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The Complete Guide to Exchange-Traded Funds (ETF) for Beginners

Written By
Angelo Silva

Published on
Dec 05, 2019

Reading time
6 mins

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Through the years exchange-traded funds or ETF had taken the investing world by storm. Primary reason for this is its unique characteristic which provides investors a new investment vehicle to choose from. But what is “ETF” exactly? And how does it work? Here at First Metro Asset, we’ve gathered information to give you a complete guide to exchange-traded funds (ETF) for beginners.

What is an ETF

An Exchange-Traded Fund, better known by the acronym “ETF”, is a basket of securities that can be bought and sold in the stock exchange. It is commonly referred to as 2-in-1 investment vehicle which provides instant diversification (as it behaves as a mutual fund) and limitless growth potential (since it’s price moves as long as the market is open).

How ETF works

ETF works in a rather simple way. Like mutual fund, when you own a share of ETF, you are owning a diversified investment portfolio. First Metro Exchange Traded Fund (FMETF), the first and only ETF in the country, mirrors the Philippine Stock Exchange Index (PSEi). PSEi, in a nutshell, is the most well known index in the Philippines. It is a fixed basket of thirty (30) common stocks of listed companies, carefully selected to represent the general movement of the stock market. In other words, it is the benchmark measuring the performance of the Philippine economy.

Why invest in FMETF

Investing in FMETF means you’re already owning shares from companies included in the PSEi! Thus, your money is allocated wisely to shares from companies that will still still exist 30 to 50 years from now! Exceeding your retirement age! Here are more reasons why you should consider investing in FMETF:

Transparency - Investors are provided with transparency in terms of ETF’s holdings, price and costs in real-time. Full portfolio disclosures are open to the public. FMETF has a dedicated website for more information - www.firstmetroetf.com.ph
Liquidity - Investors can buy and sell ETF in the stock exchange/market during trading hours.
Diversification - Investors can hold a basket or group of securities providing instant diversification. Diversification, as the term suggests, is one great way to minimize risk when it comes to investing.
Flexibility - Investors can better maximize their earning potential since ETF trades at a price that is updated throughout the day.
Cost effectiveness - Investors can now own shares included in the PSEi at a fraction of a price giving every Juan a chance to build wealth over time.

How to Invest in FMETF in the Philippines

As mentioned above, FMETF is the first and only exchange-traded fund available in the Philippines. FMETF is part of the list of award winning funds managed by First Metro Asset Management Inc. (FAMI), fund management subsidiary of First Metro Investment Corporation (FMIC) under the Metrobank Group. If you have an existing account in First Metro Asset, all you need to do is to contact your respective Relationship Manager to enjoy the benefits of investing in FMETF. For faster inquiry, you can send an email to choosetoinvest@fami.com.ph. No account yet with us? Here are the options available for you:

You may apply via online, just click this link : https://fami.com.ph/open-an-account/
You may download the forms and submit to any Metrobank branch, they will be the ones to forward to us the documents. Just use the pouch code 90020.
If you are anywhere within the metro, you can visit First Metro Asset’s head office at 18/F PSBank Center 777 Paseo de Roxas corner Sedeño Village, Salcedo, Makati from Mondays to Fridays, 9AM to 6PM.

Another option is to buy FMETF through your online brokerage account.

Frequently Asked Questions about ETF

What are the advantages in investing in an ETF?

ETFs offer the opportunity to invest in a portfolio of securities that provide the same diversification benefits of mutual funds with the liquidity and trading flexibility of stocks.

What should you do before investing in an ETF?

An investor should evaluate his investment objectives and horizon. It is crucial to begin by taking the time to evaluate your goals; considering whether such investment meet your particular needs.

What happens to the dividends when you invest in an ETF?

The dividends may either be paid out by the ETF or reinvested into the fund.

Will I be able to outperform the index if I invest in ETF?

The main goal of ETF is to track an index. Its objective is to mirror the current index. It is a passive fund hence should generate returns similar to the index.

What are the risks involved when it comes to investing in ETF?

As with any other investment vehicle, your ETF investment will also be dependent on favorable market conditions and subject to market volatility.

How much is the minimum investment for ETF?

When you trade ETF shares in the market, you will be bound by the minimum board lot size which is prescribed by the PSE. Minimum board lots depend on the price of the ETF shares. For block orders, the minimum investment amount should be equivalent to 10,000 shares.

Interested in ETF, but still have questions? One of our skilled Relationship Manager is ready to assist you and guide you thoroughly on how investing in ETF can help you in reaching your specific goals and objectives. Fill out the form below to get connected: