DIY Investor Magazine
/
December 2015
40
THE ETF ADVANTAGE
US author Rick Ferri has published a white paper
comparing an all-index tracking portfolio with one
comprised of active mutual funds. He found the index
fund portfolio beat the active one 90% of the time, and
that this probability rose as time went on.
Despite this many investors still use several specialist
active managers to invest in each asset category. Such
diversity simply increases the chances of lagging the
market.
Another approach is to outsource decision-making to
a multi-asset manager. But again their mix of funds is
likely to at best replicate the market, but with two layers
of fees to pay.
justETF is an online tool that supports the ETF
approach. It makes it easy for you to create and test
your own ETF portfolios that you can then replicate in
your own brokerage account. Portfolios can be built
from scratch or you can get assistance from its strategy
planner.
It now costs only a few tenths of a percentage point to
build a multi-asset portfolio that incorporates thousands
of shares and other assets globally. All it takes are a
handful of ETFs and a broker account to keep costs
low.
FINDING THE RIGHT ETF
There are around 800 ETFs listed on the London Stock
Exchange. Competition has helped drive down costs,
but also made it necessary to compare products.
justETF’s screening tool provides filters to help you
comb through your personal ETF universe. As well as
general data like fund size, it contains ETF specific
information such as the replication method employed.
It features line charts so you can compare the returns
of different ETFs, and gives access to fee and risk
comparisons.
Fig 1 justETF ETF Selector
WELL-GROUNDED MODEL PORTFOLIOS
To get you started, justETF features model portfolio
strategies for equity, bonds and commodities that can
form the basis of your global multi-asset ETF portfolio.
Experienced users can tweak these models by
adjusting weightings or adding or removing ETFs to
suit.
Portfolios have their own risk and return profile, which
you should understand before investing.
justETF offers historic return simulation in its portfolio
planning tool. Past returns do not necessarily provide
an insight about future returns, but at least you can
understand how those returns were achieved.
