Investors should avoid ETF trap
Investors should avoid the exchange-traded fund (ETF) trap as the move to passive strategies, with an overexposure to overtly-similar passive investments, continues and inflows reach an all-time high, according to an online trading platform, Bell Direct.
According to Bell Direct’s chief executive, Arnie Selvarajah investors should be warned against blind over-allocation and recognise that not all index-driven products are created equal.
“An issue we are now seeing emerge is an overexposure to overtly-similar passive strategies, leaving investors poorly-diversified and their portfolio performance at risk,” he said.
“For the ill-informed investor, unquestioned allocation to ETFs is a common trap.
“Attention must be given to the different styles and exposures of various ETF products, and investors should understand that passive alone will not deliver the desired return outcomes.”
According to Bell Direct, which has just launched ETF Filter, the current number of over 200 exchange traded products on the Australian Securities Exchange (ASX) made it very hard for the average retail investor to compare the products and therefore investors would need better tools.
“The trend towards actively-managed and smart-beta ETFs is just another reason why investors need tools to simply compare products,” he said.
“The world of investing is continually innovating and changing, and today’s investor needs to be able to make smarter investment decisions.”
AUTHOR
Oksana Patron
Recommended for you
US alternative credit manager Apollo Global Management is viewing Australia as a “priority market”, as it launches a fund for Australian wholesale investors with Channel Capital.
The investment manager has launched a new scholarship and career development program to promote women entering the asset management industry.
Magellan Financial Group experienced $1 billion in net outflows during April but managed to offset this and report a rise in FUM, having also announced its fourth fund from its partnership with Vinva.
Having officially opened its doors, ETF Shares – led by three former Global X employees – has now launched its first three ETF vehicles on Cboe Australia for financial advisers.
