Why invest in ETFs?

A quick explanation of ETFs for the benefit of readers who have no idea what they are. 

An ETF is an investment fund that attempts to follow the performance of a specific grouping of securities, represented by an index. 

It does this by purchasing shares of the securities in the index, in the same proportion. For example, say DBS makes up 20% of Index A. An ETF that tracks Index A would allocate 20% of its funds into DBS shares. 

When you invest in an ETF, you own a stake of the fund, not the underlying securities. As ETFs pool together money from many investors, investing in an ETF is a way to purchase the securities you want (and reap the potential benefits) at a lower capital cost. 

ETFs also offer diversification, high liquidity and variety. You can select ETFs that invest in asset classes ranging from stocks, to bonds and commodities.

Best for tracking local blue-chip stocks 

$STI ETF(ES3.SI)$

The STI, or Straits Times Index, comprises 30 top performing companies in Singapore, featuring the usual suspects like DBS Group, Singtel and CapitaLand.

Because the STI is often used as a benchmark of the overall Singapore economy, investing in the SPDR STI ETF, then, is akin to investing in the future of Singapore.

With an expense ratio of just 0.3%, it’s a reasonably low-cost investment with good long-term potential. Just don’t expect too much excitement in the short term. @Daily_Discussion@TigerStars@TigerTalks