What Are ETFs?
An Exchange Traded Fund ("ETF") is an open-ended investment fund listed and traded on stock exchanges (e.g. SGX and NYSE Arca), that generally aims to track the performance of an index.
What is an Index?
An index is formed by a basket of securities and is calculated by aggregating the value of the securities and expressing it against a base value. An index reflects the movement of an entire market. The index constituents are selected by the Index Provider from a list of securities which the index represents.
How Does an ETF Track an Index?
Some ETFs are created by full replication, i.e. they invest directly in the underlying stocks. On the other hand, ETFs can also be created by synthetic replication through the use of some derivatives.
If the index rises by 10%, the price of the ETF is very likely to rise by 10%. For a short period of time, it is possible that the returns of an ETF are higher or lower than the returns of the underlying index. But generally in the long run, the returns of the ETF and the underlying index should be close.
What ETFs can I invest in?
At Maybank Securities, you are able to trade ETFs listed in Singapore, Hong Kong, Malaysia and the USA. To find out which ETFs you can trade in, please consult your Trading Representatives.
