# ETFs



## daunus (17 September 2009)

Hi, I have about 13k to invest and think of putting them in ETFs. I know very little about investing, but want to get my feet wet this way.

My first question is, do ETFs pay and dividents? 

how do I invest in ETFs

any tips?


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## Judd (17 September 2009)

Spend $100-$200 on books about the sharemarket before you place any money in it either on a trading or long-term basis.  That's my tip.  What books you will then ask?  Go to a bookshop or library and browse.


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## daunus (17 September 2009)

Thanks, Im certainly trying to educate myself more before I do anything, and as part of that education It would be helpful If you answered my orginal question.

From what I understand there is no dividend as such but distributions, So all the dividends collected are paid out in distributions. 

Any tips secifically about Etfs Judd?


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## cutz (17 September 2009)

daunus said:


> Hi, I have about 13k to invest and think of putting them in ETFs. I know very little about investing, but want to get my feet wet this way.
> 
> My first question is, do ETFs pay and dividents?
> 
> ...




Hi daunus,

STW is the ASX200 EFT and yes it does pay distributions, here's a link http://www.spdrs.com.au/

You can buy via any retail broker and in my opinion the easiest way to get diversified.


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## lasty (17 September 2009)

daunus said:


> Thanks, Im certainly trying to educate myself more before I do anything, and as part of that education It would be helpful If you answered my orginal question.
> 
> From what I understand there is no dividend as such but distributions, So all the dividends collected are paid out in distributions.
> 
> Any tips secifically about Etfs Judd?




Try this website www.etfmate.com.au


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## Early Bird (22 September 2009)

hi all,

i'm looking into etfs as well at the moment. the one thing i dont understand is that they mention a management fee, would this come out of the distributions, or do you pay it on top, or does it just come out of the value of the fund? i suppose it cant be the latter, otherwise the price of units in the fund woudln't keep track with the index...

also, can distributions be franked?

confused...


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## niknah (10 October 2009)

Early Bird said:


> hi all,
> 
> i'm looking into etfs as well at the moment. the one thing i dont understand is that they mention a management fee, would this come out of the distributions, or do you pay it on top, or does it just come out of the value of the fund? i suppose it cant be the latter, otherwise the price of units in the fund woudln't keep track with the index...
> 
> ...




It'll be a number in the annual report.  It comes out of the cash holdings of the fund, they all hold a little bit of cash.  No it doesn't keep track of the index exactly, if you compare an etf with the index that it is tracking, the value of the etf slowly under performs the index over a long time.

I'm doing my taxes now, the dividend can be franked, unfranked, foreign income, they can get some franking credits, foreign tax credits, capital gains.  It can be a hassle to fill the tax in.


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## CanOz (25 June 2013)

A weekly pattern to watch for those interested in trading Country ETFs....

Confluence with the news is always nice too


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## CanOz (4 March 2014)

RUSS - Russian 3x bear ETF....in a cup and handle....


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## CanOz (4 March 2014)

CanOz said:


> A weekly pattern to watch for those interested in trading Country ETFs....
> 
> Confluence with the news is always nice too




This one was obviously a case of buy the bad news at the time, the H&S didn't trigger and the ETF went on to recover well.


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## CanOz (26 March 2014)

USO....bear flag


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## li21 (4 April 2014)

What sort of dividend yield can we exp from a index ETF on ASX?

Also what are peoples thoughts on ETF vs a direct fund manager ?

Is not being able to add to the fund on regular basis (without paying brokerage) the main draw back of ETF?


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## CanOz (4 April 2014)

li21 said:


> What sort of dividend yield can we exp from a index ETF on ASX?
> 
> Also what are peoples thoughts on ETF vs a direct fund manager ?
> 
> Is not being able to add to the fund on regular basis (without paying brokerage) the main draw back of ETF?




I think ETFs are great and i trade them occasionally to participate in what i suspect at the time are Macro Trends.

There is no reason you cannot add to positions in ETFs. I trade the patterns though, just as a method to enter into a trend. Some are easier to trade than other though and it pays to do some research on the ETF, hows its structured etc...


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## Bill M (4 April 2014)

li21 said:


> What sort of dividend yield can we exp from a index ETF on ASX?




Anything from zero to about 6% gross at the moment.



> Also what are peoples thoughts on ETF vs a direct fund manager ?




It has been known for many years now that around 70% of all fund managers can't beat the index, so the theory goes as to why try and pick winners, why not just buy the index?



> Is not being able to add to the fund on regular basis (without paying brokerage) the main draw back of ETF?




Swings and roundabouts, Listed ETF's usually charge a lower management fees but of course you pay brokerage. For me it comes down to selling at moments notice rather than waiting a few days for it to go through. I would go the listed ETF rather than a managed fund or ETF that is not listed.


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## thembi (15 May 2014)

Early Bird said:


> hi all,
> 
> i'm looking into etfs as well at the moment. the one thing i dont understand is that they mention a management fee, would this come out of the distributions, or do you pay it on top, or does it just come out of the value of the fund? i suppose it cant be the latter, otherwise the price of units in the fund woudln't keep track with the index...
> 
> ...




Just adding to what others have written here in case it's helpful.

The management fee of ETFs will be deducted from the net asset value (NAV) of the fund on a daily basis - rather then being taken out of distributions. This is why you will see a difference between the index being tracked by the ETF and the performance of the ETF itself. Perhaps the biggest benefit of ETFs however is that generally these management fees are very small (usually less than 0.50% per year).

Generally speaking dividends earned by the underlying shares being held are passed on to investors in their entirety, inclusive of franking credits.


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## Wysiwyg (9 April 2015)

*Over-rated*

I see a lot of raps for ETF's and think they are ideal for set and forget div./dis. investors. Can't see any trading for growth possibility.


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## thembi (10 April 2015)

Wysiwyg said:


> *Over-rated*
> 
> I see a lot of raps for ETF's and think they are ideal for set and forget div./dis. investors. Can't see any trading for growth possibility.




I have to respectfully disagree with that. Now that the ETF industry has growth (approx. 100 ETFs on ASX), there are many opportunities for traders to use ETFs more actively to obtain growth. Examples include trading sector ETFs based on views on the market (e.g overweight financials, underweight resources), using currency ETFs to trade views on, for example, the USD/AUD cross, and even things like BEAR which allow investors to profit from or protect against a decline in the market (the fund is designed to go up when the market goes down). ETFs are great from a 'buy and hold' perspective, but can definitely be used tactically as well..


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## DeepState (10 April 2015)

thembi said:


> ....but can definitely be used tactically as well..




ETF unit creation/destruction via institutional flow has grown markedly at the expense of futures.  They are used for tactical purposes in this context.  The advantages from an insto perspective of using ETFs vs futures include: tax, roll risk, tracking risk, market-on-close pricing for the baskets.

For retail investors seeking to trade with leverage, I can see WYSIWG's perspective.  For them, futures/CFD remains the main game.


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## banco (10 April 2015)

thembi said:


> I have to respectfully disagree with that. Now that the ETF industry has growth (approx. 100 ETFs on ASX), there are many opportunities for traders to use ETFs more actively to obtain growth. Examples include trading sector ETFs based on views on the market (e.g overweight financials, underweight resources), using currency ETFs to trade views on, for example, the USD/AUD cross, and even things like BEAR which allow investors to profit from or protect against a decline in the market (the fund is designed to go up when the market goes down). ETFs are great from a 'buy and hold' perspective, but can definitely be used tactically as well..




Nearly all the ASX ones seem very illiquid.


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## thembi (10 April 2015)

banco said:


> Nearly all the ASX ones seem very illiquid.




Definitely the most misunderstood area of ETFs is liquidity. Because an ETF is open-ended liquidity on screen is only 'the tip of the iceberg' and the real liquidity is bound only by the liquidity of the underlying. This is because the ETF can create new units at any time in relation to ETF demand (and vice versa). 

Here is a good blog post on the topic - http://www.betasharesblog.com.au/etf-liquidity-will-it-be-there-when-i-need-it/


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## thembi (10 April 2015)

DeepState said:


> For retail investors seeking to trade with leverage, I can see WYSIWG's perspective.  For them, futures/CFD remains the main game.




Yes that's true, there is only one product at the moment providing leverage (over the S&P/ASX 200) which is GEAR - if you are looking for extreme leverage, ETFs are probably not for you


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## Tooth Faerie (17 April 2015)

Just seeking some opinion on geared ETFs. I was looking into geared etfs, falling prey to the thought that if I hold an ETF long-term (looooong) then the leverage will boost my returns. Then I got to thinking that perhaps the magnified losses and wins would just cancel each other out.

A quick googling had me concluding that geared ETFs will actually underperform a non-geared ETF over the long-term.

Just wondering what everyone else thought?

Bibliography:
http://news.morningstar.com/articlenet/article.aspx?id=271892

http://seekingalpha.com/article/35789-the-case-against-leveraged-etfs

PS This seems to suggest that geared ETFs might be okay
http://ddnum.com/articles/leveragedETFs.php


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## clowboy (17 April 2015)

Tooth Faerie said:


> Just seeking some opinion on geared ETFs. I was looking into geared etfs, falling prey to the thought that if I hold an ETF long-term (looooong) then the leverage will boost my returns. Then I got to thinking that perhaps the magnified losses and wins would just cancel each other out.
> 
> A quick googling had me concluding that geared ETFs will actually underperform a non-geared ETF over the long-term.
> 
> ...




Your not reading what those links are saying, the EFT's are not simple geared EFT's.

If you gear an EFT then over the long term it will enhance the long term average return, if the ETF returns more positive years than negative you will be in front and vice versa.  That's assuming cost of funding is zero and no tax implications.
In reality in today's terms it would need to return in excess of 3% pa to break even at a 50% LVR, an exact figure depends on individual circumstances for tax and how you fund the loan.


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## Tooth Faerie (17 April 2015)

clowboy said:


> Your not reading what those links are saying, the EFT's are not simple geared EFT's.
> 
> If you gear an EFT then over the long term it will enhance the long term average return, if the ETF returns more positive years than negative you will be in front and vice versa.  That's assuming cost of funding is zero and no tax implications.
> In reality in today's terms it would need to return in excess of 3% pa to break even at a 50% LVR, an exact figure depends on individual circumstances for tax and how you fund the loan.




Can you explain elaborate a bit more on your first point? I am a newbie.

From what I understoond simple geared ETFs tracking indices underperform because they magnify wins and losses daily rather than annually, which by their math, means you lose in the long-run.

I read also that external gearing, e.g. holding ETFs in a margin account, is a better way to gear ETFs than internally geared ETFs. I find it hard to grasp this conceptually. Hope someone can explain it to me in simple terms.


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## DeepState (17 April 2015)

Tooth Faerie said:


> I read also that external gearing, e.g. holding ETFs in a margin account, is a better way to gear ETFs than internally geared ETFs. I find it hard to grasp this conceptually. Hope someone can explain it to me in simple terms.




Objective: obtain a leveraged exposure to a market.  
Say you have $100k in the bank and want $200k in market exposure.

Option 1 (external leverage): You borrow $100k from some place, add this to your own $100k and buy $200k worth of the market.

Option 2 (internal leverage): There is a fund, where, for every $1 in equity, it is matched with $1 of debt which the fund itself borrows from some other place.  You buy $100k of this fund.  Within the fund, there is $100k of borrowings matching the equity you just put into it.  In total, you will now have $200k in market exposure.  You, in person, did not borrow a cent.  All leverage happens within the fund.


Which is better?

All else equal, if the interest charges for one option is lower than the other, the alternative with the lower interest charges are preferred.  Fees will also be a factor.  Ultimately, the question is "which costs less to get $200k worth of market exposure?"


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## skyQuake (17 April 2015)

Tooth Faerie said:


> Can you explain elaborate a bit more on your first point? I am a newbie.
> 
> From what I understoond simple geared ETFs tracking indices underperform because they magnify wins and losses daily rather than annually, which by their math, means you lose in the long-run.
> 
> I read also that external gearing, e.g. holding ETFs in a margin account, is a better way to gear ETFs than internally geared ETFs. I find it hard to grasp this conceptually. Hope someone can explain it to me in simple terms.




In addition to Deep State's explanation, US leveraged ETFs can have one *VERY* important feature.

*The 2x or 3x leveraged ETFs seek to replicate daily 2x or 3x performance, not long term. *

Whats the difference you ask? The difference between arithmetic and geometric means! eg. if a stock loses 10%, then makes back 11.11% the next day, its back at breakeven. 
The 3x ETF however, is -30%, then up 33.33% = 0.93333, leaving you with a 6.66% loss already! Long term, volatility tends to turn your investment to 0 (thats why everyone is fighting to make more leveraged ETFs)


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## DeepState (17 April 2015)

Tooth Faerie said:


> Can you explain elaborate a bit more on your first point? I am a newbie.
> 
> From what I understoond simple geared ETFs tracking indices underperform because they magnify wins and losses daily rather than annually, which by their math, means you lose in the long-run.
> 
> I read also that external gearing, e.g. holding ETFs in a margin account, is a better way to gear ETFs than internally geared ETFs. I find it hard to grasp this conceptually. Hope someone can explain it to me in simple terms.








skyQuake said:


> In addition to Deep State's explanation, US leveraged ETFs can have one *VERY* important feature.
> 
> *The 2x or 3x leveraged ETFs seek to replicate daily 2x or 3x performance, not long term. *
> 
> ...




Oh...yea.  Now I think I see where you are coming from.

The reason why things might be as SQ states is that the ETFs move to keep leverage ratios constant.  If the market drops by 10%, they reduce the borrowing amount by 10% so that the leverage ratio remains more or less constant.  What that means is that you sell low and buy high.  It's actually form of insurance to prevent you from going bankrupt as markets go down.  Believe it or not, but you are paying for that insurance.

An alternative is to keep your dollar leverage unchanged.  It the market falls 10%, you don't change the amount borrowed.  If the market then rises 11.11% the next day, you are restored back to the same position.  You can do that in a margin account because you control the leverage, not the fund.

However, in the presence of strong trends (relative to volatility), the levered ETF will do better if markets are rising than the alternative of keeping your dollar leverage unchanged.  That's because the fund will increase dollar leverage as markets go up.  Of course, if markets go down a long way, keeping dollar leverage unchanged will crater you at an increasingly frightening rate.

When you lever, this is a really big issue and there is no right answer.  You actually need to have a perspective on what the markets will do in order to figure out what is best.  There are break-evens depending on the return expectation, interest/fees and return volatility.  

Further, equity markets show excess short term volatility.  In other words, the market moves around a lot more in the short term than would be implied if you looked at things over a longer time period.  All things equal, this makes keeping the leverage ratio constant within an ETF more damaging to performance.

I suspect that, in reality, ETFs operate within a range of leverage.  That's the case for GEAR:ASX anyway.  That helps to reduce the impact of that issue of keeping the leverage ratio constant in all situations. 

Not straight forward is it?


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## Tooth Faerie (18 April 2015)

skyQuake said:


> In addition to Deep State's explanation, US leveraged ETFs can have one *VERY* important feature.
> 
> *The 2x or 3x leveraged ETFs seek to replicate daily 2x or 3x performance, not long term. *
> 
> ...




Yes exactly, that's what I gathered from the articles I read. Looking into iShares' GEAR ETF, it also works on doubling _daily_ performance as well. Leading to volatility drag in the long term.



DeepState said:


> Oh...yea.  Now I think I see where you are coming from.
> 
> The reason why things might be as SQ states is that the ETFs move to keep leverage ratios constant.  If the market drops by 10%, they reduce the borrowing amount by 10% so that the leverage ratio remains more or less constant.  What that means is that you sell low and buy high.  It's actually form of insurance to prevent you from going bankrupt as markets go down.  Believe it or not, but you are paying for that insurance.
> 
> ...




Thank you for the detail response DeepState. I'm starting to understand a bit more but still struggling to grasp the concept completely why external gearing is less likely to be detrimental (if that is true at all). I will do further reading to try and understand more.


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## shouldaindex (18 April 2015)

Let's say you wanted to buy an ASX300 ETF, and put 50% of your money in that index.

Would you just choose 1 ETF, or would you choose multiple ETFs from different companies to protect against risk of whatever.


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## DeepState (18 April 2015)

shouldaindex said:


> Let's say you wanted to buy an ASX300 ETF, and put 50% of your money in that index.
> 
> Would you just choose 1 ETF, or would you choose multiple ETFs from different companies to protect against risk of whatever.




1 is fine.


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## Vixs (18 April 2015)

shouldaindex said:


> Let's say you wanted to buy an ASX300 ETF, and put 50% of your money in that index.
> 
> Would you just choose 1 ETF, or would you choose multiple ETFs from different companies to protect against risk of whatever.




I don't see much benefit in diversifying 'managers' (custodians?) for the sake of diversifying in this case. You're not trying to manage manager risk, it's a passive strategy. Personally my concern would be the amount of synthetic exposure the ETF has. The less the better for me.


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## DeepState (18 April 2015)

Tooth Faerie said:


> Thank you for the detail response DeepState. I'm starting to understand a bit more but still struggling to grasp the concept completely why external gearing is less likely to be detrimental (if that is true at all). I will do further reading to try and understand more.




There is no universally dominant outcome.  The best decision requires some sort of notion as to what the market is going to do...including how volatile it is...and some notion of how much the return on the market exceeds fees and interest.  In the absence of that, it is a shrug.

External static gearing works best if the market will never bankrupt you (ie. not fall by enough that your account is totally vaporized) and the market performs in the middle ground of return expectations/volatility. Hard to say what level of leverage that implies. On either extreme of return expectations, or if volatility turns out to be low (in general...crikey, the actual pattern of returns matters here), you are better off with static leverage ratio (internal gearing within an ETF).

Giving some buffer to the leverage ratio as per GEAR:ASX tries to find some sort of middle ground between the extremes.  However, even this action can produce worse outcomes than a static leverage ratio under certain conditions.

Basically, gear up 1:1 only if you are confident the market will, on average, deliver a return where the margin of the (annual arithmetic return you expect for the market over the (interest rate)/2)x2, minus the annual expected variance of market returns, is 'well above' the (unlevered expected arithmetic return less half of the annual expected variance of the market). Got that?  After that, it is close to a crap shoot as to whether to internally or externally finance (it is an options pricing problem with lots of loose bits). 

Rebalancing under conditions of leverage is effectively paying away rebalancing profits to those who do not leverage but can buy dips and sell peaks.  On most occasions, this is less expensive for the external borrower who keeps a static dollar borrowing amount.  However, if they never change their dollar leverage amount, there is a chance that, at 1:1 leverage, say, they would be wiped out...like say in the GFC.  That would not happen in the internally financed ETF unless the market completed closed.  It is for this reason that maintaining a fixed leverage ratio costs expected returns....it protects you against bankruptcy.  As mentioned before, you are paying insurance by investing this way.  There is no free lunch to be had here for simply saying you'll maintain external leverage vs internal leverage.  There is no free lunch to be had just for leveraging without being confident that returns will be high enough to allow for the risk of bankruptcy or the rebalancing costs.

Not straight forward is it?


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## Tooth Faerie (19 April 2015)

DeepState said:


> Not straight forward is it?




Definitely not straightforward.

I understand your point now. To leverage means that my view is of capital appreciation, otherwise it would make little sense to gear.


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## thembi (20 April 2015)

Just to add a little more to the discussion. I've looked into ASX: GEAR and found its annual performance. As you can see, in a situation where the market has been rising, ASX: GEAR has indeed substantially outperformed the market, net of fees/borrowing costs




Also, just to clarify, ASX: GEAR differs markedly from the US products referred to above, which have a 'daily rebalancing' objective. The daily rebalance means that the returns of the products are much more susceptible to what is known as 'path dependency' - which means depending on the path of the returns actual fund returns can vary quite substantially over the course of longer than a day. The ASX: GEAR product uses a wider range (of 90-110%) before any rebalance takes place which will mean that the return are less affected by path dependency.


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## The Falcon (22 June 2015)

Great posts DS


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## CanOz (23 October 2015)

For any of those that missed the recent break higher on some of the US indices, the small caps index ETF IWM is still coiling for a breakout. So this might be one to put on your watchlist....

I don't hold currently but will watch....


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## Wysiwyg (29 September 2017)

Wysiwyg said:


> *Over-rated*
> 
> I see a lot of raps for ETF's and think they are ideal for set and forget div./dis. investors. Can't see any trading for growth possibility.



Seems passive investment is all the rage at  present. Exchange Traded Funds are where people can park their money for apparent growth over time with no management fees. Everyone happy when the trend is constantly up.

IWM at 147 bucks tracking the Russel 2000 up.


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## drequejo (1 October 2017)

I have a system based on ETFs with a pretty decent backtesting results.
It is base on momentum and volatility  The basic idea is to select a group of ETFs and rebalance the basket ones a month based on the momentum and volatility. If somebody is interested I can explain it, and if you use Amibroker I can give you the code.


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## rb250660 (1 October 2017)

Is this for the US markets or ASX drequejo?


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## Sir Burr (1 October 2017)

Lots of info here about rebalancing monthly ETFs.
https://indexswingtrader.blogspot.com.au/

Use on Aussie or US ETFs but the number of US is huge compared to us. Idea is to have a variety that will cover various industries/markets/conditions.

Maybe I haven't found the magic ones on the ASX but for things I tested found US outperformed but not sure why. Thing with the US ETFs (for us) is covering the AUDUSD.


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## OmegaTrader (1 October 2017)

I suppose their is alot of irony in the passive investing /etf debate.


 The main purpose of an etf is to be passive but more you look into it the more complicated it gets-further down the rabbit hole. Logarithmic nature of returns, volatility, do you use a derivative like futures,cfd's or options, do you borrow on margin or against your house or do you use a vanilla etf or a geared etf. What is the ideal position sizing? How much gearing? What is the opportunity cost of cash?How much cash do I hold?  What is the tracking error. How much do I diversify? Do I hedge? What are the taxation benefits/costs. 

It can do your head in. Not too mention that the whole basis or passive investing is the mantra that in the long term that asset prices will go up. This has not happened in every country around the world and therefore an assumption or in reality a bet on the future of Australia.



I remember years ago a finance lecturer when I was at uni said verbatim,  I just buy the top 20-30 stocks and a few small caps here and there, then I look at it  every 3-6 months and adjust the portfolio slightly. I can't justify the time, complexity and effort of the other options and also can't justify the fees.


and of course THIS IS NOT ADVICE

my two cents.


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## drequejo (1 October 2017)

rb250660 said:


> Is this for the US markets or ASX drequejo?



US market


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## drequejo (1 October 2017)

OmegaTrader said:


> I suppose their is alot of irony in the passive investing /etf debate.
> 
> 
> The main purpose of an etf is to be passive but more you look into it the more complicated it gets-further down the rabbit hole. Logarithmic nature of returns, volatility, do you use a derivative like futures,cfd's or options, do you borrow on margin or against your house or do you use a vanilla etf or a geared etf. What is the ideal position sizing? How much gearing? What is the opportunity cost of cash?How much cash do I hold?  What is the tracking error. How much do I diversify? Do I hedge? What are the taxation benefits/costs.
> ...





OmegaTrader said:


> I suppose their is alot of irony in the passive investing /etf debate.
> 
> 
> The main purpose of an etf is to be passive but more you look into it the more complicated it gets-further down the rabbit hole. Logarithmic nature of returns, volatility, do you use a derivative like futures,cfd's or options, do you borrow on margin or against your house or do you use a vanilla etf or a geared etf. What is the ideal position sizing? How much gearing? What is the opportunity cost of cash?How much cash do I hold?  What is the tracking error. How much do I diversify? Do I hedge? What are the taxation benefits/costs.
> ...




 I have a basket of 15 ETFs. The system buy 2 ETFs and rebalance every month based on Volatility and Momentum so far the system is around 12% profit per year in average since 2007. Only one negative year 2012 with -2.7%. 2008 was a nasty year, the system made 8.3% but the DD was 25%. DD can be decreased by using a market filter. Monte carlo analysis show the system is robust. 

I use this system as part of my portfolio with 10% of my capital. I trade the majority of my capital in options strategies.


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## drequejo (1 October 2017)

Sir Burr said:


> Lots of info here about rebalancing monthly ETFs.
> https://indexswingtrader.blogspot.com.au/
> 
> Use on Aussie or US ETFs but the number of US is huge compared to us. Idea is to have a variety that will cover various industries/markets/conditions.
> ...




For covering you can use a forex position and rebalance every month or you can use the AUDUSD future, mini future or micro future depend on the capital of your account.
Or you can use a multi currency account (IB provide it) and you don't need to cover, IB lend you USD you pay and interest, I think now is 2.66%. Obviously covering currency has a cost that need to be considered before make any investment.


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## lenny (2 October 2017)

Hi drequejo,
Do you have a AUD hedge on atm?


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## Sir Burr (2 October 2017)

drequejo said:


> Or you can use a multi currency account (IB provide it) and you don't need to cover, IB lend you USD you pay and interest, I think now is 2.66%.




Thanks drequejo.
Not sure about this: you don't need to cover with the muli currency account.

How does that work? If you buy US ETFs you would still need a futures contract or similar if you wanted a hedge?


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## drequejo (2 October 2017)

Sir Burr said:


> Thanks drequejo.
> Not sure about this: you don't need to cover with the muli currency account.
> 
> How does that work? If you buy US ETFs you would still need a futures contract or similar if you wanted a hedge?






IB account is multy currency, what means the currency you deposit in is kept.

If for example you deposit $10000 AUD and $10000 USD and 10000 EUR, your account would have EUR, AUD and USD until you convert it in the currency you want by using Forex FXConv.

The base currency you choose for your account is only a representation of the numbers in a currency it is only for showing the numbers in that currency. Ideally you have only one currency and you use the same as a base currency.

An example of how the IB currency loan works:


You have AUD in your account

You want to buy 10.000$ USD in SPY. For making the sample easy let’s assume you buy 10.000$ USD in SPY the 1st of the month and you close your position the 30th of the month

The 1st of the month IB lend you 10000$ USD for buying the SPY (You need to have enough AUD for covering the 10k USD)

Let’s assume  at the end of the month you wing 10%, 1000 USD

When you close the position IB get back the 10k USD + Interest and you have in your account the initial AUD + 1000 USD.

The only capital is not covered is the money you win

I hope it is clear.


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## Dona Ferentes (2 January 2021)

Investors’ penchant for risk-taking has rejuvenated a volatile and sometimes dangerous group of exchange-traded funds.

_Leveraged and inverse ETFs have raked in $16.3 billion through the first 10 months of the year, on pace to top 2008’s record haul of $16.7 billion, according to Morningstar. The funds use leverage to double or triple daily returns and sometimes offer investors a chance to profit off the inverse, or opposite, of an index’s move. Those features have proved popular in this year’s stock market rally_......











						Investors Pile Into Risky ETFs During Wild Market Rally
					

A penchant for risk-taking has rejuvenated leveraged and inverse ETFs, as investors hunting for bigger returns take bold gambits that have the potential for big gains and even bigger losses.




					www.wsj.com


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