DBS Vickers Securities
Asked by Anonymous
Asked on 04 Nov 2019
I think the interface in Saxo and Vickers aren't that good for ETFs or is it just me? I can't quite see the expected dividends/returns p.a on the list of filtered ETFs. I can't open multiple tabs to check and compare ETFs of similar sector too.
There are tons of ETFs available under "infrastructure" for example and it's very difficult to compare the difference between the 1 by vanguard, by SPDR, by iShare, tracking FTSE, MSCI, or Morningstar... To decide
Any advice or comments are welcome! 😁
Hello! It's great that you're looking at ETFs as a way to gain exposure to equities (another word for stocks). ETFs typically allow wide diversification easily. There are a few things to keep in mind when searching for ETFs to invest.
1) The gap between a positive macro-economic trend and stock price returns can be a mile wide. For example, gold was worth A$620 per ounce at the end of September 2005 and the price climbed by 10% per year for nearly 10 years to reach A$1,550 per ounce on 15 September 2015. But an index of gold mining stocks in Australia’s market, the S&P / ASX All Ordinaries Gold Index, fell by 4% per year from 3,372 points to 2,245 in the same timeframe. In another example, see the chart below on the disparity between the stock market returns and economic growth for China and Mexico from 1992 to 2013. Despite stunning 15% annual GDP growth in that period for China, Chinese stocks actually fell by 2% per year; Mexico on the other hand, saw its stocks gain by 18% annualised, despite its economy growing at a pedestrian rate of just 2% per year. So when finding themes to invest in via ETFs, make sure that the macro-economic theme you're betting on can translate into commensurate stock market gains.
2) ETFs can mimic the performance of a stock market index through two broad ways: Synthetic replication, or direct replication. Synthetic replication involves the use of derivatives without directly investing in the underlying assets. It is the less ideal way to build an index-tracking ETF, in my view, because there is more complexity involved and hence a higher risk that a large proportion of the underlying index’s performance can’t be captured. Direct replication has two sub-categories: (a) Representative sampling, where the ETF holds only a sample of the stocks within an index; and (b) full replication, which involves an ETF buying the same stocks in nearly identical proportions as the weights of all the stocks that make up an index. Try to look for ETFs that utilise full replication if possible.
3) Look for an ETF that is managed by a reputable fund management company. For example, Vanguard, SPDR, iSHAREs, Blackrock are just some examples of reputable providers of ETFs.
4) Ideally, an ETF should have a listing history of at least a few years, so that we can see how the ETF has actually done, and not just rely on the performance of the underlying index.
5) The expense ratio (essentially all of the fees that an investor has to pay to the provider of the ETF) should be low. There's no iron-clad rule on what "low" means, but I think anything less than 0.3% for the expense ration can be considered low. Having a low expense ratio puts an ETF on the right side of the trend of investment dollars flowing toward low-cost index tracking funds, which lowers the risk of an ETF’s manager closing the ETF down for commercial reasons.
6) The amount of assets under management for an ETF should also be high (ideally more than US$1 billion). Having high assets under managment for an ETF would also lower the chance that the ETF will close in the future. It's not uncommon for ETFs to close. When a closure happens, it creates hassle on the investors' part to find new ETFs to invest in.
7) Lastly, look for a low tracking error. An ETF's returns should closely match the returns of its underlying index. If the tracking error has been high in the past, there's a higher chance that the ETF can't adequately capture the performance of its underlying index.
Sharing 2 resources that I use to study etf.
I will usually google a particular sector or index that i would be interested to investing follow by etf.com.
Example i will google "china etf etf.com" In etf.com, i can compare the expense ratio, PE ratio etc.
You can screen via PE, sectors etc. One thing to note is these info may not be 100% accurate as when i counter check against diff sites, the PE is usually different. This is probably diff sites uses slightly different methods to calculate. But generally the difference is not huge.
Top Contributor (Jan)
You can google for the expected dividends on the ETFs. There will be results from Yahoo, Bloomberg, morningstar which would be much more informative.
Another way is to just go directly to the fund website to check on the ETF. Such as:
So if your intent is to screen ETFs, Morningstar is a good starting point and has a lot of data.
What helps me is in order:
Figuring out what I'd like to invest in
Finding some suitable instruments via ETF.com/Morningstar
Narrowing down basis: a. Expense Ratio b. Liquidity
Total AUM 30MM USD (Below this it's likely the ETF isn't profitable and may close if it's unable to pickup more AUM although this can be discounted for newer ETFs)
Brokerage cost in terms of FX/commissions
Different providers will follow different indices such as MSCI/FTSE etc and the differences are often in the methodology used. You have the option of reading the prospectus which is usually available on the site and see if you agree with 1 or the other, but if you'd prefer to simply avoid the trouble, picking 1 ETF from the larer fund houses will likely meet your needs