Australians approaching retirement have been advised of the benefits of investing in ETFs as lower interest rates continue to drain retirees’ capital.
Speaking to nestegg, Bell Direct’s head of distribution and marketing, Tim Sparks, explained why more investors are moving up the yield curve as the effects of lower interest rates are felt.
He outlined that across advised and non-advised market segments, the amount of people moving from less risky assets to more risky assets is around 70 per cent.
Impact on retirees
As rates continue to fall, savers are the big losers in the current environment due to the return on funds being reduced to coincide with the cheaper cost of credit.
This is having an impact on retirees who hold capital, and are now being forced to choose between sacrificing lifestyle and increasing their exposure to riskier assets.
Mr Sparks said “if you have someone who is in retirement, they might be sitting on large asset base, they are feeling poor, they are not going out and buying that nice bottle of wine”.
According to him, this is why a growing number of Australians have decided to now invest in equities and take on more risk.
“ETFs and direct shares are two ways Australian retirees are getting exposure to a higher yield than say term deposits,” Mr Sparks said.
Getting balances ready for retirement
For older Australians who have built their wealth and are looking now towards their retirement, ETFs in multiple sectors allow for a more balanced approach, Mr Sparks said.
“ETFs can be used as a fantastic investment vehicle, [because] if you’re not sure what to buy, you can simply buy everything.”
Having the ability to trade hundreds of Australian stocks in one ASX trade might come with a management fee, but it allows for convenience, he noted.
Mr Sparks said investors who are looking to consolidate their funds should do so through a variety of domestic and international funds to lower risk.
“If you want to consolidate, you can build out a multi-asset portfolio across fixed income, domestic and international equities, real estate and cash.”
He indicated how with just six trades on the ASX you can get exposure to 10,000 individual stocks and bonds across 40 developed and emerging market economies.
“You can do that in a really simple way. If you have an idea of what your asset allocation should be, you can just plug in some broad-based cap weighted benchmarks into those asset allocations,” Mr Sparks concluded.
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We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians
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