ETFs are a good way for investors to get the diversification benefits of index-tracking while having less reliance on active fund managers. With ETFs, you can buy a basket of securities instead of picking individual stocks.
The best way to trade ETFs is by going through a broker who will do it for you. You can also invest in direct trades with other financial institutions or market makers, but that’s more difficult and not commonly done by retail traders.
Trading ETFs in Asia
Asian investors interested in Asia-focused funds have several options available from Asia providers such as Fidelity and SPDR, but what if you want broad regional exposure? ETF Securities provides an exciting alternative. The company enables anyone 18 years old and above to buy and sell ETFs using cash or margin.
For example, if you want to get involved in the ETF market but don’t have much money to spare, you can use 635.55 SGD (10% of the purchase price) to buy into SPDR’s FTSE Asia Pacific index fund (1 unit is about 0.98 USD). The fund tracks the performance of Asian markets that are included in the FTSE Developed Asia Pacific Index.
You can then use your money to buy or sell other items on mark offers. For example, should you wish to take profits, you could offer mark offers for units of other funds at a slightly lower price than what they are trading at the time. Alternatively, you could buy mark offers for another ETF at a slightly higher price than what they are trading at the time, and this will allow you to pick up units at a discount.
You can also use your money to buy or sell other items on margin – for example, you could buy silver bullion with cash and then take out a loan to purchase more ETFs. However, extremely high levels of leverage should not be used because that would exponentially increase the risk of adverse consequences.
You can also earn interest by putting your money into an insured money market account. This is typically reserved for more significant amounts. It costs SGD 1 per side when you place foreign trade orders (for example, to buy 1 unit of a US-listed ETF). SGD 2 is charged per trade for trading in ETFs listed within Asia.
Benefits of trading ETFs in Singapore
ETFs are like mutual funds but differ on exchanges and often have lower expense ratios. Investors can also make profits from dividends, which traditional mutual funds do not provide, or capital gains, only if they sell their shares at a higher price than what they bought them for.
The Singapore exchange allows trading of ETFs that focus on indices such as the MSCI Emerging Markets Index, developed markets such as Japan and Australia, and regional indices. The various types of ETFs available allow investors to diversify their investments. They can be traded intraday, too, so you won’t miss out on any good opportunities! And with only 0.20% in broker fees, you’ll be able to grow your investment faster.
Investors can use ETFs for short-term investments, long-term investments or even frequent trading; it’s really up to them! Most importantly, unlike other markets, exchange-traded funds on the Singapore stock exchange are free from taxes! That means you get to keep 100% of your returns instead of giving away some of it to the government as traditional mutual funds do.
Trading ETFs on the Singapore exchange isn’t complicated if you go through a brokerage or direct trades with market makers. You can also earn interest by keeping your money in an insured money market account. If you want to learn more about trading ETFs in Singapore, contact a broker from Saxo capital markets singapore, and start your investment journey today.