Learning trading/investing together part 4: ETF(Exchange-traded fund)
Exchange traded funds(ETFs)
What are ETFs?
- Exchange traded funds(ETFs ) are investment funds listed and traded on an exchange
- They aim to track the performance of an index and provide investors access to a range of market and asset classes
- Buying and selling is the same as that of a stock and can be transacted through any broker
Benefits of ETF
- Investors achieve diversification in one single transaction with minimum investment versus having to build a similar portfolio by purchasing individual stock, bonds or commodities which could require a huge investment outlay
- The cost of investing in ETFs are generally lower than actively managed funds(for example, Units Trusts) in the same markets of assets
- ETFs offer access to a variety of local and global markets, as well as asset classes, both broad and specific, which may be inaccessible to individual investors
Did you know?
- SGX lists two ETFs that track the Straits Times Index(STI) and SPDR Straits Times Index ETF(ES3) and NIKKO AM Singapore STI ETF(G3B). Investors stand to benefits from potential capital gain an dividend distribution
- An overview of their performances since 2009
- Annualized Return since 2009=11.1%(data as of 2016)
- Average Annual Dividend Yield since 2009 = 2.51%(data as of 2016)
What Is Straits Times Index?
- The Straits Times Index is the benchmarks index or the Singapore Stock market. It is represented by the 30 largest, most actively traded blue-chip companies list on the SGX and are spread across various sectors(I am currently vested in STI ETF via POSB invest saver)
The table below details the 30 STI constituent stocks sorted by their market capitalization
Do take note of the STI WEIGHT % to get a better understanding of the respective company percentage that is held in STI ETF
What are the others respective country ETF?
- S&P 500 ETF(tracks the top 500 companies in the US)
- Nikkei 225(track the top 225 companies in Japan)
- Hang Seng Index
- FTSE 100 index
That all for this week, ETF will be mention again in a near future post!do look out for next week post on REITs!
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