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Want to invest in the stock market but find picking stocks too complicated and time-consuming?
Instead of just buying unit trusts or investment-linked insurance policies, do you know there is an even better way to gain exposure to the stock market in a fast and simple way?
You can do it through a simple instrument called Exchange Traded Funds (ETFs). ETFs are one of the best instruments for us to invest in the stock market. This is especially true if you prefer to find a simple method of investing prudently, time-effective and cost-effective manner.
What is an Exchange Traded Fund?
Exchange traded funds (ETFs) are investment funds that are listed on a stock exchange as well. This means that we can buy or sell the ETFs just as we would for a stock. So basically, we can see ETFs as Unit Trusts that are listed like a stock. Yet, we can invest in them without having to pay high commission fees to our bankers or insurance agents. All you will be paying is your normal brokerage commission. On a yearly basis, most ETFs have a much lower maintenance cost compared to unit trusts as well.
Here are three which we think can get you started.
Tracker Fund of Hong Kong
Asset Under Management: HK$ 82.7 Billion (5th Nov 2018)
Dividend Yield: 3.6%
Expense Ratio: 0.09%
The Tracker Fund of Hong Kong ETF is listed on the Hong Kong Stock Exchange. It is one of the largest ETF listed on the exchange with an asset under management of close to HK$ 83 billion. It is a passive investment fund that will track the performance of the Hang Seng Index, the main index of Hong Kong. Thus, the fund will be used to invest in the 50 companies within the Hang Seng Index proportionally and track its performance.
You are able to buy this ETF with a minimum lot size of 500 shares. This means that the minimum investment amount to buy this ETF is:
HK$26.25 X 500 = HK$13,250.00 or USD 1,700.00
With that amount you would be investing in prominent companies like HSBC Holdings, Tencent Holdings, AIA Group and most of the major banks in China.
The ETF is also managed by State Street Global Advisors, one of the largest asset managers in the world, thus they are able to keep the expense ratio of the fund at a very competitive rate of only 0.09% per year. This means that for every $1,000 invested in the fund, you would only need to pay 90 cents a year to the fund manager for helping you manage the fund. Equivalent unit trusts might have expense ratio as high as 2% per annum on a similar product.
One reason State Street Global Advisors is able to charge such a low price on the ETF is because Tracker Fund of Hong Kong has the economy of scale as an ETF and that it is a passive fund, meaning that the fund manager does not make an active decision on which company to buy or sell. It is merely mirroring the Hang Seng Index, thus it requires less manpower to run the fund.
However, the passive fund does not mean uninspiring returns for investors. Over the past ten years, the Tracker Fund has returned about 5.9% per annum excluding dividends. And by looking at the 3.6% dividend that the ETF is paying out, the annual return for the ETF over the past decade could be close to 10% including dividends. No bad for a passive fund.
ABF Pan Asia Bond Index Fund
Asset Under Management: HK$ 28.4 billion (5th Nov 2018)
Dividend Yield: 3.3%
Expense Ratio: 0.18%
Price: USD 110.15
The ABF Pan Asia Bond Index Fund is the largest bond ETF listed on the Hong Kong Exchange. This ETF is also managed by State Street Global Advisors. The fund is set up to track the return of the Markit iBoxx ABF Pan-Asia Index. This is an index that is indicating the returns the high-quality bonds denominated in Asian Currency.
The fund currently holds 380 bonds in its trust, mainly bonds guaranteed by the government or Government-linked Organisations in Asia. Some of its largest bond positions include Government Bonds from Singapore, Hong Kong, China and the Philippines.
The ETF is presented in US dollar and you are able to start investing in it with just 10 shares. This means that the minimum investment amount for this ETF is around USD 1,110.
Looking at its past 10-year record, its investors would have gotten about a 3.38% return per annum with its distribution reinvested.
If you are looking for a bond investment, this could be something for you to get started in. With an expense ratio of just 0.18%, it is definitively one of the lowest cost bond ETFs around.
iShares FTSE A50 China Index ETF
Ticker: 2823.HK / 82823.HK
Asset Under Management: HK$ 23.3 billion (5th Nov 2018)
Dividend Yield: 2.65%
Expense Ratio: 0.99%
The iShares FTSE A50 China Index ETF is one ETF that allows you to gain exposure into the China A-Shares market. It tracks the China A50 Index, which are some of the top 50 companies listed on the Shanghai and Shenzhen Stock Exchanges.
Something interesting about this ETF is that you have the choice to choose if you want to invest in the ETF in Hong Kong dollar or in Renminbi. It has two tickers for you to invest in, one denominated in Hong Kong dollar (2823.HK) and the other denominated in Renminbi (82823.HK).
You will be able to invest in the ETF with a lot size of 100 shares. This means that the minimum amount you need to invest in the iShares FTSE A50 China Index ETF is HK$12,500 or USD 1,600.
With that amount, you will be investing in companies like Ping An Insurance, China Merchants Banks, Kweichow Moutai Limited and even China electronics companies like Gree Electric Appliances Inc and Midea Group Limited.
The ETF is managed by Blackrock Inc, one of the largest asset managers in the world. The ETF does have a slightly higher expense ratio at 0.99% a year. So that is something for you to take note of.
In term of performance, the ETF has returned about 6.57% per annum over the past decade with dividend reinvested.
The Easiest and Cheapest Way To Invest In ETF
Remember ETF is a cheaper alternative to investing through unit trusts. And you can save even more by buying ETF through a brokerage that offers you the cheapest brokerage rate. How about just S$10 per trade? That is the offer that FSMOne.com is giving you today.
FSMOne.com, an integrated wealth management investment platform which is the Business-to-Consumer (B2C) division of iFAST Corporation Limited (SGX:AIY), now offers one of the lowest brokerage charges in Singapore for you to invest internationally.
Source: FSMOne.com Pricing Website
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