ETFs in General
What are exchange traded funds (ETFs)?
ETFs are collection of securities that typically track a specific market index such as the Straits Times or S&P500 indices. They are similar to a managed fund, or unit trust, but trades like a stock throughout the day.
How does the performance of an ETF compare with the performance of its underlying index?
Exchange traded funds are designed to provide investment results that generally correspond to their underlying benchmark index by holding a portfolio of securities based on the underlying index.
What cost involved in trading an ETF?
The cost involved in trading an ETFs include:
Bid/Ask spread of the ETF
Fees and expenses of the ETFs such as management fee, trustee fees and custodian fee, etc
What are the risks of investing in ETFs?
Before investing in an ETF, investors should consider and satisfy themselves as to the risks associated with such an investment. Equity-based ETFs are subject to risks similar to those of stocks. Investment returns will fluctuate and the value of the units in the fund (and any income from them) is not guaranteed and may go down as well as up. Past performance is also no guarantee of future results. More details of the potential risks are set out in the individual's ETF prospectus.
ETFs vs. Shares vs. Unit Trusts
ETFs combine the best features of shares and unit trusts.
ETFs Shares Unit Trusts Bought and sold anytime during the SGX-ST trading Day Yes Yes Usually No Diversification Yes No Yes Professional Management Yes No Yes Bought and sold on margin Yes Yes No
What is the Role of ETFs in Your Portfolio?
ETFs may play a pivotal role in helping you achieve your investment goals
- Provide More Diversification: Potentially add low cost diversification to almost any market segment: domestic, international, equities, fixed income, etc.
- Broaden Asset Allocation: Fill gaps in portfolio exposure: fixed income, international equities, domestic equities, REITs, commodities, precious metal, etc.
- Adjust Portfolio to New Objectives: The precise nature of ETFs enables easy alignment with investor objectives.
- Tactically Reposition Portfolio: Liquidity, trading flexibility and low cost make ETFs effective for short-term portfolio repositioning.
Why invest in an index?
Indexing, often called "passive management," involves investing in a group of securities that represent the composition of a broad stock or bond market, stock industry sector, international stock or bond index. Index funds offer "market level" performance; they aim to generally track the performance of a specific index. Index funds generally have lower management fees and operating expenses than actively managed funds.
What are the differences between Physical and Synthetic ETFs?
Physical ETFs replicate the return of the indices through the purchase of physical securities, whereas synthetic ETFs replicate the return through the implementation of total return swaps or other derivatives.
Can I redeem my ETF shares for the underlying securities?
Requests for redemption of units must be made through participating dealers or by approved applicants. Each SPDR ETF has its own creation and redemption requirement and participating dealers. For example, the current redemption unit size for SPDR Straits Times Index ETF is 500,00 units or whole-number multiples of 500,000 units. For more information regarding redemption of ETF units, please refer to the prospectus of the fund or contact the SPDR Capital Market Group.
What are SPDR ETFs?
Offered by State Street Global Advisors ("SSGA"), SPDR ETFs are a family of exchange traded funds that provide investors with the flexibility to select investments that are precisely aligned to their investment strategy. Recognized as the industry pioneer, State Street Global Advisors created the first ETF in 1993 - SPDR S&P 500® and the first Gold ETF in 2004. In Singapore, SSGA introduced the first local ETF, the SPDR Straits Times Index ETF in 2002.
How do I buy or sell SPDR ETFs?
Units in SPDR ETFs can be bought and sold on the SGX-ST though brokers like other listed securities. Brokerage transaction costs associated with dealing on the SGX-ST will apply.
Are SPDR ETFs cost efficient?
SPDR ETFs are designed to be cost-efficient. As an indexed investment, they can have the advantage of being less expensive to operate and therefore typically have lower expense ratios. Expense ratios have become increasingly important to both retail and institutional investors because they can have a significant impact on the portfolio's return and the investor's potential for wealth accumulation.
What is IOPV?
Indicative Optimised Portfolio Value or Estimated NAV per Unit means the estimated value of an Index Basket. Such figures are only indicative of that day's Issue Price and Redemption Value and should not be viewed as the actual NAV per Unit. The estimated NAV per Unit is provided for reference purposes only and may differ from the actual NAV per Unit calculated in accordance with the Trust Deed.
Do any SPDR ETFs use synthetic replication?
Currently, all State Street Global Advisors' (SSGA) SPDR ETFs in Singapore are supported by the physical replication model.
Do any SPDR ETFs engage in securities lending?
Currently, all State Street Global Advisor' (SSGA) SPDR ETFs in Singapore do not engage in securities lending.
Can I invest my CPF in SPDR ETFs?
Yes. The following SPDR ETFs are approved under the CPF Investment Scheme, you may use your ordinary account savings to invest in these ETFs:
SPDR Straits Times Index ETF (ES3)
SPDR Gold Shares (O87) - Up to 10% investible savings can be invested in Gold
For more information about investing your CPF, please visit CPF Board's website: http://mycpf.cpf.gov.sg/
Do I get paid dividends on ETFs?
ETF unit holders are eligible to receive their pro rata share of dividends, if any, accumulated on the stocks held in an ETF, or interest on the bonds held in an ETF, less fees and expenses.
What are the distribution arrangements?
In general terms, unit holders on the register of a fund on the record of date of a distribution will be entitled to the distributable income (if any) for that period, based on the number of units held in the fund. Distributable income includes dividends and distributions received from the fund's investments. Each SPDR ETF fund has its own detailed rules on how distributable income and income entitlements are calculated. Distribution periods may be varied. Dividend distribution is at the manager's discretion and past distributions are not necessarily indicative of future distributions.
The SPDR Straits Times Index ETF (ES3) normally distributes dividend semi-annually (Jan and July each year).
The SPDR S&P500 (S27) normally distributes dividend on a quarterly basis (Mar, June, Sept and Dec).
The SPDR Dow Jones Industrial Average (D07) normally distributes dividend every month.
The SPDR Gold Shares (O87) do not distribute any dividend.
The SPDR® Straits Times Index ETF (the "Fund") is not in any way sponsored, endorsed, sold or promoted by SPH Data Services Pte Ltd or Singapore Press Holdings Ltd (collectively "SPH") or FTSE International Limited ("FTSE"). SPH and FTSE bear no liability in connection with the administration, marketing or trading of the Fund. No warranties, representations or guarantees of any kind are made in relation to the Straits Times Index ("STI") or the Fund by FTSE or SPH. All intellectual property rights in the STI vest in SPH.