Sydney, Australia, August 12, 2009 --(PR.com
)-- Australia's cosy $1.2 trillion managed funds industry is likely to face increased pressure in coming years given the growth of low cost exchange traded funds (ETFs).
Indeed, as their popularity grows, more Australians will find they can save thousands each year and boost their retirement saving by switching to lower ETFs, argues David Bassanese, founder and managing director of PennyWise Investment, Australia's first licensed specialist advisor in ETFs.
“The failure of most actively managed investment funds to protect investors from the 2008 bear market will aid the explosion in exchange traded fund (ETF) investing in the next few years.
“This will place enormous pressure on the $1.2 trillion managed funds industry to innovate, consolidate, and – most importantly - reduce fees.
“A saving in fees of 0.5% would give each Australian household an average $800 per year extra, and boost retirement nest eggs over 40 years by almost one quarter.
“Whether funds managers like it or not, the ETF snowball is rolling right towards them.”
Booming in the US but relatively new to Australia, ETFs are a revolutionary product that can be bought and sold on the stock market and provide broad exposure to investment markets, like the ASX 200 or America’s S&P 500 – at a fraction of the cost of retail managed funds.
And it’s not before time. A recent survey by Standards and Poor’s revealed that two thirds of Australian equity funds underperformed the benchmark ASX 200 index over the past five years.
Yet annual management fees on such funds can be as much as 2% or more. By contrast, “investors could buy an ASX 200 ETF – that matches performance of the Australian share market – for almost one tenth the price,” says David Bassanese, founder and managing director of PennyWise Investment,
“In fact, investors could run their own well diversified retirement fund for as little as 0.25% management fee per year – up to one tenth the cost of many actively managed funds,” says Bassanese.
“ETFs are ideally suited to be cornerstone investments within self-managed super funds, and should prove popular with the growing band of independent financial planners that want to recommend products without
expensive trailing commissions.
“With such high profile failures as Storm Financial and Westpoint, investors are also increasingly demanding simplicity and transparency in their investment options – something ETFs can easily provide.
“ETFs are a no-brainer in most investment portfolios. If your financial planner is not recommending them, you should ask why,” says Bassanese.
For more information on ETF investing and/or PennyWise Investment services, contact David Bassanese at email@example.com
or phone 0401 300 141.
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About David Bassanese
David Bassanese is one of Australia’s leading economic commentators. A former Federal Treasury official and economic consultant with the Organisation for Economic Cooperation and Development (OECD), David was senior economist and interest rate strategist with Macquarie Bank and Bankers Trust. In addition to running PennyWise Investment, David is a financial commentator.