Education


FAQ

ETFs in General

What are exchange traded funds (ETFs)?

ETFs are a collection of securities that typically track a specific market index such as the Straits Times or S&P 500® indices. They are similar to a mutual fund, or unit trust, but trades like a stock throughout the day.

How does the performance of an ETF compare with the performance of its underlying index?

Exchange traded funds are designed to provide investment results that generally correspond to their underlying benchmark index by holding a portfolio of securities based on the underlying index.

What are the costs for investing in an ETF?

The costs generally include:

  • Bid/Ask spread of the ETF;
  • Trading/brokerage commission, 
  • Fees and expenses of the ETFs such as management fee, trustee fees and custodian fee, etc.
What are the risks of investing in ETFs?

Before investing in an ETF, investors should consider and satisfy themselves as to the risks associated with such an investment. Equity-based ETFs are subject to risks similar to those of stocks. Investment returns will fluctuate and the value of the units in the fund (and any income from them) is not guaranteed and may go down as well as up. Past performance is also no guarantee of future results. More details of the potential risks are set out in the individual ETF's prospectus.

ETFs vs. Shares vs. Unit Trusts

ETFs combine the best features of shares and unit trusts.

ETFs vs Shares Vs Unit Trusts
What is the Role of ETFs in Your Portfolio?

ETFs may play a pivotal role in helping you achieve your investment goals

  • Provide More Diversification: Potentially add low cost diversification to almost any market segment: domestic, international, equities, fixed income, etc.
  • Broaden Asset Allocation: Fill gaps in portfolio exposure: fixed income, international equities, domestic equities, REITs, commodities, precious metal, etc.
  • Adjust Portfolio to New Objectives: The precise nature of ETFs enables easy alignment with investor objectives.
  • Tactically Reposition Portfolio: Liquidity, trading flexibility and low cost make ETFs effective for short-term portfolio repositioning.
Why invest in an index?

Indexing, often called "passive management" involves investing in a group of securities that represent the composition of a broad stock market, stock industry sector, international stock, or U.S. bond index. Index funds offer "market level" performance; they aim to generally track the performance of a specific index. Index funds generally have lower management fees and operating expenses than actively managed funds.

What are the differences between Physical and Synthetic ETFs?

Physical ETFs replicate the return of the indices through the purchase of physical securities, whereas synthetic ETFs replicate the return through the implementation of total return swaps or other derivatives.

Can I redeem my ETF shares for the underlying securities?

Requests for redemption of units must be made through participating dealers or by approved applicants. Each SPDR ETF has its own creation and redemption requirement and participating dealers. For example, the current redemption unit size for SPDR® Straits Times Index ETF is 500,000 units or whole-number multiples of 500,000 units. For more information regarding redemption of ETF units, please refer to the prospectus of the fund or contact the SPDR Capital Market Group.

SPDR Overview

What are SPDR ETFs?

Offered by State Street Global Advisors, SPDR ETFs are a family of exchange traded funds that provide investors with the flexibility to select investments that are precisely aligned to their investment strategy. Recognized as one of the industry pioneers, State Street Global Advisors launched the first US ETF on January 22, 1993; the first ETF in Hong Kong on November 11, 1999; the first ETF in Australia on August 24, 2001; and launched the first ETF in Singapore on April 11, 2002.

How do I buy or sell SPDR ETFs?

Units in SPDR ETFs can be bought and sold on the SGX-ST though brokers like other listed securities. Brokerage transaction costs associated with dealing on the SGX-ST will apply.

Are SPDR ETFs cost efficient?

SPDR ETFs are designed to be cost-efficient. As an indexed investment, they can have the advantage of being less expensive to operate and therefore typically have lower expense ratios. Expense ratios have become increasingly important to both retail and institutional investors because they can have a significant impact on the portfolio's return and the investor's potential for wealth accumulation.

What is iNAV?

Indicative net asset value is calculated and published throughout the trading day on a minute by minute basis. iNAV is calculated by taking into account the market prices of individual holdings in a fund. This value can be used to provide an up to the minute indication of what an ETF is worth that can be used to check investors own calculations or, by comparing the iNAV with bid-ask spreads, to see whether an ETF is being priced fairly in the market.

Do any SPDR ETFs use synthetic replication?

Currently, all State Street Global Advisors' SPDR ETFs in Singapore are supported by the physical replication model.

Can I invest my CPF in SPDR ETFs?

Yes. The following SPDR ETFs are approved under the CPF Investment Scheme, you may use your ordinary account savings to invest in these ETFs:

SPDR® Straits Times Index ETF (ES3)

SPDR® Gold Shares (O87) - Up to 10% investible savings can be invested in Gold

For more information about investing your CPF, please visit CPF Board's website: www.cpf.gov.sg

Distribution Information
  • Do I get paid dividends on ETFs?
    ETF unit holders may receive their pro rata share of dividends, if any, accumulated on the stocks held in an ETF, or interest on the bonds held in an ETF, less fees and expenses. 
  • What are the distribution arrangements?
    In general terms, unit holders on the register of a fund on the record of date of a distribution will be entitled to the distributable income (if any) for that period, based on the number of units held in the fund. Distributable income includes dividends and distributions received from the fund's investments. Each SPDR ETF fund has its own detailed rules on how distributable income and income entitlements are calculated. Distribution periods may be varied. Dividend distribution is at the manager's discretion and past distributions are not necessarily indicative of future distributions.

The SPDR® Straits Times Index ETF (ES3) normally distributes dividend semi-annually (Jan and July each year).
The SPDR® S&P500® (S27) normally distributes dividend on a quarterly basis (Mar, June, Sept and Dec).
The SPDR® Dow Jones® Industrial Average (D07) normally distributes dividend every month.
The SPDR® Gold Shares (O87) does not distribute any dividend.

Important Risk Information 

The SPDR® Straits Times Index ETF (the "Fund") is not in any way sponsored, endorsed, sold or promoted by SPH Data Services Pte Ltd or Singapore Press Holdings Ltd (collectively "SPH") or FTSE International Limited ("FTSE"). SPH and FTSE bear no liability in connection with the administration, marketing or trading of the Fund. No warranties, representations or guarantees of any kind are made in relation to the Straits Times Index ("STI") or the Fund by FTSE or SPH. All intellectual property rights in the STI vest in SPH. Commodities and commodity-index linked securities may be affected by changes in overall market movements, changes in interest rates, and other factors such as weather, disease, embargoes, or political and regulatory developments, as well as trading activity of speculators and arbitrageurs in the underlying commodities. Currency exchange rates between the U.S. dollar and non-U.S. currencies may fluctuate significantly over short periods of time and may cause the value of investments to decline. Frequent trading of ETFs could significantly increase commissions and other costs such that they may offset any savings from low fees or costs. Diversification does not ensure a profit or guarantee against loss. Investing in commodities entails significant risk and is not appropriate for all investors. There can be no assurance that a liquid market will be maintained for ETF shares. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without State Street Global Advisors' express written consent. Asset Allocation is a method of diversification which positions assets among major investment categories. Asset Allocation may be used in an effort to manage risk and enhance returns.  It does not, however, guarantee a profit or protect against loss.