{"id":3042,"date":"2018-03-07T01:02:44","date_gmt":"2018-03-07T01:02:44","guid":{"rendered":"https:\/\/raizinvest.com.au\/investors\/what-is-an-etf-and-how-do-they-differ\/"},"modified":"2021-02-08T04:35:31","modified_gmt":"2021-02-08T04:35:31","slug":"what-is-an-etf-and-how-do-they-differ","status":"publish","type":"post","link":"https:\/\/raizinvest.com.au\/investors\/blog\/what-is-an-etf-and-how-do-they-differ\/","title":{"rendered":"Investing into an ETF and how do ETFs differ?"},"content":{"rendered":"
\"\"<\/figure>\n

The
\nRaiz philosophy is to invest small amounts regularly, no matter the market
\ncondition, as this strategy can minimise the risk of investing in markets and
\nwe believe is one of the keys to having a healthier balance over the long run.<\/p>\n

All
\nyour investments, whether it be your spare change from round-ups, lump sums or
\nrecurring deposits, are invested into one of the 6 diversified portfolios that
\nwere constructed with help from the Nobel Prize winning economist and father of
\nModern Portfolio Theory, Dr. Harry Markowitz.<\/p>\n

 <\/p>\n

What
\nis a diversified portfolio?<\/h3>\n

To
\nfind the right balance between risk and reward, your money is never invested
\ninto one specific share or company. It is instead invested across a bundle of
\nshares or bonds that form one financial product, called an Exchange Traded Fund
\n(ETF).<\/p>\n

The
\nRaiz portfolios are made up of a combination of different ETFs that range from
\ncash, bonds, Australian and international shares. Every investment you make
\nwill be allocated towards these ETFs. For more information on Raiz fees, click here<\/span>.<\/a><\/p>\n

Watch our video on – How our Raiz Portfolios are built<\/a><\/em><\/p>\n

\"\"<\/h3>\n

 <\/p>\n

Let\u2019s
\ntake a deeper look into these ETFs:<\/h3>\n

The
\nfirst six are called \u2018Large Cap Stocks\u2019<\/p>\n

1.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Australia
\nLarge Cap Stocks (ASX:STW)<\/b><\/p>\n

2.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Asia
\nLarge Cap Stocks (ASX:IAA)<\/b><\/p>\n

3.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Europe
\nLarge Cap Stocks (ASX:IEU)<\/b><\/p>\n

4.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0US
\nLarge Cap Stocks (ASX:IVV)<\/b><\/p>\n

5.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Australia
\nSocial Responsible Large Cap (ASX:RARI)<\/b><\/p>\n

6.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Global
\nSocially Responsible Large Cap (ASX:ETHI)<\/b><\/p>\n

 <\/p>\n

What
\nare large cap stocks?<\/h3>\n

Large
\ncap stocks are the biggest companies on their respective country\u2019s stock
\nexchange in terms of market capitalisation \u2013 or total dollar value of a
\ncompany. Companies that fall in this category tend to be in established
\nindustries and are major players in their field. Large cap stocks can be a
\nsafer option as their earnings may be more consistent than less-established
\ncompanies, making them more likely to show returns over time.<\/p>\n

Examples
\nof Large Cap stocks that your investments can go towards are international
\nshares such as Apple, Google & Microsoft and Australian shares such as
\nTelstra, Westpac & Woolworths.<\/p>\n

You
\ncan also see all the hundreds of companies that make up these ETFs by searching
\nfor the ETF code or the provider from our\u00a0product disclosure statement.<\/a><\/p>\n

7.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Australia
\nGovernment Bonds (ASX:IAF)<\/b><\/p>\n

Australia
\nGovernment bonds are viewed as more secured and as less risky investment
\nproducts than large cap stocks. It differs to stocks as you are instead
\nessentially lending money to the government at an agreed interest rate. The
\ngovernment will then pay the interest and return the money that was lent at
\nmaturity. Rather than hold a\u00a0bond to maturity though, they can\u00a0also
\nbe\u00a0traded. The risk is therefore tied to the ability of the Australian
\nGovernment to pay you back both the interest and the money that was lent at the
\nend.<\/p>\n

8.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Australia
\nCorporate Bonds (ASX:RCB)<\/b><\/p>\n

Similar
\nto government bonds, corporate bonds are a way for Australian companies to
\nraise money, by borrowing from you. The business will pay the interest and
\nreturn the money lent. It can also be traded on an exchange before maturity.
\nThe risk is again therefore tied to the ability of the Corporate to pay you
\nback both the interest and the money that was lent at the end.<\/p>\n

9.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Australian
\nMoney Market (ASX:AAA)<\/b><\/p>\n

This
\nETF is invested into the money market, which has the least volatility. The fund
\nfocuses on investing in\u00a0term deposits\u00a0and high interest accounts
\noffered by banks in Australia. \u00a0As these tend to be short dated, the risk
\nthat a bank cannot repay both the interest and the money back is low.<\/p>\n

 <\/p>\n

What
\nare the allocations for the ETFs?<\/h3>\n

We
\ninvest your money in a combination of the above ETFs on a sliding scale
\ndepending on how aggressive or conservative you want to be with your
\ninvestments. Conservative portfolios will have a bigger allocation in bonds
\n& cash, while the more aggressive portfolios will have a bigger allocation
\nin Australian and international shares.<\/p>\n

You
\nwill be able to find the exact allocations that makes up your portfolio in
\nour\u00a0product disclosure statement.<\/a><\/p>\n

Example
\nof allocation for the Aggressive portfolio<\/i>:<\/i><\/p>\n

<\/figure>\n

\"\"<\/p>\n

 <\/p>\n

How
\ncan I keep track?<\/h3>\n

The
\nRaiz app will give you the daily, monthly and yearly performance of your
\nportfolio. You are also able to keep track of the individual ETF\u2019s performance
\nyourself through the web or via a stock app. Keep in mind though, markets go up
\nand markets go down. Therefore, it is important to look at the long-term big
\npicture and not the daily fluctuations. You can find more in our blog,\u00a0The Advantages of Dollar Cost Averaging<\/a><\/p>\n

 <\/p>\n

\n

 <\/p>\n

Don\u2019t have the Raiz App?<\/strong><\/h3>\n

Download it for free in the App store or the Webapp below:<\/p>\n

\n
\"download-raiz-app\"<\/a>
Click to download the Raiz app<\/a><\/figcaption><\/figure>\n

 <\/figure>\n

Important Information<\/strong><\/span><\/em><\/p>\n

The information on this website is general advice only. This means it does not take into account any person\u2019s 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.<\/em><\/p>\n

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.<\/em><\/p>\n

The information may be based on assumptions or market conditions which change without notice. This could impact the accuracy of the information.<\/em><\/p>\n

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.<\/em><\/p>\n

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.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The Raiz philosophy is to invest small amounts regularly, no matter the market condition, as this strategy can minimise the risk of investing in markets and we believe is one of the keys to having a healthier balance over the long run. All your investments, whether it be your spare change from round-ups, lump sums […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[1],"tags":[62,59],"yst_prominent_words":[208,202,205,199,98,204,201,200,198,153,207,97,82,117,166,125,239,209,206,203]}