“The resource sector has again outperformed on a yearly basis with investors in our Metals & Mining ETF enjoying returns of 21%, almost double that of the ASX 200 index,” said Annmaree Varelas, Aii CEO.

This is consistent with the long-term trend for resources, with the Metals & Mining, Resources and Energy sectors all outperforming the ASX 200 over a five-year period.

Local ETF researcher, PennyWise Investment has for the last 12 months taken an overweight position in resource-based ETFs within their model portfolios, and their view isn’t likely to change in the near future.

“Although commodity prices are likely near their peak for the next year or so, the demand profile facing Australian resource companies remains strong and valuations are far from expensive.  The local resources sector also retains good relative price momentum in global markets, and remains among our preferred ETF exposures within our satellite model portfolio,” said David Bassanese, Managing Director of PennyWise Investment.

“Sector ETFs can maximise portfolio returns with income and growth opportunities. An investor seeking higher income could look to invest in the Aii Financials x-A-REITs ETF with a grossed up yield of 8.22% or capitalise on long-term growth with the resource ETFs,” said Ms Varelas.“In both instances, it takes away the guess work for investors over which stock to pick, minimising the stock specific risk in portfolios.” said Ms Varelas.

“Research has shown 70-80% of a stock return is generated by the market and the sector, not the stock. So taking a market view by picking the right sector, you are 70% of the way there,” said Ms Varelas.

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Australian-owned sector ETF provider, Australian Index Investments (Aii), believes that with the growth in energy costs worldwide that it might be time for investors to tilt their portfolios towards this growth sector. With a basic underlying energy shortage, rising global demand and revolution in the Middle East, triple digit oil prices are very possible.

“With oil prices on the rise maybe now is the time to consider a higher energy stock exposure for portfolios. An easy and cheap way to implement an energy strategy is via the Aii Energy ETF, which is listed on the ASX.

“The Aii Energy ETF contains oil majors such as Woodside Petroleum, Origin Energy, Santos and Oil Search.  The basket of energy stocks in the sector is currently 22. Interestingly, the sector ETF does not just include oil producers but also offers exposure to explorers and service companies supplying the energy industry,” said Annmaree Varelas, CEO, Australian Index Investments.

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“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.

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