Updated 30 May 2020
Recently, Exchange Traded Funds (ETFs) had been in the limelight.
Typically, in Singapore, we buy funds in the form of unit trusts via
banks. For ETFs, as the name suggests, they are funds that are traded on
the stock exchange. One example is the STI ETF.
What is the STI ETF?
The STI ETF is a fund that tracks the performance of the Straits Times
Index (STI). The STI is regarded as the benchmark index for our
Singapore stock market and consists of the top 30 companies listed on
the Singapore Exchange. Say, you don't feel competent in cherry-picking
your stocks, but have a bullish view on the overall Singapore market in
the long term. Buying the STI ETF is liken to you buying the top 30
companies, without having to fork out a huge sum of money to buy all the
30 stocks.
On the Online Trading Platform, search for "STI ETF" or Code "ES3".
How does the STI ETF work?
At time of writing, the STI was trading at 3297. The STI ETF typically "mimicks"
the STI, divided by a 1000. The STI ETF was trading at 3.34.
Some would ask, why isn't it 3.29 or 3.30 then? This is because there is
always a slight tracking error arising from the underlying products
used to "mimick" the index. This is a common sight. However, as long as
the STI moves up, the STI ETF will move up in a similar fashion.
How to buy and sell the STI ETF?
Buying and selling the STI ETF is similar to buying a stock on the Lim
Tan platform. The code is "ES3". The lot size (minimum no. of shares) is
100. The commission and payment methods are the same as buying stocks.
The only difference you need to know is that the price of STI ETF is not
determined by demand or supply, it is based on the STI level.
What are the pros and cons of buying the STI ETF?
Any alternatives to STI ETF?
Yes, the Nikko AM STI ETF
(code G3B) is a similar product to the STI ETF. Both products track the
STI, but are provided by different issuers. The STI ETF is issued by
State Street Global Advisors while the Nikko AM STI ETF is issued by
Nikko Asset Management Asia Limited.
Seach for "Nikko AM STI ETF" or Code "G3B".
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