Deep, deep dive
- Step 1: Figure out what ETFs work best for your risk appetite
- Step 2: Look at the types of investments (or the index) that the ETF tracks
- Step 3: Look at past performance: what returns have the ETF produced?
- Step 4: Look at past performance: how well has the ETF tracked the underlying index? (the closer the difference is to zero, the better!)
- Step 5: Be careful about fees
- Step 6 (Optional): Once you’ve selected a few options based on steps 1-5, check that the NAV of each unit is close to the market price
Step 5: Be careful about fees
While ETF fees are generally low, their fees can still eat into your returns (as we explained in unit trusts). Typically, ETF fees are lower than 0.8%. If you recall our content on unit trusts, it has higher fees (specifically equity and balanced funds) with upfront sales costs, management fees and switching costs.
Also, every time you buy ETFs, you’ll be charged a brokerage fee by your trading account/stock broker. The minimum brokerage fee (no matter the size of your investment) ranges from RM 7 to RM12.
While it’s generally good to invest consistently, it isn’t a good idea to invest low amounts like RM100 each time as you’ll end up paying very high fees. This is why you should figure out the brokerage fee cost as a percentage of your investment. For example, if the brokerage fees is RM 8 and you want to invest RM 100. Then the upfront fee cost is: RM8/RM 100*100 = 8%. An 8% upfront fee is even higher than the typical upfront cost of investing in unit trusts (normally around 6%).
A simple guide is to invest at least RM 700 each time which will keep your brokerage costs to around 1% -2% depending on your brokerage fees
List of fees by ETF
|Name of ETF||
|CIMB FTSE ASEAN 40 MALAYSIA (0822EA)||
|CIMB FTSE China 50 (0823EA)||
|TRADEPLUS S&P NEW CHINA TRACKER (0829EB & 0829EA)||
|MYETF DOW JONES U.S. TITANS 50 (0827EA)||
|MyETF MSCI Malaysia Islamic Dividend (0824EA)||
|MYETF MSCI South East Asia Islamic Dividend (0825EA)||
|MyETF Thomson Reuters Asia Pacific Ex-Japan Islamic Agribusiness (0826EA)||
|Tradeplus Shariah Gold Tracker (0828EA)||
Source: Collated from the Fund Managers’ reports