We’re getting into real mainstream stuff now… And before we talk about the ever-popular stock market, let’s talk about her low-maintenance younger cousin: Exchange Traded Funds.

ETFs are the beautiful love child between stock markets and unit trusts. Like unit trusts, they’re a gigantic pool of many investors’ money. And like stocks, they’re traded on stock markets. This makes it easier for investors to acquire or dump ETFs whenever they please (as long as the stock market is open).

What do ETFs invest in, you ask? You actually have many choices. For example, there’s an ETF that tracks the Top 50 companies on the US stock market. There are also ETFs that track the price of gold, or the Top 40 companies in Southeast Asia. (If you look overseas, there are ETFs that track everything — for example there’s even an Obesity Management ETF!)

An average investor would practically never be able to buy shares in 50 top companies in the USA. But an ETF does that for you. And because ETFs just look to track/copy/mimic something else, they don’t require a lot of highly-paid fund managers to make investing decisions. Important Outcome: ETFs are an economical way to invest.

For comparison’s sake, typical unit trusts in Malaysia charge annual management fees between 1.5-2%. ETFs here typically charge between 0.5-0.7%.

Typical Returns:

Like unit trusts, this really depends on which sector your ETF is tracking. Higher risk, higher returns.

How to Start:

Like stocks, ETFs are listed on the Bursa Malaysia Stock Exchange. Sign up for a stockbroking account to buy them. (If you sign up for a global trading account, you can gain access to ETFs or REITs on foreign stock markets too.)

Best Places to Compare / Learn:

Understanding ETFs

ETFs listed in Malaysia

Understanding ETFs

ETFs listed in Malaysia

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