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The lowdown on common EFT investments

Legacy Phuket Gazette

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The lowdown on common EFT investments | The Thaiger

PHUKET: Given that so few managed funds are able to consistently beat important market benchmarks, Exchange Traded Funds (ETFs) are great investments, because they track and replicate the performance of key market indices at a minimal cost. However, the popularity of ETFs has led to their proliferation with some being better investments than others. So what are the best ETFs to own and which ones should you avoid?

Without naming individual ETFs, here are some general rules of thumb for selecting the right ones for your portfolio:

Buy ETFs that track important indices

ETFs tracking big name indices or markets like the Dow Jones Industrial Average, the S&P 500 and the Nasdaq should form the bulk of your ETF portfolio, but don’t overlook those that track other big indices like the Russell 2000 (small company stocks), those that track important sector indices (for example, the Dow Jones Utilities Average) and those that track important foreign stock indices like London’s FTSE, Tokyo’s Nikkei or the MSCI Emerging Markets Index. Moreover, don’t forget about bond ETFs which, like bonds, tend to do well in recessions or bear markets.

Avoid ETFs tracking obscure sectors or indices

ETFs have proliferated to such an extent that Vanguard’s founder John Bogle once sarcastically wrote in a Wall Street Journal op-ed: “Can you believe we now have an Emerging Cancer ETF?” That ETF, among others, has since closed after either failing to attract enough assets or after delivering poor returns to investors. You should also be aware that Bogle has said that individual sector and country ETFs are probably “too narrow for most” investors, but there might be times when such investments make sense.

Stick with plain vanilla ETFs

There could also be times where having a small position in so-called “inverse” ETFs (which short the market), leveraged ETFs (which use leverage in an attempt to generate outsized returns) or those tracking non-traditional assets (commodities) can make sense. However, you need to understand these ETF investments come with added and potentially significant risks while Vanguard’s Bogle has gone so far as to say that inverse and leveraged ETFs are where the “fruitcakes, nut cases and lunatic fringe” can be found.

Avoid illiquid ETFs

A major problem with ETFs tracking obscure sectors or markets along with some inverse or leveraged ETFs is their lack of liquidity because not many investors or traders are buying or selling them. This lack of liquidity could lead you to pay too much to buy and sell them.

Read the prospectus

The good thing about most plain vanilla ETFs is that they are fairly straightforward investments –meaning even less experienced investors should be able to read the prospectus and understand what they are doing. However, if reading the prospectus leaves you confused or if the prospectus is not well explained in plain simple English, you should find another ETF to invest in.

Be very careful when investing in commodity ETFs

There are two types of commodity ETFs – one type owning the physical commodity (say, gold bars) and the other type owning commodity futures contracts – meaning you need to read the prospectus carefully to understand the risks involved. Moreover, be aware that since commodity ETFs do not invest in securities, they tend to be regulated differently or are less regulated than other investments.

Avoid high fee ETFs

Most big ETFs on the market today will charge fees as low as the 0.04% to 0.25% range but there are some ETFs out there, usually “managed” ones or those with more exotic investment strategies (e.g. they invest in commodities, short the market or use leverage) which might charge fees as much as 1% or 2% (or even more). However and given the wide selection of low cost ETFs available, there is little reason to invest in one that comes with such high fees.

In conclusion, EFTs are a great way to diversify, lower expenses and grow your money. If you are unsure of which ETFs to put in your investment portfolio and how to buy them, call me for a free consultation and get your portfolio invested in the most efficient way possible.

Don Freeman is President of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand. He has over 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: freemancapital@gmail.com.

— David Mayes

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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Governments & old media versus social media – who will win? | VIDEO

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Governments & old media versus social media – who will win? | VIDEO | The Thaiger

We look at the recent changes made by the Australian and Indian governments to except control over the world’s biggest social media platforms. India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social. There is now an open battle between the rise of social media platforms and the governments and ‘old’ media that have been able to maintain a certain level of control over the ‘message’ for the last century. Who will win?

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told. The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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The social media giants in battle with ‘old’ media and world governments | VIDEO

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The social media giants in battle with ‘old’ media and world governments | VIDEO | The Thaiger

“The rules signal greater willingness by countries around the world to rein in big tech firms such as Google, Facebook and Twitter that the governments fear have become too powerful with little accountability.”

India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social.

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The companies are also being made to publish a compliance report each month with details about how many complaints they’ve received and the action they took.

They’ll also be required to remove ‘some’ types of content including “full or partial nudity,” any “sexual act” or “impersonations including morphed images”

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told.

The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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Turbulence ahead for Thailand’s aviation industry | VIDEO

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When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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