Help in understanding ETF Investing

Lancerx on 28/01/2022 - 14:29

Hi all, looking for passive share investing. I'm not a share savvy person and have no time to actively manage my portfolio. Definitely, no time to buy and sell actively.

Recently, I heard of ETF investing. Does anyone mind sharing a bit of their experience with ETF? Obviously, I don't expect a return in the high double-digit, but anything around 6-10% is ok for me. I mainly have my capital in my retail business, which arguably should give better ROI (finger crossed). What sort of real return did you get?

Once you invest money in, is it like a fixed deposit, where you can't withdraw until matured?

Should I approach a finance advisor to get a better understanding of how this works? Do they normally charge a fee or just commission from the company, say from someone like Vanguard? Or should I jump in DIY? Or is it not worth considering ETF?

Appreciate your wisdom in this field.

Financial

Comments

  • avoidfullprice on 28/01/2022 - 14:37
    +5

    An ETF is a mix bag of shares, characterised by their diversification. You choose what sort of diversification you want - be it top 200 Australian Shares, top 200 US Shares, top 100 Technology Shares, top 100 Food related shares. Etc.

    Returns are not guaranteed, some will perform better in some years than others. This is based on the diversification you chose. You need to set how long to invest in. My real return is irrelevant. I can say I double my portfolio last year, but might just be on average 5-6% before I sell my investment.

    You can buy /sell ETF anytime. No need to wait for maturity.

    I'll skip on that financial advisor comment.

    • AustriaBargain on 28/01/2022 - 16:25

      Can you bet against the bottom 100 food related shares or whatever?

      • avoidfullprice on 28/01/2022 - 16:38

        Sure. If you find a fund that invests in bottom 100 food related shares or whatever.

  • toniyellow on 28/01/2022 - 14:43
    +5

    https://moneysmart.gov.au/managed-funds-and-etfs/exchange-tr… is a good entry-level explanation, and https://passiveinvestingaustralia.com/ is excellent at going more in-depth.

    • Mr Haj on 28/01/2022 - 14:51
      +3

      Stop trying to pump Tesla. It is overpriced.

      • CyberMurning on 28/01/2022 - 14:51
        +1

        agree. Telstra is better

      • Stopback on 28/01/2022 - 14:55

        It just dropped 20%

        • Mr Haj on 28/01/2022 - 15:31

          good. still has a price to earnings ratio of 270. talk to me when its p/e is 50

    • CyberMurning on 28/01/2022 - 14:51
      +1

      why not go to bitcoin way instead ? more thrilling

      • serpserpserp on 28/01/2022 - 15:21

        The price only goes down tho.

      • Stopback on 28/01/2022 - 16:53
        +4

        bitcoin doesn't have a meme ceo controling it

    • Gareth on 28/01/2022 - 15:15

      Just put it all on Red, baby!

    • djkelly69 on 28/01/2022 - 15:21
      +3

      You can easily create an eft style investment by just buying individual stocks, but it takes a bit more work.

      Replace the word 'easily' with 'plausibly', and the word 'bit' with 'lot'.

      • Mr Haj on 28/01/2022 - 15:44
        +2

        Buy one of the three hundred largest companies on the ASX each with arbitrary share prices, and only pay 300 lots of brokerage. But hey at least you get to save the 0.1% management fee.

    • rektrading on 28/01/2022 - 17:28

      TSLA is very tradeable. It's a stonk but moves like crapcoin.

    • Kenb0 on 28/01/2022 - 18:11
      +1

      To start with, they're ETFs(Exchange Traded Funds), not EFTs.

      I figured once was a typo, but when you keep repeating it multiple times, its obvious you don't know it very well.

  • shockme79 on 28/01/2022 - 14:52
    +3

    Let research be your best friend, I highly recommend the following podcasts/facebook groups:
    - My Millenial Money - Podcast & Facebook group
    - My Millenial Money Medical (Previously Dev Raga Finance) Podcast
    - The Australian Finance Podcast
    - Morningstar Investing Compass Podcast
    - Aussie FIRE Discussion Group - Facebook Group & Podcast

    Books:
    - Barefoot Investor - Scott Pape
    - Motivated Money - Peter Thornhill
    - Making Money - Noel Whittaker
    - Sort your Money Out - Glen James from My Millenial Money

    • brad1-8tsi on 28/01/2022 - 15:22
      +3

      I'd also recommend Aussie Firebug. He has a blog and does some good podcasts.

      It's best to have an understanding of what you are buying.

      Someone above said ETFs are boring investments. Some are and some aren't and boring is great when you want to sleep at night when the market is as volatile as it is now.

      • Stopback on 28/01/2022 - 16:03
        +2

        EFTs can fall they just follow the market.

        It doesn't protect you from the ride

        • brad1-8tsi on 29/01/2022 - 13:51
          +1

          It doesn't protect you from the ride

          True but it's more like the roller coaster in the kids section rather than Magic Mountain.

          I know my ETFs will never be 10 baggers but I also know that they won't drop 50% like some of the equities I have.

          • Stopback on 29/01/2022 - 21:10

            @brad1-8tsi: Technically when you are young you should take more risks. Still better than bank interest and yeah if you panic you could be screwed

            • brad1-8tsi on 30/01/2022 - 11:33

              @Stopback: mokr. How big is your portfolio? No need to be specific but how many years of your current gross pay have you got invested?

              What is you % break-up of listed companies, LICs, ETFs and unlisted companies?

  • paulx82 on 28/01/2022 - 15:28

    If you asked yesterday, you would be told how stupid you are, but today not so much. The bears are shy every other day it seems.

    Aussie Firebug and Peter Thornhill - search Spotify and YouTube. Peter uses LICs instead of ETFs, but that is for very specific reasons, so otherwise his advice applies for ETFs.

  • Soluble on 28/01/2022 - 15:31

    Invest in your retail store. Reinvest profits into the business and grow it.

    Then after that is making enough money to support you comfortably start your investment journey.

    • Stopback on 28/01/2022 - 15:47

      Diversification maybe 10 percent.

      • Soluble on 28/01/2022 - 16:59

        Issue is depending on what you're making your paying the GOV nearly half your earnings, then half your invested earnings as well. I look at my losses as only losing half what I lost because they were gonna take it anyway!

        • sangohan on 30/01/2022 - 01:46

          your paying the GOV nearly half your earnings

          borrow more money to invest, such that you deduct the interest with this income as much as you can.

          The capital gains from the shares would then be taxed at 50% later in the future.

        • NoPetNoKid on 30/01/2022 - 11:58
          +1

          Well, 30% (CGT) is 20% far from half but anyways

          Invest, earn from the investments, pay tax on realised profits, keep the remaining
          OR
          Invest, earn from the investments by selling after at least 12 months, pay tax only on 50% of the realised profits, keep the remaining
          OR
          Do not invest, do not earn more from the not-invested money, do not pay tax, keep 0
          OR
          Invest, make a loss, roll over that loss to offset the profits from the next profitable FY

          look at my losses as only losing half what I lost because they were gonna take it anyway!

          the losses help in offsetting the profits i.e. you do not pay tax on the amount equal to the loss in previous financial year

  • Big Lenny on 28/01/2022 - 15:41
    +3

    waiting for rektradings opinion

    • Mr Haj on 28/01/2022 - 15:44
      +2

      buy low, sell high. big balls.

  • AndyC1 on 28/01/2022 - 15:58

    approach a finance advisor

  • cashless on 28/01/2022 - 16:11
    +3

    Open a low cost trading account (e.g. Selfwealth or similar).
    Go to Vanguard website and search for ETF's.
    Check through the ones they list, read about them, check the portfolio of each one.
    Examples: ASX200, high yield, high growth, international shares, Aussie shares, big co, small co and so forth.
    Select about 3 to 5 of the ones you like the sound of.
    Go back to SW, put them on your watchlist and purchase when you are happy with the market price.
    Go and pour yourself a beer and relax for the next 10 years.

  • Hearthstone on 28/01/2022 - 16:16

    @lancerx watch this video you have a better understanding of it

    https://www.betashares.com.au/fund/australia-200-etf/

    that just one ETF, there are thousands more but they all works the same way, a basket of shares or commodity
    if you buy broad market ETFs index you don't need many just a few and keep adding money to it.

    and there are always liquidity if you need to buy or sell and that one good feature about ETFs you don't get stuck
    if you want out you can get out and if you want in there is always demand create and redeem by the market maker

    you don't need any financial advisor if you want to just buy ETFs, save that money for more ETFs
    but be prepare to ride with the market, if market tanks index ETFs will tanks and vice versa, you are tracking the market
    there is no second guessing or anyone to blame, you ride with the market.

    ETF is get rich steadily and slowly, boring, buy then sits on the beach

  • rektrading on 28/01/2022 - 16:43

    ARKK.

    • Oofy Doofy on 28/01/2022 - 17:16
      +1

      I am definitely long on this. If you are fence sitting on being a 'No guts, no glory' kind of investor, the time to strike is now if you can stomach it.

      • umoddbro on 08/04/2022 - 02:32
        +1

        This did not age well……

        • rektrading on 08/04/2022 - 08:16
          +1

          People who that define "age" as 69D when investing long term have an attention span of an 🐜 and NGMI.
          https://ibb.co/rQdt3PC

  • rektrading on 28/01/2022 - 16:45

    Or anything with MAANG.

  • rektrading on 28/01/2022 - 16:52
    -1

    Stay away from ASX ETFs.

    Australia doesn't have the money to pamp the ASX the same way as the SPX gets pamp.

  • ausdday on 28/01/2022 - 18:17

    Investing ETF is investing in a bag of businesses indirectly. If you have a business with better ROI, why would you want to invest in "other people" business?

    • rektrading on 28/01/2022 - 18:32

      Investing in other businesses is a good source of passive income.

    • Hearthstone on 28/01/2022 - 18:59

      it about not putting all your eggs in one basket
      even Bill Gates made a fortune in Microsoft, he taken a lot of money out of it and throw in other business from biotech to Waltmart
      did you know he is one the largest land holder in the US? he bought a lot of properties and farm land

  • Qazxswec on 28/01/2022 - 18:27
    -3

    I don't know what ETF is, i think you mean NFT's, in which case, yes, invest all your money into these, you may even end up with a farting rainbow and a signature of Tom Brady

  • Qazxswec on 28/01/2022 - 18:43

    Heist?

  • Goldenwarrior on 29/01/2022 - 09:56
    +2

    Definitely, no time to buy and sell actively.

    • Index Etf's are best if you do not want to actively research, buy and sell individual shares.

    I don't expect a return in the high double-digit, but anything around 6-10% is ok for me.

    • You can expect this from Index ETF's such as the ASX (Australian Shares) or the S&P 500 (Mixture of Global and US companies) over time.

    I mainly have my capital in my retail business, which arguably should give better ROI (finger crossed).

    • Nonetheless, you are investing in the best companies in the world and at the end of the day, you will want to protect and grow your money in a diversified way.

    What sort of real return did you get?

    • You can research the average return on each of the Index ETF's to get this answer.

    Once you invest money in, is it like a fixed deposit, where you can't withdraw until matured?

    • Not at all. You can buy and sell anytime the market is open through your share broker. Most Index ETF's pay dividends quarterly.

    Should I approach a finance advisor to get a better understanding of how this works?

    • If you can find a very good one but from the sound of it your questions are related to investment advice and you may be better to learn yourself.

    Do they normally charge a fee or just commission from the company, say from someone like Vanguard?

    • They charge an MER (management expense ratio) to manage the investment. But you will not see it. The MER ratio is something you can control by buying low-cost Index ETF's with a low MER.

    Or should I jump in DIY?

    • About 10 years ago I was given the names of some investment advisers and I contacted them to manage my money. They did not want to take me on unless I had 1 million to invest plus ongoing inputs. One advisor was even willing for me to come in to meet with him even though he wasn't interested in being my advisor. His parting words were confidence-boosting by saying "read these books, research and do it yourself.

    (Like other posters suggested read passiveinvestingaustralia. He also has a book coming out so keep an eye out for it).

    Or is it not worth considering ETF?

    • While historically I invest in individual stocks and my portfolio over the last 10 years have doubled the returns of the Australian index (honestly I have just gotten lucky than being an astute investor, plus it takes work and research), if I was to start over I would just invest in a diversified Index ETF mix of Australian (to avoid currency risk) and International ETF's (for diversification) and concentrate on other things. Or you can buy an all in one such as VDHG or DHHF but the MER (cost to manage these) are more expensive).

    • Currently, I dollar cost average (DCA) a fixed amount into Index ETF's every month. I prefer keeping things simple. So I am talking the talk and walking the walk.

    Appreciate your wisdom in this field.
    - I'm very happy to help. Get in touch if you have any other questions.

    • Gekov on 29/01/2022 - 11:54

      "Currently, I dollar cost average (DCA) a fixed amount into Index ETF's every month."

      If you like that sort of thing.

      I sold off my shares in January when the threat of imminent rate rises and rising market volatility signalled a correction … or much worse …

      The overnight Wall St rally appears to be due to Apple's earnings result, but also looks suspiciously like mostly a short squeeze in a bear market.

      Bear markets are characterised by huge, but momentary rallies. in a down-trending market

      The current market, especially in the USA, appears to be grossly overvalued.

      I'm fully cashed up and licking my lips at, what I expect to be some upcoming sharemarket bargains.

      At present I'm doing a bit of short-term/day trading and making some money in the process.

    • Gekov on 29/01/2022 - 14:51

      "Definitely, no time to buy and sell actively."

      One of the best times to buy and sell actively.

      Higher volatility is a trader's friend.

  • Gekov on 29/01/2022 - 11:07

    "is it like a fixed deposit, where you can't withdraw until matured?"

    ETF's trade exactly as other shares.

    You can even day trade them if you want …. which I have done often.

    I have often day traded IOZ which follows the S&P ASX200 index.

  • MontyMacaw on 29/01/2022 - 11:25
    +1

    You want good advice? Follow what Warren Buffet does and he says ETFs are exactly what people like you are looking for. But you need a 7 year window to invest otherwise you will become a trader who gets the jitters when there is a bump in economic activity and sell in panic. So if you don’t have a 7 year window then shares are not for you. As for crypto then that is even worse for your nerves and it’s unproven long term.

    An ETF in the S&P 500 for example is a great way to set and forget. The S&P 500 goes up over time ALWAYS. Something a lot of people don’t understand is that the S&P 500 is not the same all of the time. It changes as some companies perform better than others and get included and some companies get dropped. So the “basket” is being refreshed on a regular basis. That’s one of the reasons it always goes up because it is always the top 500 companies that qualify to be included in the basket. It’s the same with all major share market indexes. This can give a false sense of people thinking shares always go up. Some don’t. But the index does. So for someone with your wish list an index ETF is the easier and safer option. Forget the individual share promoting people. Don’t listen to the crypto investors who need Valium 6 months of the year. Just play the safe game and you will get what you are asking for.

    • Gekov on 29/01/2022 - 11:58

      "So if you don’t have a 7 year window then shares are not for you."

      … UNLESS you're a short term trader … wait for a significant dip in the market and then sell on the inevitable rally …. easy peasy …

      • MontyMacaw on 29/01/2022 - 12:14

        OP doesn’t want to be a trader. I read the post.

        • Gekov on 29/01/2022 - 12:25

          "OP doesn’t want to be a trader."

          He could be waiting a lo-o-o-o-ng time if there is a decent market crash soon.
          "in the long term we are all dead"

          FYI …
          The Buffett Indicator — was named after an interview he gave to Fortune magazine in 2001, when he said
          ‘it is probably the best single measure of where valuations stand at any given moment.’
          The indicator is a measurement of market value versus economic activity (GDP).
          Logic says the market should NOT be worth more than the entire economic activity that supports corporate earnings.
          However, there are periods when that logic is abandoned by inexperienced and know-it-all market participants.
          In the late 1990s when Grantham and Buffett refused to join the giddy participants in the tech boom party, the Buffett Indicator was above 120% and at that time, in uncharted territory.
          That did not stop it going higher…finally topping out at 158.7%.
          The brutal fact — that the market cannot be greater than the economy supporting it — prevailed and the ratio ‘mean reverted’ back to 75%.
          Look at the current reading. 194.9%.
          This rapid increase in the ratio is due to two factors…higher share market and lower GDP:

          • MontyMacaw on 30/01/2022 - 00:33

            @Gekov: If only it was that simple it’s not. For example there is more money in the system due to quantitative easing and low interest rates. These two factors combine to provide more cash for investment. Especially as cash deposits return very little so investors want to deploy it in things that return higher returns than they get on cash deposits. That is why there are so many new retail investors in the market at present. These people are just in a lottery profiting because anybody can make money in a strong bull market. When the shit hits the fan they panic and sell just like they did with the Covid crash. Then magically made so much money from the recovery. 12 months after the crash the major indexes were not far away from where they would have been if the crash didn’t happen BUT the number of retail investors had increased even more meaning that when panic returns again they will fly out of the market in large numbers and the big institutional investors will basically inherit their money - just like they always do. Wall Street gets more powerful with every shake out of retail investors. They are the suckers because they treat the market like a casino instead of a savings plan. It’s all about greed - on all sides but the winners are the ones with the deepest pockets not the retail investors trying to make a quick buck.

          • MontyMacaw on 30/01/2022 - 00:36

            @Gekov: Your so called Buffer indicator is here. I am aware of it and have been for a long time https://fred.stlouisfed.org/graph/?g=qLC#0

    • Gekov on 29/01/2022 - 12:01

      "The S&P 500 goes up over time ALWAYS."

      BEWARE … the S&P 500 is being held up by the six FAANG stocks.
      Most of the 500 are in bear market territory.

      When Apple finally folds, look out below ….

      • MontyMacaw on 29/01/2022 - 12:15
        -1

        Lucky the S&P has them then. And if those stocks drop they get replaced. What is your point?

        • Gekov on 29/01/2022 - 12:19
          +1

          " if those stocks drop they get replaced."… HUH? By what?, when the other 500 are in bear markets?

          • MontyMacaw on 30/01/2022 - 00:19

            @Gekov: They get replaced by stocks that are not in the top 500 but have increased in value more than the ones that are taken out. It’s not rocket science here. Markets go into bear territory regularly but they are short lived and then return to being bull markets. Mostly accompanied by recessions and recovering from recessions. Your statements don’t sound very informed. Perhaps you should do some study before you pick a few weeks and label the entire market based on those few weeks. It’s just a silly conversation now. Go look at some historical charts. Yahoo finance is a good source for these. You can find all you need to get an understanding from there as long as you can comprehend the information of course. If bear markets were the predominant state of affairs the indexes would all eventually go down to zero. Can you explain why they don’t?

          • Sweetnsour on 31/01/2022 - 12:52
            +1

            @Gekov: In 1965 the S&P500 AT&T, IBM, Standard oil and General Motors made up total 25% of the index. The US has gone through periods of giant large caps dominating the index

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