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How to buy ETF to achieve 10% annual ROI
By Mike Wang | August 25, 2007
Author: Mike Wang
In my last article, I talked about how buying ETFs (exchange-traded fund) can easily allow one to achieve a 10% ROI. In this article, I shall talk more about how you can buy ETFs.
ETFs are types of index fund that track the performance of of various indexes such as the S&P 500 ETF, STI ETF,etc. ETFs are just like mutual funds and are traded like stocks on the market. You can trade them by opening an account with online brokers such as optionxpress.com, interactivebrokers.com. I am going to talk about 3 common types of ETFs that you can buy.
- Standard & Poors Depository Receipts (SPDR, Ticker symbol: SPY)
The SPDR tracks the performance of the S&P 500 Index and are listed on the American Stock Exchange (AMX). By buying a share of SPDR, you are owning a part of the top 500 companies in US.
The minimum amount of SPDR that you can buy is one share and it costs 1/10 of the S&P 500 index. For example, if the S&P 500 index is 1470 points (25 Aug 2007), one share of the SRDR will be priced around US$147 per share.
- Street Tracks Straits Times Index Fund (STI ETF)
This ETF tracks the performance of the Straits Times Index which measure the performance of Singapore companies. For the STI ETF, you have to buy a minimum of 100 shares and each share is priced at 1/100 of the STI index. For example, the STI index is currently 3369 (25 Aug 2007), so each share of STI is S$33.69. So 100 shares of STI ETF will cost S$3369.
- DIAMONDS (Dow Jones Industrial Index, Ticker Symbol: DIA)
This ETF tracks the performance of 30 significant stocks traded on the NASDAQ and NYSE such as General Electric, Disney, Exxon and Microsoft. You can buy a minimum of 1 share and each share is priced at 1/100 of the Dow Jones Index. For example, the current Dow Jones Industrial Average is 13,305 (25 Aug 2007). So each share of the DIA ETF would cost US$133.05.
In the next article, i would talk about some of the things that you should watch out for when buying ETFs.
Topics: Finance |