By Peter Freeman,
, November 2007
The popularity of sharemarket trading has delivered new products that extend your investment options
Australian investors now have another way to invest offshore. Known as iShares, they are managed by Barclays Global Investors and have just been listed on the Australian Stock Exchange.
Like the more than 190 iShares listed overseas, they give investors a relatively easy way to take a direct exposure to a range of international sharemarkets.
Their key feature is that they are structured as exchange-traded funds (ETFs) that track specific sharemarket indices.
Australia already has a number of listed index-focused ETFs managed by rival manager State Street Global Advisors, but to date these have been confined to ETFs that track local share indices.
In the same way, while Vanguard Investments Australia manages a range of index funds, including several that focus on international shares, these are all unlisted and so, at least in theory, don't provide the same liquidity that iShares should eventually achieve.
Like State Street's ETFs, which were recently rebranded as SPDRs (short for Standard & Poor's Depository Receipts) to bring them into line with their US equivalents, iShares also have the advantage of being cheaper than even Vanguard's already very low-cost funds.
When launching iShares in Australia the local head of Barclays, Morry Waked, cited their low cost as one of their key attractions, but stressed that they also provide a very simple way to invest offshore.
'Investors can take a diversified exposure to the world’s investment markets with just one trade," he noted.
This is because, like standard shares in listed companies, iShares are simply bought and sold through a stockbroker.
Eight different versions of iShares are being listed on the ASX, including iShares S&P Global 100, which provides an exposure to 100 large transnational companies, each of which is capitalised at $5.5 billion ($US5 billion) or more. The seven other iShares track S&P indices over a range of markets, including Wall Street, European markets, Japan and emerging markets.
Mini versus the rest
Contracts for difference (CFDs) are very popular with aggressive investors who are prepared to take a highly geared exposure to shares and other assets, such as commodities and currencies. They are essentially contracts between you and the firm issuing it, which involves paying a very small deposit to get a highly leveraged exposure to your chosen assets. While the vast majority of CFDs are issued "over the counter" by firms such as IG Markets and CMC Markets, there is also a stock exchange-listed CFD. Issued by ABN Amro and known as the Mini, it is a type of warrant that has been structured to operate in the same way as a CFD.
Aaron Stambulich, head of equity structured products at ABN Amro, says the Mini was listed in September and is the first and the only listed CFD available in Australia.
The advantages of Minis, he says, are they offer investors significant trading transparency (like all stock exchange-listed securities), are cheap and have a built-in guaranteed stop-loss.
"Most individual investors who buy CFDs should always have a guaranteed stop-loss, which makes Minis very suitable," Stambulich says.
A guaranteed stop-loss means that you can never lose more than you invest – although, as with all CFDs, it is in fact very easy to lose your investment if the market moves against you.
As for the cost of trading Minis, Stambulich says the cost is kept down since you only pay brokerage on the cost of the Mini itself, which is likely to be worth only around 10% or so of the underlying shares. In contrast, issuers of unlisted CFDs usually charge brokerage or commission on the total value of the underlying assets the CFD controls.
Share trading via mobile
Many short-term share traders need to stay closely in touch with the market, not only to know what's going on but also to buy and sell. Longer-term investors can also benefit from being able to have quick and easy access to market data and a trading facility, especially if the market or a stock price suddenly moves against them.
Both groups therefore are likely to have more than a passing interest in the launch by Sanford Securities of Australia's first dedicated mobile share-trading website.
The service, branded Sanford2GO, will be accessible by Sanford clients who have either 2G or 3G internet-enabled mobile phones and PDAs. Announcing the new service, Otto Buttula, head of Sanford’s parent company IWL Ltd, said the internet-enabled devices covered by the new service included the BlackBerry, i-mate JASJAM, PALM Treo 750, and SAMSUNG I601 (Blackjack). Sanford clients with these devices will be able to trade both shares and options as well as view stock quotes and watch lists.
While the new service isn't totally without cost, it is available to Sanford's premium members for their existing monthly charge of $9.95, a fee that is waived if they make at least two trades a month.
Ian Aspinall, head of marketing for IWL, says he doesn't expect people to spend a lot of time trading stocks on their mobile phones. "But we do anticipate that if they read a favourable news report or receive an SMS alert regarding a company announcement or price, they might just want to act on that information as soon as they can," he says.
Check out how your portfolio is doing.
For the complete story see Money Magazine's November 2007 issue. Subscribe now.
Keep reading - next article