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Exchange Traded Fund
(ETF)
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ETFs invest in a group of stocks or bonds or other instruments which track the performance of an
index. ETFs are listed and traded on a stock exchange.
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Why Invest in ETFs?
TRADE LIKE STOCKS
Just like stocks, you can buy and sell anytime throughout the trading day;.
FULLY TRANSPARENT
Prices are available real-time throughout the trading day. What’s more - the investment
portfolio is fully transparent as it tracks an index; and
EFFICIENT WAY TO DIVERSIFY
You can easily gain exposure to a group of securities – in a single transaction & at a
lower cost compared to managed funds. |
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FAQs
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How to invest in ETFs? Where to buy ETFs?
Similar to trading in stocks, you will require two accounts:
A Central Depository System (CDS) account &
A trading account maintained with a broker You may buy or sell ETFs through
your remisier or via online trading during normal trading hours.
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What do I have to pay when buying and selling ETFs?
Like buying and selling stocks, investors need to pay brokerage commission, stamp duty and
clearing fees.
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What determines the price of an ETF?
The market price of an ETF is usually very close to the Net Asset Value (NAV) of the fund
ie. market value of the underlying stocks and any net income not distributed.
However, the price of an ETF can be affected by demand and supply in the market.
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What are the expected returns?
Investment returns generally correspond to the price and yield performance of their
underlying indices.
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What is the minimum investment units?
ETFs are traded in minimum traded lots (board lots) of 100 units.
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Do ETFs pay dividends?
Most ETFs pay dividends to their holders either half yearly or yearly. You are advised to
refer to the distribution policy in the prospectus or offering document of the ETF.
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How are transactions in ETFs settled?
In the same manner as share transactions ie. not later than 3 working (market) days after
the transaction date (T+3).
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Is there any risk?
Yes, investing in ETFs, as in investing in stocks, is subjected to the same ups and downs of
the market.
The performance of the ETF may be directly affected by the performance of its component
stocks or bonds.
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What should I do before investing in an ETF?
You are advised to know the following before investing:
Investment objective & strategy of the ETF
Information on the index that the ETF is tracking
Dividend policy
Fees & charges that will be borne by you as an investor
Sources of trading information of the ETF
Information about the management company
PRODUCT COMPARISON
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ETFs |
Stocks |
Unit Trust |
| Diversification |
X |
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| Real-time dissemination |
X |
X |
X |
| Trade via |
Broker |
Broker |
Agent |
| Purchase of ETF / Stocks / Unit Trust |
T+3 |
T+3* |
Upfront |
* T+3 means the 3rd market / business day after trade date.
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