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Do you recommend investing in ETFs for retirees? How do you rate ETFs in terms of risk compared to direct shares, or managed funds?
A: Thanks for the question.
ETFs in general, are fine for retirees.
Whether they are suitable for you will depend on your own particular situation.
ETFs that track broad based indices are in general, less risky than individual shares. With an ETF, you should get the return of the index, less a tiny management percentage. For example, if you invest in SPDRs ETF, that tracks the S&P/ASX 200 (ASX Code STW), then if the sharemarket goes up by 2%, then the value of your ETF should go up by 2%. They are passively managed.
On the other hand, managed funds are actively managed. Strong managers will perform ahead of the index, others will do worse than the index.
With individual shares, it will depend on your skills in portfolio construction, and hence they are arguably higher risk than an ETF that tracks a broad based index.
