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Podcast – VanEck

Are you a keen ETF and Index Fund investor? ETF investments and Index Funds are attracting most people's investment and growing in popularity, especially as fund managers continue to underperform the market. For my most recent fortnightly education session on ASX stock tips I was joined by Jamie Hannah from VanEck ETFs and Daniel McDonald, creator of the ASX Stock Tips Facebook Group.


Stefan Angelini

Good day good day everyone out there in live land I'm your host Stefan Angelini. Thanks for joining us for another another ASX Stock Tips Educational session today we're talking about ETFs or exchange traded funds. What a conversation we have coming up it's an exciting time when we are filming this. We've got the U.S election going on in the background the markets are in turmoil a lot of things are happening IPOs are being pulled from the market yet we're here to find out about ETFs. We're gonna talk to Jamie Hannah from VanEck. We're gonna look at why people might use ETFs five golden rules into why people use ETFs or and how you should trade them but also we're gonna get three really interesting ideas and what VanEck have adapted to the market with.


So if you don't know what ETFs are you're going to find out if you're thinking of using them more in your portfolio this will give you the insights you need. We're gonna talk about U.S elections, we're gonna talk about Coronavirus impacts and and how that's differed from previous not pandemics but previous recessions that would have happened that have happened in the past.


Alright here we are with our special guest Jamie Hannah and Daniel McDonald welcome guys thanks a lot for joining us.


Jamie Hannah

Thank you. Thanks for having me Stefan.


Stefan Angelini

Thanks to McDonald Legal and Angel Advisory for putting on today. We're gonna get some really good insights into ETFs and ETF trading and Jamie. While we're listening up you've got the the election running on another computer to see how the U.S election is shaping up and how markets are performing based on those results.


Jamie Hannah

I do indeed and it's very early doors on the U.S election but it looks like right now that it's very close and markets don't necessarily like close calls it'll create some volatility in the market. So since the first few results have started leaking through it's about 50-50 so far between Trump and Biden the markets have fallen this morning. So yeah certainly interesting.


Stefan Angelini

And volatility is something we don't know anything about this year.


Jamie Hannah

No.


Stefan Angelini

Things have been things have been up and down so much. So Daniel McDonald was the man who created the ASX Stock Tips Facebook group and Jamie's one of one of the portfolio managers over at VanEck, one of the world's largest ETF providers. Now we're going through this Covid-19 issue markets are up and down there's a lot of volatility around but I'd love to get to know.


Jamie just from your experience like you've got over 20 years trading trading experience you've seen a lot you've been around during the tech wreck you've been around during the GFC over in 2008. Now obviously Covid-19 can you explain where were you during those times and how has those past recessions differed to what we see today?


Jamie Hannah

Well look it's been an interesting 20 years I can tell you. So if we start back when I was first starting out in the share markets and the stock markets was in the late 90s and I saw first-hand the technology bubble as it came about and the the wreck afterwards as you'd like to call it so look from my perspective. I was working in Australia as a stock broker dealing with mom and dad investors beginner investors in the markets and and helping them buy shares.


Now back in the late 90s, there certainly weren't a lot of internet brokers around. So you couldn't actually go in and buy shares through the internet and most people still had to get on the phone and ring up their stock broker to place trades and late 99 early 2000s. When the technology bubble really started my phone was ringing non-stop. I wasn't even making outbound on phone calls people were ringing me up saying I wanna buy five thousand dollars of PowerTel or I've been speaking to my mate down the pub and I hear that this you know mining company is looking to do something in a technology space I need to buy some I need to buy some and.


So I was literally just buying these shares for these people and and to be honest with you they were making money right everything was by and large going up and many of my clients at the time. You know locked in some healthy profits and what they did do however is that they reinvested all their profits back into new shares. So they've made you know double their money on this one share so then they put in the exact amount of money into the new share and come April 2000.


When the the tech burst, unfortunately some people got caught with with tax debts which they couldn't pay and that was something that I'd never really thought about when you know when these type of things happen that if you're going to make all this money on the market you actually need to understand you need to pay tax on that and if you pump in all the money that you've just made back into new shares and those shares fall then some people can't pay their tax debts and the ATO will look into that so that was the first thing I learned.


But the second thing is I work with a stock broker who was 86 years old at the time and had been a stock broker since World War II since he came back from World War II. He not have known what's going on why would people buy a company with well not much revenues his name was Jim Woodward he ended up working until he was in his 90s. But he was telling me through all the 70s with the resource booms and the 60s and things that you know obviously people just don't remember he said when the market loses track of fundamentals.


When people are trying to come up with new ways to value these companies, because the new fundamental reasons on earnings and and profit and that don't make any sense anymore and things are going up a lot then that's the time you should be looking to divest your investments and think about really what's happening in the market and and I think you know through the tech bubble. You know you can ride your profits for a while but when when things lose track with the fundamentals behind these companies that it's good time to assess what you're actually doing with these investments.


Stefan Angelini

Fair enough. Fair enough makes sense and then how about the how about the GFC?


Jamie Hannah

Well GFC I was actually working in New York. When it all started so I I left the shores of Australia from stock broking and decided to get into institutional trading and on the big trading floors in London and New York .


Daniel McDonald

So you're in the Epicenter. You're in the Epicenter when it all went down.


Jamie Hannah

Right in the Epicenter. I can tell you that right now. Now I want to be completely clear I was not trading any of these CDOs or you know the CDIs and the things that blew the market up those housing default swaps and things like that I was doing shares I was doing shares. So yes I was on the big trading floors but I was trading shares and I the day before Bear Stearns went under they're one of the world's biggest investment banks at the time. We were contacted by our risk and compliance team who said we think Bear Stearns is going under and you need to recall all your deals you've done with Bear Stearns and that was billions billions of dollars and we were all working with him.


Stefan Angelini

At that time.


Jamie Hannah

At the time who was asked to recall everything against Bear Stearns. Now what that actually did is it created a run now you hear about these runs where Bear Stearns might have been still operating just fine. But as soon as people lose confidence in the underlying company then people are constantly asking for all their money back which of course they're unable to

do if everyone comes to them on the same day and asks for billions and billions of dollars back.


So it puts the company into a position where they're unable to get out of and one of the things from the GFC is that that's what happened to a lot of these banks they were possibly operating okay. Yes they might have had some some bad deals on the back. But as soon as everyone decides that yes let's pull our money out then they're unable to meet their debts they're unable to operate and that's what really kicks things off it's a bit of a trigger and during the GFC everything fell everything fell fast and everything fell across the board.


But what but what really happened after that is that different companies and different stocks came back better than others. So it really highlighted yes you have to have a diverse portfolio you can't just buy the one stock and hope for the best you need diversification there and you need to understand how all these different parts of your portfolio move together because different things do different things at different times.


Stefan Angelini

Hence that's when the ETFs really started to become big big well diversified portfolios.

Essentially you're buying into or markets you're buying into. Now Daniel I know you don't have a heap of ETFs in your portfolio do you have any questions for Jamie?


Daniel McDonald

Oh well, yeah I don't we on a foundation I'm a part of we've got one small cap ETF and I've

it really came about just due to my suggestion that we're grabbing some penny stocks in there and the stock brokers suggested no no we'll go for a small cap yeah how do you guys go about constructing these what's what's the drivers just pulling these together?


Jamie Hannah

So I mean we're always looking for opportunities where the market isn't isn't essentially offering that opportunity to you. So you just can't go and just buy something that would give you exposure to something so we look at gaps in the market and decide right this is an opportunity this gives investors a place where they can express a view and buy it in one single trade access to something which they wouldn't otherwise be able to get.


So we're looking at what's available in the market right now what our competitors have right. We don't want to be going head-to-head with people on on the same products and then we want to make sure that you know this is something that investors want themselves. So we take that into account and then we look at everything that's available and then we say right right what can we build which investors can use in their portfolios to enhance their returns to give them exposures and to give them ability to do things they couldn't otherwise do.


Stefan Angelini

Yeah and I I was listening to a podcast the other day and people are talking about creating bitcoin not bitcoin but cryptocurrency ETFs. Because people don't necessarily want access to one individual type of of bitcoin they'd rather get access to the entire market. Yes if one of them takes off and you're a part of that you might make a hundred times. But if you're a part of the entire market you believe that that will become the form of currency then well at least you're gonna make you're gonna be a part of the run and they're the same the same applies to ETFs and that this is why I love what VanEck do because you do create some really really interesting things and we'll go through them in a bit. But how would you feel if we kicked off the presentation you sort of start to educate people on well what is an ETF and why people might actually use them in the portfolio and expanding on what you said just then?


Jamie Hannah

No. Absolutely so I know that you've spoken to another ETF provider in the market and they gave a bit of an overview of the ETF growth over the past so many years and and really the fact that ETFs have grown massively globally across the world and and now you know they make up a sizable portion of the U.S market. So to give like a really high level statistic about 40% of all trades in the U.S.A now are in ETF right.


Stefan Angelini

What?


Jamie Hannah

In Australia.


Stefan Angelini

Really?


Jamie Hannah

Absolutely. It is it is huge. It is huge in Australia I mean we're talking less than 10%. So it's nowhere near on the same scale as what it is in the U.S. However ETFs are allowing people to really get access to things that they weren't always able to. So let I mean I kick off you know the slide.


Stefan Angelini

And I get it I'm now building. I'm now building I'm getting requested from my clients to build solely ETF portfolios and people just think that's just investing into indexes in the Australian index and international index people don't realize that you can go quite specifically markets and that's obviously taken off in the U.S Australia just doesn't get it yet.


Jamie Hannah

No. No. They don't I mean Australia still has a tendency to to stock pick a lot of you know small resources and things like that and I know this group is that and there's absolutely no demand for that and look I'll be 100 percent honest with you. ETFs aren't going to give you the small stock tipping right? That's absolutely what they're not going to do but what they are going to do is allow you to express different views that you wouldn't be able to in one single trade on the ASX.


So I mean if we think about you know what you just said there is that I mean the fact is ETFs are really where we're going in the future and in the U.S they're probably a step or two above us in Australia and and I would say that whole portfolios of ETFs will give you a completely diversified portfolio that you wouldn't be otherwise able to get and you can still take 10 20 percent of that money and and trade it like you would an individual stock to try and make some money expressing views rather than taking stock specific risks.


Stefan Angelini

Yep Mate, take it away floor's yours.


Jamie Hannah

Okay. Well I have to obviously admit the the legal bit that this is not this is general advice. This is not specific to your needs and you need to speak to your financial planner or stock broker should you need anything specific you know I think that's the legal disclaimer that everyone's bound by these days.


So let's skip over, so VanEck I mean we've been managing money since 1955. Obviously I I haven't been managing money since 1955 but our U.S entity launched its first funds back way back in 1955 and they were just international active funds nothing to do with ETFs and you know they were a solid family-run business and they still are and and have been growing assets since then so they didn't really launch ETFs until around 2007 2006 and since then obviously the ETF part of the business has has really grown in comparison to the active stock picking part of the business and and to be fair with you we in Australia only focus on the ETF part of the business.


So we're trading ETFs newly now VanEck as a whole you know we have operations in Europe, U.S.A and and Asia. So we will we'll we'll run top-down organization and it kind of helps to know that we're a global organization and not just kind of just running everything locally we have support across the globe now this is really the big question I kind of touch on it. But why use ETFs and and to be completely honest with you I've said it you know earlier it gives you a way to access opportunities that you couldn't otherwise get right.


So if you are just going to pick a stock right. Let's say you pick any small mining stock that's well and good you are taking exposure to that one particular stock if it does well you will make money and you can be extremely happy and happy with what you've done. However if it loses money then you've lost everything you put into that one stock. So you need to kind of think a little bit broader and say right a lot of things in the same sector might move the same.


So if you buy a gold mining company if you're buying Newcrest. Maybe some of the other gold mining companies when got when Newcrest goes up might move the same as that underlying you know Newcrest might move. So do you just need to take Newcrest or can you just buy an ETF that buys gold miners for example and get exposure to all the gold miners without having any specific risk to that one particular company right now. It might in some way spread your profits across all those companies. However it also minimizes any of your risk to the downside.


So Newcrest might come out they might have had I'm gonna be they might have an explosion at a mine right you can't predict that but the ETF will allow you to still have exposure to all the gold mining companies without having exposure to this one particular company. So you're still getting the movement you would get if gold price moves right?


So that that's kind of like an example of what you can have and one of the key things about ETFs is they're completely transparent right? So every holding that we have in our ETF you can go onto the website and it's updated daily so there's no kind of like delays or what's happening you can see everything that we're doing live and so through this one trade on an ETF you can get exposure to whatever sector whatever part of the world you want whatever idea you might have and you can express it in one trade in ASX and you can buy it exactly like you would buy any share on the Australian Stock Exchange. So look that's why you should use ETFs.


Now if you're happy I'll I'll move on and talk about how you can trade an ETF and I think you know that these are extremely important things to know when trading an ETF and I you know I'm monitoring all the trading going on a day-to-day basis and if you don't follow these rules then you know your execution won't be as optimal as it should be right? So the Australian market opens over about 10 minutes in the morning. So the ASX opens at 10 o'clock for only A to B, C so it opens in alphabetical order. So at 10 o'clock ANZ bank will open but Westpac won't open until about 10:09.


So I don't know people aware of that so the market takes around 10 minutes to open fully and in alphabetical order so for an ETF that holds Australian shares they can't price it they can't say at 10:01 oh right? ANZ is you know up one percent but oh Westpac's not open at the moment. So they can't fully price it so what happens in that first 15 minutes of the day the prices between the bid and the ask on the screen are wider. So you should never trade in that first 15 minutes because the quotes on screen can't be tight enough because they don't have all the information right and it's really a key point.


Now also added to that the Australian market has a closing auction. So the market rates between 10 and 4 right. So for those people who know that so for at four o'clock the market stops trading however that's not the end of the day the end of the day is at 4:10 so at 4:10 there's an auction where you can put quotes into the market and you can you have all

these bids and asks and they overlap and there's an algorithm that runs at the ASX and it picks the mid price between the bids and the offers and it matches at that time. So anyone who trades a share on the market would know that if you trade after four you go into the closing auction right and I'm telling you that for an ETF you don't want to trade in the closing option. Because you can't value that ETF in that one little snap that happens at 4:10 so if you're going to trade an ETF you need to trade between 10:15 and 4 p.m right? They're the key times for you to trade any Australian ETF.


Now if I click onto the next bit let me just bring that up and I'll just skip to the next slide right. So this is extremely important so if anyone who goes into the stock market you will see this order book right this is what the ASX looks like on the one side you have all the bids how many shares. So at the top we have 3,000 to buy at 27.16 right they're people trying to buy and on the other side we have 15,000 for sale at 27.19 right? This is what you'll see on any share so if you're trading through Commsec or anyone online. This is what you're seeing so what we want to look at is how you would buy.


So even though on a share if you were looking to buy let's say you're looking to buy some shares you have to pay 27.19. If you're buying shares and if you're selling well the price is at 27.16 okay and that's just literally how any any share would work however the difference between a share and an ETF is that you shouldn't buy through that top ask exactly for example at 27.19 right? that's the price if you want to buy more than 15,000 which

is there don't buy the price up to 27.20 or 27.26 you shouldn't be paying more than what that lowest price is because these funds have market makers in them.


And these people provide quotes on screen right and so because they're always quoting on screen you shouldn't buy through they put these extra prices in. So that if they clean up

one then they'll pick up more so you shouldn't ever pay more than that top price right and if

you want to buy more right than what's shown on screen. Let's say on this one you can see that there's like 33,000 shares I know that's a big order.


But if you did want to buy 50,000 shares it doesn't look like you can do that it doesn't like there's enough shares there to buy 50,000 shares. However with an ETF, they're open-ended so you can go in and you can actually buy as many as you want so to do that you put a limit order in right you don't put market orders in for an ETF. Because as I said things are moving and the prices tick on screen and you can see there that you don't want to pay more than 27.19.


So if you're looking to buy this you put in a price of 27.19 if you want to buy 50,000 shares that's a lot but if you did you put in a 27.19 and you don't pay more you don't buy it up to 27.38. Okay that's one of the key things to understand when trading ETFs right?


Stefan Angelini

That is really really good and for all you for everyone out there. You'll notice that when you do go and place a trade for a share you can either put good till close good to a set to limit price and that's what you're referring to just when you place that trade look at your screen look at it properly and yeah find that price. That's amazing tip Jamie, thanks.


Jamie Hannah

No. No. I think this is really important and and just to be completely clear trading an ETF is exactly like trading a share right? But it's just you just need to be aware of how you do it

and what's best. So I just want to touch on one other rule and this other rule is about

buying international shares international ETFs right? You have to think time zones. Okay so in in the U.S.A, during our trading day the U.S.A the U.S markets are never open during our trading day neither is Europe right? At no time during our days till does the ASX overlap with those two markets however our markets you know the ASX does overlap with stuff in Asia.


So in actual fact New Zealand opens at 8am our time right? Japan opens at about 11am our time. Hong Kong opens about 12:30 our time. The same with China right? So the information coming out of those countries can affect our market right and they can affect ETFs. If you're trading an ETF that holds international shares then you have to understand that you know you want to be buying them when some of the markets open.


So if you want to buy China right? a China ETF you're better to wait for China to open which is at 12:30 than to trade it in the morning because at that time all the information is not available to correctly value those China shares. So it's just something to think about if you're trading an ETF you just need to think about what you're trading and you know what time zone it is and and how you can best affect the best trade you can on exchange.


Stefan Angelini

Trade in the afternoon.


Jamie Hannah

Yep.


Stefan Angelini

Where else we go?


Jamie Hannah

So there the tips on trading and there's one other thing to understand for an ETF right? And and I get questions on this all the time by people who are trading ETFs on their Commsec account or through their broker or anything like that. So the fund is valued at the end of the day right we have this thing called a NAV, the net asset value it's the unit price it's what the fund is worth on any day now to understand that it's taken the closing price from every market right? So we to value the fund the U.S is closing in our morning at like 7 o'clock in the morning it has to wait for Europe to close at 2 a.m it has to wait for the U.S to close at 7 a.m so it's the same day.


So if we take today the U.S only closed in our morning, so the fund is not fully valued until

after all the markets are closed around the world. But to understand that that's what's called

the NAV so it takes all the closing prices but the last price that you look at when you're

looking on screen is the last time that ETF traded right? So unlike a share a share is only

its last price that is what a share price is an ETF is its NAV its total valuation when all

markets are closed. So if an ETF last traded at two o'clock in the afternoon right? It didn't

trade between three and four for whatever reason then that's the last time it traded and then if you look at the next time it trades the next day it might show that you know it's moved three percent but actually it probably didn't right it's just because between that time it traded it's showing that movement. But it's not a share an ETF is its net asset value and you can get that off the website every single day that's what it's worth that's using all the markets and that's what you should base any of your trading decisions or your performance on to look at how it's performing.


Stefan Angelini

Clever I like that.


Jamie Hannah

So I didn't want to get too technical but it's just they're just the key things to understand so that you can actually maximize your use of ETFs.


Stefan Angelini

Yeah love it mate thanks a lot thanks for that info what else have we got?


Jamie Hannah

Well that's all I have in terms of tips. Alright now I'm just going to quickly click on my screen to see how the U.S election is ticking because..


Stefan Angelini

I love it.


Jamie Hannah

It's very very topical at the moment and it looks like Biden's slightly taking more electoral college votes at the moment and the ASX 200 is flatlining it's flatlining now. Okay so we saw over the last couple of days obviously that the U.S market had gone up a fair bit and that was indicating to be honest with you that there's going to be a definite election a definite election it's not going to be close that's what that information is telling us.


Daniel McDonald

The market had was that Trump was going to win it.


Jamie Hannah

Well I was reading a lot of research this morning and they were and no one was categorically saying that they were kind of saying in what I was reading they were saying there's going to definitely be a solid result but it could be Trump it could be Biden. I think it depends on if you want Biden to win or if you want Trump to win that's where your view is the worst thing that can happen to the markets right now is if this is a close election we just do not want a close election we don't want it contested we need a definitive winner markets don't like uncertainty it creates a lot of volatility it might be good if you're trying to trade shares but you've got to be on the right side of that movement.


So so for all of us I think and the markets and and growth and and you know we want it we want a definitive election result and it's looking relatively close at the moment.


Daniel McDonald

Yeah you mentioned this these ETFs being open-ended just just for us newbies in ETFs.

What does that mean does that mean that I can buy an infinite amount of units in ETFs?


Jamie Hannah

Yes that's actually exactly what it means so the fund just grows so as money comes in so as you buy shares on the exchange right as as you buy more and more of it the money comes to us and we go and invest that money into the shares that are held within that ETFs. So the fund can grow to billions and billions of dollars there's really not really an upside to it so the fund just grows as people buy it and for every every dollar that comes in we go and invest it into the underlying shares that are held in the in the ETF. So at all stages it's it's tracking this index which which which we're monitoring and it's it can just continue to grow.


Daniel McDonald

I see I was wondering about that so obviously there's no there's no it's just a linear linear growth in line with people jumping into it the more you're utilizing those investment funds to purchase more of the companies in in the fund.


Jamie Hannah

That's 100% what's happening and obviously that's part of my role as being a portfolio manager. So as new new fund you know new money comes into the ETF I have to invest that so I mean from my point of view I have you know we have 25 funds that I'm managing or you know my team is managing here in Australia. We have 25 funds and we have about five billion you know under management five billion dollars and we have 1,500 shares in more than 50 countries. So you know iron trading shares in more than 50 countries around the world regularly.


Daniel McDonald

And is it do you do any leveraging in these funds is there any leverage in any way?


Jamie Hannah

No. No. We the the funds that we launch here in Australia that's VanEck we do not have leverage or inverse funds. We are straight long only and that means when we have money come in we invest it straight away into shares that track the index there's no leverage we are just long only there is no risk in terms of counterparty risk. We're not lending stock out we're not borrowing money to to do any leverage in the fund. So we're getting your money we're investing it and it's held in custody by safekeeping by the world's biggest custody keeper called State Street. So from that perspective they're just we're just holding shares.


Daniel McDonald

Yeah. Yeah which sounds like a much safer option.


Jamie Hannah

It is a safer option it takes away a lot of the risk that's involved in leveraging the fund but at the same time it still can produce excellent returns over the over the short medium and long term. So don't feel that by not leveraging you're not getting the return you're still getting exposure without some of the risk.


Daniel McDonald

Yes of course and what are some of the things that you know the sort of newbie ETFs should look out for when they're looking at ETFs to invest into?


Jamie Hannah

Okay. Well I've actually got some slides here finally enough, Daniel.


Daniel McDonald

Okay.


Jamie Hannah

Yeah.


Daniel McDonald

Great segue.


Jamie Hannah

Yeah. So these are some of my current tips and I know there's a Stock Tipping Group but these are going to give you some ideas in terms of where I think it is and they're they're high level ideas right and I'm giving it giving away to do it. So let's think China, right? China at the moment is the second biggest economy in the world and by all accounts it could become the world's biggest economy in the world and its economy is growing. Yes it got hit by Covid and it's probably recovering slightly faster than some other countries around the world but its growth has continued to grow its growth is continued to to carry on right it's growing far faster than any developed country.


And no one really has exposure to it right no one is really going and buying Chinese shares and if we think about who can buy Chinese shares well apart from Chinese nationals living within China really. Chinese only open to the extremely wealthy and VanEck in Australia went about getting our Chinese license to trade Chinese shares within the local Shanghai and Shenzhen exchanges and it was an arduous process it took us nearly two years. But we were probably the third company in Australia to be given the access called an RQFII to trade in Mainland China.


So we are buying Chinese shares so we set up an ETF which is called the China New Economy ETF right and that's really where we think all the benefits in China are coming from and that is in four key areas and that is in technology right this is in you know technology shares within China it's within healthcare which is a growing area globally and it's in consumer discretionary consumer staples and that is consumer stables are things like supermarkets things you have to buy right and consumer discretionary is in things like that you'd like to buy like the new fashions the new technologies and things like that and those four areas are where we're thinking that China is really booming and we have got an ETF which invests in those four areas.


Now I can tell you we didn't set it up this way but those four areas have been the key areas in Covid as well right in terms of areas that have done well during the Covid you know downturn of the economy the four that have stood out are technology healthcare consumer discretion and consumer staples so that was just a by product of where we thought the new economy was going to be. But look China is something that people should think about in their portfolios because they are such a behemoth and there's no way unless you're Chinese that you're going to know what these Chinese companies are right? So the ETF which we have has 120 constituents in it split across those four sectors okay and it's something that you know there's no other way you can access this and it's something that you know has done unbelievably well this year and has been doing extremely well over the last couple of years I mean the one year growth on this ETF has been 45%.


Daniel McDonald

That's extraordinary.


Jamie Hannah

Which is extraordinary right you know partly due to the four sectors that we had which are obviously ideal for Covid but obviously they've recovered faster than us you know I'm not saying I'm having second waves but it's certainly something to think about that China

should be something in your portfolio and you know I'm not saying put all your all of your

portfolio into China but it's something that you should absolutely consider.


Stefan Angelini

Now if some people think about what Chinese what companies these might be you think of Alibaba which is becoming one of the world's largest retailers, Tencent which hold companies like WeChat.


Jamie Hannah

So those two I mean those companies aren't it they're not in it right?


Stefan Angelini

They're not okay.


Jamie Hannah

These are companies because you can buy Tencent and Alibaba right? You can you can actually go into you know a foreign stock market and buy them through certain online trading platforms right? You can buy them because there's ways to do it a lot of the companies in this you cannot buy now right you cannot buy them because they're in China and to trade in China you're not licensed to you don't have accounts to it you don't have Chinese renminbi. So you don't even have the currency and there's currency restrictions so there's no way you can access these companies most well most of them you can't access right? So yep go on.


Daniel McDonald

That 45% is extraordinary growth I mean 12 months ago Covid really established itself in

China I assumed that the market over there bombed out at that point is that is that

45% cent gross as a result of the market diving at the emergence of Covid in China or is that

just what sort of how you this this particular ETF has been performing year on year.


Jamie Hannah

The growth since we launched it and it's only been a number a couple of years the growth has been that strong. Now it is volatile China is volatile right um they have a huge proportion of their population that are trading shares right? The Chinese do like the stock tip their stock market right the vast majority of their people they're local people who are buying and selling shares in China because it's so restrictive for big institutions globally to buy shares that they just can't do it right? So..


Stefan Angelini

Imagine lending numbers for Chinese investors was through the roof was 2017. Well just numbers of margin loans basically take people taking out loans to buy more shares for the Chinese population as soon as it got opened up.


Jamie Hannah

Yeah so I mean Chinese people are really keen on investment right and and and they're happy they you know if there was a stock tipping group for China there would be a couple hundred million people in it I'd imagine.


Stefan Angelini

Yeah.


Daniel McDonald

So look at my WeChat groups not enough.


Jamie Hannah

Yeah but if you start.


Stefan Angelini

That night as an economy I mean they're now their their response to Covid you know people have questions about it but they're now operating their manufacturing numbers are basically at pre-Covid levels again or beating that therefore their economy is coming back strong really strong.


Jamie Hannah

100% and there's something to think about right we think about the ASX in Australia right and a lot of you stock tip in it I invest in it you know Australians who do anything will buy stuff in the ASX Australia only has 25 million people right with all these companies right that are valued at billions of dollars imagine if you had a billion people with all these local companies that are operating right you wouldn't have heard of most of these companies because you're not Chinese yet these companies are behemoths right the the banking institutions that are you know taking sums of money from hundreds of millions of people right this is a massive part of the market that people you know just it's hard to fathom when you know we're running a stock market that turns over five billion dollars a day and you know with 25 million people. If you've got a billion people it's turning over huge sums of money and you know you should have a piece of it.


Stefan Angelini

Yeah. No I get you it's it's so interesting and to be able to gain access to a market like that I didn't realize it was so restrictive but Jamie just in with time in mind what else have you got obviously healthcare was one of the big sectors in China?


Jamie Hannah

Yep. So let me just touch look at the moment and I will be quick healthcare at the moment is certainly something you should be looking to invest in right? I absolutely believe it and and it's a few factors which do it there's a massive aging demographic across the world. So the global population is getting older and as they get older they need more health care right? There's a prevalence of chronic disease across the world where people are seeking health care for it which they otherwise might not have done and thirdly like.


This is really important the emerging markets around the world are bringing on more middle class people and as people move out of you know their lower classes and come in the middle class. They'll then suddenly need healthcare right and if you think about Australia you think about how much you pay for healthcare right the cost of it in Australia. Well all this money and all these new countries around the world that need healthcare are going to obviously increase the healthcare sector globally right and so as money's increased and as you know the percentage of GDP in healthcare is 10% it things are just going to increase in healthcare and I'm not even talking about the Covid environment right now.


I'm talking just in general right so healthcare as a whole is something you should absolutely consider for a long-term investment. So I mean we obviously have a healthcare ETF I won't spend too much time onto it but I'm letting you know that if you're only buying ASX stocks you've got CSL. You think about how well that's done Resmed how well that's done right Australia has some absolute success stories in the healthcare space and they've been consistent good growth stories right? But you're missing out on the global companies which are doing the similar thing on a global scale. So this is just a way to access healthcare globally in one easy trade I think.


Stefan Angelini

Great. I agree.


Jamie Hannah

Yep these and yep I want to give another tip. This is the new one that you're not thinking about gaming video gaming. I'm talking I'm not talking betting I'm talking video gaming and e-sports alright?


Stefan Angelini

Online gaming. This is a new thing where people are packing out Etihad stadium.


Jamie Hannah

This is to what exactly like.


Stefan Angelini

Video games. Yep.


Jamie Hannah

100% I'm gonna give you a stat right now which is kind of mind-blowing it's not on the screen the movie industry generates about 40 billion dollars per year right? Globally.


Stefan Angelini

Yeah.


Jamie Hannah

The music industry generates about 20 billion dollars globally the the video gaming industry

is over a hundred billion dollars globally right? That's per year that was on 2019 numbers

right?


Stefan Angelini

You've got growth rates there.


Jamie Hannah

No that's just how much revenues generated out of it.


Stefan Angelini

Yeah.


Jamie Hannah

Right. So there are more gamers in the world than Netflix and Apple devices right this in Netflix subscriptions right this is a huge huge area which we just kind of don't we kind of just take for granted so look as I said the movie and it's big in the movie and the music industry and it's the world's fastest growing area you think about what you hear on the news you hear about these young guys who just won some fortnight contests one millions of dollars.


Well that is what's happening that is exactly where things are going David Beckham setting up e-sports teams right. There's new esports teams happening but that's just the esports side of thing it's actually just the the actual video game market which is just on fire and has been for years right?


Now I caught up with my niece recently and I said I hadn't seen her because of Covid she's 10 years old I said how are things going during Covid what you know what what were you doing she said I was chatting with my friends I'm like oh how are you chatting she said well I meet up on an online game and my friends meet in certain rooms and we play games online and we talk to each other so they're not just chatting on Facebook or anything like that they're going into games and they're talking communicating through games and playing against each other and that type of thing is what's going on in the current generation of younger people as well as older people who are used everything from the entire right on game's a big business right?


So we launched an esports and gaming fund right ESPO is the code on the ASX and literally it's giving you targeted exposure to literally video game makers right and that includes one XP do esports as well as producing video games and from that that is video game makers for consoles for like playstations, xboxes ones that make it for iphones right for your gaming apps as well. So it covers that whole market and and look it's done really well since we launched it and I think it's something to think about this is not what you should put 100% in your portfolio in but it's something different it's something you might not have thought much on and it gives you a way to do it and this includes it's a global it's a global esports and gaming so includes all the ones from around the world.


Stefan Angelini

It is it is it is brand new so it's less than two months old is that right unless on the ASX now in terms of so you've got 25 when you say 25 stocks is that 25 stocks that you've chosen or

because this is an ETF is the largest 25 esports and e-gaming stocks.


Jamie Hannah

It is it is essentially the largest in the world so you think of things like Activision, EA Sports things that you might have heard of when if you've played games then it's it's those ones that you would have heard or seen online it's those major companies they have to generate 50% of their revenue from gaming activities.


Stefan Angelini

And that's probably that's a really interesting thing it's it's so expensive to get into this into this environment 'cause it costs so much money to produce these games.


Jamie Hannah

Yeah.


Stefan Angelini

And to run these to run these games and consoles and then of course to break in and beat some of the competitors one of the Australian companies that people talk about Aristocrat Leisure.


Jamie Hannah

Yeah but their Aristocrat Leisure does poker machines right?


Stefan Angelini

So many poker machines yeah.


Jamie Hannah

They're not really in the video gaming market so this is purely video gaming and not poker machine so I should be completely specific this is purely.


Stefan Angelini

Yeah. Yeah.


Jamie Hannah

Fun fun gaming and and look the way gaming has changed back in the day you used to go and buy you know a console and yet or your computer and you have to put your disk in and so the video game makers were just making money just by selling a game to you and that was it one off now with online games it's all subscription services. So they might give you the game for free but you pay five dollars for an upgraded gun or you know ten dollars for some extra bricks or some extra lives and so it's it's subscription service now so the money is kind of rolling in it's it's genius in a way .


Stefan Angelini

Yeah people out there who might have 16 year old kids boys who are sitting on their PlayStation watch your credit card and make sure you're assessing how much money is for these kids.


Daniel McDonald

My son washes cars cleans houses all for these bucks for fortnight and roadblocks everything

else it's been fantastic introduction to our house in terms of getting off his butt.


Stefan Angelini

There you go benefits everywhere now that's a that's a really really different play and what

interests me so as an exchange for those of you who don't completely understand what an exchange traded fund is a lot of the times it's it's buying the biggest markets in these indexes and rising with them as they rise. But what Jamie spoke about before when it comes to well making investing when funds come in and investing them open-endedly is is it right Jamie that as funds get bigger and basically approach this top 25 number they this new company will come into your index and one company will drop out.


Jamie Hannah

It depends on the rules of each individual fund but yes at the moment one will come in one could drop out if it's small enough however I mean these as the environment grows for example things can get bigger and better . So if more if there's more big companies out there doing gaming then they'll come into the index


Stefan Angelini

Yeah


Daniel McDonald

Yeah this is a great way for people to get a piece of that action who perhaps don't trade in any foreign markets as well.


Jamie Hannah

Absolutely and that's really the number one thing of ETFs gives you something access to you wouldn't otherwise be able to do yourself.


Stefan Angelini

ETFs are a great way to get involved into macro-economic thematics or macro-economic trends that you believe are up and coming and something you don't know enough about

in the space and that's where diversification comes from you can invest into managed funds who specialise but typically they go quite diversified but if you believe there is a trend coming up and that's what VanEck has been able to create then obviously you know the e-gaming one something very interesting to look at one thing that's always been interesting for me Jamie and this might be what we chat about next is in Australia buying a general index you buy equal weights of the index you've created.


Jamie Hannah

Right.


Stefan Angelini

Something you when you buy the Australian index you buy depending on how large the company is and you buy that percentage portion VanEck takes a different approach to buying the Australian index could you explain that a little bit?


Jamie Hannah

Yeah absolutely so obviously we pre-prepared but it's particularly important oh look at this slide I've repaired earlier look it is particularly something to know and it's very particular to the Australian market. So we all read about on the news the ASX, S&P, ASX200 is up two percent down two percent right and and what exactly is that well the ASX 200 is weighted based on the size of the company so the bigger the company the bigger the weight in it so the top five shares in the ASX 200 make up nearly 29% of the index and then the top 10 make up 42.84% right?


So when you're buying anything to do or looking at the ASX 200 you're really only buying the top 20 shares they're making up a massive percentage of the ASX 200. So the other 180 shares are really just an irrelevant little piece to the ASX 200. They're not having any major impact and what it does is it overweight's things like banks because the big four banks and they're making up a big percentage of the ASX 200 and making it probably 20 percent right?


Stefan Angelini

So Jamie just to get this right if I'm putting a thousand dollars into the ASX 200.


Jamie Hannah

Yep.


Stefan Angelini

Basically 428 dollars of that is going to 10 stocks.


Jamie Hannah

Correct.


Stefan Angelini

10 companies.


Jamie Hannah

Yes.


Stefan Angelini

And the rest of that 58 dollars is getting a portion between the other however many 190 stocks.


Jamie Hannah

That is exactly right yes.


Stefan Angelini

And I agree.


Jamie Hannah

Yep and and so what that does is it kind of overweights you into these couple of securities and and looking at that as a whole it doesn't represent Australia and what the market's actually doing so we went away and we thought right this is the ASX 200. But what's a better

indicator of the Australian market.Sso we looked at what's called equally weighting so we looked at how big the Australian market is right by size and we said right every company in this makes up 100% and we said we want to take 85% of the whole entire Australian market

right?


So if we take it how much is 85% of the Australian market and it's about 90 shares the top 90 shares make up about 85% of the Australian market by size and we said right let's take these 90 companies and we'll equally wait them all so TPG telecommunications has the exact same weight as ANZ right and you know one of the smaller companies right at the tail end of this has the same weight as one of the bigger and so by equally weighting it you get a fairer picture of the Australian market without this massive overweight to these huge big Australian companies and what that's actually done over time since we launched it it has by and large outperformed the the ASX 200 pretty much year on year it's outperformed it by you know a good percentage and part of the reason it's done that you can analyze all these different reasons it's because by equally weighting it you're exposed more to a lot of the the mid cap companies that are growing right?


So if you're getting all these just big banks and things like that then you're missing out on the growth stories you know so you're not getting the companies that are really doing well that are building their business that are that are the new thing that's going to come onto the block. So you're really missing the access to them by just getting the ASX 200. Because they probably make up one of those small companies 0.01 of a percent whereas in ours it's the same weight as a bank right so it's a different way to think about the Australian market and MVW has been a success story since we launched it.


Stefan Angelini

I mean it makes sense right as those up-and-comers come through you get equal weighting towards the other ones and that means it's just so it's a portion out between the 90-odd investments now important just to touch on for everyone out there this is no recommendations to go into these investments this is pure a purely educational perspective around what is out there and I've been seeing a lot of interest coming into this because that story of 42% of the top 10 com top 10 companies make up 42% of the index massive and even you look over into the U.S now the top five companies 10 companies in the U.S are starting to take up huge portions.


So I guess for all the investors out there it is quite important to to know that if you're investing into the ASX 200 ETFs but you also own the big banks and the big miners individually a large portion of your portfolio is going to be overweight towards those big names sound right?


Jamie Hannah

Yes. 100%. 100%.


Stefan Angelini

I think I think it's great if you've got any other stories for us or any other slides you want to touch on look I'm I'm obviously you know on time how are we going I can talk one more but if not I'm happy to take questions or anything like that that you'd like?


Daniel McDonald

You've got time for one more yeah.


Stefan Angelini

Good if you've got more to slide or do you want to just chat chat about one Jamie?


Jamie Hannah

Well let's talk about I do have one more but you know it's really just quality investing right? Okay so most Australians don't have access to global shares they go in they buy Australian equities you know and I know you're stock tipping and you're trading Australian shares that that's fine but if you think about your portfolio and you know your superannuation fund and things like this you want to think global Australia makes up 1 or 2 percent of the market in the world and you want access to all the the main companies around the world so you know you want to invest in the right companies around the world though so you need companies that have strong.


Fundamentals you know low financial leverage they have you know good solid growth record

and they have stable like balance sheets and they essentially are good quality companies right so you know if you're looking as an investor to get involved in the international markets then you need to know all these companies you're gonna go and buy Apple you're gonna go and buy Google you're gonna go and buy you know Louis Vuitton like this there's so many companies out there in the world.


So what we've done is we've created an ETF that invests in the top quality companies around the world and it invests in 22 different countries around the world by all the developed markets and it essentially just weights them based on how good quality they are to get into it so Apple's in it you know Google's in it Microsoft's in it and there's a lot of companies that you might have heard of like Visa there's Mastercard there's there's Under Armour there's think there's big companies that you would otherwise have heard of that brand names that you probably don't have in your portfolio and this is just a way to get access to international shares in one in one trade and and look I mean the performance has been really good over the years and look all I'm really saying is think about international shares and if you're going to think about how you invest in international shares.


Stefan Angelini

Obviously creates a portfolio just allocating all your funds into one asset class is sometimes

people might deem it as being a bit risky.


Jamie Hannah

Yep


Stefan Angelini

And look we help people set up investment portfolios all the time and the amount of the amount of returns you've been seeing from international portfolios over the last few years is is much better than Australia for instance if you were going to invest into you at top 500 companies in the U.S from the for the 10-year period between 2009 and 2019 you would have seen on average a return of about 16 17 percent per year and whereas in Australia it was closer to 7.8 percent.


So it just goes to show that look we are an ASX stock tips group but getting that international allocation to a portfolio can be quite important Daniel you got any finishing questions for Jamie anything that's on your mind.


Daniel McDonald

No. No not at all that was quite a comprehensive presentation Jamie thank you so much for being part of our education series I think I'm going to take a position on seeing you pretty much straight after this call but that was quite enlightening I mean 45% is pretty extraordinary and I I didn't really have a great deal of insight into what they are about but you've certainly educated me so thank you so much and I'm sure you've educated our members too.


Jamie Hannah

Look no problems at all thanks for having me and obviously if you have any follow-up questions on that I'd happy to answer anything that might come your way.


Stefan Angelini

Hey mate thanks so much Daniel before we sign off just a quick introduction to McDonald Legal.


Daniel McDonald

Yes thanks Stefan so everyone I'm the principal of McDonald legal we're a commercial and property law firm we have been assisting some members with self-managed super funds a few months back just let everyone know that we're still doing that so if you are looking at getting yourself managed super fund set up please come to me you can message me or reach out to me through Facebook we're doing that for a very special limited price just for ASX Stock tip group members only so look forward to hearing from you.


Stefan Angelini

Beautiful mate and I'm Stefan Angelini I run Angel Advisory we help people set up those well-rounded investment portfolios so when you get frustrated with your trading people end up turning to me we invest through companies like VanEck and everyone else that a lot of the people that you would have seen on this show when we try to create our portfolios so on that Jamie I want to say mate truly truly knowledgeable thank you so much for sharing all those insights hopefully everyone out there knows now what exchange traded funds are and they get a bit more insight into just how sexy the space can be.


Jamie Hannah

Thanks very much Stefan. Thanks mate thanks Daniel.


Stefan Angelini

Bye guys. Thank you everyone for your time. Take care bye.



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