Trading ETFs for Long-term Growth

Trading ETFs for long-term growth is a strategy that involves holding onto these funds for extended periods, rather than actively buying and selling them. This approach allows you to ride out market fluctuations and benefit from the power of compounding.

Research suggests that a long-term approach to trading ETFs can lead to significantly better returns. For instance, a study found that the S&P 500 ETF has outperformed the average actively managed mutual fund over the past two decades.

To achieve long-term growth, it's essential to set clear investment goals and risk tolerance. This will help you determine the right ETFs to invest in and the right time to buy and sell them.

By diversifying your portfolio with a mix of ETFs, you can minimize risk and maximize returns over time.

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ETFs are traded through online brokers and traditional broker-dealers, and many sources provide pre-screened brokers in the ETF industry.

You can also purchase ETFs in your retirement accounts, and an alternative to standard brokers is a robo-advisor like Betterment and Wealthfront.

An ETF's expense ratio is the cost to operate and manage the fund, and ETFs typically have low expenses because they track an index.

Most online investing platforms offer commission-free trading, meaning that investors don’t have to pay fees to the platform providers to buy or sell ETFs.

Creating a brokerage account is the first step to buying and selling ETFs, and you can search for ETFs and buy and sell as wanted once you've set up your account.

To narrow down your ETF options, you can use an ETF screening tool with criteria such as trading volume, expense ratio, past performance, holdings, and commission costs.

The first ETF in the U.S. was the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index.

ETFs can be structured to track anything from the price of a commodity to a large and diverse collection of stocks, and they can even be designed to track specific investment strategies.

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Investing in ETFs can provide a low-cost way to diversify your portfolio, with some ETFs having expense ratios as low as 0.03%.

Having a diversified portfolio can help reduce risk, as seen in the example of the S&P 500 ETF, which tracks the performance of the 500 largest publicly traded companies in the US.

Investing in ETFs can also provide liquidity, as they are traded on major exchanges, allowing you to quickly buy or sell shares.

This liquidity can be beneficial for investors who need to access their funds quickly, as seen in the example of the Vanguard Total Stock Market ETF, which has an average daily trading volume of over 10 million shares.

ETFs can also offer tax efficiency, as they are pass-through entities, meaning that investors only pay taxes on the gains they realize, not on the gains of the underlying holdings.

This tax efficiency can be particularly beneficial for investors who hold ETFs in a taxable brokerage account, as seen in the example of the iShares Core S&P Total US Stock Market ETF, which has a tax cost ratio of 0.07%.

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You can choose from various ETF strategies, including a general or specific approach based on your goals, risk tolerance, and time horizon.

Consider using a robo-advisor like Betterment and Wealthfront for an alternative to standard brokers.

ETFs are available on most online investing platforms, retirement account provider sites, and investing apps like Robinhood, which offer commission-free trading.

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An ETF is created when a sponsor files a plan with the Securities and Exchange Commission (SEC), and it's approved for listing on the stock market.

To trade an ETF, authorised participants, such as market makers or large institutional investors, place shares of the securities listed in the ETF in trust and create ETF units.

The creation and redemption process ensures the ETF price remains in line with its net asset value (NAV), allowing investors to buy and sell ETF units throughout a trading session.

Investors indirectly own the fund's securities and receive an annual report, making them entitled to a share of any profits in the form of dividends or interest.

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A minimum investment of $1.00 is required for some ETFs, like Vanguard's Consumer Staples ETF (VDC), which tracks the MSCI US Investable Market Consumer Staples 25/50 Index.

Industry ETFs are used to rotate in and out of sectors during economic cycles, limiting volatility due to diversified holdings.

ETF share prices are determined throughout the day, unlike mutual funds, which trade only once a day after the markets close.

You can expect competitive long-term returns from ETF investing, with 88% of Vanguard ETFs beating their peer-group averages. This means that a significant majority of these ETFs have outperformed the market over time.

Some ETFs, like the 5 REIT ETFs on the SGX, can also pay dividends, with an average dividend of 5.5% and some even reaching as high as 7.12% in the first quarter of 2024. This can provide a regular income stream for investors.

Returns from ETFs vary depending on the type of ETF and its associated risk profile, with equity ETFs generally offering higher returns than bond ETFs. For example, an equity ETF is likely to have higher returns than a bond ETF.

A notable exception to the rule is Vanguard, which has consistently delivered competitive long-term returns. In fact, over the past 10 years, 83% of Vanguard ETFs beat the returns of their peer-group averages.

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Asset allocation is a key part of any investment strategy, and ETFs can make it easier to construct your portfolio. You can allocate a portion of your portfolio to a specific sector, such as technology or consumer staples.

A strategy is the general or specific approach to investing based on your goals, risk tolerance, and time horizon. This helps you make informed decisions about how to allocate your assets.

ETFs can make it easier to rebalance your portfolio over time, ensuring that your asset mix remains aligned with your investment goals. An investor can allocate a portion of their portfolio to a specific asset class, like bonds or commodities.

To find the asset mix that best fits your needs, use our investor questionnaire. This will help you determine the combination of stocks, bonds, and cash that's right for you.

By allocating your assets effectively, you can achieve the desired asset mix in your portfolio and help you achieve your investment goals.

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Sector rotation is a common investment strategy where investors shift their focus from one sector to another based on economic trends. During times of strong economic growth, investors often favor high-growth stocks.

Investors might rotate out of growth stocks and into value stocks when economies slow down. This helps to balance their portfolio and reduce risk.

If an investor's portfolio becomes overweight in a specific sector, they can sell some of their ETF holdings to invest in a different sector. This prevents the portfolio from becoming overly concentrated.

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Funds and stocks are two popular investment options, but they have some key differences.

Funds, including ETFs and mutual funds, can be bought and sold without a commission, just like stocks. However, some funds charge management fees, though fees have been trending lower for years.

One of the main advantages of funds is diversification, which can help spread risk across multiple asset classes and sectors. For example, an ETF can create a portfolio that spans multiple asset classes, sectors, industries, and instruments.

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Stocks, on the other hand, involve actual ownership of the security and risk is concentrated in the stock's performance. Diversity would have to be achieved by buying other stocks.

ETFs tend to have lower fees than mutual funds, and some ETFs can be purchased commission-free. Mutual funds, however, can be more expensive due to management fees.

Here's a comparison of funds and stocks:

Overall, funds can provide a convenient and cost-effective way to invest in a diversified portfolio, while stocks offer direct ownership and potential for higher returns.

Trading ETFs can be done in various ways depending on your experience, risk tolerance, and preferred trading strategy. You can choose from different approaches to suit your needs.

ETFs offer a simple way to hedge your portfolio against downside risk, making it easy to take a short position on a certain sector or the broader market. This can be especially useful in times of economic uncertainty, rising inflation, or low interest rates.

You can hedge your portfolio using ETFs that focus on commodities like precious metals, which are known to provide a hedge against economic uncertainty, rising inflation, and low interest rates.

ETFs can be used to manage risk through diversification, which is a key benefit of investing in them. This can help reduce the impact of market fluctuations on your portfolio.

Here are some pros and cons of using ETFs for trading and risk management:

If you're planning to execute a large trade in an ETF, it's a good idea to engage the help of a professional. A large trade is typically defined as one that accounts for 20% of an ETF's average daily volume or more than 1% of its assets under management.

You have two main options when making a big trade: block trades and trading algorithms. Block trades allow you to make a large trade at a single price, but this can occur outside of the bid-ask spread. Trading algorithms can source liquidity over longer time frames while minimizing the price impact of the large order.

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Using a professional can potentially save you substantial execution costs. However, this will require some time on the phone with your broker, a representative of an ETF provider's capital markets team, and/or a market maker.

Limit orders are a good practice for all trades, not just big ones. They allow you to choose a maximum price at which you will accept a trade, which can help prevent a bad trade.

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You can buy ETFs directly on stock exchanges in the same way as company stocks. This allows you to own shares at the current market price, rather than speculating on its future value.

Buying ETFs on stock exchanges is a straightforward process. You can do it through your online brokerage account or through a financial advisor.

You can own shares in an ETF at the current market price by buying it on a stock exchange. This is a great option if you want to invest in a particular asset class or sector without taking on too much risk.

Stock exchanges provide a platform for buying and selling ETFs, just like they do for company stocks. This makes it easy to get started with trading ETFs.

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Hedging is a smart way to protect your investments from potential losses.

You can use ETFs to hedge your portfolio against downside risk, which is especially useful during times of economic uncertainty, rising inflation, or low interest rates.

Investing in commodities like precious metals can provide a hedge against these risks, and ETFs make it easy to invest in them.

While advanced investors can trade put options on specific securities, ETFs allow you to take a short position on a certain sector or the broader market with ease.

This makes hedging with ETFs a straightforward and accessible strategy for many investors.

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Understanding supply and demand is key to navigating the world of trading. The market price for an ETF is determined by the value of its holdings as well as supply and demand for the fund.

If demand rises, the price will move higher, and if it falls, the price will decrease. This is because buyers are willing to pay more for the ETF when demand is high.

The price fluctuates throughout the day as buyers and sellers execute trades. This means that market conditions can change rapidly, affecting the price of the ETF.

As a result, it's essential to stay informed and adapt to changing market conditions to make informed trading decisions.

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Trading during market hours can make a big difference in ETF trading. Liquidity is significantly better during US market hours.

For US ETFs that invest in securities trading outside the US, it's best to trade when the underlying market is open. This is especially true for ETFs like Vanguard FTSE Europe ETF VGK.

European markets are more active during US morning hours, making it easier for market makers to keep ETF prices in line with their underlying stocks. Once European markets close, market makers rely on US market fluctuations, which can be less reliable.

Investors trading ETFs like iShares MSCI Japan ETF EWJ should trade during Japan's trading hours, which don't overlap with US trading hours.

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Trading near the market open or close can be a recipe for disaster. The stock market takes some time to "wake up" after the opening bell, and market makers play it safe during this time, widening their spreads.

Most participants don't start trading until normal market hours, so the opening auction is a time for price discovery. This can lead to volatile price movements and wider spreads.

Market makers can't accurately price ETFs until price discovery works out its kinks, which usually takes about 15 minutes after the opening bell. This is why it's best to wait about 15 minutes after the opening bell to trade an ETF.

As the market winds down toward day's end, market makers widen their quotes to limit their risk headed into the close. Closing auctions are where the action is, and participants don't want to get stuck with a bad trade right before the closing price is struck.

Spreads tend to widen as US markets approach the close, making it a bad time to trade ETFs.

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ETFs are available on most online investing platforms, retirement account provider sites, and investing apps like Robinhood, offering commission-free trading.

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You can search for ETFs and buy and sell as you want after creating and funding a brokerage account. One of the best ways to narrow ETF options is to utilize an ETF screening tool with criteria such as trading volume, expense ratio, past performance, holdings, and commission costs.

Vanguard Brokerage Account is required to buy an ETF through Vanguard, but if you already have a brokerage account with them, you can enter the ETF trade path through the Buy & Sell page.

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A fund is essentially a collection of assets, like stocks or commodities, that are pooled together for investment purposes. This allows individuals to invest in a variety of assets with a single investment.

ETFs, or exchange-traded funds, are a type of fund that can be bought and sold on an exchange, similar to an individual stock. They can track anything from a commodity to a large collection of stocks.

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Index funds, on the other hand, are mutual funds that track an index, such as the S&P 500 Index. The first ETF in the U.S. was the SPDR S&P 500 ETF, which tracks the same index.

ETFs are often more cost-effective and liquid than index mutual funds, making them a popular choice for investors. This is because ETFs can be bought and sold throughout the trading day, whereas mutual funds trade via a broker after the close of each trading day.

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Lower Expense Ratios can make a significant difference in your investment returns.

According to Vanguard, their average ETF expense ratio is 77% less than the industry average. This means you can keep more of your hard-earned money.

The industry average ETF expense ratio is 0.22%, while Vanguard's is a mere 0.05%. That's a big difference.

Lower expense ratios are a key benefit of ETFs, and it's one reason why they're becoming increasingly popular.

Here's a comparison of the average expense ratios of different providers:

By choosing an ETF with a lower expense ratio, you can save money over time and potentially earn higher returns on your investment.

Index funds are a type of fund that aims to replicate the performance of a specific stock market index.

Index mutual funds are a great choice if you place no value on intraday liquidity and prefer to forgo navigating the ins and outs of ETF trading.

Index funds can be structured as a mutual fund or an ETF, but they typically don't require a minimum investment, unlike many mutual funds.

Index mutual funds often have lower expense ratios and broker fees compared to actively managed funds, making them a more cost-effective option.

You can choose between an index mutual fund and an ETF that tracks the same benchmark, ultimately coming down to personal preference and circumstance.

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Funds are a type of investment that pools money from multiple investors to invest in a variety of assets.

They offer a way to diversify your portfolio by spreading risk across different investments, as seen in the example of a fund that invests in a mix of stocks, bonds, and commodities.

Funds can be actively managed, meaning a professional will make decisions about where to invest the money, or passively managed, where the fund tracks a specific market index.

Unit trusts, on the other hand, are a type of fund that is specifically designed to pool money from multiple investors to invest in a specific type of asset, such as stocks or bonds.

They typically have a fixed investment period, allowing investors to lock in a specific return over a set timeframe, as mentioned in the article section about investment options.

Unit trusts often come with a higher minimum investment requirement compared to other types of funds.

This can make them less accessible to smaller investors, but they can also offer a higher potential return due to their focus on a specific asset class.

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There are various types of ETFs listed on the SGX, which can be broadly divided into categories.

The Straits Times Index is tracked by some ETFs, providing a way to invest in the overall Singaporean stock market.

Some ETFs focus on bonds, such as the ABF Singapore Bond Index.

Only one commodities ETF in Singapore tracks the gold spot price.

There are various REIT indexes that ETFs can track, including those focused on Asian and Singaporean REITs.

Currently, only five REIT ETFs are listed on the SGX.

Investors can choose from 43 ETFs listed on the Singapore stock exchange, with a combined AUM of S$10.6 billion as of end-2023.

In 2023, five new ETFs launched on the SGX, all focused on equities, and collectively attracted S$765 million in net inflows.

A fund screener can be a powerful tool to help you find the right investment for your portfolio. You can use a fund screener to narrow down your options based on various criteria such as trading volume, expense ratio, past performance, holdings, and commission costs.

To get started, you can use an ETF screening tool with criteria such as trading volume, expense ratio, past performance, holdings, and commission costs. This will help you find the best ETFs that fit your investment goals and risk tolerance.

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One of the best ways to narrow down your ETF options is to use an ETF screening tool. You can filter your search based on various criteria such as trading volume, expense ratio, past performance, holdings, and commission costs.

Here are some key factors to consider when using a fund screener:

Here's a summary of the key factors to consider when using a fund screener:

By using a fund screener and considering these key factors, you can find the right investment for your portfolio and achieve your financial goals.

In August 2022, Vanguard was awarded the #1 Most Trusted Financial Company in the ETF/Fund category based on data from June and July 2022.

Vanguard received this award without any compensation for consideration, but it did receive compensation for using the rating in its marketing materials.

This distinction highlights Vanguard's strong reputation and trustworthiness in the financial industry.

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Stocks and unit trusts are two popular investment options, but they have some key differences. Here's a quick rundown of how they compare:

Stocks have no management fees, which is a significant cost savings for investors. This is a major advantage of investing in stocks.

Unit trusts, on the other hand, have management fees, which can eat into your returns. This is a key consideration for anyone thinking of investing in a unit trust.

In terms of price transparency, stocks and unit trusts are both transparent, but unit trusts are not as transparent as exchange-traded funds (ETFs).

Here's a comparison of the two at a glance:

Overall, the choice between stocks and unit trusts will depend on your individual investment goals and risk tolerance.