Benefits & Uses of SPDR® ETFs

Benefits

  • Diversification

    SPDR ETFs provide investors with the ability to gain diversified exposure to stock markets through one transaction. i.e. SPDR ETFs generally give investors exposure to the securities that make up an index. Therefore, by investing in SPDR ETFs, investors can achieve diversification as if they owned many different securities.

  • Low Cost

    SPDR ETFs are designed to be cost-efficient. As an index investment, they can have the advantage of being less expensive to operate than actively managed funds, and therefore typically have lower management costs. Management costs are increasingly important to both individual and institutional investors because they can have a significant impact on a portfolio's return and investor's potential for wealth accumulation.

    As the majority of trading is generally conducted through the stock exchange, there can be fewer internal costs associated with operating an ETF versus a typical unlisted indexed managed fund.

  • Transparency of Performance

    Index investments are designed to inherently replicate the performance of the underlying index (often before fees and expenses). This is achieved by purchasing securities generally in accordance with their weighting in the index and provides investors with transparency of performance.

  • Tradability

    With traditional unlisted managed funds, investors may only be able to subscribe for or redeem units at unknown prices (i.e. at prices calculated after the request is made). In contrast, SPDR ETFs can trade on a stock exchange throughout the trading day. This can provide investors with more flexibility, allows them to determine when they want to transact and affords greater price transparency.

    Naturally, like all investments there are risks associated with an investment in SPDR ETFs. We have not dealt with the general risks of investing nor the risks specific to SPDR ETFs on these pages.

Uses

  • There are many ways that investors use them including the six methods outlined below:
    1. Exposure to Share Markets
    2. Source of Income
    3. Short and Long-Term Investment Tools
    4. Flexible Transaction Management
    5. Transition Management

  • Exposure to Share Markets

    Both institutional and individual investors can use SPDR ETFs to conveniently, efficiently, and affordably gain exposure to share markets through one transaction.

  • Source of Income

    SPDR ETFs can offer a source of income from growth assets at a low cost. Structurally, the Funds invest in securities that generally correspond to a given index. That is, while the units trade like listed shares, they also benefit from the income streams of the underlying securities. The potential for low turnover (minimising capital gains) and overall cost efficiency (typically a low management cost) can make SPDR ETFs an attractive alternative for investors who want the potential for income from a growth asset class.

  • Short and Long-Term Investment Vehicles

    SPDR ETFs provide a place to temporarily invest cash that is ultimately designated for investment in shares. SPDR ETFs can be liquid securities that allow investors to participate in the market while deciding on their longer term strategy - thus avoiding potential opportunity costs.

    Sales charges, entry/exit fees and high expenses can impact the performance of a portfolio over the long term. By using investment vehicles that have low management fees and adopt low turnover trading strategies, performance impact can be reduced.

  • Flexible Transaction Management

    SPDR ETFs can provide investors with a new spectrum of flexibility. Unlike unlisted managed funds - which are often priced at the end of the day regardless of the time of day an application is made to subscribe for or redeem units - SPDR ETFs can trade on a stock exchange throughout the day. Investors can also employ traditional share trading techniques, including stop orders, limit orders, and margin purchases (if available), using SPDR ETFs. This empowers investors to determine exactly when they want to transact, while affording them greater price transparency.

  • Transition Management

    When institutional investors change asset managers, one of their over-riding concerns is preserving the ability to maintain equity exposure while the transition occurs. One way to achieve this goal is to liquidate the portfolio while simultaneously buying a relevant ETF. Once the assets are transitioned, the new manager can redeem the ETF shares to pay for share purchases.

  • SPDR ETFs

    Naturally, like all investments there are risks associated with an investment in SPDR ETFs. We have not dealt with the general risks of investing nor the risks specific to SPDR ETFs on these pages.

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