Tuesday, 23 October 2007

Low cost investing, the ETF way

In one of the business news today,

"According to the Singapore Exchange, total trading value of such ETFs amounted to S$99.6 million for the week ending October 19.
The SGX said the increased trading was largely due to strong interest in iShares MSCI India ETF and Lyxor ETF China (Hang Seng China Enterprises Index). " Full story

ETF (Exchange Traded Fund) is a cost effective way for gaining exposure to a particular market. For unit trust, you give your money to fund manager and let them manage for you. The catch is they would charge management fee which is typical 2% a year, after all expenses. Some people argue that given the cost structure, unit trust is unlikely to outperform the stock market index. The born of ETF is a way for investor to buy into underlying index stock, with a fund like structure. The good thing is investment amount is small and cost is low.

Given the high valuation of India and China market I won't be interested in investing in these ETF mentioned. However, if the market is substantial coming down, this would be a fast and low cost way for participating in their growth. If you have no time to do stock picking, these would be a good alternative. Of course, not to forget that, STI itself also has an ETF.

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