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Understanding the structure of different investment options is key to choosing what’s right for your objectives and risk profile. Sally Campbell from JBWere, explains the benefits of the main types of product you can include in your portfolio.
LICs, ETFs, SMAs, ETPs, mFunds, unit trusts… I thought professionally managed products were introduced to make investing simple for private investors. Is anyone else confused by the ever increasing array of investment structures now available? Well if you are, you are not alone.
I prepare a monthly update on listed managed investments and when I started preparing the document in late 2014 I included a section titled “New News” where we discuss any new ETFs, LICs or ETPs that listed during the month. Initially, I thought this would be short-lived because not many new products come out each month. In reality, there has been no shortage since then.
As investors, it is important to be able to differentiate investment structures so that you are aware of their characteristics and can identify which is most appropriate for your portfolio.
Often referred to as managed funds, unit trusts have been the core investment structure of the Australian market for many years now.
Examples include: WaveStone Australian Share Fund and Zurich Global Growth Fund.
LICs also have a long track record and have been well supported over the years.
Examples include: Magellan Global Equity Fund (MGE), BetaShares Australian Equities Bear Fund (BEAR)
Interest in ETFs has increased over the last five years.
Examples include: iShares S&P 500 (IVV), SPDR S&P/ASX 200 Fund (STW).
ETP is a term used for a range of listed investments:
mFunds are unlisted managed funds available for settlement under the ASX Operating Rules and through the mFund Settlement Service.
Examples include: Aberdeen Asian Opportunities Fund, Bennelong ex 20 Australian Equities Fund.
SMAs are direct stock/bond/hybrid portfolios managed on a discretionary basis.
Examples include: JBWere Growth Portfolio, JBWere Fixed Income Portfolio.
As I have highlighted, there are advantages to each structure. This summary will help guide you towards the most appropriate structures for your portfolio and objectives within your risk profile. Please contact your adviser for more information.
By Sally Campbell, JBWere
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