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  • Addition of a tactical plays category to help investors construct their supplementary portfolio more effectively.
  • Slight changes were made to our selection methodology to bring you the most diverse range of ETFs yet.
  • This year, 40 ETFs made the cut to be on our Focus List, including 13 new additions.

Finding the right ETF for you

With more than 2,200 ETFs listed on our platform, choosing the right ones for your portfolio can be daunting, especially for new investors. Thus, we introduced the ETF Focus List last year to help investors with their ETF selection decisions. The list is updated on an annual basis to ensure that our recommendations remain current and relevant for all investors.

This year is no exception – as we approach the halfway mark of 2019, we have done a refresh of our ETF Focus List. For 2019, we have decided to make several changes to the ETF Focus List in order to feature a wider range of ETFs the world has to offer.

Here are some of the notable changes.

1. A brand-new ‘Tactical Plays’ category in the ETF Focus List

One of the biggest shake-ups to our ETF Focus List this year is the addition of a new ‘Tactical Plays’ category, which will replace the ‘Sector Equity’ category. Instead of having a recommended ETF for every sector (as we did previously), the new ‘Tactical Plays’ category will feature our highest conviction ETF ideas, such as the semiconductor industry and China’s tech sector.

By narrowing down the category to include only our highest conviction ideas, we believe that the ‘Tactical Plays’ category will help investors construct their supplementary portfolios more effectively. As we are always on the lookout for investment opportunities, we will constantly update the category as and when we discover attractive investment ideas.

2. Refining our selection methodology

The selection methodology used to construct our ETF Focus List also saw slight changes from the previous year. This time round, we have decided to remove primary liquidity in our assessment of an ETF’s liquidity as we found that this metric is a less relevant measure in the context of most retail investors. In place of primary liquidity, we now consider mainly secondary liquidity in our analysis, taking into account two measures: bid-ask spreads and average daily volume. There are no changes to the other criteria.

For a detailed explanation on our selection methodology, visit the link below.

(Related Article: Here’s how we select the best ETFs (and how you can too))

3. 13 new additions to the list

Using our improved selection methodology, there are a flurry of changes to the ETF Focus List this year, where many old names have been replaced with new ones which are quantitatively and/or qualitatively better. Including the new additions from the tactical plays category, there are a total of 13 new ETFs which have made the cut to be on the list this year (Table 1). With a total of 40 ETFs chosen from 13 different issuers, representation for ETF issuers has never been more diverse.

Table 1: Changes to the 2019 ETF Focus List

Category20192018
Equity
Emerging MarketsVanguard FTSE Emerging Markets Index Fund ETF Shares (NYSE.VWO)iShares Core MSCI Emerging Markets ETF NYSE.IEMG
Regional Equity
Emerging SEAPremia Dow Jones EM ASEAN Titans 100 ETF (HKEX.9810)CIMB FTSE ASEAN40 ETF SGX.M62
Country Equity
Hong KongTracker Fund Of Hong Kong (HKEX.2800)
China A sharesiShares FTSE A50 China Index ETF (HKEX.2823)
Tactical Plays
Chinese BanksBMO Hong Kong Banks ETF ( HKEX.3143)
China TechInvesco China Tech ETF (NYSE.CQQQ)
REITNikko AM StraitsTrading Asia ex Japan REIT ETF (SGX.CFA)
China HealthcareKrane Shares China Health Care (NYSE.KURE)
US TechFidelity MSCI Information Technology Index ETF (NYSE.FTEC)
Fixed Income
AsiaBMO Pan Asia IG Bond (HKEX.3141)iShares JP Morgan USD Asia Credit Bond Index ETF SGX.N6M
Singapore CorporateNikko AM IG SGD Corporate Bond ETF (SGX.MBH)
US High YieldXtrackers USD High Yield Corporate Bond ETF (NYSE.HYLB)
Asian High YieldiShares Barclays USD Asia HY Bond ETF (SGX.O9P)
Source: iFAST Compilations

In the Core Equity category, there is a change in our recommended emerging markets ETF, with the iShares Core MSCI Emerging Markets ETF making way for the Vanguard FTSE Emerging Markets Index Fund ETF Shares (NYSE.VWO). With a tiny expense ratio of just 0.12%, tracking difference of -0.7% and an average of 3.7 million shares changing hands each day, the Vanguard FTSE Emerging Markets ETF surpasses its peers in almost every aspect, making it our recommended emerging markets ETF.

In the regional equity category, we warmly welcome the addition of Premia Dow Jones EM ASEAN Titans 100 ETF (HKEX.9810) as our recommended ETF for the Emerging ASEAN sub-category. This ETF is issued by Premia Partners, an investment manager that specialises in Asia ETFs.

The Premia Dow Jones EM ASEAN Titans 100 ETF provides exposure to some of ASEAN’s fastest growing economies such as Vietnam, Indonesia and Thailand. However, unlike the existing recommended ETF for ASEAN, this ETF does not provide exposure to Singapore. Investors who wish to complete their ASEAN exposure can do so easily by using the SPDR Straits Times Index ETF (SGX.ES3).

In the Fixed Income category, a change was made to the Asia subcategory, with the incoming BMO Pan Asia IG Bond (HKEX.3141) replacing the existing iShares JP Morgan USD Asia Credit Bond Index ETF. Although the new incumbent has a slightly higher expense ratio compared to our previous pick, it more than makes up for it with its higher liquidity and lower tracking difference.

Income-oriented investors will also be happy to hear that we have added two new sub-categories, Singapore Corporate and REITs. Coincidentally, both the recommended ETFs are from Nikko AM. As Singapore’s first corporate bond ETF, the Nikko AM Investment Grade SGD Corporate Bond ETF (SGX.MBH) allows retail investors to get a piece of Singapore’s corporate bond market, which used to be highly inaccessible due to the high minimum investment amount of SGD 250,000 for each wholesale bond issue.

This ETF contains over 100 issues from both the private sector, such as DBS (SGX.D05)and UOB (SGX.U11), as well as quasi-government agencies, such as the Land Transport Authority Singapore. With a broad range of companies operating across different sectors, this ETF provides diversified exposure to Singapore’s corporate bond market with minimal capital outlay.

A starting point for ETF selection

While the ETF Focus List is not designed to be the be-all and end-all list of ETFs that investors can select for their investment portfolios, it still serves as a good starting point for investors who are seeking a low-cost method to gain diversified exposure to markets, guiding them through the sheer number of ETFs that are available on various exchanges.

As our selection methodology is largely quantitative in nature, decent ETFs with favourable expense ratios, liquidity and tracking differences may still be excluded from the ETF Focus List, beaten by a hair’s breadth by a fellow peer. As such, investors who are holding on to the ETFs that were featured in the ETF Focus List last year, but have since been knocked off their perches by newcomers should not fret, as these ETFs remain viable options for their portfolios.

With hundreds of new ETFs listed each year, there will certainly be more changes to the list in the future. We look forward to what 2020 will bring, but for now, investors can start building their portfolios using our ETF Focus List 2019!

This is a republished article from our Sponsor: FSMOne.com

Learn more about how to use Exchange Traded Funds to create the perfect portfolio for yourselfFind Out More Here.

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

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