This article is written in collaboration with FSMOne.com. Views expressed in the article are the independent opinion of DollarsAndSense.sg.
Exchange Traded Funds (ETFs) pool together the funds of many different investors to invest in assets that track the performance of an index, commodity or basket of assets. They are also listed on stock exchanges, which means they offer good liquidity to investors who wish to buy and sell them.
In Singapore, there are several popular ETFs, including:
– The two Straits Times Index (STI) ETFs – SPDR STI ETF and Nikko AM Singapore STI ETF – tracking the 30 largest and most liquid companies listed in Singapore.
– The ABF Singapore Bond Index Fund, tracking high quality bonds issued by the Singapore government and quasi-Singapore government entities.
– The three REIT ETFs – Lion-Phillip S-REIT ETF, NikkoAM-Straits Trading REIT ETF and Phillip SGX APAC Dividend Leaders REIT ETF – listed in Singapore.
Why Invest In Exchange Traded Funds (ETFs)
ETFs present a simple starting point for new investors. For starters, a single decision to invest in an ETF provides you instant diversification across numerous underlying companies on the stock exchange. These companies could also be in different sectors and operating in different countries. For example, when you invest in the STI ETF, you are investing in the 30 largest companies in Singapore, providing you with exposure to a diverse mix of business sectors and a revenue stream comprising over 40% contribution from outside Singapore.
Fees and charges are also another consideration when it comes to investing. While seemingly small, this can compound to a significant amount over time. ETFs provide a low-cost alternative when it comes to investing. Lastly, you don’t need a large amount of capital to start investing in ETFs.
Being in Singapore should not limit your options to only what is available on the Singapore Exchange (SGX). Many investors are increasingly looking at mature global markets such as China, USA and Hong Kong.
There are thousands of ETFs in different markets that you can invest in globally. Here are 7 ETFs that you can consider investing in if you want to gain broad-based exposure in overseas markets.
One of the most popular index funds globally, the Vanguard Total Stock Market ETF gives investors exposure to the US market. The ETF is intended to replicate the performance of the overall US market by tracking the CRSP US Total Market Index.
The Vanguard Total Stock Market ETF is made up of more than 3,500 stocks. Its top holdings include popular investments such as Microsoft, Apple, Amazon, Facebook and Berkshire Hathaway. While the bulk of this ETF lies in large cap companies, the Vanguard Total Stock Market ETF also holds mid-cap and small-cap stocks.
Many investors are also looking to get a piece of the China growth story in their investment portfolios. This is hardly surprising, considering that the Shanghai stock market has already surged more than 27% in 2019.
In recent years, China companies have also made notable progress, becoming world leaders in some major sectors. Examples of successful Chinese companies dominating the world stage include Alibaba and Tencent. Chinese products from manufacturers such as Huawei and Xiaomi have become more common and easily accessible. Financial companies such as China Construction Bank and Ping An are also playing an increasingly vital role regionally and globally.
One way to invest in China’s growth is through the iShares MSCI China ETF, which tracks an index comprising large and mid-cap equities listed outside mainland China. Top holdings in the ETF include Tencent, Alibaba, China Construction Bank, Ping An Insurance and China Mobile.
China’s rapid development in technology has not gone unnoticed. If you have ever been to China, you will realise that their cashless society is miles ahead of Singapore. WeChat Pay and AliPay have become the primary modes of payments in China. QR codes are being used even by elderly street peddlers and buskers along the street.
Technology companies such as Alibaba, Tencent, Huawei and Xiaomi have also made major inroads into the world stage. One way to invest in China’s dynamic technology sector is through a technology ETF such as Invesco China Technology ETF. Companies that are make up this ETF include top tech players such as Alibaba, Tencent, Baidu and JD.com.
Hong Kong is one of the most popular stock markets for active investors, with the Hang Seng Index (HSI) up 17% since the start of 2019. Hong Kong also recently overtook Japan to become the third largest equity market globally, only behind global powerhouses USA and China.
The iShares MSCI Hong Kong ETF is designed to track the investment returns of an index composed of Hong Kong equities, exposing investors to large and mid-cap companies listed in Hong Kong.
The iShares MSCI Hong Kong ETF is heavily slanted towards the real estate, insurance and utilities sectors. Top holdings in the ETF include AIA Group, CK Hutchison Holdings, Sun Hung Kai Properties and Hang Seng Bank.
This iShares Core MSCI Emerging Markets ETF tracks the MSCI Emerging Markets Index, an index that comprises of large and mid-cap stocks across 24 Emerging Markets (EM) countries. This ETF provides you with exposure to a range of companies in emerging markets.
The countries that form a large part of the MSCI Emerging Markets Index include China, South Korea, Taiwan, India and Brazil. The MSCI Emerging Markets Index also comprises of stocks from diverse sectors, including financials, information technology, communication services and energy.
The semiconductor industry has been fast growing over the past few years, not just in Singapore but also globally. Riding on the global technology wave, semiconductors manufacture key components in many smart and/or electronic devices, including your computer, tablets and smartphones.
The VanEck Vectors Semiconductor ETF seeks to replicate the performance of the MVIS US Listed Semiconductor 25 Index. This index tracks the overall performance of companies involved in semiconductor production and equipment.
An ETF that tracks the semiconductor index, investors of VanEck Vectors Semiconductor ETF will be investing in the top semiconductor companies in the world, rather than diversifying across different sectors. USA is the leader in the semiconductor industry and this ETF is heavily focused on companies listed in the USA, followed by a smaller weightage in Taiwan and Netherlands.
The Invesco S&P 500 Equal Weight Communication Services ETF was introduced in November 2018. It tracks the performance of the S&P 500 Equal Weight Communication Services Plus Index, providing investors with exposure to software companies, media and online retailers.
The internet has become an integral part of consumers’ lives. Scrolling our Facebook feed, watching films on Netflix and searching on Google are just some of the common activities millions of people do on a daily basis. Hence, companies such as Facebook, Netflix and Google have become some of the biggest and most influential companies in the world today.
The Invesco S&P 500 Equal Weight Communication Services ETF includes 27 holdings currently. Top holdings include Walt Disney, Twitter, Facebook, Alphabet and TripAdvisor.
These are just 7 of the thousands of ETFs that you can invest in globally. FSMOne.com has an ETF Focus List available that aims to provide investors with ETF investment ideas and to guide them through their ETF selection process.
With thousands of ETFs to choose from, this ETF Focus List features top global ETFs, coming in handy for investors looking to build a strong and diversified portfolio.
Learn More About ETFs At The FSM ETFestival 2019
Through this event, you can get ETF investing ideas and gain exposure to the different kinds of ETFs available both globally, regionally and in Singapore. Listen to experts sharing their tips on ETFs investing and learn how you can build a strong and profitable ETF portfolio for yourself.