BT Money Hacks: Is now the time for ETFs?
If you've been spooked by the current investment landscape of volatility in global markets, you might be looking for alternatives.
Exchange-traded funds (ETFs) are low-cost investment vehicles that allow investors to track popular indexes or benefit from experienced manager selections aiming to outperform the market. Unlike open-end mutual funds, ETFs are traded on exchanges throughout the day.
In the latest episode of Money Hacks by The Business Times, Howie Lim, speaks to Dina Ting, senior vice president, head of Global Index Portfolio Management, Franklin Templeton to gain a better understanding of ETFs and if they are right for skittish investors.
The increasing popularity of ETFs
Ting shares that ETFs provide investor choices that they haven't had before. Many strategies are now packaged into ETFs at a very low cost. The popularity of ETFs she says is skyrocketing, pointing out that new records in net flow into ETFs are being set almost every year.
With market volatility on the rise due to political factors, ETFs might offer precise exposure and a variety of strategies. Whether it's a strategy that protects against volatility, doubles it, or balances income and performance, there's an ETF for that.
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What are the risks
Despite their benefits, ETFs face headwinds similar to specific stocks. The main concern is liquidity during extreme market events. However, historical performance has shown ETFs to be reliable reflections of their underlying holdings, providing an alternative liquidity source when traditional markets are closed.
In stressed markets, Ting suggests that ETFs could offer easier liquidity, especially in fixed income investments. She expands on this in the podcast which makes this a key highlight.
Diversification investment strategy
ETFs are just a wrapper for various investment strategies. They offer advantages like tax efficiency, especially for US investors, and the ability to trade throughout the day unlike mutual funds, which trade only at day's end. ETFs are competitively priced, and the variety of available strategies has contributed to their increasing popularity among institutional and retail investors alike.
Ting highlights why investors should consider international diversification, given tariff uncertainties suggesting that this is an opportunity now to balance investment portfolios.
Listen now to learn more about ETFs and make an informed decision on whether this is an appealing entry point into the stock market for you if you are a new investor.
If you have feedback or an idea for a podcast episode, contact us at btpodcasts@sph.com.sg. Stay tuned for more episodes of Money Hacks.
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Written and hosted by: Howie Lim (howielim@sph.com.sg)
With Dina Ting, senior vice president, head of Global Index Portfolio Management, Franklin Templeton
Edited by: Howie Lim & Claressa Monteiro
Produced by: Howie Lim & Chai Pei Chieh
A podcast by BT Podcasts, The Business Times, SPH Media
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Do note: This podcast is meant to provide general information only. SPH Media accepts no liability for loss arising from any reliance on the podcast or use of third party's products and services. Please consult professional advisors for independent advice.
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