ETFs have been going in popularity because it is easy to trade on the exchange.
In addition, there are ETFs for almost every investment theme.
If you are not familiar with ETFs, watch this production we did for you!
PS: Read till end to see ETF Focus list 2020!
Mistake Number 1: Buying the next HOT NEW THING!
Driverless cars, 3-D printing … you name it, there’s an ETF for that.
How about a Cloud computing ETF? It is definitely going to benefit from covid-19 right?
Check First Trust Cloud computing ETF SKYY listed in NYSE.
But an ETF is usually created for it after it has gotten some hype and some run up in the market. You'd need to be wary if you are late to the party. Valuations matter for good investing returns long term.
The top 10 names also have mega-cap IT firms like Alibaba and Amazon.
Mistake Number 2: Buying commodities ETF without understanding
Commodities is a sector that ETFs can get you access into.
If you are keen on gold, check my video below on a general analysis on the subject.
A method to get invested into gold is SDPR GOLD TRUST (GLD) which is an ETF that holds physical gold to back its shares.
However, buying buying an oil ETF with owns futures is a different matter.
An Oil futures contract recently plunged to NEGATIVE territory in price
Which means traders were paid to own an expiring contract, crazy right!
Some traders blamed Oil etf USO for it but that is to be proven. However, there are other problems such as "contango effect" with an ETF owning futures contract that you should know first before investing.
Mistake Number 3: Trading excessively
Emotions can be your worst enemy to having good investment returns.
When equities fell 30% from Jan 2020 to Mar2020 , which is one of the fastest 30% decline in history, it is not easy to stomach loses.
ETFs are traded on the exchange with a live price and astute investors don't actually need liquidity.
Famed investor Jack Bogle is one of them. In addition, he never liked ETF as
Quote "Open ended mutual funds are only priced at the close of the trading. This means that investors are always guaranteed to get in and out at NAV. ETFs, by contrast, typically trade at premiums, because authorised participants, who create and redeem ETFs with the issuer, pass on the costs of financing creation baskets." Read more here.
ETF Focus list 2020
If you understand ETFs then this list below is a good discussion point.
This list is complied by IFAST research published in June2020 and contains some of the regional and emerging market economies which I personally like.
*If it is NYSE: You'd need a US trading account. If it is SGX: You'd need a Singapore trading account.*
If you are keen to read more on a Singapore listed ETF, I've an article below.
Phillip Sing Income ETF focuses on companies listed in Singapore which can pay higher dividends.
ETFs provide you with diversification just like mutual funds (unit trust). It has a lower cost structure because it is a passive tracking investment method.
However, there are low cost funds like Dimensional funds that have a sound investment methodology.
Below is one that I've featured with diversification to bonds also as an asset class. Enjoy.