Saturday, January 26, 2008

Invest in ETF

Dear Mr. Tan,

I would like to invest in ETF over a period 10 years. Is it a good time to do it now?

REPLY

I think that this is a good time, even though there is still some uncertainty. The market has corrected to a satisfactory level. If you wish to invest a large sum, break it into three portions to be invested over the next three months.

I observed that during the past few days, the spread in the STI ETF has narrowed down to less than 1%. It is a fair spread.
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4 comments:

Anonymous said...

What is meant by "spread"?

January 27, 2008 10:48 PM
Tan Kin Lian said...

The Spread is the differene between the Buy Price and the Sell Price.

If the spread is less than 1%, then the prices are at their fair value.

For example, if a stock is trading at $2.00, the spread between the buy and sell price should be 2 cents, i.e. say buy at $1.99 and sell at $2.01.

If you are keen to buy, you can pay $2.01. If you are willing to wait, you can offer $2.00 and see if any seller will sell to you at that price.

January 28, 2008 6:28 AM
Hippo KK said...

I would like to comment that eventhough the spread is small, but we still have to consider the IOPV(Indicative Optimised Portfolio Value) of the shares, this price represent the NAV of the underlying share that the STI ETF hold. Currently i see that there is an premium of 10 cents over the IOPV value, so we might want to consider this factor to see if the purchase price is closer to IOPV value or not(more worth if can buy at IOPV price)

January 28, 2008 2:56 PM
Anonymous said...

Mr. Tan,

I also agree with your view that this is good time to buy. I also think so.

I noticed the spread is thinner, and that's good for business for us coz we can ask more people to invest for their future or retirement.

Your view of investing now is good. Will share with my customers. Now can sell more. Thanks for letting us know when to get in the market.

R.

January 29, 2008 1:55 AM

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