What are ETFs?<\/span><\/h2>\n

Exchange-traded funds (ETF) is a fund that tracks an index, bonds, commodities, and a basket of assets like an index fund does. These types of securities trade on the stock exchanges just like individual stocks.<\/span><\/p>\n

\nHistory:\u00a0<\/span><\/h2>\n

ETFs were introduced into the U.S market in 1993, with only 21 products listed. As of 31st March 2016, there were more than 2700 ETFs with about $3 trillion in total net asset value (NAV), according to the BlackRock report*. The sharp increase in number and size is partly due to their low-cost structure and tax-efficient nature compared with other mutual funds.<\/span><\/p>\n

\nTypes of ETFs<\/span><\/h2>\n

There are mainly four types of ETFs: the index ETF tracks mainly:<\/span><\/p>\n

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• \n

  Equity indices<\/span><\/p>\n<\/li>\n

• \n

  Commodity\u00a0 index<\/span><\/p>\n<\/li>\n

• \n

  REIT indices<\/span><\/p>\n<\/li>\n

• \n

  Fixed income indices<\/span><\/p>\n<\/li>\n<\/ul>\n

  
  \nAnd there are two active ETFs tracking the Straits Times Index:<\/span><\/p>\n

  \n
  • \n

    The SPDR STI ETF<\/span><\/p>\n<\/li>\n

  • \n

    Nikko AM STI ETF<\/span><\/p>\n<\/li>\n<\/ul>\n

    
    \nYou can also opt to invest in the Gold SPDR. (<\/span>read this article<\/span><\/a> for more info).<\/span><\/p>\n

    
    \nIndex funds aim to track an index by buying all the securities in that particular index. If you invest $1,000 into an index fund, you should get close to $1,000 worth of that particular index on average if it is well-diversified. Index funds have lower cost ratios than actively managed funds because they do not require research analysts or portfolio managers.<\/p>\n

    <\/span><\/b><\/p>\n

    These funds usually cost less than mutual funds, which mirror real-life portfolios for investors.An active ETF is a type of investment fund traded like stocks on stock exchanges with no restrictions regarding their investments. The performance of this type of fund does not necessarily correlate to that of the index they are tracking.<\/p>