ETFs pave the road for those seeking diversification

Investors have piled money into exchange-traded funds in recent years for a good reason: they offer investors low-cost exposure to asset classes such as shares and bonds, including those listed on offshore exchanges which were previously inaccessible.

The fact that ETFs track various indexes also makes them a great alternative for investors who have no interest in picking individual stocks, or in paying fees to active managers trying to beat the benchmark when more often than not they don’t.

Reflecting their popularity, funds under management in the Australian exchange traded products (ETP) market jumped 27.4 per cent to $60.7 billion in the year ended April 30, Australian Stock Exchange data shows.

About 90 per cent of this market consists of ETFs. There were 212 ETPs listed on April 30, up 194 a year earlier.

Angela Ashton, founder and director of investment consulting business Evergreen Consultants, says ETFs are popular because they are inexpensive, liquid and generally simple in concept.

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Source: ETFs pave the road for those seeking diversification