Australian Securities Exchange offers a wide variety of trading choices that include exchange-traded managed funds, real estate investment trusts, and the like. Among all the things traded in the market, the number of ETFs on the ASX has been growing since it started in Australia. So, this article would present why Australians must get into and trade ETFs, especially during this generation.
Reasons to Invest ETFs on the ASX
As rational beings, one would not rush into decisions and make choices without proper deliberation of the best thing to do in a specific situation. Furthermore, investments involve money, so it must be carefully taken care of for allocating it. So, here are some reasons why:
- A promising start-up for trading: ETFs can be traded as low as $500, and based on their characteristics, they are very accessible by everyone.
- A more efficient investment: ETFs is a much simpler and more cost-effective investment than others, and it has fewer operational expenses that result in lower expense ratios for its investors.
- Lower Investment Risk: ETFs have a lower investment scheme because they are a passive investment that provides instant diversification across numerous companies.
- Investing in a large basket of shares: One ETF usually comprises shareholdings among hundreds or thousands of listed companies, whereas it would not give a challenging time for the investor on deciding what is the best to buy among the rest.
- Has ready access to other types of assets: ETFs allow individuals to easily invest among different markets and various asset classes.
- Easy process: ETFs has a simple trading method because it is traded via a stock exchange, wherein the investors are not required to fill out investment application forms.
- Returns in a short amount of time: ETFs’ returns are quarterly, which happens after pooling the dividends paid by the companies that investors have invested in.
- Global investments: ETFs also allow their investors to invest outside the Australian market, enabling individuals to have broad direct exposure to shares and various assets in various countries. So, it also gives its investors a higher opportunity to receive much more significant returns from their investments.
According to the reasons listed above, it is safe to conclude that ETFs incredibly give a more considerable opportunity for Australian investors. Moreover, it provides a lower risk which makes it great the most, especially for investors that are just starting investing. So, now let’s summarize what stands out ETFs the most among all other investments available in ASX.
What Stands Out ETFs the Most in the ASX?
ETFs on the ASX, which are passive investments, has become popular among the younger generation of Australians, and the most rampant reasons include the following:
- Lesser source of anxiety: It would not make an individual feel that nerve-wracking compared to other investments because, as mentioned earlier, it has lower risk, and purchasing one ETF would allow you to invest in a pool of companies.
- ETFs have a market capital growth of about 34%: A high market capital growth indicates lower risk, so it fundamentally poses a better way for investors that are just starting.
- ETFs listed on the stock exchange worth about $70 billion: It significantly supports that it is a low-risk investment, so there is a lower chance of a slip in price.
- Diversified Portfolio: As mentioned earlier, it really provides a wide range of possible investments that an individual could buy.
To sum it up, the situation of ETFs in Australia has provided a great starting point for young investors to invest with and practice trading because of its lower risk.