How you can diversify by investing $500 in an ETF
Investors who are looking for diversification can get a stake in a local or international property portfolio with as little as $500 through an exchange traded fund (ETF).
If you have a little more, $1000, you can buy into a local award-winning property fund via the ASX's mFund settlement service.
mFund enables you to buy unlisted managed funds through your stockbroker, eliminating the paperwork and identity checks normally associated with buying unlisted funds. However, not all brokers offer the service.
Real estate investing through the ASX offers you the choice of Australian real estate investment trusts (A-REITs), ETFs and mFunds. Apart from convenience, you'll also enjoy the liquidity associated with listed investments and be able to see your entire portfolio in one place.
On the downside, you'll have to pay management fees and brokerage each time you buy a parcel of securities on the ASX. (With regular managed funds you can normally avoid any upfront fees.) You will also need to put up with market volatility.
mFunds are exempt from this volatility because they are not listed.
Investing through an ETF gives you more bang for your buck. For example, SPDR S&P/ASX 200 Property (ASX: SLF) invests in the A-REITs that comprise its index.
The top three holdings are Scentre, Westfield and Stockland. Returns have averaged 15.64%pa for the three years to October 31 (ASX 200 Property index, 16.08%) and the management fee is 0.4%.
Vanguard Australian Property Securities Index ETF (VAP) - also an award winner - tracks the S&P/ASX 300 A-REIT index, and its holdings and sector allocation are virtually the same as for the SPDR fund. Returns have averaged 15.84%pa for three years (index 16.04%) and the management fee is 0.25%.
If you want to go global, SPDR Dow Jones Global Real Estate Fund (DJRE) holds 59% of its investments in the US, 9% in Japan and 7% in the UK. The Dow Jones Global Select Real Estate Securities Index is its benchmark. It launched in late 2013 and the one-year return is 26.94% (index 27.49%). The fee is 0.5%.
The APN A-REIT, which has either won or placed in Money's Best Property Securities Fund award six years in a row, is available through mFunds.
It also invests in A-REITs. The minimum investment is $1000 and returns have averaged 16.74%pa since its January 2009 inception, beating its benchmark S&P/ASX 300 Property Accumulation Index by more than 3%pa on average. The fee is 0.85%.
Investors can also access APN's Asian REIT, which invests in a portfolio of Asian REITs, through mFunds. Its biggest holding is in Japan (38%), followed by Singapore (29%), Hong Kong (11.5%) and China (10.5%).
Returns have averaged 18.18%pa since inception in July 2011, beatings its benchmark (Bloomberg Asia REIT Index) by an average 1.86%pa.
As well as the APN funds there are seven global and four local mFunds, which investors can access with a minimum of $10,000 to $30,000. Click here for a complete list of mFunds.