Hi Tan Kin Lian,
It is clear to me that any index ETF tracks the underlying index. However, index itself will have dividend yield (let's say 3%), which I believe is significant.
If so, in the ideal circumstances ETF performance shall have to beindex + dividend yield.
Does ETF price reflect the dividend yield of the index? Where does the dividend of index go?
REPLY
If you invest in the STI ETF by StateStreet, the dividend is paid out in half yearly distributions.
Its NAV includes dividends received from the component stocks.
ReplyDeleteBut its market price may be different from NAV.
So this is different from investing into the singapore index fund run by the Singapore Consortium. Singapore index fund is managed like a unit trust which tracks the STI. Out front fee is 2% but it so far has not paid any dividend. ETF on the other hand is not liquid enough.
ReplyDeleteBeware: The question now is whether the entity holding your ETF investment is another US investment Company that can go bust under this credit crunch and you will only get back 5 cents for one dollar invested.
ReplyDeleteMr Tan,
ReplyDeleteCan you advice on this posting "Beware: The question now is whether the entity holding your ETF investment is another US investment Company that can go bust under this credit crunch and you will only get back 5 cents for one dollar invested" please. thanks