Exchange traded funds (ETFs) can help investors in the hunt for yield but without the risks associated with stocks, according to Vanguard.
Vanguard's head of product, Robyn Laidlaw, told InvestorDaily that ETFs allow an exposure to Australian stocks but mitigate some of the risks that come with building an equity portfolio.
"ETFs are going to track a very diversified exposure as opposed to having to think of which specific stocks to get," Ms Laidlaw said.
"Investors could obviously do the same thing by buying a selection of stocks with high yields, but then they would have the associated portfolio risk with specific companies."
Vanguard said ETFs should be thought of as a complement to holding equity assets but should be a core part of a diversified portfolio.
"I think investors should use them as a complement to holding direct stock and hold an ETF because it will diversify their exposure to the market and will be a low-cost product option," Ms Laidlaw said.
In January, the Australian Securities Exchange (ASX) noted the domestic ETF industry comprised $6.8 billion.
Ms Laidlaw said the popularity surrounding the take up of ETFs is likely to continue as more products are developed.
She added, however, that despite ETF diversity, investors still need to think strategically about these funds as an investment option.
"As we've seen more products issued in the last few years, it really gives financial advisers more in the toolkit in terms of constructing portfolios for their clients," Ms Laidlaw said.
"We would just say to investors to listen to the investment advice around building strategic portfolios, as well as having shorter term use."
