How are ETFs taxed?

How are ETFs taxed?
 
ETFs: Everything you need to know about tax on ETF investments in Australia.

One of the reasons exchange-traded funds (ETFs) have gained popularity with Australian investors is because they are highly tax efficient.

Compared to managed funds and Listed Investment Companies (LICs), ETFs tend to have lower turnover and pay out fewer capital gains. This is great news for investors in ETFs who typically inherit a lower tax bill during their holding period compared to other fund structures which need to distribute regular capital gains from redemptions or frequent rebalancing.

If you’ve invested in ETFs on your own, through a broker, or with the help of an automated investment service like Stockspot, here are some tax issues to consider.

Keep in mind that this article is general information only and doesn’t consider your personal circumstances.
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Better investing on autopilot

Investing on autopilot
 
Almost 7 million Australians invested in direct shares or other securities such as Exchange Traded Funds (ETFs) in 2018, up from 6 million in 2015.

If you are one of these investors, or are considering starting investing, you should ask “How does Stockspot compare to managing my own investments online with, say, CommSec or NabTrade?”

Content:

  1. Build a diversified portfolio instantly
  2. Saves time and risk
  3. Helps you avoid mistakes
  4. Avoids costs like brokerage fees
  5. Keeps up with your situation and goals

 
Certainly the trend over the last 10 years has been towards more people investing themselves. The latest ASX Share Ownership Study highlighted that direct ownership of shares and ETFs has rocketed over the past decade, while interest in managed funds and professional advice has fallen.
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Top 5 reasons for portfolio diversification

Diversification tips
 

I spoke on Your Money’s Investing 101 segment this week with the ASX’s Rory Cunningham to share my top 5 tips on why you should diversify your investment portfolio. Here they are:

1. Diversification gives you a smoother ride

Diversification is about spreading your money across different investments to enjoy a smoother ride. It serves as a cushion to protect your basket when a few eggs crack.

Diversification is important for anyone who doesn’t want to experience stomach churning ups and downs in their portfolio which is what happens when you only own a few shares.

The theory on how to use diversification was pioneered by Harry Markwitz in his paper “Portfolio Selection” published in 1952.

He showed that by owning shares in different industries and countries as well as other asset classes like bonds, you could get a smoother portfolio return without sacrificing return. Markowitz later won the 1990 Nobel Prize in Economics for his work.
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What Labor’s proposed changes to franking credits mean

Labor franking credit changes
 

Everything you need to know about Labor’s proposed franking credit changes including how the changes could actually be good news for self funded retirees, SMSFs and the Australian economy.

One of the more controversial policies being recommended by the Federal Opposition in the lead up to the 2019 election is the removal of cash refunds for franking credits or dividend imputation credits.
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What returns have Stockspot clients earned?

Stockspot client returns
 
Why some numbers matter more than others when you invest. We show which figures you should focus on and how Stockspot clients have done.

A couple of questions we often get asked by clients are:
‘How do my returns compare to others?’, and
‘What are the average returns earned by people like me?’.

Both are great questions and ones you should ask any investment adviser – more on that later. Let’s start with the basics on how Stockspot and others calculate returns.

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What are the best Global Share ETFs?

Global share ETFs
 
International share ETFs and U.S. share ETFs have had a huge increase in popularity for individual and SMSF investors in Australia.

As of 2019 there is over $17 billion invested in ETFs tracking global shares on the ASX. The largest and most popular track either a broad global index or the U.S. share market which is considered to be a proxy for global shares.

Each year we compare all 175+ ETFs in our ETF Report. Here we road test 12 popular Global share ETFs, comparing them across 5 factors, as well as summarising our favourites.
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Performance update – January 2019

January performance update 2019
 
2018 was a down year for investment returns across the board.

In US dollar terms, every major asset class apart from cash fell in value. That’s an even larger percentage of assets falling than the financial crisis in 2008! If you didn’t lose money as an investor in 2018, you’ve done very well.

The Australian dollar also got hit, falling 9.7% during the year. The falling dollar had a silver lining since it helped to boost returns for Australians investing overseas who had not hedged the currency.
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How I’d fix default super

Productivity Commission Superannuation Report
 
If you’re someone who has selected your own super fund or set up a Self Managed Super Fund (SMSF), it might surprise you to find out that you’re an exception.

The majority of Aussies just take the fund they’re ‘defaulted’ into by their employer when they start work. These default super funds make up about 80% of all super accounts.

Most people in default super take little to no interest in their fund and they tend not to switch regardless of performance.

Because of this, default super funds don’t face the kind of price-based competition they would in other industries where customers demand value-for-money.
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Market predictions for 2019

Market predictions 2019
 
The start of the new year is a popular time to make predictions about the market.

A lineup of experts will confidently tell you which shares to buy, if property is going up or down, whether the RBA will raise or cut rates, where the Aussie dollar is heading and if the stock market will crash.

Expert market forecasts have been a pet peeve of mine for a long time. I’ve never understood why they’re so popular (to give or receive) in light of how terrible forecasters track records are.
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What I learnt at the ASX Investor Day

Chris Brycki ASX event
 

I recently presented at the ASX Investor Day in Sydney, which I was thrilled to be asked to do since the ASX has featured heavily in my life.

First winning the ASX share game as a school student, then as the work experience kid and more recently as the CEO of Stockspot.

The topic the ASX gave me was: ‘Why invest on the ASX? How to pick the best investments’.

I really enjoyed the opportunity to present to 300+ eager investors and hopefully provide some useful tips to help make them better investors.
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Savings accounts are broken. So we decided to fix them

Stockspot Savings
 
Tired of low interest rates on your savings?

So are we! That’s why we have created a better way to save money.

What is Stockspot Savings?

Stockspot Savings is an alternative to a high-interest savings account and ideal for cash savings you don’t want to invest. Rather than deposit money with a bank, Stockspot Savings will place your money into a high interest cash ETF. You get access to the best interest rates from the big banks without having to lock away your savings for months or years.
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Index investing succeeds in down markets too

Index investing in down markets
 
Whenever markets fall, funds who use active stock picking or market timing strategies fire up their sales engines. Their pitch? That if you put your trust in their active strategy you won’t have to withstand the down periods that come with a ‘buy and hold’ strategy.

It’s a tempting story! Why go through the emotional roller-coaster of down markets if that part of investing is optional…
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How to build an awesome investment portfolio

portfolio-5-assets-banner
 
Clients sometimes ask us how we built the Stockspot portfolios, and why we selected 5 assets to invest in rather than 2, 3 or 10!

It comes down to the purpose of the Stockspot portfolios which is to maximise returns for each level of risk. Five assets allows us to give clients the best possible combination of returns, risk and costs.

To do this we leverage the benefits of diversification. Diversification simply means that by combining investments with different characteristics you can improve the quality of returns in your portfolio.

Quality of returns is measured by how much risk you need to take to earn a certain return. Since all investing involves taking some risk, the aim is to minimise the risk you need to take to earn the return you want. Diversification across assets enables you to take less risk to earn better returns.
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How to pick the best super fund

Best super funds
 
Stockspot’s Fat Cat Funds Report 2018 has once again found that fees make all the difference when it comes to your retirement savings. If your super funds charges you high fees, chances are you could be $250,000 worse off when you retire.

The Fat Cat Funds report looks at the performance of Australia’s largest superannuation funds. It names the funds that take advantage of Australians unwittingly paying away their retirement funds in superannuation fees.
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Bank rip-offs that won’t exist in 2020

bank-rip-offs-banner
 
When you take a step back, you may be surprised at how many bank fees, charges and costs we take for granted.

As a result of their cosy oligopoly, Australian banks have become the most profitable in the world, collecting $31.5 billion in profit this year. That’s after bank CEOs take $30 million a year in salaries and bonuses. But have you ever wondered why some fees exist at all – or what could be done to get rid of them?
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How to make the most of market dips

long-term-game-banner
 
Financial markets can be quite scary at times. Headlines like ‘$50 billion wiped from the ASX’ can make it difficult to stay the course and remain invested when shares are going up and down like a yo-yo.

First-time investors tend to sell when the market falls out of a fear it will continue to go down and never return.

Research shows people feel the pain of losses twice as much than the enjoyment of profits. It’s our fight-or-flight response, the amygdala part of our brain kicking into overdrive to avoid the potential for loss.

People don’t like uncertainty and will avoid risks if possible.
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Top five things to do before you invest

Palm trees
 
Investing is the best way to create long-term wealth and financial independence.

If you’re just starting out no doubt you’ve figured out that it can be confusing at first. There are lots of decisions to make so it’s important to make sure you’re prepared to give yourself the greatest chance of success.

With this in mind, here’s the five things we think everyone should consider before investing.
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How super funds play the ratings game (Part 1)

Ferris wheel
 
It’s that time of the year again when super funds release their annual performance. This blog looks at how the funds twist their performance relative to other funds and indexing. The funds’ PR is parroted by the ratings agencies whose tables and good news story are accepted at face value by the media.

Firstly, we look at how funds manipulate their inclusion into the categories set by the ratings agencies.
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