Index ETFs – Why, How and When

Dear Friends,

One of my professors in my university days said that, “Most People cannot beat the Market. so don’t even try.” He followed up by saying, “Just follow the market and you will be fine.

After some time investing and sharing my experience in investing, i realised that what my professor said is in fact factual. Most people really cannot beat the market and I truly believe that it is because in order to beat the market, you need the knowledge, the time as well as the passion to invest for yourself. Believe or not, the knowledge is the easy part.

So if you decide that you do not really have the passion or time to invest on your own, I will encourage you to follow the advise of my professor to “follow the market”. In fact, if you follow the market, you would have beat most of the funds. So how do we do that. Simply put, we can invest into Index ETF.

An index is what tells us how the market performs. In Singapore, we have the STI (Straits Times Index), in US there are a few indices, namely the Dow Jones Industrial Average, the S&P500 index. When you hear something like the market is up by how many points or down by how many points, it really means the index.

So how do we do invest into indices? We can buy into the Index ETFs.

Let’s examine the kinds of Index ETFs we can invest in and lets take a look at Singapore, Hong Kong and China

Singapore STI ETF

We can purchase either the Nikko AM Singapore STI ETF and/or the SPDR® STI ETF ETFs.
From gateway SGX:
“ETFs are open-ended investment funds but are listed on and traded on an exchange. ETFs aim to track the performance of an index and provide access to a wide variety of markets and asset classes. Investors can either
trade the two ETFs on SGX via brokers with a minimum trading size of about $310 or $3100 for Nikko AM Singapore STI ETF and SPDR STI ETF respectively. ”
http://gallery.mailchimp.com/f853114635eabc6cff8920e15/files/MyGateway_27_Jan_v3.pdf

The STI ETF (Exchange Traded Funds) are basically funds that buy into the stocks that are in the STI. So whenever these stocks gives dividends, it is passed back to us.

How to buy – can use any Singapore brokerage to buy when you think it is at a good price or can use the following to buy monthly:

1. POSB Regular Savings Plan ( Nikko AM Singapore STI Exchange Traded Fund (“ETF”))
http://www.posb.com.sg/personal/landing/invest-saver/index.html?pid=vanity

If you want more customization, you can also use the following:

2. OCBC Blue Chip Investment Plan (customize from 19 counters + STI ETF)
http://www.ocbc.com.sg/personal-banking/Investments/bluechip.html
See the 20 coutners here
http://www.ocbc.com.sg/personal-banking/Investments/bcip-counters-list.pdf

3. Poems Sharebuilder Plan (Customize from 19 coutners + STI ETF)
http://www.poems.com.sg/rsp/Share-Builders-Plan.html

 

Hong Kong – Hang Seng Index ETF

We have:
1) Hang Seng H-Share Index ETF (2828.HK)

http://finance.yahoo.com/q?s=2828.HK

We can see that PE is 7 and that this ETF has dropped from a high of HK117.20 (on 2nd Dec) to current of HK99.6.

With a PE of 7, definitely looks cheaper than STI with PE of 12+ and SPY with PE of 18+?

2) iShares MSCI Hong Kong (EWH)

http://finance.yahoo.com/q?s=EWH&ql=0

Current PE of 15

3) iShares MSCI Hong Kong Small-Cap (EWHS)

http://finance.yahoo.com/q?s=EWHS&ql=0

Current PE of 12

For China – Shanghai Composite Index.
I will take reference from this article i found (see link below)
In summary, to invest in China, we can look at these following ETFs

1) iShares FTSE China 25 Index Fund (NYSE: FXI)

http://finance.yahoo.com/q?s=FXI

Current PE of 8

2) Guggenheim China Small-Cap ETF (NYSE: HAO )

http://finance.yahoo.com/q?s=HAO&ql=0

Current PE of 10

3) iShares MSCI China Small Cap Index Fund (NYSE: ECNS )

http://finance.yahoo.com/q?s=ECNS&ql=0

Current PE of 9

Other China Sectors ETFs
1) WisdomTree China Dividend Ex-Financials Fund (NASDAQ: CHXF )

http://finance.yahoo.com/q?s=CHXF&ql=1

2) Global X China Consumer ETF (NYSE: CHIQ )

http://finance.yahoo.com/q?s=CHIQ&ql=0

3) iShares MSCI Emerging Markets Index Fund (NYSE: EEM )

http://finance.yahoo.com/q?s=EEM&ql=1

4) Guggenheim China Technology ETF (NYSE: CQQQ )

http://finance.yahoo.com/q?s=cqqq&ql=1

Read more: http://www.nasdaq.com/article/believe-china-is-cheap-try-these-etfs-cm179881#ixzz2rkcC616U

Hope this sharing enriched you. I look forward to your comments and sharing.

Free VIP Workshop

To learn more about how to invest, join us in our Free Investing Workshop at <<www.valueinvestingprogramme.com>>.

Mind Kinesis Research Team

Leave a Reply

Your email address will not be published. Required fields are marked *