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Should you invest in an ETF? Is it safe to invest in this fund?
What is an Exchange-Traded Funds (ETFs)?
Exchange-Traded Funds are a type of pooled fund investment security that operates much like a mutual fund and can be traded on a stock exchange. It is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, exchange-traded funds trade like common stock on a stock exchange.
History of Exchange-Traded Funds (ETFs)
The first ETF was launched in the US in 1993 by State Street Global Advisors (SPDR or Spider), and it is still one of the most actively traded ETFs today. In their early days, ETFs were used primarily by institutional investors to execute sophisticated trading strategies.
Soon afterward, individual investors and financial investors embraced ETFs. In Asia, the first ETF was introduced in 1999 (TraHK, or Tracker Fund of Hong Kong), which paved the way for the development of the HK ETF market.
History of ETF in the Philippines
In 2013, First Metro Investment Corporation (FMIC) launched the first ETF in the country, called First Metro Philippine Equity Exchange-Traded Fund (FMETF). The fund aims to provide returns that reflect the performance of the Philippine equities market by investing in the stocks of listed companies included in the PSEi.
First Metro Asset Management, Inc. (FAMI) is the fund manager and principal distributor of FMETF, while First Metro Securities Brokerage Corporation (FMSBC) and IGC Securities (IGC) are the authorized participants.
What are the available Exchange-Traded Funds in the Philippines?
In the Philippines, there's a first and currently only one ETF in the market, First Metro Philippine Equity Exchange Traded Fund (FMETF), that tracks the performance of the PSE Index (PSEi). FMETF is managed by First Metro Asset Management.
What are the advantages in investing in an ETF? How do Exchange-Traded Funds work in the Philippines?
It works in a simple way. Exchange-Traded Funds offer the opportunity to invest in a portfolio of securities that provide the same diversification benefits of mutual funds with the liquidity and trading flexibility of stocks.
Easy on The Pocket
Gain instant access to 30 blue-chip companies in the Philippines.
Easy to Understand
Simply managed to mimic the performance of the Philippine Stock Exchange Index.
Transparency. No Surprises
Investors know the ETF holdings, price and costs in real-time by disclosing the full portfolios daily on public. No surprises in the companies it holds. No surprises in the strategy. No surprises in the performance.
Easy to Trade
Trade using any stock broker. Trade as many times as you want during the day. No minimum holding period. Trade anytime, anywhere using any device. Minimum investment amount is the price of price of 1 board lot or 10 shares.
When you trade ETF shares in the market, you will be bound by the minimum board lot size which is prescribed by the PSE. Minimum board lots depend on the price of the ETF shares. For block orders, the minimum investment amount should be equivalent to 10,000 shares.
As with any other investment vehicle, your ETF investment will also be dependent on favorable market conditions and subject to market volatility.
Dividends in ETF
Dividends may either be paid out by the ETF or reinvested into the fund.
How to invest in First Metro Philippine Equity Exchange Traded Fund (FMETF)?
You can start by opening an account with First Metro Sec so you can begin investing in FMETF. For the step-by-step process on how to open a First Metro Sec Account, read my separate blog post here: How to open an online stock trading account using First Metro Sec (First Metro Securities).
Take note: You can also use any PSE-accredited online stock trading platform, such as BPI Trade, COL Financial, or BDO Securities, to buy and trade FMETF.
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ABOUT THE BLOGGER
Hi, I'm Ralph Gregore Masalihit!
An RFP Graduate (Registered Financial Planner Institute - Philippines).
A Personal Finance Advocate. An I.T. by Profession. An Investor. Business Minded. An Introvert. A Photography Enthusiast. A Travel and Personal Finance Blogger (Lakbay Diwa and Kuripot Pinoy).
Currently, I'm working my way toward time and financial freedom.