Investors seeking steady returns and good yields in the share market have had new investment opportunities open up in recent years with the advent of exchange trade funds (ETFs). In this column I have regularly reviewed different investment themes and money making opportunities with the local ETF sector, ranging from sector rotation to international exposure.
ETFs strongest benefit is their relative cost. For a fraction of the cost of most actively managed funds, investors can get exposure to indices that track established benchmarks such as the S&P/ASX 200 (State Street’s STW) or S&P/ASX 300 (Vanguard’s VAS). Their management expense ratios are 0.29% and 0.15%, respectively.
We've also looked at so-called 'strategy based' ETFs, such the suite of high-dividend-yield products available. For only a fraction more in management fee, these ETFs aim to select stocks from within the large cap and most liquid end of the market that are most likely to produce reliable and above-average dividend yields. Ideally, such ETFs might produce capital returns broadly in line with the market over the long-run, though with the added benefit of a higher dividend yield. As such, these products are well suited to investors seeking regular tax effective income.