How to trade U.S. stock ETFs on the uSMART SG App?
01-08 18:58uSMART

What are U.S. ETFs?

An ETF (Exchange-Traded Fund) is an open-ended fund that is listed and traded on an exchange, buying an ETF is equivalent to buying all the constituent stocks of the index. Similar to a regular/unlisted fund, an ETF invests in a basket of stocks, bonds, and/or other assets, when buying the underlying ETF, the investor also takes on the underlying asset exposure. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours—potentially lowering your risk and exposure, while helping to diversify your portfolio.

ETFs can be categorized into "passive" and "active" types. In brief, passive ETFs aim to track the movement of an underlying index/benchmark which is also known as an index-tracking ETF, such as an index ETF which tracks the movement of an index and moves up or down in tandem with the index which it tracks. An active ETF is a financial product in which the fund manager decides to invest and actively manages the underlying portfolio to achieve its investment objective.

In addition, there are also inverse ETFs and leveraged ETFs, which are mainly used for hedging purposes. The return of an inverse ETF will be opposite to the performance of the tracked asset. When the price of the relevant underlying financial product or index tracked goes up, the price of the inverse ETF will go down and the opposite is also true. Inverse ETFs are similar to call or put options. Leveraged ETFs, in contrast to traditional ETFs, are designed to provide profits or losses equal to a specific multiple of the related index and are also subject to daily rebalancing. Leveraged and inverse products involve the use of leverage and rebalancing activities and as a result their prices may be more volatile.


What are the advantages of investing in U.S. ETFs?

  1. Diversity: ETFs typically track a specific index or portfolio of assets. The U.S. stock market is one of the largest and most active stock markets in the world, encompassing a wide range of companies from various industries and sectors. Through investing in U.S. ETFs, you can easily gain access to a basket of U.S. stocks, avoiding the impact of a single stock's performance on your return, spreading your risk, and gaining access to a broader investment portfolio at a lower entry fee than regular stocks.
  2. Stability: ETFs are more suitable for medium or long-term investors who emphasize on the "general trend" rather than individual stock research. Normally, investors can choose a few ETFs with good liquidity, buy them after the stock market bottoms out, and sell them after the general trend reverses. The number of transactions per year is not high, and the risk is relatively low. 
  3. Trading flexibility: U.S. ETFs have high liquidity and trading volume. U.S. ETFs are listed and traded on U.S. stock exchanges and can be bought and sold during the trading day. This means you can buy or sell U.S. ETF shares anytime at the market price, enjoying trading flexibility and liquidity.
  4. Lower cost: Compared with some actively managed U.S. stock investment funds, U.S. ETFs usually have lower management fees and transaction costs. This is because U.S. ETFs usually adopt a passive management strategy that tracks a specific index and does not require frequent trading or active research for stock selection.
  5. Transparency: U.S. ETFs usually disclose their positions and net asset value (NAV) publicly and transparently, enabling investors to clearly understand the fund's composition and and company information, so that investors can better evaluate and understand their investments.
  6. Tax Benefits: The trading structure and redemption mechanism of U.S. ETFs allow investors to manage capital gains tax more effectively. When selling U.S. ETFs, you can choose to sell specific shares, thereby controlling your capital gains tax liability.


Comparison of U.S. ETFs of Different Sizes

U.S. ETFs can be broadly categorized into large-cap ETFs, small- cap & mid-cap ETFs and full-market ETFs.

The following is a comparison of U.S. ETFs with different sizes in terms of investment targets and volatility.

What are the three major U.S. stock indexes?

At present, the three major indexes of the U.S. stock market are the Dow Jones Industrial Average index (Dow), the NASDAQ Composite Index (Nasdaq) and the Standard & Poor's 500 Index (S&P 500), which are important indicators of the overall performance of the U.S. stock market.


Categories of ETFs


Examples of Constituent Stocks

 NASDAQ Composite Index 

Includes all shares listed on the Nasdaq Stock Exchange (currently over 3,600) and is an important indicator of technology stocks, which also include new and emerging sectors.

Constituents stocks mainly include technology stocks, but also include emerging sectors such as telecommunication stocks, biotechnology stocks and semiconductor stocks.

 Standard & Poor's 500 Index

Containing 500 U.S. companies, the index is composed of 500 companies selected by the rating agency Standard & Poor's based on market capitalization and liquidity value. The S&P 500 has a more diversified industry coverage and better reflects the performance of the U.S. economy in general.

Constituents stocks include Twitter, Starbucks, Netflix and FedEx and so on.

Dow Jones Industrial Average index

Established more than 100 years ago, it is the oldest stock index, in which 30 constituent stocks are large U.S. companies, however, its industry coverage is relatively small.

The constituent stocks are large U.S. corporations, such as McDonald's, Microsoft and so on.


How to buy and sell U.S. ETFs?

U.S. ETFs are traded in the secondary market in the same way as U.S. stocks and can be traded at any time during market trading hours. The smallest trading unit of U.S. stocks is one share, and the fees associated with investing in U.S. ETFs are basically the same as those for U.S. stocks in general. However, investors should note that ETFs will incur some fees and expenses, such as management fees and other administrative fees charged by the fund manager, which will be deducted from the ETF's assets, thus lowering its net asset value.


What are the benefits of buying U.S. ETFs with uSMART SG? (Simple, easy, and smart order placement)

  1. Comprehensive range of tradable types: almost all U.S. ETFs can be traded.
  2. Low trading commissions: long-term will save a lot of costs and increase earnings in the stock market. 0.003 USD per share, minimum 0.50 USD per order, maximum 0.50% * transaction amount.
  3. Full-time trading hours: support for U.S. stocks before and after trading, night trading to achieve U.S. stocks 24 hours trading, providing more trading opportunities.
  4. Intelligent order function: there are 9 types of intelligent orders, such as sell high, buy low, grid orders, etc., to realize the automatic monitoring of the market, at any time to place an order, do not have to worry about missing the preferred price, fast pending transactions, easy to save energy.
  5. Professional and high-quality customer service: Provide 24 hours a day service, and at any time through the official website and uSMART SG App to contact our customer service, while customers can also through WhatsApp or Telegram (+65 89124669), quickly communicate with professional customer service manager, get timely assistance. In addition, uSMART SG provides multi-language services in Chinese, English, Cantonese and Malay and so on.


Considerations for Investing in ETFs

In order to select a quality ETF product and diversify risk, it is best to have a broad tracking universe, liquidity, ability to hold for a long period of time, and no reliance on unrepeatable assets, etc. ETFs offer a wide range of products to choose from, such as stock ETFs, bond/fixed-income ETFs, commodity ETFs, currency ETFs, inverse ETFs, leveraged ETFs, and ETFs on sustainable investment concepts, etc. 

However, there are some points to note when buying ETFs, for example, investors should consider the track record of the fund mana.


Steps to buy U.S. ETFs with uSMART SG:

After logging in to uSMART SG APP, click on [ Quotes ] at the bottom of the page, then click on [ US ] at the top of the page and pull down slightly, find the Quick Access column and select [ Hot ETF ], select the ETF category and specific ETF index you want to invest in, then click on [Trade ] at the bottom right corner and select [ Buy/Sell ] function, and then select the stock price, number of shares, and trading conditions and then send out the order; if you select the [SMART Order ] function, select the type of smart order and then send it out. Picture operation guideline is as follows:


(This diagram is provided for illustrative purposes exclusively)



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