Discover what an ETF is and the difference between ETF's and Stocks. Find out what are the different types of ETFs that you can invest in, and understand the features and benefits before buying.
What are ETFs?
An ETF, or "Exchange Traded Fund", is a package of securities from different companies. It offers a way of getting diversification in your portfolio, which can give more stability than investing in individual companies.
You might be wondering, how do ETFs differ from unit trusts? There are a few major differences, but the biggest one is that you can buy and sell ETFs on the stock market. This means real-time prices that are updated throughout the day when markets are open.
What kinds of ETFs are there?
ETFs allow you to invest your money in an area you are interested in. Here are some of the more commonly available types:
Feel like a region's economy is about to boom? Or maybe you're hoping you can help a country/region develop by investing there? Then check out Regional ETFs. These funds are packages of companies from different countries and regions around the globe. They can be specific: China or France; they can be broad: Southeast Asia or North America; or they can be based on a theme: developing economies.
These allow you to invest in the entire industry of your choice, whether it's automotive, healthcare or technology. Keep in mind that these are very broad categories. If you want to get more specific (say, investing in electric cars instead of cars, trucks, buses, etc) then take a look at Thematic ETFs.
Index tracking ETFs
These are ETFs that allow you to invest in the top performing companies on a given stock market, such as the Straits Times Index, the Hang Seng Index, the Dow Jones Index or the S&P 500 Index. If the market goes up, so does your investment. Conversely, if the market goes down, your investment will suffer.
Want to invest in gold but don't want to actually buy physical gold bullion? Here's another option you can explore. Commodities ETFs allow you to focus your investment to things like gold, oil, timber or sugar. A lot of the investments normally done in commodities involve complex financial instruments such as futures and derivatives. But Commodities ETFs simplify this investment, allowing for easy entry into the market.
Normally if you want to invest in a bond, you need to hold the bond until it matures, otherwise you could lose money. It's also tricky sometimes to see how that bond has performed over the years. Both of these issues are solved with Bond ETFs. Not only can you chart the fund's performance on a day to day basis, you can buy or sell at any time.
Real Estate Investment Trust (REIT) ETFs
Aside from a few volcanoes in Hawaii, nobody's making more land. If you want to invest in real estate but can't afford to get on the property ladder, an REIT ETF might be your ticket in. It's like buying tiny pieces of property in many different locations, and being able to trade it on the exchange.
Here's where things get really interesting. Thematics allow you to invest very specifically in what you want. For example, you can invest in the technology industry with a Sector ETF, but you can find Thematic ETFs about robotics, AI or cloud computing. Thematics is also where you'll find ESG, or sustainable ETFs. These allow you to focus your investment on companies that are eco-friendly and supportive of human rights for their workers, suppliers and customers.
How are ETFs different than other investment strategies?
||Active Equity funds
|Active Equity funds
Ready to start exploring ETFs?
If you've registered for online banking and have an Equity Investment Account, you'll have access to HSBC Online Securities Trading. This feature lets you explore the ETFs we offer and trade them just like any stock.
It also includes our 'Quick Quote' function, which lets you find the ETFs you have in mind, so you can analyze and compare their performances and even add them to your watch list.
To get full access to trades, you'll need to have completed your CAR, Risk Warning Statement (RWS) and W8-BEN forms. If your CAR form has expired, you can update it via the online Document Center.
Already set up and ready to start investing?
Log on to online banking and go to the Wealth Dashboard to begin.