ETFs' Most-Enthusiastic Personal Investors
Self-managed funds rank among the longest and biggest supporters of Exchange Traded Funds (ETFs).
Research by Investment Trends shows that until late 2012, self-managed funds made up at least half of the investors in Australian-listed ETFs.
This percentage of SMSF ownership has slowly decreased to 38 per cent today as ETFs become more mainstream and much more widely accepted by non-SMSF investors.
Online surveys for the recently-published 2017 Vanguard/Investment Trends Self Managed Super Fund Reports shows that an estimated 285,000 investors held ETFs in March this year – 108,000 of the investors being self-managed funds.
The number of SMSFs investing in ETFs is up by 20 per cent over the 12 months to March. And in the next 12 months, 125,000 SMSFs intend to invest in ETFs, including 80,000 that intend to reinvest.
Why the sustained and growing popularity of ETFs among many self-managed super trustees? Not surprisingly, diversification, low cost and ease of trading are high among their key reasons given in the Investment Trend surveys. (Multiple responses were permitted.)
The most-commonly-given reasons for using ETFs are: diversification (76 per cent), access to overseas markets (57 per cent), low cost (46 per cent), liquidity/easy to buy and sell (36 per cent), access to specific types of investments (34 per cent), avoiding risk from individual stock exposure (33 per cent) and easier to access than unlisted managed funds (25 per cent).
With the mushrooming demand for ETFs comes a growing need for advice about the products. Investment Trends found that trustees of 46,000 self-managed funds believe they have an unmet need for advice about investing in ETFs.
It is clear from this research that a high proportion of SMSF investors recognise how much such factors as appropriate diversification of their portfolios and low investment costs contribute to their chances for investing success.
Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment.