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Why older Aussies should buy ETFs
Retirees looking to move up the risk curve in a low-yielding environment are being urged to look at exchange-traded funds as a way to minimise risk.
Why older Aussies should buy ETFs
Retirees looking to move up the risk curve in a low-yielding environment are being urged to look at exchange-traded funds as a way to minimise risk.
In a conversation with nestegg, ETF Securities CEO Kristian Walesby explained the situation many retirees are facing and how they can reduce their overall risks through diversification.
“When we look at typical SMSF as a proxy for a person coming up to a retirement or in retirement actually has, you’re going to see it loaded up with five or six top 20 companies,” Mr Walesby said.
The ETF provider explained that if investors only have a narrow pool of shares in similar sectors, they are facing higher levels of risks then required.
“If they only have six or seven companies and two are banks, you can have a situation where those banks are not doing what they used to do and are not able to pay the same yields,” Mr Walesby said.
The ETF provider believes a low-risk ETF product can help provide balanced growth with less risks for older Australians in a couple of trades.
“You only need two or three of them and they should have a good profile in combination in lower risk through lower-risk classes,” Mr Walesby said.
Mr Walesby also highlighted the need for providers to educate older Australians to ensure they are making informed decisions.
“One of the biggest things we are trying to talk to retirees about, the dangers they have in their SMSF if they got just say five or 10 stocks, if three or four go down heavily, the dramatic change it has on their futures.”
“Whereas if they flip them out to an ETF, they still have a probability of downfall, but it’s much more reduced,” he continued.
The fund manager suggested these older investors are being forced to enter the market due to historic low rates and need products that cater to them.
“Anyone who is near retirement age who hasn’t got a big enough nest egg, that’s a horrible situation because you’re having to take risk with your savings to try and make sure they get to whatever your target is and know you’re going to get there with no risk.”
“If you don’t invest, your money won’t grow as even inflation will erode that,” Mr Walesby concluded.
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