Road test: Is this ETF investment platform better than the competition?

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BetaShares, one of Australia’s largest providers of exchange-traded funds (ETFs), has launched Betashares Direct, which allows users to buy and sell units in ETFs listed on the Australian Securities Exchange and the country’s second-largest sharemarket, Cboe Australia.

ETFs have become popular with investors, including younger ones, as they allow them to access immediate diversification by investing in broad markets, rather than individual investments.

ETFs are seen as being more versatile than individual investments.Credit: Dionne Gain

ETFs started out as trackers of markets, such as Australian sharemarket indices or US share indices, but have since broadened to almost any type of market or theme, including the tracking of prices of commodities and precious metals.

Units in them are bought on sharemarkets just like shares in companies, and their unit prices rise and fall in line with the market being tracked.

Pros: The major appeal of BetaShares Direct is that it charges no brokerage each time the user buys or sells ETF units. Usually, with most other investment platforms, brokerage is charged each time units in an ETF are bought or sold, which can make it too expensive to trade small parcels of units in ETFs regularly.

Betashares Direct offers model portfolios of ETFs, where each portfolio has a differing risk-versus-return trade-off. Regular investments can be made without running-up brokerage costs.

By consistently investing a fixed amount over regular intervals, investors can smooth out the price they pay for units over time.

Cons: The fee for the platform’s model portfolios is $3 a month on balances up to $10,000, or 0.2 per cent a year on accounts that have a balance above $10,000. For custom portfolios, where the user decides which ETFs to hold, the fee is $4 a month on balances up to $10,000, or 0.25 per cent a year on higher balances.

For model portfolios and custom portfolios, there is a $500 minimum initial deposit on direct debits, and $100 minimum for recurring and one-off deposits via direct debit.

No minimums apply to portfolios for deposits from the Betashares cash account, but the minimum trade size is $10.

Investments analyst Kylie Purcell says Betashares Direct’s fee structure is good for those looking to build their ETF portfolio gradually.

Users do not earn interest on the money they keep in the cash account, with the interest earned on the cash retained by Betashares. That can occur with other investment platforms as well.

Verdict: Kylie Purcell, investments analyst at Finder, says Betashares Direct is competing with investment platforms that also focus on ETFs, such as CommSec Pocket and Raiz.

Brokerage with CommSec Pocket is $2 each time you buy or sell amounts of up to $1000 – with higher brokerage for larger trades, with no other fees, apart from the management fees of the ETFs themselves.

That can make CommSec Pocket attractive for those making infrequent, larger trades, Purcell says. It offers 10 ETFs with differing themes, such as Australian shares, tech and sustainability.

Raiz also offers investment in a number of ETFs. In addition, users can invest in Australian residential real estate and in the 50 biggest companies listed on the Australian Securities Exchange.

It has a monthly fee that starts at $4.50 a month and does not charge brokerage.

“Betashares Direct distinguishes itself with a fee structure that’s generally more favourable for investors who are building a substantial portfolio over time, as it has zero brokerage with an ongoing fee that is relatively low,” Purcell says.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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