They are securities that consist of a basket of assets such as stocks, bonds, commodities and money market instruments. The value of an ETF is based on the underlying investment it represents, which can be indices, currencies or commodities, for example.
Traders buy and sell ETFs on exchanges during regular stock trading hours, making them highly liquid investments. This type of fund has a low management fee and broad diversification benefits. It is a valuable tool for investors to manage their risk exposure through efficient trading strategies.
In Singapore, ETFs have become increasingly popular in recent years as investors look for ways to invest in different asset classes without taking on too much risk. However, as with all investments, risks are associated with investing in ETFs.
Types of ETFs
At present, there are three main categories in which you can classify ETFs: equity funds, bond funds and currency funds. These categories differ primarily by the types of assets they hold because all ETFs share standard features such as transparent portfolios, daily liquidity etc.
Equity funds invest in stocks and, as a result, offer investors exposure to the broad equity markets. On the other hand, Bond funds invest in debt securities such as government bonds, company loans, and mortgage-backed securities.
Finally, currency funds invest in foreign currencies to track their performance against other global currencies or the U.S. dollar.
ETFs for long-term and short-term investment goals
One important thing to note about ETFs is that traders can use them for long-term and short-term investment goals. So, if you’re looking for a low-cost way to gain broad exposure to the equity markets, an equity ETF would be suitable.
If you want to take advantage of price movements in specific markets, you might consider using ETFs that track index or specific sectors. In this case, you would be using ETFs as short-term trading instruments.
How do I invest in ETFs in Singapore?
There are two ways to invest in Singapore ETFs: a brokerage account or a fund supermarket.
Brokerage accounts
Accounts with reputable brokerages allow investors to buy and sell ETFs like individual stocks. To open a brokerage account, you will need to provide your personal information, such as your name, address, and Social Security number, and choose a broker. Contact a reputable online broker from the Saxo Bank Group for the best customer service and lowest commissions.
There are numerous brokers to choose from in Singapore, each with its fee structure and investment products. Make sure to do your research before selecting a broker to ensure that they offer the products and services that fit your needs.
Fund supermarkets
Fund supermarkets allow investors to buy ETFs and other mutual funds directly from the fund company. It can be a convenient option to invest in various funds without opening multiple accounts.
Most fund supermarkets in Singapore offer low management fees and lower minimum investment amounts than most brokerages. However, some funds only offer their products to institutional investors, not the general public.
What are the risks of investing in ETFs?
The main risk when investing in ETFs is the possibility of losing money due to market fluctuations. Because ETFs trade like stocks, they can be subject to sudden price changes due to shifting interest rates and stock prices. It’s important to always research an ETF before purchasing to ensure a history of solid returns and low volatility.
Finally
Overall, Exchange Traded Funds offer many benefits, such as diversification and transparency, which makes them suitable for use by investors. Suppose you are interested in adding ETFs to your investment portfolio. In that case, you need to consider choosing an asset class that meets your investment goals and then finding an ETF that suits this selection criterion. As long as you do some background research and take care when making transactions, ETFs can prove to be a valuable tool for managing your financial assets.