Low-Cost Message Breaks Through

One of the more interesting findings in Investment Trends’ latest Exchange Traded Fund (ETF) report is the high importance that many financial planners and investors place on the low cost of Australian-listed ETFs.

Some 86 per cent of financial planners who are "interested in ETFs" rank low cost right at the top of their list of ETF attributes – this percentage is markedly up over 12 months.

Fifty three per cent of ETF investors name low cost as second only to diversification on their list of ETF benefits. This is also up over 12 months.

As Smart Investing recently discussed – see A hunger for ETF knowledge – Investment Trends surveyed investors and financial planners between September and October to gather data used in its recent ETF report.

Surveyed investors included about 800 already using ETFs and almost 500 considering investing through ETFs.

Certainly, planners and investors highly value such other attributes of ETFs as their use to: diversify portfolios, gain access to overseas markets, provide liquidity/ease of trading, avoid individual stock risk and create a good core to portfolios.

The strong recognition of the low-cost attribute of ETFs appears to reflect a growing realisation of the critical impact of fees on a portfolio’s real returns. In short, high costs take a relentless and compounding toll.

The cost of investment management can, of course, be a somewhat of a silent destroyer of investment returns with many investors vulnerable to falling into the trap of concentrating on headline returns – rather than the after-fees, after-tax figures.

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.

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