Questions of the Week – ETFs, buybacks and financial advisor fees are on the agenda

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Question 1: I’m looking to invest in the ETF, HACK. I’ve noticed that over the last nine months, the amount of shares on issue has increased from 10MM to 18 MM. Surely this must be diluting the share price and the dividends. Can you give me your thoughts, please?

Answer (by Paul Rickard): Thanks for the question. Like all ETFs, HACK is an open-ended fund, meaning that it grows or shrinks depending on investor activity and the role of market makers. From an investor’s perspective, the only downside from being open-ended is whether the growth inhibits the ability of the manager to find attractive investments.  Personally, I’d be surprised if HACK had yet reached this size. The demand and supply for HACK does not affect its price, it’s the share prices of the stocks the ETF holds that determines that.

Question 2: I note in the BHP buy-back information that part of the arrangement is “a fully franked deemed dividend.” From the ATO website, they say “DEEMED” means the dividend is from the company accumulated franking credits. Does this mean shareholders will receive all the dividend money as a franking credit, which can be claimed from the ATO in due course?

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