Reasons for investing in ETFs

Easy diversification

ETFs provide investors with the ability to simply and cost effectively establish a diversified portfolio through a single security with minimal time and effort. ETFs can be used to create a diversified portfolio or to complement an existing portfolio.

Buy / sell flexibility

Being traded on ASX's market, ETFs offer greater buy/sell flexibility than unlisted managed funds. You can buy and sell ETFs at any time during ASX's trading hours, at prices that you specify. This means you can get into and out of an investment in ETFs as quickly and as easily as shares and be assured of three day settlement.

Returns from capital appreciation and income

An ETF will change in value as the underlying portfolio of assets changes in value and provide income for investors through distributions. Investors may also enhance after tax returns from franking credits.

Low cost

Since ETFs are typically able to achieve lower operating costs, the management fees are significantly lower than other managed funds. Lower management fees can enhance investor returns. Brokerage or an adviser fee may apply when buying or selling an ETF, just like shares.

Fair value

ETFs are designed to ensure that they trade close to their underlying value. This provides the investor with certainty that the on-market price will closely reflect the value of the underlying assets held in the fund.

Taxation advantages

Particularly with indexed based funds, the turnover of the underlying portfolio tends to be low, reducing the level of capital gains tax that needs to be paid by the fund and its investors.