Types of ETFs Singapore Investors Can Explore

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ETFs, short for Exchange Traded Funds, are becoming popular in recent years. Espoused by legendary investors such as Warren Buffett, these are low-cost investment vehicles to get exposure to a diversified basket of stocks or a specific asset class.

Basically, an ETF is an open-ended investment fund that tracks the performance of an underlying index or asset class. The fact that it is traded on a stock exchange, lands it the name, exchange-traded fund. In this article, we explore the types of ETFs listed on the Singapore stock market, designed to track the different indices or assets.

Equities index

An equities ETF tracks the movements of a stock index. One example is SPDR STI ETF (SGX: ES3), which mimics the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI). The Straits Times Index contains the 30 biggest companies in the local stock market in terms of market capitalization, adjusted for their free float. Other than the SPDR STI ETF, there is also the Nikko AM STI ETF (SGX: G3B), which also seeks to replicate the fundamentals of the Straits Times Index.

In this category of ETFs, they can be further segmented by country or region. If investors wish to get exposure to the Chinese market, they can choose to invest in the United SSE50 China ETF (SGX: JK8), which tracks the SSE 50 Index. Those who prefer dividends and want to get exposure in the Asia-Pacific region, there’s the CIMB S&P Ethical Asia Pacific Dividend ETF (SGX: QR9). This ETF mimics the S&P Ethical Pan Asia Select Dividend Opportunities Index.

REIT index

A REIT (real estate investment trust) is a fairly new asset class in Asia, as compared to the U.S. A REIT ETF tracks the fundamentals of a REIT index. In Singapore, there are three REIT ETFs: Nikko AM STC Asia REIT ETF (SGX: CFA), Phillip APAC SGX REIT ETF (SGX: BYJ), and Lion-Phillip S-REIT ETF (SGX: CLR).

The newest them is the Lion-Phillip S-REIT ETF, which tracks the performance of Morningstar’s Singapore REIT Yield Focus Index.

Commodity or commodity index

A commodity ETF gives investors exposure to a single type of commodity or a basket of commodities. In our shores, there’s only one such commodity ETF – the SPDR Gold Shares (SGX: O87), which tracks the gold spot price.

In the US, however, there are more types of commodity ETFs to choose from. Some track the crude oil price specifically, while others track a commodity index.

Bond index

A bond ETF tracks a specific bond index. Last year, the Nikko AM SGD Investment Grade Corporate Bond ETF (SGX: MBH) was launched. The ETF aims to replicate the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index.

The ABF SG Bond ETF (SGX: A35) is the longest bond listed here. The ETF invests in a basket of high-quality bonds issued by the Singapore Government and Government-linked bodies such as the Housing & Development Board and the Land Transport Authority.

Key Points

Some risk-averse investors solely invest in ETFs to allow for broader diversification with little costs.

There are also many types of ETF investing strategies that such investors can follow. One such strategy is the core-satellite ETF portfolio where core ETFs are chosen for the long-term while the satellite ETFs are bought to supplement the core with shorter-term holdings. Such shorter-term holdings could offer more diversification through non-correlated asset classes.

Whichever ETFs or strategies that one chooses, he or she must be aware of the pros and cons involved.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. 

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