All-in-One Guide to Investing via US Listed ETFs September 16, 2024
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
| Index | ETF Ticker | AUM (US$) | Expense Ratio | Inception Date | Dividend Yield |
| S&P500 | VOO | 1,205 B | 0.03% | 9 Sept 2010 | 1.30% |
| S&P500 | SPY | 558 B | 0.09% | 22 Jan 1993 | 1.24% |
| Nasdaq 100 | QQQ | 287 B | 0.20% | 3 Oct 1999 | 0.61% |
| Nasdaq 100 | QQQM | 31.5 B | 0.15% | 12 Oct 2020 | 0.66% |
| Russell 2000 | IWM | 68.3 B | 0.19% | 22 May 2000 | 1.18% |
| Dow Jones Industrial Average | DIA | 34.9 B | 0.16% | 13 Jan 1998 | 1.66% |
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)
| Category | ETF Ticker & Description |
| Country | GREK 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 Industry | XLK 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 Industry | XLK 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 Industry | CHIE 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 Technology | WCLD 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 Discretionary | FDRV Automotive ESPO Gaming XLY BROAD Consumer Discretionary XRT Retail XLC Media IYC Consumer Services PEJ Leisure & Entertainment |
| US Healthcare | IHI Medical Devices IHF Healthcare Services XLV BROAD Healthcare IBB Biotechnology IHE Pharmaceutical |
| US Industrial | BOAT Shipping MAKX Manufacturing XME Metals & Mining PHO Water EVX Environmental Services XLI BROAD Industrials IYT Transportation ITA Aerospace & Defense JETS Airlines |
| US Consumer Stable | IYK Consumer Goods PBJ Food & Beverage XLP BROAD Consumer Staples |
| US Material | CRIT 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 Financials | KCE 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 Utilities | PAVE Infrastructure XLU BROAD Utilities |
| US Real Estate | REM Mortgage REITs INDS Industrial/Office Real Estate VNQ BROAD Real Estate REZ Residential Real Estate |
| US Energy | TAN 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 |
| Commodities | GLD 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 |
| Bonds | BND 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:
- [1] https://www.investopedia.com/terms/e/etf.asp
- [2] https://www.fool.com/investing/how-to-invest/etfs/etfs-to-buy/
- [3] https://www.kiplinger.com/investing/etfs/best-growth-etfs
- [4] https://tradingeconomics.com/united-states/consumer-spending
- [5] https://tradingeconomics.com/united-states/gdp
- [6] https://www.statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/
- [7] https://think.ing.com/articles/us-manufacturing-outlook-better-times-are-coming/
- [8] https://www.bea.gov/data/gdp/gross-domestic-product
- [9] https://www.goldmansachs.com/insights/articles/is-us-consumer-spending-losing-momentum
- [10] https://www.reuters.com/markets/us/us-manufacturing-output-beats-expectations-with-04-rise-june-2024-07-17/
- [11] https://tradingeconomics.com/united-states/gdp-growth
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About the author
MuMing Yong
ETF Specialist
Phillip Securities Pte Ltd
Mu Ming traded and invested for more than 8 years in various instruments including ETFs, Equities, Unit Trusts, Options, DLC, CFD, and ILP from the US, SG and HK market. He's a believer of personal finance, macroeconomics, and, technical analysis - so much so that he found himself analysing his social media engagement using trend lines and patterns.
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