Why Russians rarely invest in ETFs and mutual funds

ETF
Exchange-traded index instruments can attract money from private investors to the Russian market. But this requires an information campaign and an expansion of the range of products.
The inflow of private investment into the market can stimulate investment instruments, which require a minimum of knowledge and experience in the stock market. For such purposes, certainly, the simplest products such as synthetic OFZ for the population are suitable (OFZ-n), as well as index funds (Mutual funds and ETF), which by themselves imply maximum diversification.

In the case of index investing strategies, there is no need to try to guess trends., geopolitics and other risks and factors. AND, according to our estimates, index instruments are the future of investment retail in Russia. So far, a limited line of 12 ETF, but with the growing demand for them, it can be assumed, that it will expand.

World Index Glory

Index funds are mega-popular all over the world. The global ETF market is priced at $4,17 trillion, and in the country with the largest number of index funds, the United States, the total assets under management of these funds exceed $2,8 trillion. Total in the world is represented by more than 5 thousand. ETF-papers, out of which 1,8-2 thousand. are traded on the US market. Order 70% of all ETF assets are concentrated in the hands of financial giants - the largest providers of BlackRock index funds, Vanguard и State Street Global Advisors.

The ETF industry is growing at a high rate. IN 2017 year inflow to them, according to research company ETFGI, was the maximum for the entire time of observations: ETF market volume reached a record high in $4,17 trillion, having increased over the year by 17,5%. The reasons are the ease of investing in ETFs, maximum diversification and low commissions, as well as frustration with proactive management strategies, who started to lose passive investing.

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Invest in almost anything through ETFs - for example, into broad stock indices. So, structure S&P repeats SPDR S fund&P 500 ETF (ticker — SPY), structure of the Dow Jones Industrial Average — SPDR Dow Jones Industrial Average (MORNING). Фонд PowerShares QQQ (QQQ) Watching Nasdaq 100. Besides, there are funds for indices of countries or regions (US states, in particular), industries (medicine, IT sector), types of raw materials (gold, oil) and bonds.

An investor in an ETF can focus on individual investment ideas – biotechnology, Internet of Things, autopilots, cryptocurrency, Or they can believe in something very specific and exotic — for example,, manufacturers of solar panels or vegetarian convenience foods.

ETFs have different mechanics. There are so-called "flipped" versions of ETFs, whose quotes change opposite to the underlying asset. Or, say, Double and Triple Leverage ETFs, that double or triple the dynamics of the "base". With the help of ETFs, you can save, invest or even speculate.

Buying securities of these funds helps to achieve the most diversified and balanced portfolio.. Diversification is also achieved through the very structure of the ETF, and due to the inclusion in the portfolio of funds for different asset classes (precious metals, stock, bonds) and countries (ETF for different country markets). It all depends on the timing, the goals of the formation of savings and the risk appetite of a particular investor. For instance, conservative investors are recommended to form a large share of the portfolio from bond ETFs, and they, who is risk-averse, can choose stock ETFs.

Index investments in Russia

In the U.S., with the help of an analogue of our IIS – IRA accounts (Individual Retirement Accounts) - Americans can invest, including, in ETF. The same option is available for ISA UK investment account holders. Is it possible for the owners to do so? IIS в России? Undoubtedly. But a Russian investor can buy only those ETFs on IIS, which are traded on Russian stock exchanges.

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While the supply in this market is limited. ETFs have just begun to gain traction in Russia. A stripped-down set of local FinEx ETF products is presented on the Moscow Exchange. This is a nuance, of particular relevance to more sophisticated investors, because they are interested in specific market segments, which are not represented in this set. For example, the already mentioned biotechnologies or manufacturers of autonomous cars are a trending investment topic in the world. In this sense, the funds, traded in Russia, practically do not give room for investment thought, Although they fully fulfill the tasks of diversifying a conservative portfolio.

According to our estimates, Recently, Russians have been quite actively interested in passive investment products — mutual funds and ETFs. But while the number of investors, believing in this direction, Very small — about 3-5% of our clients were interested in index strategies and / or used them. Despite, what, according to the Moscow Exchange, behind 12 months from July 2016 to July 2017 yy. in ETF began to invest in 2 times more investors, it's just 2% of the total number. They invest in open-ended mutual funds even less - about 0,03%.

In monetary terms, according to the estimates of the National League of Governors, from the beginning 2017 years, investors have brought only about 260 RUB million in index funds. For comparison: The total trading volume on the stock exchange in June was almost 80 billion rubles.

According to our estimates, so far low demand for index instruments is due to insufficient information of private clients about the advantages of passive investments. A serious information campaign was launched on the same people's bonds, almost every bank speaks about investment life insurance, but ETFs and even mutual funds are perceived by many as something complex and requiring specific knowledge.

Index instruments are undervalued, but with more active propaganda, they have great potential in the segment of experienced investors, and in the mass segment. Investment and asset management companies can play an important role here, working with retail.

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It is also necessary to solve the problem of limited supply in the market.. One ETF operator in the market is too small for the industry to grow. It remains to be hoped, that with the growing number of private investors and their demand for ETFs, other index fund providers will emerge in Russia in the coming years, which will expand the range of available products.

Anyway, the future belongs to passive investments. I see, that people are looking at index products and asking about them. Beyond automatic investment diversification, index funds also offer low fees (about 0,2% world average) and ease of work - in terms of the formation of ideal risk-return portfolios and their subsequent rebalancing. With more active awareness of the benefits of passive investments, as well as the emergence of new types of ETFs on the local market, Investments in ETFs index funds in Russia can grow exponentially— show in 2017 year increase in the area 4-5%, and in 2018 In the year — already in 8-10%.

(With)www.forbes.ru/finansy-i-investicii/350981-nedoocenka-indeksa-pochemu-rossiyane-redko-investiruyut-v-etf-i-pify

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