Introducing ETFs

ETF or Exchange-traded Funds (ETF) are quite popularly traded in foreign markets, especially on NYSE/NASDAQ due to its appeal for those testing the waters or those aiming to invest for long-term gains.  

ETFs, historically have produced stable, long-term gains which certainly adds to their attractiveness among investors of varying experience and since Rakuten Trade has started its US services, we see the same trend resonating with our clients. 

In layman terms, ETF allows investors to invest in many companies at once instead of putting all their funds into just one company.  ETFs are designed to track the performance of a specific index, commodity, bond, or a basket of assets. It allows investors to diversify their portfolio with a single investment, at a lower cost, all while reducing their risk.  

Here are the top actively traded ETF’s at Rakuten Trade 

Supported with fractional share trading services, beginner investors could start dipping their toes into the world of ETFs in smaller amounts.   

That means, you can buy an ETF as small as 0.01 units (instead of a whole unit) at a brokerage rate of RM1.  

The downside, though, to buying ETFs is the lack of ownership in individual stocks, which means you miss out on specific corporate announcements like dividends.  

Paired with trading ETFs is a commonly employed strategy - Dollar-Cost Averaging. Known for its simplicity and long-term viability, this approach requires consistent investing of a fixed amount into the ETF, irrespective of its share price fluctuations. 

Here’s an example of Lum Sum Investing vs. Dollar Cost Averaging (DCA):  

In the long run, DCA may be more beneficial than a lump sum investment.  

Are ETFs on your radar now?