All-in-One Guide to Investing via US Listed ETFs September 16, 2024

All-in-One Guide to Investing via US Listed ETFs

Why Invest in the US?

The United States, with a GDP of over US$27.3 trillion in 2023, remains the largest and most innovative economy in the world. Its strong consumer spending, advanced industries, and consistent growth make it a top destination for investors. Exchange-traded funds (ETFs) offer a simple way to invest in US companies and sectors, providing a solid path to long-term growth.


Key Economic Highlights

  • GDP Growth: The US economy grew by 3.0% in Q2 2024, improving from 2.8% in the previous estimate. Growth is expected to stabilise at 1.2% by the end of Q3 2024.
  • Consumer Spending: Consumer spending reached US$15.76 trillion in Q2 2024, continuing its steady rise from US$15.64 trillion in Q1 2024.
  • Industrial Output: The US leads the world in manufacturing and technological innovation, maintaining its global leadership in these key areas.

The strength and innovation of the US economy make it an ideal choice for investors, and ETFs offer a straightforward way to access its growth.


Investment Merits

  • Diversification: Investing in US equities can provide diversification for investors whose portfolios are primarily focused on their home markets.
  • Stability: The US economy has a long history of stability and growth, making it an attractive destination for long-term investors.
  • Innovation: The US is home to many of the world’s leading companies in sectors such as technology, healthcare, and finance.

Investment Risks

  • Market Volatility:US equity markets can be subjected to periods of volatility, which can impact short-term returns.
  • Economic Cycles:The US economy is not immune to economic cycles, and investors should be prepared for potential downturns.
  • Geopolitical Risks:The US is not immune to geopolitical risks, such as trade disputes or global conflicts, which can affect the performance of US equities.


Why ETFs?

ETFs offer several advantages for investors looking to gain exposure to US equities:

  • Diversification: ETFs provide exposure to a basket of stocks, reducing the risk of investing in individual companies.
  • Low Costs: ETFs typically have lower fees than actively managed mutual funds, making them a cost-effective way to invest.
  • Liquidity: ETFs can be traded throughout the trading day, offering flexible investment and withdrawal options.


Who Should Consider This?

Investing in US equities through ETFs can be suitable for:

  • Long-term investors looking for exposure to the US economy and its growth potential
  • Investors seeking diversification outside their home markets
  • Investors who prefer a passive, low-cost approach to investing


How to Start: Core and Satellite Strategy

Investors looking to balance long-term growth with short-term opportunities can adopt the core and satellite strategy. This approach involves building a stable, long-term investment foundation (the core) while also taking advantage of short-term market opportunities (the satellite).


Core Strategy: Long-term Passive Investing

The core portion of your portfolio focuses on long-term, passive investing in broad, diversified US ETFs. These ETFs track major indices like the S&P 500 or Nasdaq 100, providing exposure to the overall growth of the US economy. This portion of your portfolio is intended to grow steadily over time, with minimal trading activity. Investors can employ strategies like Dollar-Cost Averaging (DCA) market volatility and consistently build their positions, benefiting from long-term market trends.


Examples of Broad-based Core ETFs

IndexETF TickerAUM (US$)Expense RatioInception DateDividend Yield
S&P500VOO1,205 B0.03%9 Sept 20101.30%
S&P500SPY558 B0.09%22 Jan 19931.24%
Nasdaq 100QQQ287 B0.20%3 Oct 19990.61%
Nasdaq 100QQQM31.5 B0.15%12 Oct 20200.66%
Russell 2000IWM68.3 B0.19%22 May 20001.18%
Dow Jones Industrial AverageDIA34.9 B0.16%13 Jan 19981.66%


Satellite Strategy: Short-term Active Trading

The satellite portion of your portfolio is designed for short-term, active trading. This strategy allows investors to capitalise on specific market opportunities by trading sector-specific or thematic ETFs that may outperform in certain market conditions. The satellite component typically involves higher risk but offers potential for higher returns in the short term. Active traders should be mindful of market trends, technical analysis, and sector rotations to make the most of these opportunities.

Examples of Satellite ETFs (Highest Asset Under Management against each’s direct peers)

CategoryETF Ticker & Description
CountryGREK MSCI Greece
EWN MSCI Netherlands
FLMX MSCI Mexico
FLSW MSCI Switzerland
EWQ MSCI France
INDA MSCI India
EWT MSCI Taiwan
EWD MSCI Sweden
VGK FTSE Europe
TUR MSCI Turkey
NORW MSCI Norway
EWA MSCI Australia
EWJ MSCI Japan
EWG MSCI Germany
EWU MSCI United Kingdom
ENZL MSCI New Zealand
EPOL MSCI Poland
ASEA Southeast Asia
ILF Latin America 40
EWZ MSCI Brazil
BKF MSCI BIC
EIDO MSCI Indonesia
EPHE MSCI Philippines
EZA MSCI South Africa
THD MSCI Thailand
MCHI MSCI China
EWH MSCI Hong Kong
EWM MSCI Malaysia
ECH MSCI Chile
EWS MSCI Singapore
PAK MSCI Pakistan
ARGT GlobalX Argentina
GXG GlobalX Colombia
NGE GlobalX Nigeria
PGAL GlobalX Portugal
VNAM GlobalX Vietnam
US IndustryXLK SPDR Technology
XLY SPDR Consumer Discretionary
XLC SPDR Communication
XLI SPDR Industrial
XLB SPDR Materials
XLV SPDR Health Care
XLF SPDR Financial
XLP SPDR Consumer Staples
XLE SPDR Energy
XLRE SPDR Real Estate
XLU SPDR Utilities
US IndustryXLK SPDR Technology
XLY SPDR Consumer Discretionary
XLC SPDR Communication
XLI SPDR Industrial
XLB SPDR Materials
XLV SPDR Health Care
XLF SPDR Financial
XLP SPDR Consumer Staples
XLE SPDR Energy
XLRE SPDR Real Estate
XLU SPDR Utilities
China IndustryCHIE Global X MSCI China Energy
CHIM Global X MSCI China Material
CHII Global X MSCI China Industrial
CHIQ Global X MSCI China Consumer Discretionary
CHIS Global X MSCI China Consumer Staples
CHIH Global X MSCI China Health Care
CHIX Global X MSCI China Financial
CHIK Global X MSCI China Info Tech
CHIC Global X MSCI China Communication
CHIU Global X MSCI China Utilities
CHIR Global X MSCI China Real Estate
US TechnologyWCLD Cloud Computing
BITQ Cryptocurrency
VPN Internet Infrastructure
TINY Nanotechnology
IGV Software
SMH Semiconductors
XLK BROAD Technology
CIBR Internet Architecture
KNCT Networking
FDN Internet
SOCL Social Media
DRIV EV Electric Vehicle
CIBR Cybersecurities
US Consumer DiscretionaryFDRV Automotive
ESPO Gaming
XLY BROAD Consumer Discretionary
XRT Retail
XLC Media
IYC Consumer Services
PEJ Leisure & Entertainment
US HealthcareIHI Medical Devices
IHF Healthcare Services
XLV BROAD Healthcare
IBB Biotechnology
IHE Pharmaceutical
US IndustrialBOAT Shipping
MAKX Manufacturing
XME Metals & Mining
PHO Water
EVX Environmental Services
XLI BROAD Industrials
IYT Transportation
ITA Aerospace & Defense
JETS Airlines
US Consumer StableIYK Consumer Goods
PBJ Food & Beverage
XLP BROAD Consumer Staples
US MaterialCRIT Rare Earth/Strategic Metals
ALUM Aluminum
ITB Homebuilders
GRID Electric Energy Infrastructure
URA Uranium
XME Metals & Mining
SLX Steel
COPX Copper Miners
LIT Lithium
XLB BROAD Materials
HAP Hard Assets Producers
GDX Gold Miners
WOOD Timber
GUNR Natural Resources
MOO Agribusiness
SIL Silver Miners
US FinancialsKCE Capital Markets
IAI Broker-Dealers
IYG Financial Services
KIE Insurance
XLF BROAD Financials
PSP Private Equity
KBE Banks
QABA Community Banks
BIZD Business Development Company
KRE Regional Banks
US UtilitiesPAVE Infrastructure
XLU BROAD Utilities
US Real EstateREM Mortgage REITs
INDS Industrial/Office Real Estate
VNQ BROAD Real Estate
REZ Residential Real Estate
US EnergyTAN Solar Energy
ICLN Clean Energy
FCG Natural Gas
XLE Oil & Gas Exploration & Production
FXN BROAD Energy
FAN Wind Energy
NLR Nuclear Energy
MLPX Energy Infrastructure
ERTH Cleantech
OIH Oil Equipment & Services
RNRG YieldCos
AMLP MLP
CommoditiesGLD Gold
SLV Silver
GLTR BROAD Precious Metals
PPLT Platinum
PALL Palladium
CPER Copper
DBB Industrial Metals
KRBN Carbon Allowances
UGA Gasoline
BNO Brent Oil
DBE BROAD Energy
USO Crude Oil
UNG Natural Gas
SOYB Soybeans
CORN Corn
DBA BROAD Agriculture
WEAT Wheat
CANE Sugar
BondsBND Vanguard Total Bond Market Index Fund
AGG iShares Core U.S. Aggregate Bond ETF
BNDX Vanguard Total International Bond Index Fund
TLT iShares 20+ Year Treasury Bond ETF
VCIT Vanguard Intermediate-Term Corporate Bond Index Fund
ZROZ Zero Coupon Bond ETF


Conclusion:

Investing in US-listed ETFs offers a flexible and diversified way to participate in the growth of the world’s largest economy. Whether you’re looking to build a long-term, stable portfolio through passive investing or seeking tactical opportunities with active trading, the US market provides a range of options to suit your goals. By following a core and satellite strategy, you can balance risk and reward while navigating the dynamic landscape of US equities. Take the first step by setting clear objectives, choosing the right ETFs, and aligning your strategy with your financial aspirations.


Reference:

Disclaimer

These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

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This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

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