{"id":60434,"date":"2012-08-17T10:49:31","date_gmt":"2012-08-17T00:49:31","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/08\/17\/switzer-super-report-an-etf-saved-me-from-russian-roulette\/"},"modified":"2012-08-17T10:49:31","modified_gmt":"2012-08-17T00:49:31","slug":"switzer-super-report-an-etf-saved-me-from-russian-roulette","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/08\/17\/switzer-super-report-an-etf-saved-me-from-russian-roulette\/","title":{"rendered":"Switzer Super Report: An ETF Saved Me From Russian Roulette"},"content":{"rendered":"

\n\tBy Peter Switzer, Switzer Super Report<\/a><\/p>\n

\n\tOne of the scariest propositions you can deal with as a financial adviser is to play around with the timing of a stock market. And one of the rules of thumb or maxims of our game is that it’s ‘time in the market’, not ‘timing the market’, that’s important.<\/p>\n

\n\tWrapping it up<\/strong><\/p>\n

\n\tRecently we had a new client who came from a situation where he was on a wrap platform that didn’t suit his new circumstances, goals and appetite for risk. In addition, we could see he would be charged lower fees by using a self-managed super fund (SMSF<\/span>) and so that was our recommendation.<\/p>\n

\n\tWe also wanted to tweak his portfolio so that it was less risky, more dividend-oriented and a better reflection of his new attitude to risk. This guy had been an entrepreneur with an aggressive investment stance and was now someone wanting steady growth and a lot more sleep-at-night security.<\/p>\n

\n\tA wrap account allows you to control all your investments within one account – even if they come from a number of different providers. One of the challenges of disentangling from a wrap and then reworking a portfolio is that it can take time, but time can be your friend if you cash out a portfolio on a wrap to reconstruct one for a SMSF<\/span>.<\/p>\n

\n\tThe problem<\/strong><\/p>\n

\n\tNow our predicament came on July 26 when Mario Draghi<\/span> – the European Central Bank (ECB<\/span>) boss – decided to positively shock global financial markets with his “whatever it takes” promise to save the euro. From that date, the S&P\/ASX200<\/span> index rose from 4,123.9 to 4,312.6 by August 8, which was a 4.6% move and on a portfolio of around $2 million. That was a potential $90,000 loss if we had our client out of the market for too long.<\/p>\n

\n\tThe solution<\/strong><\/p>\n

\n\tThankfully, nowadays products such as exchange traded funds (ETFs<\/span>) that track the index are available and an ETF<\/span> became a default position until we were in a position to put the new portfolio together.<\/p>\n

\n\tPersonally, I’m concerned about ETFs<\/span> that are derivatives as they could be risky and I’m not sure if everyone who uses them is aware of the potential problems that could go with these instruments for ‘sophisticated investors’.<\/p>\n

\n\tOn the other hand, ETFs<\/span> that buy the underlying securities have a lot of appeal because the product-makers actually buy and hold the relevant 200 stocks when you put your money into an ETF<\/span> that tracks the S&P\/ASX200<\/span> index. You also get the associated dividends that would go with these stocks.<\/p>\n

\n\tThese are a good product innovation and can be used to help SMSF<\/span> trustees create a diversified portfolio of investment assets. They can also help an adviser out of a tight and potentially risky situation, where a $90,000 gain looks a lot better to a client than $90,000 that never was!<\/p>\n

\n\tFind out more about ETFs<\/span> on our website by reading <\/em>What is an ETF<\/span>?<\/em><\/a> or <\/em>JP Goldman’s recommendations<\/em><\/a>.<\/em><\/p>\n

\n\t[See also Active Passive And ETFs<\/span><\/a>, and Exchange Traded Funds Part II <\/a>from FNarena's<\/span> SMSFundamentals<\/span> series.]<\/em><\/p>\n

\n\t
\n\tPeter Switzer is the founder and publisher of the Switzer Super Report, a newsletter and website that offers advice, information and education to help you <\/em>grow your DIY super<\/em><\/a>.<\/em><\/p>\n

\n\tImportant information: <\/strong>This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Peter Switzer of the Switzer Super Report discusses the advantages of using ETFs for portfolio management.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60434"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=60434"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60434\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=60434"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=60434"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=60434"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}