Through 15 years of publishing Smart Investing articles, a community of engaged smart investors has grown. A community that is keen to learn, who challenge ideas presented, and regularly pose questions that have prompted some of our most well-read articles.
So here are the lessons we’ve learned and shared based on your key questions over the years…
Managed funds vs Exchange-traded Funds
Over the years we’ve regularly addressed the ‘Managed fund vs ETF’ question, and it is a conversation that continues to play out through social media and online forums.
A quick review of this debate online will reveal a range of passionate viewpoints, creative calculations, and diverse case studied. While social media might not always be known for well-reasoned or conclusive debates, this online flurry does highlight a crucial point. Individual circumstances, goals and preferences matter.
When the time comes to weigh up a managed fund or ETF, considering your individual goals and preferences may guide you to one structure over the other.
And no discussion of this topic would be complete without a reference to the time-tested Vanguard wisdom- “strategy before structure”. In most instances your decisions about asset allocation and investment strategy should come before any consideration about product structure.
To SMSF or not to SMSF, that is the question?
Considering the establishment of a Self-Managed Super Fund may not be equal to the ‘life or death’ undertones of the Shakespearian reference, but it endures as a difficult decision for readers who have regularly asked if they should SM their SF.
Over many years Vanguard and specialist research house Investment Trends have explored the rationale for Australian’s setting up funds, monitored their decision making, and analysed their experiences as Trustees.
We’ve consistently found that some people simply want greater control over where their superannuation money is being invested. That’s the key driver behind the establishment of around 600,000 SMSFs in Australia.
While these insights have always been of interest, a question is regularly prompted by these articles- what is the appropriate age, super balance, market environment to establish an SMSF?
The answer won’t come as a surprise to smart investors– it depends heavily on your personal circumstances and goals.
Is now the right time for active/index investments?
At this very moment, somewhere in the world, someone is making an impassioned argument for active investment. Sharing their conviction that active investment has the edge over passive index investing in the current economic and market conditions.
A similar impassioned argument has been made consistently in the past and will continue into the future- through all market cycles and in the face of any and all events with a market impact.
This high conviction commentary, at least in part, prompts one of our frequently asked questions- is now the right time for active investing?
While some might expect Vanguard to come out swinging for index investing- the reality is that neither active nor index investing can credibly be championed as the best approach for any ‘now’.
Selecting the appropriate investments relates entirely according to individual goals, risk tolerances, time horizons and return requirements, and not about pitting index against active. There can be a role for both.
Focusing on an either-or debate often distracts from the one factor that transcends investment style or preference when selecting investments. Cost.
As demonstrated by Morningstar’s research in 2010, where their analysis across its universe of funds and found that, regardless of fund type, low expense ratios was one of the best predictors of future relative outperformance.