I am interested in ETF's and some new ones hit the market in the last few days while a few more will commence trading soon. I completed an on-line survey pre-Christmas and suggested a few sector ETF's would be handy especially a resource sector ETF - lo and behold one has appeared ..........

Aii S&P/ASX 200 Financials CODE : FIN Listed but does not appear to have traded yet
Aii S&P/ASX 200 Financials x-A-REIT CODE : FIX Not yet available
Aii S&P/ASX 200 Resources CODE : RSR Trading
Aii S&P/ASX 200 Industrials CODE : IDD Not yet available
Aii S&P/ASX 200 Energy CODE : ENY Listed but does not appear to have traded yet
Aii S&P/ASX 300 Metals and Mining CODE : MAM Not yet available

Keep an eye on the ASX site (although they do seem to show ENY, IDD and FIN under New Listings and they havent kicked in)

Also not sure why but noticed that the ASX Resources Index went down about 1% today while RSR went up slightly.

Cheers
Deckard

Firstly I admit that I'm a fan of ETFs and look forward to having more choice here in Oz. However one thing to bear in mind is that some of the sectors are dominated by a few stocks. "SLF" (a-Reits) for example is very much dominated by Westfield (approx 40% of the index). And in the case of "RSR" BHP makes up approx 44% of the index!

Overall these new ETFs are a nice addition to the existing sparse choice. I was somewhat dissappointed with Vanguard's recently listed ETFs.

But I hope the trend towards investing in ETFs gathers pace here like it has overseas.

Cheers - Gordon

sort of sensible article in the Australian

http://www.theaustralian.com.au/busines ... 5881498210

""... Market timing may be particularly risky in the prevailing highly volatile market, being buffeted by Europe's sovereign debt crisis, debate over the resource super-profits tax and talk of a possible double-dip recession overseas. In practice, few professional investment managers, let alone personal investors, consistently succeed in timing the market. Most investors who attempt it have an almost uncanny knack of selling after share prices have fallen and buying after prices have recovered. Market timing, as opposed to a strategy of investing for the long term, is almost a certain way to lose money.

Doug Turek, managing director of Melbourne financial planning firm Professional Wealth, says ETFs tracking a chosen index are usually most appropriately used by personal investors to provide the long-held core of their equity portfolios. He believes any heavy trading generally should be limited to a satellite of perhaps higher risk, directly held shares or actively managed funds outside the core portfolio. Turek says "trigger-happy investors" who trade frequently tend to lose money for their efforts from a combination of buying and selling at the wrong time, taxation and transaction costs. "It is a losing-sum game, " he says,

Numerous studies highlight the high risk of market timing. Turek points to, as an example, the regularly updated study Quantitative Analysis of Investor Behaviour, compiled by researchers for Dalbar, in the US. The research covered investor behaviour and their returns through 17 years. "This study found that investors in US equity funds on average made the wrong timing decisions and managed to underperform the funds they were buying by a substantial margin," Turek says. "The investors' main problem [as emphasised in the Dalbar study] is that they were performance chasers," he adds, and they "stampeded for the door" when returns fell. Dalbar researchers concluded this usually meant investors "buy high and sell low".....


and there is more, on StateStreet and ETFs at - streettracks-listed-funds-stw-slf-sfy-3730.html

iShares launched 4 new ETFs

iShares High Dividend IHD - The Index has been designed to serve as a benchmark for Australian income seeking investors investing in the Australian equity market. The Index seeks to provide exposure to high dividend paying common stocks from the S&P/ASX 300 universe, while meeting diversification, stability and tradability requirements. Even though the Fund aims to track the Index, which comprises companies that are expected to deliver above market average dividends, higher dividends cannot be guaranteed. MER 0.30%

IHD top holdings:
4.37% NAVITAS
4.14%% WESTPAC BANKING CORP - WBC
4.12% UGL LTD - UGL
4.12% MONADELPHOUS GROUP - MND
4.07% IRESS MARKET LTD - IRE
4.07% COMMONWEALTH BANK - CBA
4.07% GUD HLDGS LTD - GUD
4.06% DAVID JONES LTD - DJS
4.01% LEIGHTON HOLDINGS - LEI
4.00% METCASH LTD - MTS
3.99% BENDIGO BANK - BEN
3.99% SPARK INFRASTRUCTURE - SKI
3.99% COCA-COLA AMATIL LTD - CCL
3.98% GWA GROUP LTD - GWA
3.94% SONIC HEALTHCARE LTD - SHL
3.93% ADELAIDE BRIGHTON - ABC
3.93% TATTS GROUP LTD - TTS
3.93% TELSTRA CORP - TLS
3.86% APA GROUP - APA
3.85% WOOLWORTHS LIMITED - WOW
3.85% IOOF HOLDINGS LTD - IFL
3.82% QBE INSURANCE GROUP - QBE
3.81% HARVEY NORMAN HLDGS - HVN
3.24% GRAINCORP LTD - GNC
3.18% DOWNER EDI LTD - DOW

plus IOZ - MSCI Aust 200 - MER 0.19% - The Index is a free float-adjusted market capitalisation weighted index designed to track the performance of the 200 largest companies of the domestic Australian equity market, excluding foreign companies listed on the ASX. The selection universe of the Index is based on constituent securities of the underlying MSCI Australia Investable Market Index.

plus ILC - ASXTop20 - MER 0.24% - The Index includes the 20 largest stocks by market capitalisation in the Australian equities market. Index constituents are drawn from eligible companies listed on the ASX. The Index is the narrowest market capitalisation-based index of the S&P/ASX Australian indices.

plus ISO - ASXSmall Ords - MER 0.55% - The Index includes the smallest 200 members of the S&P/ASX 300 Index. Index constituents are drawn from eligible companies listed on the ASX.


http://au.ishares.com/domestic.do

also Russell have a High Dividend Index ETF - RDV (and about to launch another: "value Index" RVL)

The Russell Australia High Dividend Index is a newly created index specifically designed to address Australian investors’ needs of generating income and attaining capital growth. It is an equity index that provides an investable portfolio of around 50 large, blue chip Australian companies and has a particular emphasis on dividends.

pays quarterly; MER 0.46%.

Turnover approx 30% of portfolio per annum. Their methodology for building this index is interesting (it isn't really an index but ...) weighted towards size and dividend characteristics
- 60% based on Forecast dividend yield
- 20% on Trailing dividend yield
- 20% on Dividend trajectory
- 20% on EPS variability

currently allocation is 46% Financials (index is 32%), 17% consumer staples (index 9%), Materials 14% (index 26%) and energy 1% (index 7%). other allocations roughly in line with index : Consumer discretionay 4.3%, healthcare 2%, industrials 8%, property trusts 6%, telcos 3% Utilities 1.5%

has been up and running for a few months; despite the presence of market makers, the proliferation of sector and specialist ETFs is spreading things thinly - RDV seems to be only having about 5-6 trades a day of late. Fund size is $100mill and there are 2 institutional mandates, rest are individuals and SMSFs !!

Despite my previous enthusiasm for ETFs I admit that it is a case of safety in numbers for me nowadays. Contrary to my earlier post I'm now of the opposite view that there's just too many ETFs for our small market in my opinion. So I'm only invested in STW being the oldest, largest and most liquid. It may not offer anything fancy in that it is a boring, broad based index tracker following the ASX200 but I feel more comfortable that it will still be here years down the track. I can't be so sure about all these other ETFs. Perhaps if some of the newer ETFs get large and liquid enough I might consider investing in them. But given that my main game is all about reliable income I'm more than ever committed to sticking with the older LICs. Must admit also that it's a lot easier at tax time dealing with LIC dividend statements than dealing with ETF annual statements!

Cheers - Gordon

I must be totally cynical. All these EFTs coming out. Smacks of opportunism to me. Remember before the Tech Wreck all these fund managers bringing Technological funds to the market? Sometimes the "I want" murmuring of the chattering classes results in them getting what they want. Whether they need it or understand it or are confused by the plethora of what's on offer is another issue altogether. Well, to help you thorough this maze, let me introduce you to this financial adviser who can sort out all your problems. With apologies to the more ethical planers out there.

I have a great idea. If a few of them collapse, then we can have a Parliamentary Inquiry into the whole thing so a further raft of regulations to safeguard investors interests can be introduced.

the 'financial industry' is creating more and more ETFs because there is a need. the first ETFs, broad index-based main-board stuff, have been very successful, pulling in money.

The vast pools of investment money - insurance reserves, private wealth, pension provisions, people's savings - have been in managed funds. Thats what managers did; they took money in and optimised returns, while managing risk. Then it all stated getting complicated and also a gravy train for the intermediaries, and investor expectations compared to outcomes have evolved to be somewhat removed from each other. Now a dirty little secret is out; that 80% of managed funds haven't made the index over the longer term. (5 Aust funds, in their defence, have achieved better 10 year numbers than the market with more than 10%pa returns: Aviva, Ausbil, Perpetual, Tyndall, UBS). And at a cost of 1%++ per annum for the privilege, (the really good talkers take 2%)

Along come ETFs which return the index (hence better than 80% of the shiny suits) and at a low cost (the S&P500 ETF in USA is 0.09%pa). Then more and more 'products' are created, and a whole new subsector of the 'industry' is thrown up, with more confusing jargon and such 'philosophies' as core and satellite.

Nothing succeeds like success, imitation is the sincerest form of flattery, .... nothing exceeds like excess.

Curently ETFs are the fastest growing form of managed investment, and the established wealth managers are worried/ threatened to some extent.

My worry - ETFs based on deriviatives rather than ownership of the underlying asset, the integrity of the market makers, the complexity and lack of transparancy.. etc. And the managers of index money, the salesmen, are paying themselves obscene salaries as their FUM grows. Its only the index, dude.. As Judd aludes to; the emergence of the same old issues, in a new guise.

My other worry - it is only the index. And it is complacency. Should I actually be in the market at all?

There's a monthly? paper for financial planners that I sometimes have a browse at Borders.. what can i say? a real eye opener to the world of fund management and financial advisors.. it seems that in every issue, there's an article discussing a new fund that has started.. or a merger or takeover of funds... and all local managed funds at that
(I often wonder why there are so many funds mentioned in the paper.. they can't ALL be above average?! So how do the fund managers convince their investors to stay with their poorer performing funds? a mystery...)

And it doesnt stop at fund management, there is also the merger activities in the financial planning business.
The paper has definitely been including more articles on ETFs in the past year...

as for these ETFs - i think the previous posters are spot on - these have unknown track record.. run by fund managers I haven't heard of (although, must admit that I do lead a sheltered life)... owning stocks that are really not that dissimilar to the index or older LICs, but WAY more concentrated.. at higher fees too.. hmmm.

Guess I will take a wait and see approach with these new ETFs.. Meanwhile, the older LICs are trading close to or lower than NTAs.. so.....

venger wrote:.. Guess I will take a wait and see approach with these new ETFs.. Meanwhile, the older LICs are trading close to or lower than NTAs.. so.....

Perhaps one advantage of the proliferation of alternative passive investments such as ETFs is that there might be less demand for LICs and hence greater opportunity to grab the better LICs closer to NTA or at a decent discount. More income for less outlay! But then again all these new ETFs might have investors that excited that they give up completely on LICs and the LIC managers all go bust

Cheers - Gordon

Hi Gordon

I forgot to add a belated happy new year to everyone! haven't been reading or doing much on the portfolio front.. I think the trouble with being a LIC investor is that there's not much excitement to talk about.. guess that's why we are talking about ETFs instead..

Should I actually be in the market at all?

Guess my big assumption (or gamble?) here is that australian businesses as a group will continue to profit as they have in the past, and that the market will reflect that collective return/value over the very long term. As odds go, its probably better than the ones I would get at my local tab, so I am/have been making that bet over the past two decades and will continue to do so in the future.

Mind you, I don't see why businesses in other countries aren't going to do as well or better than us.. afterall, if you think about the great global businesses in the world, there's a lot of them from the US or euro. The trick i guess is finding the cheapest and simplest way to invest in those businesses ETFs might be one of the ways to do that...

....The trick i guess is finding the cheapest and simplest way to invest in those businesses. ETFs might be one of the ways to do that...

True but by heck it is hard to know what you are actually doing. Take for instance the Australian prospectus for one of the ETF's offered under the iShares arrangement, it states in part that one (out of 19) of the risks is securities lending risk but to get the actual details of that you have to go to the Principal Risks section of the US Prospectus. So the question is, when plonking one's money down for these - and I dumped those that I did hold once I read the document - what am I actually buying? It seems to be buying exposure to the shares and not the company (LIC) which is actually a shareholder in a number of companies.

Is that true of all other ETF's? I don't know and I haven't the time nor inclination to go through the prospectus of each and every offer which may then entail me to go to a prospectus lodged in the County of Delaware in the good ol' USA.