We are pleased to launch our new website. Clients can seamlessly access the portal by clicking on the login button located at the top right-hand corner for desktop and left-hand corner menu for mobile.
Exchange Traded Funds
Exchange Traded Funds (ETFs) combine simplicity, diversity, and cost-effectiveness, representing open-ended investment funds similar to traditional managed funds, easily tradable like shares on the ASX. Most ETFs aim to closely track the performance of an index or underlying asset, providing investors with the returns of that index or asset – minus any fees and costs.
What is an Exchange Traded Fund?
As one of the fastest-growing categories of investment products globally, ETFs offer many advantages that appeal to Australian investors seeking financial objectives. These include simplicity, liquidity, transparency, cost-effectiveness and Self-Managed Super Fund (SMSF) friendliness. ETFs provide investors with access to a diverse array of investment strategies, geographic regions, and asset classes, making them an ideal choice for those looking to build a well-rounded and flexible portfolio.
Gain sector exposure
Gain sector exposure
With hundreds of ETFs available on the ASX, investors have the freedom to construct a diversified portfolio tailored to their needs. Whether you're interested in Australian shares, international sectors, property securities, fixed income, precious metals, commodities, foreign currencies, or even digital assets, ETFs provide a straightforward way to gain exposure.
Passive and active
ETFs can be broadly categorised into two types: passive (designed to match specific index performance) and active (aiming to outperform the benchmark). The choice between them depends on individual investment preferences and objectives. It's essential to understand the risks associated with ETFs, such as market risk, sector risk, currency risk, liquidity risk, and the potential for tracking/pricing errors.
Physical and synthetic
ETFs come in two main structures: physical and synthetic. Physical ETFs own the underlying securities that make up a particular benchmark, while synthetic ETFs use derivatives to provide exposure to an asset class that is challenging to access physically.
Diversify your portfolio with ETFs
Investing in ETFs offers diversification in one trade, access to markets traded on the ASX, low management expenses, and tax efficiency. However, investors should be aware of potential risks, such as market fluctuations, sector-specific challenges, currency exposure, liquidity concerns, and the possibility of tracking/pricing errors. Contact a Morgans adviser to find out more about ETF investing, explore the advantages, and assess the risks for informed decision-making to achieve your investment goals.
News & Insights
Assessing the Australian Banking Landscape
The major domestic banks are a core holding in the portfolios of many Australian investors. All four of them have outperformed the broader market since the start of 2024.
Our banks analyst Nathan Lead recently had a close look at the valuations of the banks to see if their recent share price strength could be justified by fundamentals. His conclusion was that it could not, particularly given an outlook for flat if not declining earnings (at least in the short term) driven by weaker net interest margins and higher costs. In his view, all four of the major Australian banks (and Bank of Queensland) are now trading above their intrinsic value, with CommBank and Bank of Queensland looking especially stretched. Dividend yields, so often an argument for investing in banks, are relatively low compared to history, as well as to their own term deposit rates and hybrid capital yields.
We think now is a good time to consider trimming some positions in the banks. Nathan does not have an ADD rating on any of the major banks, rating all of them HOLD except for Commonwealth Bank (REDUCE). With Bank of Queensland also rated REDUCE, the only bank Nathan sees as offering value at current levels is the smaller and arguably higher-risk Judo Capital (ADD).
Looking at the major banks in turn
ANZ (HOLD)
ANZ's Australian loan growth has outperformed its peers over the past 6 months. It is awaiting final approvals to complete the acquisition of Suncorp Bank. Our forecasts are above consensus for this year and next, but this may be because other analysts have not properly factored in the acquisition.
Commonwealth (REDUCE)
Trading at 2.7x book, it is the elevated valuation of CBA that keeps us on a REDUCE rating. It has been trying to protect margins during a period of intense home loan competition, which has resulted in its loan book growing less than others. CBA is the highest quality bank for our money, but we just think it's overpriced.
NAB (HOLD)
We have higher forecasts than the street because we think net interest income growth will be higher and loan losses lower than market expectations. We do expect cash earnings per share to decline this year, though, as costs increase.
Westpac (HOLD)
Westpac has been growing its Australian loan book at a similar rate to that of NAB (0.9x system). The shares have done well, which we believe stretches the valuation enough to make it hard to see further share price upside.
If you agree that the time is right to trim some of your positions in banks, you might want to think about alternative equities with broad exposure to the Australian economy and decent dividend yields. Within the insurance sector, consider QBE. Or within Diversified Financials, our analysts prefer GQG and WH Soul Pattinson.
Morgans clients receive exclusive insights such as access to the latest stock and sector coverage featured in the Month Ahead. Contact us today to begin your journey with Morgans.
We all know that the world is changing rapidly, and this has seen a flow-on impact on how society thinks about charitable giving. Social media, technological change and our day-to-day cost of living means that Not-for-Profits need to think differently to ensure they remain relevant to this new socially conscious generation and how Not-for-Profits invest their funds to continue to benefit their ongoing mission and values.
According to the 2020 Australian Communities Report, Australian givers are looking for a more personalised experience and to build relationships with organisations that they donate to or partner with. This may mean being practically involved in the organisation (volunteering) or even as simple as understanding the impact that their donation makes.
The 2019 Community Trends Report shows that Australians seek transparency and impact from charitable organisations. The key issue that Australians want transparency over is administration costs with seven in ten Australian givers rating this as an extremely important charity essential. Most believe that charity administration costs should comprise 20% or less of the organisation’s total revenue. For those younger Australian givers, having a website is also seen as an important part of the engagement and communication process when dealing with a charity.
The report also highlighted how much the cost of living is impacting on Australians’ ability to donate to charities. More than half of Australian givers agree that the cost of living and changes to housing prices have significantly or somewhat decreased their ability to give to charities.
Some key takeaways from these reports that NFPs should consider:
• Focus on local causes as Australians prefer to support charitable organisations with a local/national focus
• Consider how your charity can highlight a specific issue that people can directly donate to, rather than just raising awareness generally of an issue
• Ensure you can provide givers with a detailed breakdown of where donations are allocated
• Consider how you currently report on the impact donations are having on your charity’s goals and mission, can you improve or change the way you report?
• Simplify your organisation’s mission and ask “will this help achieve our purpose?”
• Where possible, invest in developing effective leaders and communicate leadership wins of the organisation to donors
Investment Watch is a quarterly publication produced by Morgans that delves into key insights for equity and economic strategy. This latest publication will cover;
- Asset allocation – Migrating toward a risk-on strategy
- Economic strategy – The view from the FED
- Equity strategy – Preferencing cyclicals and small-caps
- Updated Morgans Best Ideas
- … and much more
Morgans clients receive exclusive insights such as access to our latest Investment Watch publication. Contact us today to begin your journey with Morgans.
Preview
In recent months, debate has shifted away from ‘recession risks’ towards expectations for a ‘soft landing’ or even the possibility of a ‘no landing’ scenario for the US economy. Inflation has remained on a mild downward trend, there is better visibility on the US rate cutting cycle and China’s increased stimulus is reducing downside risks both domestically and globally.
These are all ingredients supporting the market’s migration toward a risk-on footing. We saw this in the February reporting season via a broad rotation from expensive defensives toward more economically leveraged cyclical industrials and small-caps. We discuss opportunities to put cash to work in global equities, real assets, and fixed income. In Australian equities we favour the healthcare, financials, retail, travel, resources and energy sectors, and we also call out several small-caps via our Best Ideas report.
