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SMSFs like diversification from ETFs

Diversification is still the major factor motivating SMSF members to invest in exchange-traded funds (ETF), the latest market research has shown.

The “BetaShares/Investment Trends 2017 Exchange Traded Funds Summary Report” revealed 72 per cent of SMSF members who use ETFs did so to achieve better diversification within their fund portfolio.

Other motivating factors included the low-cost nature of ETFs, with 60 per cent of SMSF respondents surveyed for the study citing this reason, and the access ETFs give investors to overseas markets, with 54 per cent of SMSF members nominating this as an important consideration.

According to Investment Trends research director Recep Peker, the reasons SMSF members give for allocating a part of the fund’s assets to ETFs are in alignment with non-SMSF ETF investors.

He did, however, point out there were some notable differences.

The research showed SMSF members indicated the liquidity associated with ETFs and the ease with which you could buy and sell them was important, with 38 per cent of this group expressing this sentiment. In contrast, only 28 per cent of non-SMSF ETF investors thought this was a major motivating factor.

On the other hand, around 34 per cent of non-SMSF ETF investors saw avoiding risk through individual stock exposure as a good reason to use these offerings. Conversely, only 29 per cent of SMSF members thought this was a driver for an investment in ETFs.

“If you think about why this might be the case, SMSFs tend to have a lot more in assets so they can invest in multiple stocks and reduce that risk, whereas for smaller investors that’s not always possible,” Peker noted.

The “BetaShares/Investment Trends 2017 Exchange Traded Funds Summary Report” was conducted in 2017 across the months of August and September. Overall, 6000 responses were received and analysed.

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