ETF Fund Certificate, or Exchange Traded Fund, is becoming a popular and attractive investment tool in the financial market. Known as a flexible combination of stocks and investment funds, ETFs bring many benefits to investors.
What is an ETF certificate?
ETF Fund Certificate is the abbreviation of Exchange Traded Fund or Exchange Traded Fund in Vietnamese. This is a type of passive investment fund, simulating the reference index of a specific asset class such as stocks, bonds, and different industries such as gold, real estate, oil and gas, etc. ETF fund certificate is a certificate of partial ownership of an ETF fund.
ETFs are not only listed and traded on the Stock Exchange, but also operate similarly to stocks. This is a passive securities investment vehicle, attracting the attention of many investors due to the simplicity of the trading process and stable investment performance during growth market cycles.
When investors invest in a fund, they receive a certificate of ownership called a ETF fund certificateThese certificates can be bought/sold on the stock exchange, and the price can fluctuate according to the principle of supply/demand, changing many times a day.
Investors can flexibly buy/sell ETF certificates on the stock exchange, with the price of ETFs fluctuating according to supply/demand and changing many times a day. This not only helps investors easily manage their investments, but also facilitates the diversification of securities products, providing more useful tools for investors.
ETF Fund contribute to diversifying the stock investment landscape and at the same time providing investors with more options. However, like many other financial products, ETFs also carry limitations and risks that need to be carefully considered and evaluated.
Currently, there are three popular types of ETFs that many investors choose to invest in, including Stock ETFs, Bond ETFs, and Sector ETFs. Each of these types of funds has its own unique characteristics and properties.
- Stock ETF Fund: This type of fund simulates the fluctuations of stock indexes on the stock market, such as VN100, VN30 or S&P 500 along with some other important indexes.
- Bond ETF: Bond ETFs track the performance of a broad range of bond indexes, including government bonds, corporate bonds and other yield-bearing bonds.
- Sector ETFs: This type of fund mimics the performance of a market index by industry or sector. For example, the automotive, food, agricultural, seafood or other commodity industries.
In addition, there are many other types of exchange-traded funds such as currency ETFs, inverse ETFs, alternative investment ETFs, however, in the Vietnamese market, these types of funds are not yet popular.
5 benefits of investing in ETF certificates
Profits From Diversification: Investing in ETFs means diversifying your portfolio, which helps reduce risk. For example, a fund that mimics the VN30 provides a return equal to the average of the stocks in the VN30.
Controlled Risks: Investing in an ETF reduces risk compared to investing in an individual stock, because the fund represents an economy or economic sector.
Low Cost: ETFs are suitable for investors with small capital, with low management costs, about 0.6%. This helps save costs and lower the investment threshold.
Flexible and Transparent: ETF certificates are listed and traded on the stock exchange, allowing investors to trade like regular stocks. Daily trading information is also transparently disclosed.
No Ownership Limits for Foreign Investors: Investing in ETFs is an indirect way for foreign investors to benefit from a good stock portfolio without investment restrictions.
Distinguishing ETF Funds and Open-End Funds
– Similarities: Both are issued and bought back continuously and without limit, high liquidity as investors can sell back to the fund management company when they need cash.
– Differences:
| ETF Fund | Open-end fund | |
| Transaction | Listed and traded like a regular stock, traded daily | Trading date depends on fund regulations |
| Investment strategy | The fund simulates the reference index, the profit has a close performance with the index. | Apply proactive investment methods, aiming for profits exceeding the reference index |
| Expense | ETFs typically have low overhead costs, due to their passive investment approach. | Funds typically have high operating expenses, higher buying and selling fees, and higher management fees. |
| Fund certificate price | Fund certificate price (NAV) is determined by intraday trading and closely follows the net asset value/fund unit | Fund certificate price is determined as the net asset value per fund unit on a trading day. |
Operations of ETF groups in Vietnam
In Vietnam, the ETF market is growing with more than a dozen diverse ETF funds in the investment portfolio. These funds are mainly divided into two main groups:
- Domestic Fund: Established by Vietnamese fund management companies, complying with regulations of State agencies
- (Foreign Fund: Established by international organizations, focusing on investing in the Vietnamese stock market.
| ETF Code | Date of establishment | Fund management company | Index Simulation |
| E1VFVN30 | 6/10/2014 | Vietnam Investment Fund Management Joint Stock Company - VFM | VN30 |
| FUEMAV30 | 8/12/2020 | Mirae Asset | VN30 |
| FUESSV30 | 12/8/2020 | SSI Securities | VN30 |
| FUESSV50 | 10/12/2014 | SSI Securities | VNX50 |
| FUEVN100 | 16/06/2020 | VinaCapital Fund Management Company | VN100 |
| FUESSVFL | 24/02/2020 | SSI Securities | VNFIN LEAD |
| FUEVFVND | 22/04/2020 | Vietnam Investment Fund Management Joint Stock Company - VFM | VN Diamond |
The most important thing in the two groups of domestic and foreign funds is the ability to build a benchmark index. Foreign funds often build their own index for investment, while domestic funds must use the index built by the Vietnam Stock Exchange (HOSE and HNX), which is more limited in terms of flexibility.
Currently, there are 6 domestic funds operating in Vietnam, managed by three fund management companies: Vietnam Investment Fund Management JSC (VFM), SSI Asset Management Company Limited (SSIAM), and VinaCapital Asset Management Company. These funds can be classified into 2 main groups based on their investment characteristics.
ETF Fund Group The fund focuses on the return on equity (ROE) of the Vietnamese stock market, including funds such as ETF VFMVN30, ETF SSIAM VNX50, ETF VINACAPITAL VN100, SSIAM VN30 ETF.
The foreign ETF group does not focus on the market's return on equity but focuses on specific stocks such as the financial sector (ETF VFMVN DIAMOND) and closed-room stocks (ETF SSIAM VNFIN LEAD), including funds such as ETF VFMVN DIAMOND, ETF SSIAM VNFIN LEAD.
Source: Onstocks
