In todayâÂÂs dynamic world, investors want high returns as soon as possible without wanting to lose any of the principal amount they have invested. This is the reason why many investors are always on the lookout for investment plans where they can double their money in a few years with little or no risk. However, there is no such investment product that can deliver a high return without any risk. The risks and returns are directly correlated to each other; higher the risk, higher is the return. So, while selecting the investment, one must look at how much risk they can assume to get to the desired results. We are going to talk about one of the financial products available in the market- Exchange Traded Funds (ETFs).
Exchange Traded Funds (ETFs) are one of the most important and popular products created for individual investors in recent years. They offer many benefits if utilized wisely. They constitute a preferred choice for achieving the investorâÂÂs long-term goals.
What Are ETFs?
ETFs offer investors a way to channelize their money in a fund that makes investments in bonds, stocks, commodities or any other financial assets or by a combination of these and, receive a return in the form of dividends or capital gains. ETFs are collection of securities, like commodities, stocks, or bonds, that is intended to mimic an underlying index. ETF shares are traded throughout the day on stock exchanges and at market prices close to the NAV of the underlying securities.
History of ETFs:
Advantages of ETFs
The appeal of ETFs to individual investors is:
Disadvantages of ETFs
While superior in many respects, ETFs do have drawbacks, including:
LetâÂÂs look at some well-known ETFs trading on the ASX
The Fund invests in a diversified portfolio of ASX-listed securities with the aim of providing investment returns (before management costs) that closely track the returns of the MVIS Australia A-REITs Index (ASX: MVA). The index is an Australian sectoral index based on pure-play rules. The fund mimics the performance of the most liquid and largest Real Estate Investment Trusts (A-REITs) listed on the ASX.
Top ten Holdings Source: Thomas Reuters
The investment objective is to match the return (income and capital appreciation) of the S&P/ASX 300 A-REIT Index before considering fund fees and expenses. The Fund provides a low-cost way to invest in a portfolio of Australian real estate investment trusts (A-REITs) listed on the Australian Securities Exchange (ASX) across the retail, office, industrial, tourism, and infrastructure sectors.
Top ten Holdings Source: Thomas Reuters
The Fund aims to replicate the performance of the Morningstar Australia Dividend Yield Focus Index before fees and expenses, this Fund is an exchange traded fund (ETF) which is a registered managed investment scheme and can be traded on the ASX. This Fund allows investors to gain exposure to a diversified portfolio of listed Australian securities that, are forecast to offer sustainable income via the distribution of franking credits and dividends and provides investors with the flexibility of listed securities along with the benefits of a managed fund.
Top ten Holdings Source: Thomas Reuters
Investment in the ETFs can be considered as a good option for the investors looking for regular income at low costs, adequate liquidity and minimum risk. Moreover, the investors have the option of investing in multiple sectors through ETFs and trade them like equities in the market.
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