Local Sector ETF specialist, Australian Index Investments (Aii), has seen increased interest in their resource-based ETFs from SMSF Trustees, with one in three ETF investments being held by DIY SMSFs.
“We are seeing increased interest from SMSFs, particularly in our two resources ETFs (ASX Codes: MAM and RSR). SMSF trustees seem to be using our sector resource ETFs to bolster their existing share portfolios,” said Michelle Morgan, Marketing Manager at Aii.
Aii found that the average trade by an SMSF was around $25,000 to invest in its ETFs.
“Quite often SMSF portfolios hold major mining and banking stocks but when seeking to add a tilt towards mining/resources, trustees are caught in a bind between bulking up their BHP and Rio Holdings or using research to find the next star mining stocks.
“Buying a resource sector ETF allows a greater allocation to the sector without needing to sell down existing stocks or add individual mining stocks. This can be done for the cost of a single share trade on ASX and they have piece of mind knowing that their investment fully replicates the underlying index.
“By holding a basket of resource stocks via a resource ETF means that investors naturally increase their exposure to the major players but also pick up smaller miners/explorers who can provide capital growth opportunities over time. SMSFs can achieve this outcome easily and cost-efficiently, without spending large amounts of time on research and stock selection.
“Mining is hot now but what about when other sectors start to shine? Investors can sell down their mining sector ETFs and buy into a Financials or Industrial ETFs as market sentiment turns to these areas.
“We believe that SMSF trustees are using our sector ETFs to not only get an overweight position is a sector but also make new investments without touching their core share portfolios that would trigger CGT events,” said Ms Morgan.