Dear Mr. Tan
I am a retiree. I intend to buy STI ETFs with my savings instead of buying annuities.I would also like your advice on what happens if we put our life savings into ETFs and the company behind it goes bust. Are there any other ETFs worth considering now?
REPLY
The ETF is a trust fund invested in the top 30 companies in the SGX. The fund manager is DBS or State Street. If they go bust, another fund manager will take over to manage the underlying assets (shares of SGX). The risk is very small and it is safer than investing in any single share.
I am a retiree. I intend to buy STI ETFs with my savings instead of buying annuities.I would also like your advice on what happens if we put our life savings into ETFs and the company behind it goes bust. Are there any other ETFs worth considering now?
REPLY
The ETF is a trust fund invested in the top 30 companies in the SGX. The fund manager is DBS or State Street. If they go bust, another fund manager will take over to manage the underlying assets (shares of SGX). The risk is very small and it is safer than investing in any single share.
3 comments:
I'm looking at STI ETF myself.
I don't have the skill, desire or inclination to study individual company annual reports so I can't adopt a fundamental style of investment.
I figure it's not easy for a company to be included in the Straits Times Index. And the "committee" (SPH, SGX & FTSE) that decides and manages the ST Index is a lot smarter than I am about the basic strengths of each constituent stock.
The only decision I ever need to make is when to buy and when to sell the STI ETF i.e. technical analysis.
And if I can't even do technical analysis, then I'll just do as Mr Tan KL suggested. Use "fixed dollar amount" cost averaging.
March 2009: STI Index was less than 1600
Nov 2010: STI Index was more than 3200
Today: STI Index is around 2,800
The volatility is the opportunity (for big profits) as well as the
danger (if it scares you into selling at the market bottom).
Hi Mr Tan,
I think the heading is a bit misleading. We must differentiate between synthetic ETFs and traditional ETFs. Similar to investment link policies and traditional life plans, the risk for investing in synthetic ETFs is less clear. There are currently two ETFs that track STI, one is listed by State Street Bank another by DBS. I understand that the ETF by State Street is a conventional one but I am not so sure about the one by DBS. It is always good to read the prospectus on SGX website before buying any stocks. Perhaps Mr Tan would like to educate readers more on synthetic ETFs, the associated risk and how to differentiate the two.
My comment refers to the "pure" ETF, i.e. the STI ETF marketed by SPDR and DBS. Synthetic ETF have high risk and should be avoided.
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