Why are investors increasingly choosing ETF funds?

The investment market today is full of options, but why are so many investors turning to ETF funds? Because ETFs offer solutions to common problems faced by investors — the need for balanced returns, limited time to analyze individual stocks, and the desire for good risk diversification.

In fact, in uncertain economic conditions like these, investing is not just about generating income but also about protecting against losses. ETFs have become an important choice for many investor groups.

ETF Funds - Modern Investment Tools

Exchange Traded Fund or ETF is a special type of mutual fund that pools together multiple stocks and can be traded like regular stocks on the stock exchange. Whether it’s Gold ETF (gold stocks), Equity ETF (general stocks), or Foreign ETF (international stocks), all are managed by a mutual fund management company (MFC).

These managers are responsible for adjusting the portfolio to track the reference index and distributing returns to investors through two channels:

First channel - Capital Gain (Capital Gain): When the ETF price you buy increases, you profit from the price change.

Second channel - Dividends (Dividend): The ETF management account may distribute dividends periodically based on the number of units you hold (after expenses).

Types of ETFs - Choose According to Your Investment Style

ETFs are not one-size-fits-all; there are many types to choose from:

1. Stock ETF (Equity ETF) - Invest directly in stocks, possibly in a broad market index or specific sectors like SPY or XLK (Technology).

2. Bond ETF (Bond ETF) - Invest in bonds, including government, corporate, or municipal bonds, such as AGG or VCIT.

3. Commodity ETF (Commodity ETF) - Invest in gold, silver, oil, or agricultural products like GLD or USO.

4. Sector ETF (Sector ETF) - Focus on industries expected to grow, such as XLF (Financials) or ITA (Utilities).

5. Global ETF (Global ETF) - Access foreign markets, such as EEM (Emerging Markets) or VEA (Developed Markets).

6. Multi-Asset ETF (Multi-Asset ETF) - Combine stocks, bonds, and commodities in one file, such as VBAL or AOR.

7. Inverse & Leveraged ETF (Inverse & Leveraged ETF) - For advanced investors, used to profit from falling markets or amplify returns.

Why Are ETFs Attractive to the General Investor?

Advantage 1 - Risk Diversification: Instead of investing in a single stock and risking large losses, ETFs give you access to a basket of stocks simultaneously. The Thai stock market has over 800 stocks — think carefully about which to pick as a beginner. ETFs solve all these problems.

Advantage 2 - No Need to Be an Expert: You don’t need to be skilled at analyzing profit statements, market trends, or stock valuation. The fund managers do all that for you.

Advantage 3 - Low Capital Requirement: You don’t need a lot of money to buy shares of large companies. ETFs allow smaller investments to gain exposure to many companies.

Advantage 4 - Low Fees: ETFs typically have lower expense ratios than regular mutual funds, meaning your net returns are higher.

Advantage 5 - Easy Trading: Like stocks, ETFs can be bought and sold throughout trading hours, giving you high flexibility.

ETF vs Stocks vs Mutual Funds - Which Is Right for You?

ETFs:

• Traded throughout the day at market prices
• Highly diversified
• Low costs
• Tax-efficient (due to special structure)

Stocks:

• Direct ownership of a company
• Receive dividends from profits
• High risk (because investing in a single stock)
• Requires analysis
• Subject to capital gains and dividend taxes

Mutual Funds:

• Traded at daily NAV
• Highly diversified
• Higher fees than ETFs
• May have tax liabilities even without selling
• Less liquidity than ETFs

Who Should Consider ETFs?

Beginner Investors:
ETFs are a low-risk option, requiring less capital, managed by professionals, and not needing extensive research. If you’re just starting out, ETFs are a safe entry point.

Long-term Investors:
If you’re looking 10-20 years ahead, ETFs offer risk diversification, steady dividends, and proven cumulative returns, aligning with your savings goals.

Things to Know Before Buying ETFs

1. No minimum holding period: But ETFs fluctuate with the market and can incur short-term losses. Think about how long you’re willing to hold.

2. Management fees: Included in the ETF price, calculated as a proportion of your investment.

3. Price deviation from index: Caused by fees and portfolio adjustments, known as “tracking error,” which is minimal for well-designed ETFs.

4. ETF returns may be lower than well-chosen stocks: Because ETFs follow indices and don’t attempt to beat the market, but this is what makes ETFs safer for most.

How to Buy ETFs - Easier Than You Think

If you’ve traded stocks before, the process is the same:

Method 1 - Via Streaming App:

1. Register and log in to the app
2. Go to “Watch” menu and download the list of tradable ETFs
3. Enter the “.ETFs” section
4. Tap “Buy/Sell” at the bottom
5. Fill in the fund name, volume, price, and your PIN
6. Tap “BUY” (to purchase) or “SELL” (to sell)

Method 2 - Contact a Broker:
Market exchange staff can help place your order, reduce errors, and provide additional advice.

Important: You must open a stock trading account before buying stocks or ETFs.

Summary - ETFs Are the Answer for Modern Investors

Investing in ETF funds is about building assets based on appropriate risk management accessible to everyone — whether you have plenty of time or little, deep knowledge or just starting out.

If you’re looking for an investment option with manageable risk, decent returns, low capital, and a long-term perspective, ETF funds are undoubtedly the right choice.