An ETF is an Exchange Traded Fund and is a useful investment product that can help anyone invest in a diversified portfolio of stocks and bonds, even if you are only starting out on your investing journey.
Here’s how they work:
What is an ETF?
An ETF is a Fund that is traded on an exchange – an Exchange Traded Fund (ETF). At Raiz we invest in ETFs quoted on the ASX, the biggest stock exchange in Australia.
Some ETFs are made up of stocks, some are made up of bonds, and some are a combination of the two. You can think of an ETF as its own portfolio!
ETFs are usually setup with the aim to track a clearly defined objective, which means an investor who buys an ETF can aim for a similar financial returns (and risks) as an index or some other clearly defined benchmark.
For example, the STW is an ASX quoted ETF that aims to track the returns (and risks) of the S&P/ASX200 Index, which includes many of the top 200 stocks in Australia like Afterpay, BHP, Commonwealth Bank, Woolworths, and many others. The performance of S&P/ASX200 is often mentioned on TV in the financial section of the news.
By investing in STW, if the S&P/ASX200 Index goes up 1%, the STW will go up by a very similar amount 💡 – same logic if the S&P/ASX200 falls.
How do I know what is in each ETF?
Sometimes the code of the ETF is an indication of the type of stocks that the ETF Fund is invested in. For example, ETHI is a Global Sustainability Leaders Fund issued by BetaShares and invests in stocks that meet the threshold for a certain criterion of ethical standards. ETHI is part of the Raiz Emerald Portfolio and can also be included in the Raiz Custom portfolio.
The name of an ETF is also a good indicator of what it is tracking. For example, IVV is the iShares Core S&P500 ETF, with the aim to match the performance of the S&P500 Index in the USA, which includes many of America’s Top 500 stocks. This ETF is included in many of Raiz Portfolios. You can visit the website of each ETF issuer to find out the exact components of each ETF if you want to know the specific holdings in each. In our PDS there are the links to the websites for each ETF, or you can google “IVV ASX”, for example, and one of the top results should be the ETF’s website.
Do I need to choose which ETFs are in my portfolio?
The benefit of our approach is that for all our portfolios (except Custom), you do not need to pick which ETFs to include. Rather, the Portfolios have already been built by our team for you, and show you the approximate percentage that will be invested in each of their selected ETFs. If the percentage of an ETF is 10%, then that means 10% of your total portfolio value is held in that ETF.
How can I tell what the level of risk is?
Raiz has portfolio names ranging from Conservative to Aggressive, which gives an indication of the risk profile of that portfolio. Check which portfolio you are investing in and assess which one suits your personal circumstances and sentiment. For more info please read our blog post “Which Raiz portfolio could be right for me”.
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The information on this website is general advice only. This means it does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the product.
A Product Disclosure Statement for Raiz Invest and/or Raiz Invest Super are available on the Raiz Invest website and App. A person must read and consider the Product Disclosure Statement in deciding whether, or not, to acquire and continue to hold interests in the product. The risks of investing in this product are fully set out in the Product Disclosure Statement and include the risks that would ordinarily apply to investing.
The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
Past return performance of the Raiz products should not be relied on for making a decision to invest in a Raiz product and is not a good predictor of future performance.