Exchange Traded Funds

i. What are the financial instruments about? An Exchange Traded Fund (ETF) is an open-ended investment fund listed and traded on a stock exchange. concern an ETF is similar to trading mutual funds over a stock exchange except for the fact that mutual funds cannot be traded over a stock exchange. Exchange Traded specie are commonly used to cutting off an office such(prenominal) as the Straits Times Index (STI) or the Dow Jones industrial Average (DJIA). ETF can also be used to track the impulsion of commodities and some of these ETFs implicate GLD and SLV (in AMEX, American Stock Exchange) It is weighty to understand what an indication is in order to understand how ETFs work. An tycoon is made up of a basket or kind of different securities. The movement of an index is often used to pot the well-being of the economy. The DJIA is made up of 30 largest publicly own companies in the United States and the STI is also made up of 30 companies. Most of these companies are very well-known and they would have to satisfy certain criteria in order to qualify for the STI. Some of these companies include SIA, Singtel, DBS Group Holdings and CapitaLand. (http://www.straitstimes.com/STI/STIMEDIA/sp/ftse07/appendix2.

pdf) As mentioned, the ETF would track the movement of its underlying index and as such the value of the ETF units would change according to the movement of the index. For example, the DBS STI ETF (an ETF launched by DBS to track the STI) is $3.20 when the STI is at 3144 points and $1.62 when the STI is at 1675 points. There is usually a small difference between the value of the ETF and the index it tracks due to tracking errors. The movement of an index is determined by the amount of weight a particular constituent protective cover has. INDEX X A B Index X is made up of A (10%) and B (90%). The movement of Constituent B would allude the movement of the index significantly whereas movement of Constituent A has minimal impact on Index X. ii. Why do investors want to invest in... If you want to get a skillful essay, order it on our website: Orderessay

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