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ETF is an open-ended mutual fund that is traded on a stock exchange, just like a stock. ETF enables investors to instantaneously buy or sell via a securities broker, at any time during the trading hours at the prevailing price when the order is executed. ETF also provides real-time NAV called “Indicative NAV (i-NAV)”, calculated throughout the exchange trading hours. ETF is different from a mutual fund, which is normally traded via an asset management company or a fund issuer only at an end-of-trading day price only with an NAV calculated at the end of day only. Moreover, ETF has a designated market maker or a liquidity provider quoting bid and offer to ensure that investors can buy or sell ETF at the market price at anytime.
ETF is typically designed to track a performance of an index or commodity price, such as SET50 Index, a stock sector index, commodity index and commodity price including gold price and oil price. Being a passive management fund, ETF generally carries lower expense and management fee comparing to a general mutual fund which is more active. Since ETF mostly invests in a basket of underlying stocks that replicates a return of a stock index, the return of investing in such ETF is the same as that of investing in the whole basket of such underlying.
ETF has globally become a popular financial product over the last decade. Due to the benefits of ETF as an exchange-traded product and a diversified fund, the Stock Exchange of Thailand (SET) encouraged a launch of the first equity ETF in Thailand, named ThaiDEX SET50 ETF (TDEX) tracking SET50 market-weighted index, which was first traded on September 6, 2007. |
