Tom Lydon, president of Global Trends Investments, says good ETFs have a reasonable expense ratio, a well-diversified underlying index and underlying stocks with lots of liquidity.
The financial conditions index indicates that Singapore should see little growth benefit from increased global liquidity with a stronger SGD offsetting any beneficial impact on domestic financial conditions.
The challenge for the architect of a bond ETF is to ensure that it closely tracks its respective index in a cost-effective manner, despite the lack of liquidity in the bond market.
Among exchange traded funds holding a broad index of small companies, two stand out for low expense ratios and good liquidity: the Schwab U.S. Small Cap ETF ( SCHA ) and the Vanguard Small Cap ETF ( VB ).
The suppliers of bond ETFs get around the liquidity problem by using representative sampling, which simply means tracking only a sufficient number of bonds to represent an index.
These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points.