Introduction

Ever glanced at a list of different managed funds and wondered why some have remarkably low fees compared to others? Chances are, the ones with lower fees are index funds, also known as passive funds.

Over the last couple of decades, index investing has become increasingly popular, with big players like Vanguard and Blackrock managing trillions of dollars in assets (as of 2022).

Before we dive into the reasons and consequences of this trend, let's break down the two main investment styles:

Introduction

Not a day goes by where we don’t hear about bitcoin in the news or from a friend who has a hot tip on a new cryptocurrency. The past few years have seen an increase in the popularity of digital assets such as cryptocurrency and Non Fungible Tokens (NFTs). Direct shares and managed funds are also digital assets.

However, this does not diminish the value of physical assets such as property, gold and cash. There are certain societies in the world that accumulate gold because it is a status symbol. On the other hand, people in countries like Australia love to invest in property.

Introduction

Exchange Traded Fund investments are gaining popularity but do we really understand them? While they can be low-cost and relatively simple, there are a few other things you should know before hopping on board.

According to research undertaken by Morningstar, Australian investment in Exchange Traded Funds (ETFs) grew by 30.4% in the twelve months ending December 2020 to reach a capitalisation of $79.3 billion (US $60.8 billion).

What do these investors know that you don’t?

Introduction

In 2011, the average term deposit could earn you around 6% per annum. Since then, the times, they have a-changed – and so have the returns on term deposits.

Despite average one-year term deposit rates paying around 0.9%, they still take an important role in most financial portfolios for the capital security and diversification components they offer.

The Reserve Bank of Australia (RBA) sets the cash rate via its monetary policy. The aim is to stimulate the economy by making savings accounts and term deposits unattractive and make borrowing cheap to encourage consumers to spend.

Generally this kind of monetary policy only lasts a couple of years which is why so few economists foresaw the protracted period of low rates we are experiencing.

Introduction

Just when you thought investing was easy to understand - you put your money into shares, property, fixed interest, cash, etc. – your adviser starts talking about “investment styles”!

In essence, what that means is how fund managers choose the underlying investments of their funds.