Exchange Traded Funds (II)
How to invest in Exchange Traded Funds?
Exchange Traded Funds have a nature like stocks – they are listed on stock exchanges and are bought and sold like stocks during market trading hours. You can also put advanced orders on the purchase such as limits and stops.
Depending on your objective or diversification strategy, you can purchase ETFs to get exposure based on specific:
country-specific or developed/emerging markets
energy, technology or healthcare
stocks, bonds or commodities
BUYING SINGLE ETF
You can purchase single ETFs from the exchange via a brokerage or an online trading platform.
In Singapore specifically, there are 2 types of ETFs – Excluded Investment Products (EIP) and Specified Investment Products (SIP):
Less complex and generally suitable for retail investors with some understanding of financial instruments.
Derivatives or products containing derivatives, with complex features and higher risks. To invest in an SIP-ETF, the investor must undertake the “Customer Account Review (CAR)” to assess your knowledge/experience and understanding of the product features/risks.
Find out more
Ways to add ETFs into your investment portfolio
An ETF Portfolio
Ready-made ETF portfolios are usually thematic and could include up to 10 or more ETFs adding diversity such as expanded geographical access or exposure to desired asset classes.
These portfolios are often curated by a team of investment experts, who monitors and rebalances as market conditions change for optimal performance. And are usually available at a fraction of the cost, if you had attempt to replicate the portfolio using the same underlying assets.
Lump Sum Investment
ETFs are traded in board lot sizes of 5, 10 or 100 units. Depending on your amount you’ve set aside and the charges e.g. commission fees incurred for your ETF purchase, you will receive the corresponding number of ETF units..
Regular Savings Plan
Alternatively, if you prefer regularity – a fixed sum from S$100 on a monthly basis, and investing that’s fuss free, consider a Regular Savings Plan (RSP).
An RSP for ETF keeps investment decisions simple – you determine the sum of dollars you’d like to set aside every month and your choice of ETF. Set it up using iBanking / iWealth (check) and you can start accumulating your investments progressively and steadily.
No need to time the market with Dollar-Cost Averaging
The fixed sum goes into buying the same choice of ETF on a specified date every month, regardless of market conditions and unit price. This investment strategy, known as Dollar-cost Averaging, gets you more ETF units when prices are low and lesser units when prices are high. Over time, the average cost of your investment could potentially be lower versus a one-time, lump sum investment.
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