Dive into Dow: ETFs an easy way to tap US market

The easiest way for investors to play directly into the dramatic changes set to hit the US market is through ETFs.

For Australian investors, the easiest way to “play” directly into the dramatic changes set to hit the US market is through ETFs (exchange traded funds).

There are dozens of ETFs now listed on the ASX.

These funds are far from perfect since they buy “everything” in an index with no discretion for which stocks are actually the best performers, but they have exceptionally low fees.

Among the many ETFs now available from perhaps a dozen providers locally are funds that specialise in US-listed shares. ­Examples include iShares S&P 500, iShares S&P Small Caps, SPDR DJ Global and Vanguard US Total Market.

Of late there have also been ­attempts to offer Australian ETFs that are more than “plain vanilla” — in other words, ETFs that go beyond simply mirroring the returns of an index. An example of these ETFS would be Betashares Geared US Equity ETF.

There is also the prospect of ­directly delving into the US ­market through buying Wall Street shares online.

Though this process has become much easier in recent times, there is still considerable work and planning involved with currencies and US tax laws.

Many Australian investors will also find the dividends (unfranked) from US companies much smaller than they are used to on the ASX.

For Australian investors prepared to go one step further and buy a US-listed ETF, the choices are immense; there is also the opportunity to concentrate on areas where Donald Trump is set to make an immediate impact.

Barrons, a News Corp publication, recently highlighted the Fin­ancial Select Sector SPDR ETF (XLF), which had been rising strongly after the Trump victory.

The investment magazine also highlighted Health Care Select Sector SPDR ETF (XLV), which is loaded with pharmaceutical and biotech stocks as another EFT that has been moving higher since the election.