ETF, the full name of “Exchange-Traded Fund”, investment products in between stocks and funds. Maybe investors in Malaysia are relatively new to it, but ETFs are very common abroad. ETFs can be understood as “funds that can be traded on exchanges”, that is, you can directly invest ETFs on the stock exchange market.

REITs ETFs operate by raising funds to purchase a basket of REITs, which are then subdivided into small units and sold on stock exchanges. For example, the price of REITs ETF A is SGD1 per unit, and it currently holds 20 REITs share. So by only paying the price of SGD1 per unit and investing in REITs ETF A, is equivalent to investing in 20 REITs at the same time.

If there is any surge in REITs share price, eventually will be reflected in ETF. In the other hand, distribution given by REITs will be distributed by ETF as well.

Advantages:

  1. Pay stable dividends like REITs and enjoy stock price returns

  2. Reduce risk because you invest in a basket of REITs instead of a single REIT

  3. Reduce costs, you can invest in multiple REITs  by paying a brokerage fee once

  4. ETF manager professional management

Disadvantages:

  1. Management fee must be paid, usually 0.3-0.5% per year

  2. Bad REITs in the basket may drag down overall performance


REITs ETF I Cover


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