Sector specific ETFs
If you are looking to invest in a specific sector such as real estate, healthcare, technology or energy , you can invest in an ETF instead. An example is Real Estate Investment Trusts (REITs); with dozens of REITs available on the SGX, investors are spoiled for choice. Instead of taking the time to analyse and cherry-pick your REIT winners, you can consider investing in the entire sector with a REIT ETF.
REIT ETFs include:
- NikkoAM-Straits Trading Asia Ex-Japan REIT ETF
- Phillip SGX APAC Dividend Leaders REIT ETF
- Lion-Phillip S-REIT ETF
Beyond REITs, there are also other ETFs available such as the Invesco China Technology ETF that specifically tracks technology stocks in China and the Vanguard Health Care ETF that consists of stocks involved in medical or health care products, services, technology, or equipment.
Country specific ETFs
ETFs are also a great way to increase your exposure to overseas markets. For example, if you’re looking to start investing in Singapore stocks, you can consider an ETF that tracks the STI, such as the SPDR STI ETF or the Nikko AM Singapore STI ETF.
Alternatively, you can gain exposure to popular overseas markets such as the US and China with ETFs that track their markets. Examples include:
- SPDR S&P 500 ETF
- iShares MSCI China ETF
Costs of investing in ETFs
All investments come with a fee. When it comes to the ETFs, here are the costs you have to consider.
- Expense ratio: The annual rate or fee the fund charges on the total assets you hold. This fee helps to cover the cost of portfolio management, administration costs and more.
- Commission fees: Fees paid to the broker when you buy or sell on your brokerage platform. There could also be a minimum commission fee required. The more transactions you make, the more commission fees you incur.
If you are purchasing ETFs listed on US stock exchanges, do note that your dividends and bond coupons will be subject to a 30% US withholding tax.
How to get started?
Now that you have a better idea of what ETFs are and the various types you can invest in, here are three ways you can get started.
Help yourself to better financial shape in the new norm, with SingSaver's all-new Ultimate Savings Guide! Got your free copy yet?
Option 1: Open a brokerage account
Much like other investments you make, such as purchasing a stock on the SGX, you can also purchase an ETF on the open market. To do this, you’ll first need to open a brokerage account as well as a CDP account.
With a brokerage account, you can then purchase an ETF of your choice at a price you’re comfortable with.
Option 2: Start a regular savings plan
A regular savings plan (RSP) is one that allows you to invest a predetermined amount each month, starting from as little as $50. An RSP encourages investors to make regular investments and makes it possible for new investors to get started.
RSPs such as DBS/POSB Invest Saver allow you to invest in ETFs such as Nikko AM STI ETF or ABF Singapore Bond Index Fund. There are also providers such as FSMOne and dollarDEX that allow you to start an RSP by investing in ETFs of your choice.
Option 3: Invest with a robo-advisor
Robo-advisors offer portfolios that are tailored towards your investment goals, preferences and risk appetite. These portfolios typically offer automatic rebalancing and the option for you to add to your portfolio every month.
Some robo-advisors such as Stashaway and Autowealth curate these investment portfolios with ETFs. This allows you to own a portfolio that consists of various types of ETFs through a single investment with the robo-advisor.
Do keep in mind that not all robo-advisors invest using ETFs as some select individual stocks or unit trusts instead.
Much like all other investments, investments come with a degree of risk. Before selecting an ETF to invest in, you should first make sure you have your financial safety nets in place. Your ETF investment can be a little more worry-free if you have your emergency funds down pat, or if you’ve paid off outstanding high-interest rate loans.
Read these next:
Best US Exchange Traded Funds (ETFs) To Invest In (2021)
Best ETFs In Singapore For Tracking Stocks, Bonds And REITs
Guide To Real Estate Investment Trusts (REITs), And Whether You’re Ready For It
Best Robo Advisors To Auto-Pilot Your Investments In Singapore
SPDR STI ETF vs Nikko AM STI ETF: A Comparison In A Jiffy