Singapore Markets close in 2 hrs 10 mins

4 Different Types of ETFs Available for Investors in Singapore

Sudhan P.

Exchange-traded funds (ETFs) are open-ended investment funds that track the performance of an underlying index or asset class. They are traded on a stock exchange, and hence their name.

There are many types of ETFs that investors can choose from depending on their preference. In this article, let’s look at some of the various types of ETFs listed on the Singapore stock market that are designed to track the different indices or assets.

Equities index

An equities ETF tracks the movements of a stock index.

For example, the SPDR STI ETF (SGX: ES3) mimics the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI). The Straits Times Index contains the 30 biggest companies in the local stock market in terms of market capitalisation, adjusted for their free float. Other than the SPDR STI ETF, there is also the Nikko AM STI ETF (SGX: G3B), which also seeks to replicate the fundamentals of the Straits Times Index.

The ETFs in this category can be further broken down by country or region. If investors wish to get exposure to the Chinese market, they can choose to invest in the United SSE50 China ETF (SGX: JK8), which tracks the SSE 50 Index. For those who like dividends and want to invest in the Asia-Pacific region, there’s the CIMB S&P Ethical Asia Pacific Dividend ETF (SGX: QR9). This ETF mimics the S&P Ethical Pan Asia Select Dividend Opportunities Index.

REIT index

A REIT ETF tracks the fundamentals of a real estate investment trust (REIT) index.

In Singapore, there are three REIT ETFs, namely, Nikko AM STC Asia REIT ETF (SGX: CFA), Phillip APAC SGX REIT ETF (SGX: BYJ) (SGX: BYI) and Lion-Phillip S-REIT ETF (SGX: CLR).

The newest listed REIT among the trio is the Lion-Phillip S-REIT ETF, which tracks the performance of Morningstar’s Singapore REIT Yield Focus Index.

Commodity or commodity index

A commodity ETF gives investors exposure to a single type of commodity or a basket of commodities. In our shores, there’s only one such commodity ETF – the SPDR Gold Shares (SGX: O87), which tracks the gold spot price.

In the US, however, there are more varieties of commodity ETFs to choose from. Some ETFs track the crude oil price specifically, while some others track a commodity index.

Bond index

A bond ETF tracks a specific bond index.

Just last month, the Nikko AM SGD Investment Grade Corporate Bond ETF (SGX: MBH) was launched. The ETF aims to replicate the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index.

The oldest bond ETF listed here is the ABF SG Bond ETF (SGX: A35). The ETF invests in a basket of high-quality bonds issued by the Singapore Government and Government-linked bodies such as the Housing & Development Board and the Land Transport Authority.

The Foolish takeaway

Some risk-averse investors solely invest in ETFs to allow for broader diversification with little costs.

There are also many types of ETF investing strategies that such investors can follow. One such strategy is the core-satellite ETF portfolio where core ETFs are chosen for the long-term while the satellite ETFs are bought to supplement the core with shorter-term holdings. Such shorter-term holdings could offer more diversification through non-correlated asset classes.

Whichever ETFs or strategies that one invests in or follows, he or she must be aware of the pros and cons involved.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn't own shares in any companies mentioned.