Safest index investment methods similar to shares?

[Krusty the Klown]

Krusty thanks for the reply. I looked up SPDR and it seems to be company of some kind. So these ETFs are somehow linked to this company aren't they? What exacly will happen if this company dissapears or goes broke with massive debts?

One thing to look for in a pooled investment is what is the structure? If the pooled funds are in the form of a company then if the management puts the total assets at risk you lose all your capital.

If the pooled funds are in a trust structure, which most managed funds are, then the management company's assets are totally separated from the actual investment funds. The assets in the fund, while the trustee has control of them, cannot be used in the management company's business. In effect they are quarantined in the fund. The manager must invest the funds as per the trust deed's mandate, in this case an index.

So if the management company goes broke, the investment funds are still intact, and can be distributed back to the beneficiaries, or investors. Or a different manager appointed to manage the funds.

If you use an LIC as an investment fund, then your capital invested is at risk the same as if you bought direct equities. Structurally, LIC's are different to ETF's, though they can offer the same benefits.

So if your concern is bankruptcy risk, it seems the trusts would be safer. You would have to read the PDS or prospectus of each entity to be sure though i.e. read the fine print.

 

[peterh]

I came across an article on the Vanguard website today discussing indexing, ETF's and risk which might be relevant:

http://www.vanguard.com.au/personal...constructing-portfolios-with-etfs&WT.mc_id=si

 

[ems]

I'm also new to shares and have been wondering if it would be best to buy individual shares or use an Index. I have looked at both Vanguard Aussie Shares and STW. If one wanted to contribute say 1k a month into a fund which would be the best in terms of fees etc?

I'm kinda leaning towards Vanguard but STW looks pretty good too. Hmmmm decisions decisions

 

[So_Cynical]

I'm also new to shares and have been wondering if it would be best to buy individual shares or use an Index. I have looked at both Vanguard Aussie Shares and STW. If one wanted to contribute say 1k a month into a fund which would be the best in terms of fees etc?

I'm kinda leaning towards Vanguard but STW looks pretty good too. Hmmmm decisions decisions

1K a month into STW using Comsec as your online broker would cost u 19.95 or through
Bell about 15 dollars....so u could cut your costs in half straight up by putting 2k in every
2 months....the STW thread can be found here https://www.aussiestockforums.com/forums/showthread.php?t=14461

 

[peterh]

I'm also new to shares and have been wondering if it would be best to buy individual shares or use an Index. I have looked at both Vanguard Aussie Shares and STW. If one wanted to contribute say 1k a month into a fund which would be the best in terms of fees etc?

I'm kinda leaning towards Vanguard but STW looks pretty good too. Hmmmm decisions decisions

Managed Funds are probably better for regular investment plans. ETF's are probably better for larger investments less frequently. Perhaps look at Vanguards Index Managed Funds.

 

[cutz]

This is where I need your help. I would like to reinvest in an index this time around. Are there really safe instruments around that can be sold/purchased just as quickly as shares and have no way of collapsing ? I don't really know how they are set up, but I wouldn't want them to be organised by some company that can go broke one day and the instrument dissapears off the ASX along with my money. Nor a product that forces me to sell in years from now.

Thanks for your advice.

If you want to invest in an index but not via a fund all I can suggest is to download a copy of the ASX20 constituent list, then in an excel spreadsheet record the market cap of each, total market cap, percentage of each constituent of total market cap then from there you can work out how many shares of each company you need per 100K or whatever you’ve got. Anyhow once you have the basic sheet set up you can play around with it to suit your needs.

BTW, there are probably flaws in the above so please DYOR, and if anybody else has a better method or suggestion let us know, indexing has always interested me but not via a fund.