Direct. To help you on your way, here's a list of iShare's more popular options:
To buy or sell shares from as little as $15 per trade, go to www.belldirect.com.au
Happy investing!
Julia Lee Equities Analyst Bell Direct
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