ETF

Investments

Asked by Anonymous

Updated 3w ago

What do people mean when they say “ETF”?

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Jacob Chong
Jacob Chong, Executive Financial Advisor at PIAS
Level 3. Wonderkid
Updated 3w ago

As most of them has explained... What ETF stands (a lot of my clients asked this and are clueless as to what they really mean how it works). So i will explain in this manner to them and i hope it will help you as well.

In Layman terms, ETFs tracks the index of a particular market that you are interested in comprising of the similar made up of the index. i.e.

  • STI Index,
  • FTSE ST Mid Cap Index
  • etc

There are mandy index out there and also in different segment for example Marinetime industy has

  • FTSE ST Maritime Index

So you get that picture what Index are?

Now ETF as echoed by Yang Teng is a fund that track these indices for example STI ETF tracks STI index, ST REITs ETF Tracks the Reits index etc. Investor buys ETFs because they have a certain confidence/view in the Index they want to track in to reap the performance of it but at the same time do not have that huge captial to copy the exact allocations of it is made up i.e

STI comprises of 30 stocks, DBS, UOB, GENTING etc. Can you imagine buying each of this stock at one LOT (1000 shares) each that's a huge capital to invest in for any retail investor out there.

As such there is ETFs that allow investors to contribute a small amount of investment into a pool that tracks the indices they want to invest in.

Do note that no ETFs are able to track 100% to the index because there is some techincal tracking errors and other factors as well, but in general they do track closely to index.

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Lok Yang Teng
Lok Yang Teng

07 Nov 2018

Hi Jacob, the standard lot size is 100 but the argument still holds true haha
Gabriel Lee
Gabriel Lee,
Level 6. Master
Answered on 07 Nov 2018

It stands for Exchange Traded Fund and it is traded on the stock market too

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Lok Yang Teng
Lok Yang Teng,
Level 6. Master
Answered on 06 Nov 2018

It stands for Exchange Traded Fund where the fund is traded publicly on the market. A fund system is when investors contribute some money to invest, the fund manager will then use the cumulative sum to invest.

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