How to Invest in ETFs: A Guide for Beginners

The ETF market is booming. Global ETF assets under management hit US$17.85 trillion in August 2025, surpassing the record high of US$17.34 trillion reached during the previous month. Besides being an asset class for retail investors, ETFs are also an investment vehicle used by robo-advisors to curate portfolios.

An ETF is a fund traded on the stock exchange, which consists of a basket of securities such as stocks, bonds and commodities. ETFs seek to track the performance of indices such as the S&P 500 Index or the Straits Times Index (STI), making them a great investment choice for passive investing. These ETFs are also listed on financial markets such as the New York Stock Exchange, NASDAQ and Singapore Exchange (SGX).

For example, the STI tracks the top 30 companies listed on the SGX. Rather than individually purchasing DBS, CapitaLand and SingTel stocks to build your portfolio, you can opt to buy the STI ETF instead, which holds all of these stocks and more.

Beyond passive ETFs, there are also other ETFs available for your consideration, such as commodity or even Bitcoin ETFs. Read on to find out more about the best Singapore ETFs and US ETFs.

An ETF may aim to produce a return that tracks or replicates a specific index such as a stock index (SGX) or commodity index (Philadelphia Gold and Silver Index (XAU). These index-tracking ETFs are also known as passive ETFs, which charge lower fees than actively managed ETFs, as they do not require the decision-making services of a portfolio manager.

Some ETFs may have complex structures, such as Currency ETFs, which track the value of a currency or a basket of currencies instead of an index. As Bitcoin continues to gain in popularity, Bitcoin ETFs have also entered the arena. Retail investors can choose to invest in spot Bitcoin ETFs if their goal is to directly hold Bitcoin assets, while those with a bigger risk appetite may decide to go for derivatives-based funds such as Bitcoin futures ETFs.

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In Singapore, we also have special ETFs categorised as Specified Investment Products (SIPs). Trading in these products on the SGX requires completion of the Customer Account Review (CAR). You'll need to meet 1 of either 3 criteria, whether in educational qualifications, work or investment experience. Retail investors who do not meet the requirements will have to take the SGX SIP Online Education Module and answer at least 15 out of 20 questions correctly.

ETFs are a great way to start investing in Singapore since it does not require you to pick and choose individual stocks. With an ETF, you gain exposure to a basket of stocks, bonds or other asset classes depending on the ETF you invest in.

This helps to diversify your portfolio at a low cost. Diversification helps you to reduce your investment risk by not having all your eggs in one basket.

ETFs are considered to have higher liquidity than mutual funds, which means they can be bought and sold quickly without significantly impacting its market price. This is one of the biggest selling points of ETFs, as their high liquidity allows for investors to cash out when needed.

With an ETF, you can invest in top companies at a fraction of the price, without minimum investment amounts. 

For example, a single unit of the STI ETF may range around S$4.38 while a single stock of a company within the STI, like DBS, stands at about S$51.44. It's far more cost-effective for investors to purchase a single ETF containing a basket of stocks they're interested in, versus buying them one by one.

With thousands of ETFs available on the market, you can choose which ETF to buy from different asset classes, geographies, industries, countries and stock exchanges. You can even search for ETFs that are commodities-based or track specific industries, if you so desire.

So, how do you trade ETFs in Singapore? It's easier than you think.

Think of an ETF as a pre-packaged basket of investments containing a variety of assets, such as stocks, bonds, or commodities. ETFs are strategically assembled to track the performance of a specific index, such as the S&P 500 or Hang Seng index, allowing investors to instantly diversify their holdings across a range of companies. Of course, you may also opt for ETF portfolios, which are actively managed by investment experts, though this may come with higher fees.

Many ETFs are now available for purchase through online brokerage accounts. If you have your mind set on a certain ETF, do some research and find out if your desired brokerage offers access to that particular ETF. 

Once you have an account set up, you can start your ETF investment journey by placing an order.

Buy 100 units at once or contribute a fixed monthly to your investment? That's up to you! Depending on the commission fees associated with your ETF, your investment horizon and your financial obligations, one or the other may be more suited for you. For example, if you've built up significant savings, you may prefer a lump-sum investment for higher potential long-term gains. On the other hand, if you are a recent graduate, you may want to go slow to mitigate the risk of inadvertently investing heavily at a market peak.

Once you have your account all set up, you may decide to day-trade ETFs. This involves timing your buying and selling against fluctuations based on market demand. Reacting to market changes and seizing opportunities is something many beginners take time to learn, some losses are to be expected.

Now that you have a better idea of what ETFs are and how they work, here are 3 ways you can get started.

Remember how we mentioned that you can now purchase ETFs on the open market through online brokerage accounts? If you'd like to trade on the SGX, remember to open a CDP account first. For individuals who are set on ETFs not available on SGX, your brokerage will act as your custodian in place of your SGX CDP account. This could be your Webull, Saxo or IBKR account, for example.

Once you have a brokerage account, you'll be able to purchase an ETF of your choice.

A Regular Savings Plan (RSP) is one that allows you to invest a predetermined amount each month, starting from as little as $100. An RSP encourages regular monthly contributions and is ideal for beginners looking to build good financial habits.

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 non-bank online brokerages such as FSMOne and dollarDEX that allow you to start an RSP by investing in ETFs of your choice.

Robo-advisors offer portfolios that are tailored towards your investment goals, preferences and risk appetite. Most robo-advisors are able to automatically rebalance your portfolio in the event of market upheavals. Some robo-advisor platforms in Singapore, such as Stashaway, offer specific ETF portfolios, ranging from low-cost ETFs to themed ETFs.

Like all other investments, ETF investments come with a degree of risk. Before committing to your investment, you should first make sure you have your financial safety nets in place. Paying off outstanding high-interest loans and having an emergency fund set aside helps pave the way to worry-free investing.

>>  MORE: Compare the Best Robo Advisors in Singapore

Some retail investors may decide to broaden their portfolio beyond Singapore, while others are perfectly happy to invest within the country. Below are some ETFs that are popular in Singapore:

Stock ETFs are made up of a portfolio of stocks that track an index's performance. One of the most popular and oldest ETFs available is the SPDR S&P 500 ETF, which tracks the S&P 500.

Other examples of ETFs that track stock indices include: 

• The Invesco QQQ ETF, which tracks tech stocks on the Nasdaq 100 Index

• The SPDR Dow Jones Industrial Average ETF which tracks 30 stocks on the Dow-Jones Industrial Average

Bonds or fixed income ETFs are made up of various types of bonds or fixed income products. They are a low-risk asset class that usually appeals to risk-averse investors. While bonds generally have lower returns when compared to stocks, they offer stability to a portfolio with their fixed interest payments. 

Examples of bond ETFs include: 

• ABF Singapore Bond Index Fund

• Nikko AM SGD Investment Grade Corporate Bond ETF

Commodities can prove to be a good hedge against inflation, and are at times negatively correlated to other asset classes such as stocks and bonds. Commodity ETFs consist of a basket of commodities such as gold, silver and oil. Agricultural ETFs, such as the Invesco DB Agriculture Fund, which tracks exchange-traded futures on the index Commodities, are also classified as Commodities ETFs.

Examples of commodity ETFs include: 

• SPDR Gold Shares ETF

• iShares Silver Trust

• iShares MSCI Global Agriculture Producers ETF

Convinced that a sector boom is imminent in real estate, healthcare, technology, artificial intelligence, or energy? Sector-specific ETFs exist for that very reason. REIT ETFs, which are wholly concentrated on Real Estate Investment Trusts, are widely available on the SGX. 

Some REIT ETFs available on SGX include: 

• NikkoAM-Straits Trading Asia Ex-Japan REIT ETF 

• Phillip SGX APAC Dividend Leaders REIT ETF

• Lion-Phillip S-REIT ETF

Beyond REITs, there's also the iShares U.S. Technology ETF (IYW) and The Energy Select Sector SPDR® Fund (XLE), an ETF that tracks US electronics, software and hardware companies — and one that tracks the energy sector of the S&P 500 Index.

ETFs are also a great way to increase your exposure to overseas markets. From Brazil ETFs such as the iShares MSCI Brazil ETF (EWZ) to the iShares MSCI Emerging Markets ETF, which tracks mid to large sized companies in China, India, Saudi Arabia and more, there are plenty of ways to diversify your investments.

Some popular country ETFs include: 

• SPDR S&P 500 ETF

• iShares MSCI China ETF

Leveraged ETFs use borrowed capital to increase their exposure, aiming to magnify gains. While they can be tempting for short-term traders seeking higher returns, leveraged ETFs carry increased risk and are generally not suitable for beginners. Leveraged ETFs use options and futures contracts to leverage their returns.

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Bitcoin ETFs provide exposure to the exciting world of digital assets without requiring investors to directly hold or manage cryptocurrencies. These ETFs typically track the price of Bitcoin or a basket of cryptocurrencies, offering a more regulated and accessible way to participate in this emerging asset class. 

Examples of Bitcoin ETFs include:

• iShares Bitcoin Trust ETF (IBIT)

• Bitwise Bitcoin ETF (BITB)

Alternatively, you may want to consider the Evolve Cryptocurrencies ETF (ETC), which holds Ether, Solana, and XRP in addition to Bitcoin.

Sometimes referred to as world ETFs, international ETFs can be a good way to broaden your diversification across multiple countries and regions. 

These ETFs track global or regional indexes, allowing you to spread your investments across a wider range of economies and reduce your reliance on any single country's performance.

Some examples of international ETFs include:

• Invesco FTSE All-World UCITS ETF (FWIA)

• MSCI All Country World Index (ACWI)

>>  MORE: 5 Leading REIT ETFs to Watch in 2025

ETNs are similar to ETFs in that they are traded on exchanges, but they are structured differently. 

Instead of owning a basket of assets, ETNs are unsecured debt securities issued by a financial institution. They promise to track the performance of an underlying index or asset, but they carry credit risk associated with the issuer. 

ETNs can be useful for accessing certain markets or strategies that may not be readily available through traditional ETFs, but it's essential to consider the issuer's creditworthiness before investing.

Some examples of ETNs include:

• MicroSectors Gold Miners 3X Leveraged ETN (GDXU)

• Bank of Montreal MicroSectors FANG ETN (FNGS)

Dollar-cost averaging involves investing fixed amounts at regular intervals, regardless of market conditions. Instead of constantly monitoring the market, these investors focus on building their position over time. 

The beauty of DCA is that you are buying at multiple price points, which tends to average out the investing cost over the longer term. This gives DCA an advantage over lump-sum investors, who may end up investing heavily over a market peak, if they decide to buy at an inopportune time.

Since DVA reduces risk and shields investors from market volatility, it is suited for beginner investors such as first jobbers and young professionals.

When investment experts talk about diversification, they are referring to the act of spreading out your investments across different categories to manage risk. When applied to your assets, this is called asset allocation. For example, holding onto both bonds and stocks allows you to mitigate stock market volatility with the stability of bonds. 

ETFs have the benefit of having a low barrier to entry which fresh grads and young professionals can take advantage of. As their income stabilises, they may look to portfolios geared towards growing their capital. When they move onto the next stage of their lives and start their own families, they may shift toward portfolios designed to secure their capital. In the next season of life, as they venture into their sunset years, high liquidity and being able to earn an income from one's savings become their new priorities.

When it comes to diversification, many ETFs qualify by virtue of tracking a diverse range of companies belonging to various sectors. Of course, this excludes sector-specific ETFs, which may focus on the oil and gas sector or the defense sector.

Swing trading is a strategy that capitalises on price changes over several days to a few weeks. ETFs are well-suited for this approach because they offer diversification and narrow bid-ask spreads, making them less volatile than individual stocks. 

Swing traders need to be capable of making a variety of high-pressure decisions, often within a short timeframe. They will need to decide which direction to trade (long or short?), where to enter the market, what price to cut losses and sell, as well as what price to sell to capture profits.

Sector rotation involves shifting your portfolio to align with different phases of the economic cycle. For example, during an economic slowdown, an investor may move from a growth sector like biotechnology to a more defensive sector like consumer staples.

This strategy is risky as it relies on accurate market timing, which is difficult even for experts. The economic cycle, which includes early, mid, late, and recession phases, can be hard to predict, and frequent trading may result in higher costs and taxes.

Short selling is also known as shorting. It is a high-risk strategy that involves borrowing and selling a stock to profit from a price drop. Unlike a regular stock purchase, where losses are limited, a short sale can potentially result in unlimited losses if the stock price rises. This risk is amplified during a short squeeze, which forces short sellers to buy back the stock at a higher price.

While shorting ETFs is less risky than shorting individual stocks due to a lower possibility of a short squeeze, it's still not recommended for anyone other than experienced investors. Beyond unlimited losses, short sellers also face risks from sudden increases in borrowing fees, dividend payments to the stock's owner, and margin calls from their brokerage.

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ETFs can be used to capitalise on seasonal trends, such as the historical underperformance of US stocks from May to October or the September-October rise in gold prices. An investor could short a broad market ETF like SPY during the weak months or buy a gold ETF like GLD during its strong season.

However, relying on seasonality is risky. Historical data is not a guarantee of future results, and patterns may not hold every year. Because markets have a long-term upward bias, shorting carries unlimited risk, and holding positions for extended periods can increase costs and risk exposure. Always use stop-loss orders for risk control.

You may have heard of the time “hedging your pets”. In investment terms, hedging is a risk management strategy investors deploy to protect against losses by taking an offsetting position in a related asset. It acts like an insurance policy for a portfolio, where a premium is paid for protection against a decline in asset value.

While hedging offers peace of mind by mitigating potential losses, it isn't without cost. Investors must determine if the price of protection is worth the benefit, assessing their own risk tolerance and market outlook before paying for insurance against a downturn.

Do you know the difference between your ETFs, stocks and mutual funds? Before we move onto our chart which details their similarities and differences, here's a refresher on what each of those financial products are about.

• ETFs: An investment fund that holds a collection of assets, such as stocks, bonds, commodities, or other securities.

• Stocks: Also known as equities or shares, stocks are units of ownership in a company that investors can buy and sell.

• Mutual funds: An investment product representing a diversified portfolio of securities, created by a professional fund manager pooling money from many investors.

The creation and redemption mechanism of ETFs ensures that a unit's price stays close to its Net Asset Value (NAV). If an ETF trades at a premium, new shares are created to be sold, driving the price down. If it's at a discount, shares are redeemed, reducing supply and pushing the price up, keeping it in line with its NAV.

For example, if an ETF's market price and the value of its underlying securities were to go out of alignment, trading can help to redistribute those values accordingly. Think of an ETF trading at a lower price than what its worth and investors swooping in to either buy shares or sell the underlying securities, or even both.

First of all, it's important to understand that the ETF fund is distinct from the issuer that manages it. Although ETF shareholders indirectly own shares of the fund, they are still entitled to a share of any interest or dividends earned by the fund's underlying assets. They also receive a residual value if the fund is liquidated. For example, if assets in the ETF portfolio are liquidated, a manager will sell the fund’s assets and distribute the proceeds to investors.