The Flaw with ETFs

Let's talk about the problems with Exchange Traded Funds (ETFs).

In this video, I'll cover the pros and cons of investing in ETFs, particularly in Australia. I'll cover fees, especially with actively managed funds, liquidity, and tax optimization.

Then we'll discuss the bigger issues of diversification and how most of your fund will be heavily weighted toward the top 5 or 10 biggest companies by market capitisation.

To keep a fund that has equal weighting between its investments there will always be more buying and selling within that fund. Even with less actively managed funds, there is still more buying and selling than an average person’s portfolio.

As ETFs become more popular, more fund managers are starting new ETFs with different mixes of companies and investments. These funds are driven by the market. To make a new fund more popular to get investors excited to invest in one fund over another, or multiple funds.

The sad fact remains that most index funds and exchange traded funds outperform the market by any significant margin.

Happy investing :)

Tracey


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DISCLAIMER:
Investing carries risk.
The content in these videos is my opinion and is not intended to be substituted for your financial situation.
Please do your own due diligence and seek professional advice where necessary.

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