HOW TO CHOOSE A DIVERSIFIED ETF

Hi, I’m Matt Cho, and I’m excited to talk to you about our range of Diversified ETFs. The goal of this video is to answer the most frequent question we hear from you. That is “Which one do I choose?”.

So, to get started, let’s quickly all get on the same page and clarify what is an ETF? Or Exchange-Traded Fund? It’s a type of investment that lets you buy a large mix of assets—like shares or bonds—all in one simple investment. Think of it as a basket of investments that trades on the stock exchange, just like a single share.

This means you get an instant, diversified investment which generally helps to spread your risk and can lead to more stable returns over time.

Now our ready-made Diversified ETFs take this to the next level. We use our expertise to combine, not just investments of the same type but a diverse mix of different shares and types of bonds, from different countries, both big and small. And one of these ETFs can possibly form a complete portfolio for you.

But the question we get is...how do I know which one to choose?

We recommend asking yourself 3 simple questions. So you can align your choice with your financial goals and risk tolerance.

Question 1. How long do you want to invest for? 

Are you investing for the short term, like a few years, or the long term, 7 years plus? Your time frame may help influence the ETF that’s right for you.

You’ll notice each one suggests a ‘minimum investment time frame’ to help narrow your choice.

Higher risk ETFs are usually associated with a longer investment time frame, as returns tend to smooth out over the long term.

Question 2. What are your needs while your investment is growing?

Do you want your investment to focus on growing in value over time, or are you looking for regular income along the way? Each of our diversified ETFs is tailored to different objectives, so it’s important to understand your needs while your money is invested.

For example: Our ‘All growth’ option will aim to provide the most growth with little to no income, where as our ‘Income’ option is designed to provide an income stream along the way.

Question 3: How comfortable are you with potential losses? 

This question will help you understand what we call your ‘risk appetite’ or ‘risk tolerance’.

Our Diversified ETFs have different exposures to growth and defensive assets, with higher allocations to growth assets such as shares, you’ll get higher levels of risk. Each ETF is designed to match a different level of risk and return.

Remember, there’s a trade-off between risk and return. If you’re more risk-averse, you might sacrifice some return potential to avoid significant losses. Conversely, if you’re willing to take on more risk, you have the potential for higher returns, but you should be prepared for more volatility – which is how much and how quickly markets are moving.

To bring this all together…

Whether you’re a beginner investor or a seasoned professional, our diversified ETFs can be used as a standalone solution or as the core of your portfolio, allowing you to layer in other investments.

You can invest in them through a Vanguard Personal Investor account or your preferred broking platform. If you have a financial adviser, they can also help you determine if these funds are a good fit for you.

Finally, it’s worth noting that this 3-question framework we’ve discussed can be applied to our entire range of ETFs and managed funds. These questions will help you make an informed decision that aligns with your financial goals.

Keep an eye out for more investment education and insights in the future.

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer and the Operator of Vanguard Personal Investor. We have not taken your objectives, financial situation or needs into account when preparing this video so it may not be applicable to the particular situation you are considering. You should consider your objectives, financial situation or needs, and the disclosure documents for Vanguard Personal Investor before making any investment decision. Before you make any financial decision regarding funds, you should seek professional advice from a suitably qualified adviser.

A copy of the Target Market Determinations (TMD) for Vanguard's financial products can be obtained at vanguard.com.au free of charge and include a description of who the financial product is appropriate for. You should refer to the TMD before making any investment decisions. You can access our IDPS Guide, PDSs Prospectus and TMD at vanguard.com.au or by calling 1300 655 101. Past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. This video was prepared in good faith and we accept no liability for any errors or omissions.

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