Exchange Traded Fund (ETF)
Exchange Traded Fund (ETF) is an investment fund that trade like stocks. Cheap, flexible, and tax-friendly, it allows investment of any size in a myriad of different portfolios of securities, equities, bonds, commodities etc. ETF is more than just cheap fund. It is an entirely different animal from unit trust funds. ETF can be bought and sold instantaneously on a stock exchange as opposed to unit trust funds, which almost always trade at end-of-day prices.
ETF is designed to track performance of an index. It offers additional benefits of diversification and market tracking while retaining the features of convenience and flexibility of ordinary stocks. Investors can buy or sell ETF through their stockbrokers anytime during trading hours.
Benefits of Investing in ETF:
Diversification
ETF invests in a portfolio of securities as the case maybe giving diversified exposure to selected markets or sectors. By investing in an ETF, you can replicate the gains and losses of the basket of securities which is designed to track without the expense of buying all the underlying securities yourself.
ETF invests in a portfolio of securities as the case maybe giving diversified exposure to selected markets or sectors. By investing in an ETF, you can replicate the gains and losses of the basket of securities which is designed to track without the expense of buying all the underlying securities yourself.
Low minimum investment
ETF is traded in board lot which is usually maintained at an affordable level, and with a minimum investment, offers a wide array of securities.
ETF is traded in board lot which is usually maintained at an affordable level, and with a minimum investment, offers a wide array of securities.
Liquidity
ETF is continuously traded on the exchange during trading hours. Most ETF have market makers who act as counter-parties to buyers and sellers in trade execution and increase liquidity.
ETF is continuously traded on the exchange during trading hours. Most ETF have market makers who act as counter-parties to buyers and sellers in trade execution and increase liquidity.
Transparency
The underlying index and constituent securities of an ETF is transparent and price quotations are disseminated during trading hours. Trading information of an ETF is also easily accessible on a real-time basis.
The underlying index and constituent securities of an ETF is transparent and price quotations are disseminated during trading hours. Trading information of an ETF is also easily accessible on a real-time basis.
Convenience
ETF is tradable through brokers at anytime during the trading hours and are settled in the same way as ordinary stocks.
ETF is tradable through brokers at anytime during the trading hours and are settled in the same way as ordinary stocks.
What are the key features of an ETF?
ETF is structured as a unit trust while it is also tradable on the Bursa
Malaysia like an equity during the usual trading hours.
To achieve the index tracking objective, a fund manager may use various
strategies to manage an ETF. It may purchase securities identical to the constituent securities of
an index or otherwise purchase securities that share common characteristics of those constituent
securities.
Each ETF has a Net Asset Value (NAV) that is calculated with reference to the
market value of the securities held by it. However, the trading price of an ETF on the Bursa
Malaysia, like that of a stock, is determined by the supply and demand of the market. The trading
price of an ETF may not be equal to its NAV, and this disparity may give rise to arbitraging
opportunities.
An ETF may or may not distribute dividends, depending on its dividend
policy.
An ETF incurs certain fees and expenses such as management fees charged by the
ETF manager and other administrative costs. These fees and expenses will be deducted from the ETF's
assets and the NAV will be affected accordingly. Trading ETF on the Bursa Malaysia also incurs
transaction costs such as stamp duty, brokerage commission, etc.
Below are a list of related brochures for your download:
Why
ETF? (1 MB)
ABFM FAQs
(368 KB)
ABFM
Supplementary FAQs (15/5/06) (341 KB)
Adobe Acrobat Reader is needed to view the
documents. If you don't already have it installed on your computer, click on the icon to download
it.