ETFs provide the diversification you need
The hot investment for financial planners and investors at present is multi-country international funds, according to the latest survey of financial advisers by Investment Trends. It found 70% of planners intend to use them in the next 12 months, up from 62% in 2013 and 49% in 2012. Interest in single-region global investments has waned, with only 28% of planners saying they intend to use US-specific funds in the next 12 months, down from the six-year high of 40% in 2013. "The US is no longer as hot a destination as it used to be for financial planners," says Investment Trends' senior analyst Recep Peker.
"Considering the significant gains achieved by the Dow over the past few years, it's natural for some to feel it's near a peak and seek to diversify their exposure." Two funds from Vanguard, Money's best exchange traded fund (ETF) provider for 2015, will suit these investors perfectly. Actually it is the same fund - the MSCI Index International Shares ETF - but one version is hedged (ASX: VGAD) while the other is unhedged (VGS). Both track the MSCI World ex-Australia Index in $A (with net dividends reinvested), which covers around 1500 securities in 22 developed sharemarkets. With expense ratios of 0.18% per annum (unhedged) and 0.21%pa (hedged), these funds are among the lowest-cost, locally managed international equity products on the market. Both are administered in Australia.
MONEY VERDICT Both these easy-to-access international ETFs give you bucket-loads of diversification. Fees are low because Vanguard is a mutual company that passes all profits to its investors rather than having to reward shareholders. If you are nervous about currency movements, the hedged version manages the risks for just 0.03% extra (a total of 0.21%). Because the funds are administered in Australia, there is no need to fill out a W-8BEN tax form for the US.
Get stories like this in our newsletters.
