Exchange Traded Fund (ETF)
ETF is portfolio investment products that are admitted to listing or trading on a regulated exchange. An ETF provides investors with exposure to a diversified basket of shares or other financial products. ETFs aim to replicate the performance of a specific index; this index can be a blue chip, a regional, or a sector index. ETF is similar with mutual funds, but we can trade ETF in Stock Exchange.
The differences between ETF and mutual funds:
| Stock Mutual Fund | ETF | |
|---|---|---|
| Trading | Investment Manager and Mutual Fund sales agent |
|
| Minimum Purchase | 1 unit | Primary Market: Creation unit ( = 1000 lot = 100.000 units) Secondary Market: 1 Lot (100 units) |
| Transaction fee | Buy and Sell fees (usually 1% until 3%) | Broker fee (same like stocks) in Stock Exchange |
| Price | The end of the day | Real time |
| Underlying | Stock | Reference index |
| Settlement | T+7 Settlement | T+2 Settlement |
| Dealer Participant | No | Yes |
Dealer Participant is Exchange's member who cooperate with ETF Investment Manager to sell and buy ETF shares. In Indonesia, there is 6 (six) Dealer Participant, that is Bahana Sekuritas, Mandiri Sekuritas, Philip Sekuritas, Sinarmas Sekuritas, Indopremier Sekuritas and Panin Sekuritas.
The Benefits of ETF
The benefits of ETF compare to another alternative investment are:
The Purpose of ETF
The purpose of trading ETF are:
- Diversification: Automatic Diversification of some superior stock in one order.
- Flexibility: Memanfaatkan fleksibilitas jual/beli yang tinggi, karena dapat langsung melakukan pembelian maupun penjualan ETF selama jam bursa berlangsung selayaknya saham.
ETF’s Trading Mechanism
ETF’s Regulation
The surveillance of ETF is held by three parties, that is OJK, BEI and KSEI. ETF’s trading in Indonesia is regulated by :
Listed ETF :
As 20 January 2020, 39 ETF listed on IDX. Click here for more information about ETF.
