Let’s use unit trust funds as an analogy. Unit trust funds are collective investment schemes where you invest together with a lot of other people. These funds allow you to establish a diversified portfolio quickly without having to cough up a lot of money. An ETF is kind of the same thing but, as its name suggests, it’s listed on the stock exchange. You can buy and sell ETFs like you would a stock.
The argument for unit trust fund managers and stock-pickers using an active management style is that you could get better returns by being opportunistic at getting in and out of stocks and the markets at strategic or tactical moments (e.g. selling your holdings to buy back at lower prices if the market drops).
But this is somewhat of a “gamble”, as it involves some kind of “bet” on the smarts of the fund manager in picking the right instrument or holding cash at the right time. Research shows that for the large number of actively managed funds, this has fallen short of benchmark return — especially when high costs are involved.
On the other hand, Akru uses indices and market returns provided by ETFs to aid some kind of reliability in long-term financial planning through passive investing. The market's long-term returns are more than capable of giving the highly unpredictable extraordinary gains from short-term tactical investing a good run for their money.
In other words, if you stay fully invested and ride the ups and downs of the market in the long run, you'll be in a much better place to meet your overall financial goals.
Managing your goals in a way that tries to get you the amount of money you need at a future date is a complex process that goes beyond maxing out returns at all costs. It’s also about weighing all the risks involved.
This question reminds me of the song “Anything you can do I can do better” by Betty Hutton and Howard Keel. Okay, maybe I’m a bit old-school, but the song uncannily describes the raging debate of ETFs vs unit trust funds, or passive vs active investing.
In a nutshell, if there’s any type of fund you can find in a unit trust fund, you’ll also be able to find them in ETFs and more. Let’s list down just a few examples: you have broad-market ETFs; Country & regional ETFS (which Akru uses); Sector ETFs; Dividend ETFs; Style-based ETFs; Commodity ETFs; Currency ETFs; Bond ETFs; and Thematic ETFs (such as the — Millennial ETF)... I could go on and on.
However, Akru focuses on less exotic ETFs in the context of long-term goal-management for the reasons I mentioned earlier.
That’s a good question with a simple answer: open a trading account with an online broker that allows you to trade in foreign markets.
But a better question would be: how can I fulfill my financial goals?
At Akru, we’re not asking you to make decisions on whether you want to invest in the US ETF, the China ETF or even the US-China ETF. We’re asking you how much you’d like to save up for retirement. Then, we’ll recommend you a portfolio to help you achieve those goals, and it just so happens that these recommended portfolios contain efficient instruments called ETFs. Oh, and did we mention that we’ll also cover your trading fees, which is better than trading ETFs yourself?