Online brokers are increasingly popular as a simple, DIY platform to manage exchange traded investments such as Active ETFs, Passive ETFs and shares. Popular online brokers include:
Already have an account? Great! Simply search the code of the Active ETF you wish to invest in e.g. EIGA, IMPQ, ECAS, ECOR or EMAX. and follow the prompts. The process is the same as investing in a single BHP or Westpac share.
Don’t have an account? Simply follow the sign-up procedures and once your account is active you can follow the steps above. Remember, you can use the one online broker account to make many investments in one place.
Traditional brokers offer a more tailored service to their clients.
Examples of brokers include:
To execute and order through a traditional broker, call you broker and quote the code of the Active ETF you wish to invest in e.g. EIGA, IMPQ, ECAS, ECOR or EMAX.
Your financial adviser can probably help you invest into an Active ETF. Call or email them and quote the code (e.g. EIGA, IMPQ, ECAS, ECOR or EMAX.) and the amount you wish to invest. It’s that simple!
If you like we can send then an information pack designed for advisers so they can learn about the Active ETF.
Follow the prompts here for an automated email to be sent to them with all the details.
Exchange Traded Funds (ETFs) are parcels of securities such as bonds and shares which are traded as a single unit, in much the same way as you can buy and sell shares. Unlike individual shares, ETFs are designed to reflect the performance of a specific index or market sector rather than the performance of a single security.
ETFs are made up of a wide range of underlying assets, compiled by ETF providers and fund managers, and you can buy them on exchanges such as the ASX in the same way as you would buy shares. One of the key benefits of ETFs is that it provides investors with easy access to a wider range of assets than buying individual stocks and shares.
Mutual funds, often used as an alternative to savings accounts, are another investment option which works on a similar principle to ETFs, pooling investors’ money into a range of assets. What sets ETFs apart are their iNAV, or indicative Net Asset Value. The iNav refers to the total estimated value of the assets held in a portfolio.
Unlike mutual funds, whose value is calculated only at the end of the day (limiting opportunities to buy and sell as a result), ETFs provide a regularly updated iNAV to give investors an accurate idea of a fair price for an ETF unit. This allows investors to trade ETFs much more freely, making them a much more liquid investment than mutual funds. In turn, this gives investors more freedom in their trading strategies.
Check each one’s brokerage fees, whether they impose inactivity fees, minimum deposit amounts and what markets they have access to. If you’re new to investing, choosing an easy-to-use trading platform with educational features and financial advice can also be a good option.
After you’ve opened a trading account, it’s time to choose your ETFs. There are different types of ETFs, as explained below, but no matter the variety of ETFs you should assess two important factors: the expense ratio and whether they pay dividends. The expense ratio is essentially the fixed rate you pay the issuer for the ETF’s management, normally shown as a percentage; for example, a 1% rate on an investment of $800 would mean paying $8 per year.
Dividends may or may not be paid depending on the underlying assets and the terms of the fund. Should your ETF pay dividends, check whether they are paid directly to your bank account or if they are automatically reinvested as part of a dividend reinvestment plan (DRP). Information on both the expense ratio and dividends should be available in the ETF’s product disclosure statement.
Passive ETFs (also known as index funds) are intended to track an index highly accurately, working on the principle that the market will generally rise over time even if individual securities within it fall. This makes a passive/index a relatively hands-off investment for the long term which will hopefully gradually build up a solid return.
Active ETFs (also known as Exchange Traded Managed Funds, or ETMFs) aim to outperform the market they’re based on. The Active ETF’s fund manager will do this by focusing more heavily on high-performing securities within the index and, as the name suggests, being more active in trading assets to rebalance the Active ETF.
Beyond active and passive ETFs there are also many other variations such as commodity, currency, debt, fixed income or bond, and sector ETFs.
Sector ETFs: Track market sectors instead of indexes — for example, a technology ETF would track a set of companies in the tech sector, and insurance ETFs might track car insurers or life insurance providers.
As with every investment, exchange-traded funds do carry risk and it’s important for every investor to do their own research, conduct due diligence, investigate the product disclosure statement and be aware of the pros and cons from a taxation standpoint.
That said, ETFs can be a great way to diversify your portfolio and gain access to a wide array of asset classes, especially for investors that are looking to build wealth, minimise risk and capitalise on the benefits that investors can gain from an ETF.