Exchange Traded Funds - ETF Investing In Australia

My interest in Exchange Traded Funds has grown since I first wrote about asset allocation a few months ago. As you may recall from that post, I like the strategy as a way of diversifying away from Australian shares and as a way of making the investment process more objective and systematic. Anyway, this line of reasoning caused me to search for a cost effective and relatively simple way of implementing a fairly basic asset allocation - and the humble ETF fits the bill. 

What Are Exchange Traded Funds?

An ETF is an open ended fund which trades on the stock exchange (open-ended means that the fund can issue or redeem shares at any time). Most of the ETFs I've looked at are designed to track the price of a particular index. They are similar to shares in that you can buy and sell them through your normal stock broker. The only cost you need to pay is brokerage. Another way in which they are like shares is that they pay distributions in a similar way to which shares pay dividends. 

Asset Allocation - Investing By The Numbers

What is asset allocation and how can it make you a better investor?

I've been reading a lot about asset allocation lately. I don't recall what prompted this sudden interest. Perhaps it's a factor of age. My investment strategy has always been heavily skewed towards Australian shares, for a number of reasons, but mainly because shares traditionally have a good return when compared to other asset classes and although they are more volatile, since retirement is still a fair way off, I was happy to accept the volatility in exchange for higher returns. However, while retirement is still a fair way off, it's still something which I need to take seriously as the recent fall in world stock markets would have been disastrous if I was about to retire.