What is an ETF and why should you consider ETFs as part of your retirement plan? When you’re getting started on your ETF journey, there can be a lot of information to process which can sometimes be overwhelming. Let’s get you started.
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n exchange-traded fund (ETF) is like a cross between an index managed fund and a share. ETFs are one of the world’s fastest growing categories of investment products. They’re like a managed fund, but with some differences. An ETF is an openended investment fund with access to almost every corner of the market and every major asset class and traded on the Australian Securities Exchange (ASX). In investing terms, ETFs allow you to buy a suite of shares or assets in a single ASX trade and allow you to invest in markets or assets that otherwise can be difficult or expensive to access.
And because you are buying diversified exposure, if one of the shares held by the ETF performs badly, it is unlikely to have a significant effect on your overall investment.
ETFs offer the same diversification benefits as actively managed funds, but usually at a lower cost Most ETFs are passively managed funds that aim to track the performance of a given index or asset class and
provide the returns of that index or asset class – less any fees. Because there are no analysts or fund managers being paid to try and beat the index, management costs are typically lower than for actively managed funds. Traditional managed funds, on the other hand, are usually actively managed by a fund manager trying to beat the market with their investing expertise, which often means higher costs for you. Some actively managed funds may outperform ETFs in the short term, but history has shown they rarely outperform them in the long run. In a nutshell, ETFs are simple, transparent, cost effective and flexible
Simplifying ETFs – A comprehensive guide to ETFs and retirement investing
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