Why ETFs
Embarrassingly our ETF portfolio has been outperforming our other portfolios (written on 17th February 2021). It is a revelation that this low-cost, low activity, low stress, low administration, relaxed portfolio, exposed to compounding returns in the Australian market as well as the HACK, FANG, FUEL and S&P 500, is outperforming our Australian stock picking in the Growth portfolio as well as the income stocks in the Income portfolio. Here is the performance chart of the ETF portfolio.![ETF model portfolio performance](https://marcustoday.com.au/member/webpages/images/report/20210217/image(82).png)
- As a fund manager, I can tell you that it is not easy to outperform a compounding index which is, after all, a fantasy with its costless index replication, perfect costless dividend reinvestment, no humans, no fees – it’s not realistic - I am staggered that we have allowed the industry to be benchmarked to it and used for underperforming – but, as they say in The Mandalorian, “This is the Way”.
- ETFs allow you a very low cost “as perfect as you can get” exposure to a compounding ASX index.
- ETFs also effortlessly, by clicking the same buttons that you would click on an Australian stock, at no extra commission, allow you exposures to not just a compounding ASX index, but to compounding international indexes and many other inaccessible combinations.
- Waking up to ETFs is something the US did 10 years ago. As one of my former colleagues (Remember Sam?) can tell you after his visit to the Berkshire Hathaway AGM some years ago, a US broker said “Oh, you’re Australia. I bet you’re still dealing in individual stocks and charging commission”.
- ETFs perfectly suit financial planners. Wealth Management in the US is all about ETFs and asset allocation using ETFs. It is long-term, low cost, low stress and cheap. But some most of our financial planners are still using illiquid managed funds and/or doing individual stock picking. In the US stock picking is a minority sport for traders, not investors.
- Stock picking, by comparison, is a lot of work and stress.
- Stock picking is riskier. The out performance from stock-picking usually comes by getting one or two stocks absolutely right – rarely from getting “most” of them right. To catch those one or two stocks you have to take a fair bit of risk (large holdings in growth stocks).
![Marcus Today ETF Portfolio](https://marcustoday.com.au/member/webpages/images/report/20210217/image(79).png)
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