ETFs or Exchange Traded Funds are an innovative investment product which are traded on the stock exchanges similar to conventional stocks. ETFs are an open-ended fund and provide a combination of stocks and index funds.
Before we learn about investing in ETFs in Malaysia, it is important to understand that there are different types of Exchange Traded Funds available like equity ETF, Commodity ETF, Fixed Income ETF etc. Depending on the type of ETF, it can include a basket of commodities, stocks, bonds etc. which provide a great opportunity for diversification. Investing in an ETF eliminates the risks which are incurred when you invest in the stocks of a particular company.
Let us now take a look at the basic so of exchange traded funds and also find out why should you invest in Exchange Traded Funds.
What is an ETF?
ETFs or Exchange Traded Funds are an investment product which are listed and traded on the stock exchange similar to stocks. ETFs are traded in the form of units. You can buy or sell units in an Exchange Traded Funds on Bursa Malaysia. ETFS allow investors for a wide exposure to a commodity, stock, sector, industry or geographical location. You can choose an ETF depending on the underlying asset which aligns with your interest or style of investing.
Why should you invest in Exchange Traded Funds
Investing in ETFs in Malaysia comes with a number of advantages. Let us take a look at some of the key benefits of investing in Exchange Traded Funds.
Diverse Exposure: ETFs have a basket of assets under them which can be stocks, bonds, commodities etc. This quality of ETFs actually makes than an asset which can replicate the market index up to an extent. Investing in ETFs in Malaysia rather than individual stocks allow you to get a diverse exposure to a wide variety of investment options.
Cost Effective:If compared with Unit Trusts, Exchange Traded Funds have a low annual management fee, which makes ETFs an economic buy and cheaper to maintain when held for long term.
Simple: As we have discussed, Exchange Traded Funds are listed on the Bursa Malaysia exchange similar to stocks. You can buy or sell an ETF unit depending on its current market price by placing a single transaction. You can trade in ETFs through your stock broker or simply place an online order. Investing in an ETF is as simple as buying stocks.
Transparent: All the information about the underlying assets which any given ETF is holding can be viewed by simply visiting the website of the ETF which is provided by the ETF manager. Alternatively, you can also cross check the website of Bursa Malaysia, which also updates information about all the ETF constituents on a daily basis.
Investing in Exchange Traded Funds in Malaysia can be a great alternative to investing in stocks to make the most out of diversification. However, choosing the right ETF which aligns with your goal and investing style is very important. An invesment Advisorcan provide you all the information which is required for making an investment in the stock market.
