Overview of Exchange Traded Funds

•  ETFs - Combining the best of shares and unit trusts

	Exchange Traded Funds	Stocks	Unit Trusts
Diversification	Yes	No	Yes
Price Transparency	Yes	Yes	No
Sales Charges	None	None	3 - 5%
Management Fees	Less than 1%	None	1 - 2%
Traded Through Broker	Yes	Yes	No
Cash Settlement	3rd business day after trade date	3rd business day after trade date	Upfront

• What are Exchange Traded Funds (ETFs)?
• Why invest in ETFs?
• What are the risk considerations before investing in ETFs?
• What are the investment applications that can be adopted with ETFs?
• Are there seminars that I can attend to learn more about investing in ETFs?

•  What are Exchange Traded Funds (ETFs)?

Exchange Traded Funds (ETFs) are open-ended investment funds listed and traded intraday on a stock exchange. They aim to track the performance of an index and provide access to a wide variety of markets and asset classes.

•  Why invest in ETFs?

Exchange-traded funds offer the following advantages:

• Efficiency: Annual management fees for ETFs are generally less than 1%, enabling investors to obtain cost-efficient exposure to a diversified portfolio of securities through a single transaction.
  
  
• Transparency: Investors have ready access to the component securities represented in an ETF. Moreover, market prices are published real-time throughout the trading day.
  
  
• Flexibility: An investor can buy and sell ETFs anytime during trading hours and may employ the traditional trading techniques including stop orders, limit orders, margin purchases, and short sales.

•  What are the risk considerations before investing in ETFs?

Investors should note the following risks associated with ETFs:

• Market risk: An ETF represents interest in a portfolio of securities. Hence, the performance of the ETF will be directly affected by the performance of its constituent securities.
  
  
• Tracking error: An ETF may not be able to exactly replicate the performance of the underlying index due to management fees, timing differences and other factors.
  
  
• Foreign exchange risk: Investors whose base currency is other than the currency denomination of the ETF will be subject to the risk of fluctuations in currency values.

•  What are the investment applications that can be adopted with ETFs?

ETFs are simple tools with many applications, some of which are outlined below:

• Asset allocation: ETFs can be used to fill voids in a portfolio as they provide an efficient and diversified way to gain access to specific markets or asset classes.
  
  
• Targeted exposure: ETFs are ready vehicles for investors seeking to take positions based on their views on a particular markets returns.
  
  
• Hedging: ETFs can be used to hedge against other investment positions. For instance, an investor may long a specific market segment while at the same time shorting an ETF.

•  Are there seminars that I can attend to learn more about investing in ETFs?

To register for seminars about ETF, please click here.

•  Keen to find out about investing in ETFs, please click here.