Fixed Income ETFs to be traded on Stock Exchange (ASX)

[Andrew Williams]

A very recent rule change now makes it possible for Fixed Income Exchange Traded Funds (ETFs) to be traded on the Australian Stock Exchange (ASX).

Until now it has not be allowable to trade Fixed Income ETFs on the ASX but following the change in rules it certainly will not be long now until companies start to offer these ETFs.

Blackrock’s iShares have already welcomed the news and I’m sure will be one of the first to have a product available.

At the moment in Australia it is possible to gain exposure via ETFs to Australian Equities, International Equities, Property (growth assets), Commodities e.g gold, silver and oil and Currency e.g british pound, american dollar (alternative assets) however it is not possible to gain exposure to defensive assets.

Now this ruling has occurred defensive asset ETFs should become available e.g Australian Fixed Interest index, Government Bond index and Corporate Bond index exposure.

ETFs can be bought and sold on the ASX like buying a direct share with own funds, borrowed funds (geared), superannuation funds etc and are becoming increasingly popular for SMSF investors.

They offer the ability to gain exposure to an index, commodity, currency or a specific region/sector within 1 trade making it easy to tilt your investment portfolio.

As an example, if someone has a strong view on say the Japanese market, Gold and the British Pound the portfolio could be weighted towards these areas.

ETFs are certainly gaining traction here in Australia but generally should not be used in isolation and instead should be used as part of a well-diversified investment portfolio.

Here is a link that provides some info on ETFs http://www.asx.com.au/products/excha...ommodities.htm



Regards

Andy