Advantages of ETFs
Here we will explore some advantages of ETFs and reasons why they are a great way to invest, including transparency, index performance, access, liquidity and diversification.
ETFs diversify your investment and lower risk
With one simple trade, buying an ETF gives you instant diversification. It’s important to think about diversification if you want to reduce risk while maximising returns. ETFs offer investors greater diversity than simply buying individual stocks1.
- ETFs match index performance
Investments are never guaranteed but ETFs track indexes to help take the guess work out of investing. There are no surprises because you know a good ETF will aim to closely match the performance of the underlying index that it invests in.
- ETFs are transparent so you know what you are getting
Generally, ETFs are transparent, because you can always see what the underlying investments in the ETF are. This is not always the case, for example in a managed fund, where the portfolio manager has the discretion to choose not to reveal the investments in the fund.
- ETFs make accessing markets easy
There is usually an ETF for whatever you are looking to invest in, from a country in southeast Asia to an asset class like global bonds—and even commodities like gold. For investors who would like to invest in difficult-to-access markets such as emerging markets, it now becomes straight forward by investing into an ETF.
- ETFs are easy to trade
Since ETFs trade on the exchange, you simply buy and sell your ETF via your broker, at the market price., with no minimum purchase requirement.
Bonus: The annual management expenses for ETFs are typically lower than those of managed funds2!
In summary, ETFs are the better way to invest because...
They’re low cost.
And usually much cheaper than mutual funds.
You know what you’re getting.
They’re transparent and you can see the underlying investments.
They offer the best of both worlds.
The diversification of a managed fund with the tradability of a stock.
There are no surprises.
You know a good ETF will aim to closely track the performance of the underlying index it invests in.
They make accessing markets easy.
With one trade you get exposure to a whole range of assets.
1 Diversification does not fully protect you from market risk and does not guarantee returns or eliminate potential for loss. 2Morningstar, as of 12/31/18. Comparison is between the average Prospectus Net Expense Ratio for the iShares ETFs (0.34%) and active open-end mutual funds (0.96%).
Important information
The nabtrade service is the information, trading and settlement service provided by WealthHub Securities Limited ABN 83 089 718 249 AFSL No. 230704 (WealthHub Securities). WealthHub Securities is a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL No. 230686 (NAB). NAB doesn’t guarantee its subsidiaries’ obligations or performance, or the products or services its subsidiaries offer. WealthHub Securities is not an authorised deposit-taking institution, and its obligations do not represent deposits or liabilities of NAB.
This material contains general advice only and has been prepared without considering your objectives, financial circumstances or needs. Before acting on any general advice or information in this material, you should consider the appropriateness of the general advice or information with regard to your objectives, financial circumstances or needs and you should obtain and consider the relevant Product Disclosure Statement, Terms and Conditions, Financial Services Guide and any other disclosure document. Subject to any terms implied by law and which cannot be excluded, neither WSL nor NAB shall be liable for any errors, omissions, defects or misrepresentations in the information or general advice (including by reasons of negligence, negligent misstatement or otherwise) or for any loss or damage (whether direct or indirect) suffered by persons who use or rely on the general advice or information. If any law prohibits the exclusion of such liability, WSL and NAB limit its liability to the re-supply of the information, provided that such limitation is permitted by law and is fair and reasonable.
© National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.
BlackRock Investment Management (Australia) Limited ABN 13 006 165 975, AFSL 230 523 (BIMAL)
Information provided on this site in respect of BIMAL products comprises general information only and does not take into account your individual objectives, financial situation, needs or circumstances. Before making any investment decision, you should assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. Refer to BIMAL’s Financial Services Guide on its website for more information. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any financial product in any jurisdiction.
No part of this material may be reproduced or distributed in any manner without the prior written permission of BIMAL.
© 2022 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES and the stylised i logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.