20 Sep Why more investors are choosing diversified funds
A growing number of Australian investors are choosing diversified ETFs and managed funds.
One of the constants in investing is that investment returns are never constant.
It’s quite normal for returns from different asset classes and market sectors to show variations from year to year, for a wide range of reasons.
Which is why a growing number of Australian investors, either directly or through a financial adviser, are choosing diversified exchange traded funds (ETFs) and managed funds as a way of offsetting ongoing market volatility over the longer term.
Taking a diversified approach
Rather than being exposed to just one asset class, market or sector, diversified funds invest across multiple asset classes via a single product.
They do this by investing in a combination of funds, which invest in a mix of asset types, markets and sectors.
Investing across a range of different types of investments helps to smooth out volatility.
A key advantage of diversified funds is that they give you the option of having higher or lower exposures to different assets, such as shares and bonds, depending on your individual tolerance for risk.
Diversified funds are versatile products that can be used as an all-encompassing single product portfolio, or as an extremely well diversified core building block with ‘satellite’ exposures around the edges.
They can help you to maintain a more disciplined approach to portfolio management, avoiding regular switches into and out of other assets. This allows you to have a more consistent risk profile, no matter how markets move.
Another advantage of diversified funds is that they’re relatively cost effective compared with the fees involved in buying and managing the asset allocations of multiple fund or individual investments.
Vanguard has four diversified fund options, which have been designed for investors seeking either conservative, balanced, growth or high growth asset allocations.
Each fund invests across seven to eight different funds, covering all of the major asset classes, to provide broad diversification.
The long-term view
The Vanguard Index Chart shows the real power of perspective and diversification.
And it demonstrates that while markets do experience volatility and can sometimes fall quite sharply over short periods, they consistently rise over longer time frames.
Investors who stay the course, rather than trying to time when to buy and sell, tend to be more successful in the long run.
If you invest in products such as diversified ETFs and managed funds that provide broad exposures to markets, you are well positioned to capture the rising returns from those markets over time.
Feel free to contact our investment team to find out how we can help you reach your financial goals. Give us a call at 08 8231 4709 or send us an email at info@centrawealth.com.au.
Article courtesy of Vanguard.
