For our Conservative share market strategy we recommend using the SPDR S&P/ASX 200 share fund (ASX code STW) which is the most liquid ETF in Australia.
However, other exchange traded funds that may be used for our Conservative strategy are State Street Global Advisors SPDR S&P/ ASX 50 Fund (ASX code SFY) which invests in the top 50 listed companies, Vanguard’s Australian Shares Index ETF (ASX code VAS) which invests in the top 300, iShares MSCI Australia 200 Fund (IOZ) which invests in the top 200, BetaShares FTSE RAFI Australia 200 Fund (QOZ) which invests in a ‘fundamentally weighted’ index of shares and Market Vectors Australian Equal Weight ETF (MVW) which invests in an equally weighted index of over 60 of the largest listed companies.
Our Conservative strategy can also be applied to high dividend ETFs such as Vanguard’s VHY, SPDR’s SYI and Russell’s RDV and listed investment companies such as Mirrabooka Investment Ltd (ASX code MIR), Australian Foundation Investment Company (AFI), Milton Corporation Ltd (MLT) and BKI Investment Company (BKI), whose share portfolios are representative of the Australian stock market.
Our ETF Rotation strategies comprise a Local and a Global version. These strategies use the following listed ETFs:
- SPDR OZF (Australian finance sector excluding property),
- BetaShares QRE (Australian resources sector),
- SPDR SLF (Australian commercial property sector),
- iShares IVV (USA share market),
- iShares IVE (non-USA developed share markets),
- iShares IEM (Emerging markets’ shares),
- ETF Securities GOLD (Australian gold market), and
- BetaShares AAA (Australian cash fund) or simply a Bank cash management account.
Possible ETF substitutes for
- OZF (Australian finance sector) are QFN and MVB,
- QRE (Australian resources sector) are OZR and MVR,
- SLF (Australian property sector) are MVA and VAP, and
- IVV (USA share market) are SPY, VTS, IRU and QUS.
There are no suitable ETF substitutes for IEM (Emerging markets’ shares) and IVE (non-USA developed share markets).
Advantages of ETFs
Equity exchange traded funds (ETFs) listed on the Australian Securities Exchange (ASX) are a simple and inexpensive way to gain a diversified stake in the top 50, 200 or 300 companies listed on the ASX or on other stock exchanges around the world (e.g. USA, Europe, Japan, Emerging Markets) thereby minimizing specific risk exposure to any one company.
Because ETFs have very liquid markets they can be bought or sold quickly through any stockbroker either by phone or online. They also have very low annual management expense ratios (MERs), normally of less than 0.3% per annum. For these reasons they are the preferred class of investment vehicle for market timing.
Further information about Australian ETFs is available from these websites: