Savings never help financial growth; investment does!
Have you tried to understand an easy, affordable and manageable investment plan? What if you could invest in varieties of assets at once? Do you want to know about an investment plan to begin with? Well, then, you have landed in the right place!
ETFs could be the best solution to this. In this write-up, let’s explore ETFs, how they work, and benefit your investor’s profile!
ETFs stands for Exchange-Traded Funds.
Do you know about unit trust funds? They compile investors’ money to buy stocks, bonds, and other investments in groups. ETFs work very similarly to that.
But, ETFs involve exclusive and passive management and tracking of indexes that vary from Unit Trusts where regular buying and selling of Fund Managers is involved. Thus, the ETF fund manager has to replicate and track indexes rather than select individual stocks for investment purposes.
The index referred to here is the sample portfolio representing a market or segment. For example, refer to the table below:
|Index||What is it made up of?||What is it representing?|
|FTSE Bursa Malaysia KLCI||30 largest companies on Bursa, Malaysia||Malaysian Stock Market|
Let us look at five essential tips that can help you make money out of ETFs in Malaysia
Generally, there are two ways investors make money out of ETFs: Capital Appreciation, which refers to selling stocks when the price goes up, and dividends, which refer to investing in ETFs that offer dividends on a specific specified time interval.
ETFs have a NAV (Net Asset Value). The formula for a NAV is Asset – Liabilities/shares outstanding. The price rises when more people buy ETFs, and when more people sell ETFs, the price goes down. However, it stays close to the NAV
ETFs differ by class, investment approach, and geographic location. Understanding the different kinds of ETFs available in the Market is essential. They are Equity, Fixed Income, Leveraged, Inverse, and Commodity.
The most significant advantage of ETFs is the low fees. The expense ratio for ETFs generally revolves around 1%. But that isn’t quite accurately predictable. The expense ratio is dependent on expenses and asset value. Like, it’s one percent only if the expense is $100,000 and the asset’s value is $10 million.
Most importantly, you must focus on the ETFs set location’s stock market, like Malaysia. For that, you need to open a stock trading account first. To check the entire list of Malaysian ETFs, refer to the Bursa Malaysia or KLSE stock website.
These were a few tips on acing the ETF market. This investment is perfect for starting your journey in the financial market. At The Learning Art, we enable young and rising investors to become successful in the working of Trading, Investment, and Exchange through our expert recommendation, advisory and technical services. Connect to us now!
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