online casino bluebook - online casino gambling guide, to top ranked online casinos and reviews of over 200 gambling related websites. www.onlinecasinobluebook.com also host a casino forum, blog, and casino news articles
Investing in ETF Written by Gan Yen Kuan
Monday, 06 April 2009 11:32
KUALA LUMPUR: The Kuala Lumpur Composite Index (KLCI) has plunged 27% over the one-year period to April 2, and 40% from its peak of 1,516 points in January last year. Prices of many stocks have been battered to levels not seen in recent years.
The sharply lower prices present some investment opportunities, and for investors who want a diversified exposure to several sectors and stocks, an exchange-traded fund (ETF) can be an option.
An ETF is essentially a unit trust fund, except that it is traded on a stock exchange. It represents a basket of securities and is designed to track the performance of an index. Investors can buy and sell units of an ETF during trading hours.
i-VCAP Management Sdn Bhd director and chief executive officer Zainal Izlan Zainal Abidin said investors could start investing in ETFs now but they should be prepared for a medium- to long-term investment horizon.
“No one can tell if we have seen the bottom (but) starting to invest now means taking advantage of the relatively lower share prices.
“We believe this is the right time to invest in ETF, but investors should not jump in with a large investment. They should accumulate gradually, build up their holdings step by step, and be prepared to hold the units for 18 to 36 months,” he told The Edge Financial Daily.
However, investing with a medium- to long-term view does not mean investors shouldn’t sell duringthe period, Zainal Izlan said.
“The market is still volatile. So, if there’s any trading opportunity, such as a short-term rebound in share prices, investors should sell on strength and then buy again,” he added.
i-VCAP is the manager of MyETF Dow Jones Islamic Market Malaysia Titans 25 (MyETF-DJIM25), Malaysia’s third ETF and Asia’s first syariah-compliant ETF listed on Bursa Malaysia in January last year.
i-VCAP is a wholly owned subsidiary of fund management company Valuecap Sdn Bhd, which in turn is equally owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and Retirement Fund (Incorporated).
The other two ETFs listed in Malaysia are ABF Malaysia Bond Index Fund, which was listed in July 2005, and FTSE Bursa Malaysia Large 30 Index ETF, which was listed in July 2007.
Zainal Izlan said ETFs were particularly suitable for investors less savvy in picking individual stocks and managing risk.
“Investing in individual stocks is generally riskier, especially when the market is volatile (like) now. But an ETF gives exposure to different sectors and counters. It helps risk exposure management,” he said.
However, for investors more familiar with the local stock market, they could invest directly in some good stocks for better returns instead of investing in an ETF, according to Choong Kuat Hock, head of stock research and a partner at fund management firm Kumpulan Sentiasa Cemerlang Sdn Bhd.
“They are a few big-caps that already give you exposure to the KLCI. Investors can try to pick five to six good, liquid stocks individually – stocks that can outperform the index,” he said.
“The tendency of local fund managers is picking individual stocks (on Bursa Malaysia); ETFs are to give us a broad-based exposure to foreign markets and commodities, for example,” he added.
Choong pointed out that ETF units were generally not as liquid as the shares of individual companies.
On that note, i-VCAP’s Zainal Izlan said retail investors who were not looking at sizeable investment should not face any problem in buying or selling ETF units in the market. “Currently, the liquidity of ETF may not be as good as some stocks. But retail investors can trade almost immediately.”
He said for investors who were keen on a sizeable investment in ETF (say, one million units) but have difficulty buying it from the market, they can always approach the participating dealers, who will assist in creating more units in the ETF by buying more shares of the underlying stocks, Zainal Izlan added.
This article appeared in The Edge Financial Daily, April 6, 2009.
The benefits of investing in ETFs
Published: 2009/06/20
This article explains what Exchange Traded Funds are and the benefits of investing in them
In recent years, the world has witnessed a dramatic change in the financial markets, which have become increasingly complex.
Many dynamic investment instruments have been created to meet the diverse needs of the investors. One of the more innovative instruments which has become increasingly popular is the Exchange Traded Fund (ETF).
To date, there are three ETFs listed on Bursa Malaysia, namely ABF Malaysia Bond Index Fund, FBM30etf and MyETF Dow Jones Islamic Market Malaysia Titans 25. The first two ETFs are managed by AmInvestment Bank Group. Datin Maznah Mahbob, chief executive officer (CEO), Funds Management Division of AmInvestment Bank Group explains what ETFs are and the benefits of investing in them.
Question: As the pioneer fund manager who developed the first bond and the first equity exchange-traded funds in Malaysia, can you explain what an ETF actually is?
Answer: An ETF is a unit trust that is listed and traded on a stock exchange. An open-ended fund with no expiry date, it usually tracks or replicates the performance of a benchmark index. This means that ETF investors hold units of a fund that invests in a number of securities.
By investing in ETFs, investors enjoy a cheaper and easier way to gain exposure to a basket of securities represented in an index through a single transaction. The basket of securities could consist of either stocks, bonds, commodities or other instuments.
Investors can buy or sell units of the ETFs on the stock exchange through any remisier, just like how they buy or sell stocks. They are required to have a Central Depository System (CDS) account and a trading account - that they use for trading stocks - to trade ETFs. In Malaysia, a single trading lot for ETF consists of 100 units. This means investors can buy or sell a minimum of 100 units for each lot.
Q: How do ETFs track an index?
A: As ETFs are index-tracking funds, it is important to know what an index is and how ETFs track an index. An index is a "basket" or portfolio consisting of either stocks, bonds or other securities which are grouped to reflect the movement of an entire market. The securities that form an index are called index constituents.
The underlying securities of the index are chosen by the Index Provider to represent the broad market or sector. For example, Standard & Poor's is the Index Provider for the S&P 500 stock market index, which comprises 500 stocks with the largest market capitalisations in the US.
An ETF tracks an index by holding securities in the same composition as the underlying index. The fund could also hold a sample of securities that statistically tracks the index closely. This means the ETF could invest in a fewer number of securities as compared to the index.
The objective of ETFs is to give returns that are very similar to the performance of the index that the funds track. The funds do not seek to outperform or underperform the index. For instance, if the index increases by 10 per cent, the price of the ETF is likely to have an increase of 10 per cent.
Q: Why should investors invest in ETFs?
A: There are four main reasons why ETFs can be a viable investment tool for investors. Firstly, it is easy for investors to buy and sell the funds. Just like trading stocks, investors could buy or sell ETFs through their remisier during trading hours or via online trading. They could check the price of ETFs throughout trading hours and enjoy the flexibility and price transparency when they trade ETFs.
In Malaysia, the prices are available real-time (live) throughout the trading day on Bursa Malaysia's MASA* feed. (*MASA refers to "Maklumat Saham", a computerised display of real-time price).
Secondly, the transaction costs of ETFs are generally lower than those of unit trusts. ETF investors do not need to pay any entry fee. They also pay lower management fees because the funds are passively-managed funds. The annual management fees for ETFs are generally below 1 per cent. For example, the annual management fee for ABF Malaysia Bond Index Fund is 0.10 per cent of net asset value (NAV) of the fund and FBM30etf has an annual management fee of 0.50 per cent of the NAV of the fund.
Thirdly, investors can diversify their investments because ETFs invest in a basket of securities rather than a single security. Hence, investing in ETFs allows them to have instant diversification in the index portfolio. Investors can also gain access to markets that are not easily available such as emerging markets by investing in ETFs that concentrate on emerging markets.
Last but not least, it is convenient to invest in ETFs because investors get immediate exposure to the underlying securities representing an asset class in an index by just making a single transaction. For instance, if investors invest in FBM30etf, they are exposed to 30 largest listed companies (based on market capitalisation) in Malaysia through a single transaction.
Usually, it is more expensive for them to buy a large number of individual stocks to track the index, and to spend on the trading costs for each transaction. When investors buy or sell ETFs, they incur transaction costs including brokerage fee, clearing fee and stamp duty which are applicable when trading stocks on the exchange.
This article was contributed by the Funds Management Division of AmInvestment Bank Group.
