This term should be very common in foreign countries which have ETF for some time. However, in Malaysia, not many investors are aware of it yet, at least for the moment. ETFs stand for Exchange-Traded Funds
Exchange-Traded Funds have been available in the US since 1993 and in Europe from 1999. The purpose of ETFs is to combine funds and stock exchange trading into one product. A simple definition from WikiPedia:
An ETF is a pool fund invested with a stated investment objective, for example, a tracker fund for the energy sector or geographical area. Shares owned in this fund by investors are in turn traded on an exchange.
As most of us aware, each investment tools has pros and cons. If use correctly, all investment tools should complement each other. Below is a summary of the features for individual stocks, unit trust funds, and ETFs investment. For comparison purpose, the unit trust funds and ETFs are assumed to be equity funds. Of course, here I am looking at these investment instruments from the perspective of individual investors.
What are the ETFs available in Malaysia market? There are 3 at the moment:
MyETF-DJIM25: Malaysia’s first National ETF and the first Asian Shariah-compliant ETF. With MyETF-DJIM25, investors can acquire units of the fund with a single transaction, and immediately invest in the largest 25 Shariah-compliant companies trading on the stock market, as determined by the Dow Jones Islamic Market Malaysia Titans 25 Index. Top holdings are large blue-chip companies including Sime Darby Bhd, IOI Corp Bhd, Kuala Lumpur Kepong Bhd, DiGi Bhd, MISC Bhd and Gamuda Bhd. It offers investors exposure to the plantation, telecommunication, oil and gas, construction, infrastructure and transportation industry.
FBM30ETF: FBM30ETF was the first equity ETF to list in Malaysia. This passively managed fund does not comply with Shariah laws. Designed to track performance of FTSE Bursa Malaysia Large 30 Index, FBM30ETF holds a basket of shares comprising 30 of the largest companies by market capitalization. As of end of last year, FBM30ETF’s constituents were blue chip companies including Malayan Banking Bhd, Bumiputra-Commerce Holdings Bhd, Tenaga Nasional Bhd, Public Bank Bhd and Telekom Malaysia Bhd.
ABFMY1: This first ETF to list in Malaysia holds a basket of fixed income securities. ABFMY1 offers investors a low-cost method to invest in Ringgit denominated government and quasi government debt securities. Bond ETFs such as ABFMY1 would also suit investors with a more conservative risk profile and particularly those looking for a savings instrument.
Labels: ETFs