Want to invest in Vietnam through ETFs? Why this may not be such a good idea..
Before we go any further and focus on Vietnam, let's first take a look at what an ETF is. ETF stands for Exchange Traded Fund and is a basket of securities that an investor can buy or sell through a stock brokerage firm. Over the past few years or decades, ETFs have become increasingly popular and there are good reasons that may help explain the importance of this phenomenon. One of the main reasons is that ETFs make investing in any country very easy for all investors. Through an ETF, for example, an Argentine investor can easily invest in Russian equities while benefiting from a satisfactory degree of diversification. The bad news, indeed we should be saying one of the bad news, is that ETFs are unfortunately much more useful in some countries than in others. The United States currently has the most sophisticated stock markets in the world and this is where we can find the most efficient and best designed ETFs. ETFs are kind of magical, they provide investors with instant diversification while they only invest in a single traded security. Even though the ETF choices available in Vietnam are limited, the Vietnamese stock markets still offer the option of investing in Vietnam through an ETF. The Market Vectors Vietnam ETF is the most popular fund for investors looking for exposure to the fast growing South-East Asian country. This ETF offers to its investors exposure to a limited of Vietnamese publicly traded companies. The fund holds approximately 30 different companies with financials making by far the largest sector. Any investor who would not wish to invest massively in the financial sector should keep this in mind.
Another massive problem of the Market Vectors Vietnam ETF is its performance. When compared to the performance of the main stock indexes or by many funds or obviously our clients’ performances, the performance of the Market Vectors Vietnam ETF is clearly disappointing. ETF are also very popular thanks to its low management fees. However, these low management fees are to be paid regardless of your portfolio’s performance. On the other end, if you decide to invest yourself with the help of Anh Thomas Investment, not only will you end up paying low management fees but you will not have to pay any fee at all if your portfolio do not rise in value.
Overall, despite some advantages, especially in the most sophisticated markets, ETF have drawbacks that can turn out to be dramatic when it comes to performance. The Market Vectors Vietnam ETF is a perfect illustration of these limitations. This fund is unable to invest in high potential stocks and tend to invest instead on companies with high valuation. It seems obvious that the Market Vectors Vietnam ETF is not the best option for an investor seeking performance and trading directly on the Vietnamese stock exchange seems to make much more sense especially for a long-term investor.