Shocked by the low level of investor knowledge concerning cheap exchange trade funds, leading Australian economist and finance commentator David Bassanese has launched an investment service to help financial planners and self managed super funds exploit their advantages.
Booming in the US but relatively new to Australia, ETFs are a revolutionary product that promise to save average investors thousands. They 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 Standard 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, Australia’s first specialist ASIC licensed provider of investment advice on ETFs.
“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.
“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."
Mr Bassanese said that this would 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," he said. "Whether funds managers like it or not, the ETF snowball is rolling right towards them.
“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.”
For more information on ETF investing and/or PennyWise Investment services, contact David Bassanese at [email protected] 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 provides regular commentary to The Australian Financial Review, through his “Bassanese” column.
PennyWise Investment helps investors, financial planners and accountants easily run their own balanced investment fund for a fraction of the cost of most actively managed funds. Using a relatively new product to Australia - exchange traded funds or "ETFs" - our AssetMAX Report helps clients effectively run a total-return global macro fund at an effective management fee of as little as 0.25%.
Our flexible investment strategy also offers better returns for less risk. Rather than a fixed exposure to equities or bonds, studies show that a carefully implemented tactical asset-switching strategy can allow investors to avoid the worst of bear markets and ride the strongest markets during bull periods. The result is equity beating longer-run returns with reduced volatility.
PennyWise Investment was founded by David Bassanese, one of Australia's best-known economic analysts. With 20 years experience in financial markets and economic forecasting, David is also an expert commentator with The Australian Financial Review and Smart Investor magazine, where his "Bassanese" column appears regularly.