What is the best way to buy Singapore ETFs?

There are many reasons why you should buy Singapore ETFs.

First of all, this type of investment provides diversity for your portfolio. It is just as flexible as traded shares but it is not as costly to manage. Since the ETF monitors indices and bases calculated returns from it, a single ETF investment exposes your money to a wider market.

You get to see daily information about the investment – thus allowing you to monitor how well your money is gaining or losing. The fact that your investment is liquid is like icing on the cake.

But why buy in Singapore? Because a report revealed that the Asian ETF is expected to grow 18% each year for the next five years. With the STI ETF as the leading benchmark in Asia, things are looking great for ETF investment in Singapore.

The question is, how can you buy Singapore ETFs?

What is the best way to buy Singapore ETFs?

Probably the best way to phrase the question is what is the best way to do it.

The truth is, the easiest way to invest in Singapore ETFs is through a broker. There are two main reasons why.

Convenience

First of all, investing with a broker makes everything convenient. You just have to make sure that you will choose the right broker to help you manage your investment. After that, you can sit back and relax as they help you buy or sell ETFs.

Expertise

Another reason to trade through a broker is the expertise. It is their job to know the market and how to identify which of the funds will earn a profit and those that will not. You can rely on their expert opinion to help you decide on where you should place your money.

Of course, when you buy Singapore ETFs with a broker, you need to pay a brokerage fee. They profit from the commissions that they will get from every transaction. That means if you will buy, there is a fee. If you will sell, there is also a corresponding fee.

This fee is an important consideration when you are buying or selling ETFs because it can compromise the gains that you will get from your investment. On the other hand, there are specific investing situations that will make these commissions irrelevant.

For instance, if the commission is a flat fee and you intend on investing a huge amount in one transaction, the fee could end up being a very small fee. But if you plan to trade actively and frequently, then the fee will become a financial burden.

In case you do not want to go through a broker, you can buy Singapore ETFs through an online platform. This will allow you to buy directly from the fund. This means you have to be directly involved in the trading process. You have to know the market and what company is performing well so you can make a smart decision about your investment.

Questions to ask before you buy Singapore ETFs

Regardless of how you choose to buy an ETF, it is important to read the prospectus. This is the document that the fund will issue to describe its investment policies and objectives. This is your chance to determine if this particular fund is aligned with your personal investing style and goals. It will allow you to look into the risks that your investment will take. If there is a portfolio manager involved, their description will also be written in this prospectus.

Apart from that, there are a couple of questions that you need to ask being you buy Singapore ETFs.

• What will the ETF track? The answer will give you an idea of what you should keep an eye out for.
• What is the expected risk, exposure, returns, and volatility?
• How is the ETF structured? ETFs are structured differently and have varying complexities. Make sure you understand what you are investing in before you decide that you are ready to invest.
• Who will manage the fund? You want to look into the track record of that manager when it comes to the quality of the investment returns, etc.
• What are the expected costs? You have management fees, commissions, expense ratio, etc.
• What is the expected tracking error? You want to know how it will impact the return on your investment. You also want to know if there are measures in place to manage the errors.
• How can you monitor your investment?

These are the basic questions that you should ask prior to buying any form of ETF in Singapore. After getting all the answers, you should be able to make a smart decision about your investment.

Be careful of these risks when you buy Singapore ETFs

When you buy Singapore ETFs, it is also important that you are fully aware of the risks involved. There are a couple that you need to be on the lookout for.

• Market risk: If the index that you are tracking fails, your investment will do the same. For instance, an STI ETF will be significantly affected by price fluctuations on the market.
• Tracking error: This is simply the risk that the fund manager will not be able to replicate the benchmarks in the index because of fees and other investment constraints.
• Foreign exchange risk: There are ETFs that are dominated by the movement of foreign currencies. You have to be aware of how much this foreign exchange investment fluctuates. The risk might not be compatible with your risk tolerance.
• Counterparty risk: This is more for ETFs that use a swap or even a participatory note structure. There could be significant losses in case the counterparty files for bankruptcy or something similar.
• Liquidity risk: There may be times when it becomes hard to buy or sell an ETF. You might have a hard time converting your investment to cash. This can be tough when there is an emergency and you were relying on this to help you survive financially. Think about this when you are deciding how much to invest in an ETF.

Consider all of these before you buy Singapore ETFs. While risks are common in all investment types, you have to make sure that investing in ETFs will help you reach your financial goals.