The fund is then chopped up into individual shares which investors can buy and sell on the stock market like any other shares.
ETFs also offer investors the chance to invest in broad investment themes or industries, such as green energy, tech or healthcare, for instance.
Tiger, a Nasdaq-listed online broker which recently entered the Australian market, allows investors to buy equities in the US and Hong Kong in addition to Australia, offering $0 brokerage for US/ASX shares.
Tiger customers can buy and sell US stocks and exchange traded funds in pre-market and post-market trading and live in US trading hours, features which usually aren’t available to retail online investors.
This allows for more geographic and sectoral diversification than is available in Australia. For instance, Australia has only a handful of tech stocks and nothing of the scale of the tech giants such as Apple, Google and Meta, which owns Facebook.
“A lot of international investors who went to the US markets wanted tech exposures which in Australia, for example, we don’t have a lot of listings that satisfy that requirement,” McCarthy says.
McCarthy says many investors are using what’s known as a core and satellite investment strategy.
This means they buy an ETF which appeals to them, whether it tracks an index or is aligned with an industry sector, and then if there are stocks they particularly like, they will buy them as well, as “satellites” around the core ETF.
Buying ETFs in the US can be advantageous for investors if they want to get exposure to the US dollar as well. If an investor buys a US market ETF in Australia, this will be in Australia dollars and often the gains or losses will be hedged, or adjusted to take out currency movements.
However, McCarthy says some investors want exposure to the US dollar and so like to buy ETFs direct on the US market.
Nick Muscat started investing in aged 18 in 2018.
He is currently saving for a house, with a combination of his wages as an IT profession and share market investments.
“I basically just take a long-term approach through ETFs. I invest in every listed stock worldwide, so that’s developing and developed countries,” says Muscat, who writes the aussiemoneyman blog based on his experiences as a first-time investor.
“I just chuck my money into it and I just leave it there. I’m thinking minimum seven to 10 years.”
Zoomers plough cash into ETFs as a hedge against white picket fence
Source: Philippines Alive
