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Exchange traded funds - Australia

Shares - Bringing the world's leading companies to join Australia's best Via Exchange traded funds

 

What is exchange traded funds ?

ETFs are portfolios of stocks, bonds or in some cases other investments that trade on a stock exchange much the same as a regular stock does

Etfs  are growing ,Asia, Africa and more recently Australia. Exchange. Traded Funds. Fact sheet.  Here is a ETF pdf file from www.asx.com.au giving the in and out of Etfs in australia

The S&P/ASX 200 ETF has allowed investors to build their portfolios with Australia’s leading companies. Now with iShares listed on ASX, Australian investors will be able to enhance their portfolios with the world’s leading companies with just one trade.

Barclays Global Investors (BGI) a global leader in Exchange Traded Funds (ETFs) has listed eight iShares on ASX.  Each of the funds tracks an established international market index enabling investors to gain cost effective and immediate exposure to global, regional and single country markets.

The table below lists each of the iShares and describes the composition of the iShare fund:

Fund Name
ASX Code
Composition

iShares MSCI Japan
IEM
Reflects the performance of the Japanese equity market

iShares MSCI Emerging Markets
IJP
Leading companies in 22 emerging countries and 10 industry sectors

iShares S&P Global 100
IOO
100 large transnational companies with minimum capitalisation of US$5bn

iShares S&P 500
IVV
US large-cap stocks across a range of industries

iShares S&P Midcap 400
IJH
US stocks capitalised at US$1bn to US$4bn

iShares S&P Smallcap 600
IJR
US stocks capitalised at US$300m to US$400m

iShares MSCI EAFE
IVE
Reflects European, Australasian and Middle East market’s performance

iShares S&P Europe 350
IEU
350 stocks in 17 European markets and 10 industry sectors

The shares of an iShares fund trade on a continuous basis at prevailing market prices. Each iShares fund holds a portfolio of securities that is managed to reflect the performance of the particular index being tracked.  The name of each fund above includes a reference to the underlying index and the sponsor of that index.  The index sponsor is responsible for choosing the components of that index.

For more information on iShares go to www.ishares.com.au.

ETF Education - ETF Center - Yahoo! Finance

ETFs are easy to use, but their internal workings are not. A finely tuned financial system is needed to operate create, trade and redeem them. ...

Morningstar: ETFs - Exchange-Traded Funds

Learn about Exchange-Traded Funds and view ETF performance data.

Advantages and disadvantages of ETF's

Like any tool, however, ETFs aren't appropriate for everyone in every situation. Here is a rundown of the pros and cons:

The pros

Flexibility One of the most commonly cited is flexibility. Since ETFs are listed on an exchange, you can buy and sell them at whatever price they happen to be trading at during the day just as with stocks.

Mutual funds, by contrast, are priced only once, at the end of the trading each day.

And because ETFs trade like stocks, you can also buy on margin -- that is, buy shares with borrowed money in hopes of magnifying your gains -- and use techniques for profiting from market downturns such as selling short, which involves borrowing shares and selling them in the hopes of replacing them with less expensive shares when the market falls.

Low costs ETFs' biggest plus is their low annual operating costs. Their expenses are not only well below those of traditional mutual funds, but in many cases even less than the expenses levied by their index fund counterparts.

For example, the iShares S&P 500 ETF charges 0.09 percent of assets per year, or just $18 a year on a $20,000 investment, while the Vanguard Total Stock Market VIPER, an ETF that tracks the entire U.S. stock market including stocks large and small, carries annual operating fees of just 0.07 percent of assets, or just $14 a year on a $20,000 investment.

Tax efficiency When a mutual fund manager sells a stock for a gain, shareholders in the fund are on the hook, regardless of whether they've sold their fund shares.

Since ETFs trade on an exchange like stocks, however, you're usually buying shares from or selling them to another ETF investor. So the ETF itself doesn't have to buy or sell securities. Which means there aren't taxable gains to be passed on. (ETFs may still generate taxable gains, however, if they have to sell shares to reflect a change in the stocks that make up the index they track. And like any other mutual fund, an ETF must pass along interest and dividend payments it receives.)

The cons

Brokerage commissions Probably the biggest disadvantage to ETFs is that you've got to buy them through a broker.

Even with the low fees available at discount and online brokers these days, brokerage commissions can seriously erode ETFs' low-expense advantage, especially when investing small sums of money.

For example, if you were planning to invest, say, $100 a month in ETFs, even a cost of just $10 per trade would mean 10 percent of your investment is being siphoned off. So your ETFs' price would have to rise 10 percent just to recoup your buying cost -- and you'll have to pay a commission when you sell too.

For this reason alone, ETFs are generally better suited for investors who are socking away larger amounts of money -- as in 401(k) and IRA rollovers. If you're more likely to be dollar-cost-averaging with small sums or you tend to invest sporadically with modest amounts of money, you're probably better off in a regular mutual fund.

Too much flexibility? The ability to move in and out of ETFs quickly could easily lead to the temptation to try jumping into sectors of the market you believe are about to explode for gains and then bailing out just before the sector tanks.

In theory, that may be a great strategy. In reality, it's a difficult feat to pull off.

Many investors end up buying into hot sectors late after prices have been bid up and then find themselves selling for a loss after the sector flames out. Even if you manage to time your entry and exit correctly, there's still the matter of transaction costs, which can eat into potential returns.

You may be the shining exception, but research by University of California at Davis finance professor Terrance Odean shows that the more often individual investors trade, the worse they tend to do.

AUstralian ETfs Listen On US stock exchange

ETF (Australia):

ETF Symbol
   ETF Name

EWA
iShares MSCI Australia Index Fund

IAF
Aberdeen Australia Eqty

The Australian exchange-traded fund (ETF) iShares MSCI Australia Index (EWA) has rebounded sharply lately. Some of the factors behind its increase include the resilient Aussie dollar that has reached new highs and steady performances by top holdings such as BHP, which is an industry leader in major commodity businesses, such as aluminum, coal and gas. Year-to-date, EWA is up 40.7% and CurrencyShares Australian Dollar Trust (FXA) is up 19.3%.

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