Sunday, June 28

Using Fund Characteristics Of STI ETF As A Purchase Decision

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It has been 4 years since I wrote my last post. A lot of information is now available on easily online as compared to a few years ago when I first wrote about the STI ETF.

Some information is now available on the website of the SPDR Straits Times Index ETF.

I do get questions from time to time on when is a good time to purchase the STI ETF. You can click on this link to access the official website for the SPDR STI ETF.


On the website, you can refer to some information on this ETF under the fund characteristics section.



The price/earnings ratio or in short, the P/E ratio can be used a gauge to decide if the ETF is cheap enough for entry. The P/E ratio is taken from the selling price of the item divided by its earnings. In this case, since the STI ETF is tracking the Straits Times Index (STI), this can be taken to mean that it is the ratio of the total market price or capitalization of the companies that consists of the STI to the total earnings of these companies.

We are looking for a ratio as low as possible since this essentially means that the lower the P/E ratio, the lesser the number of years it takes for the earnings to pay back the purchase price.

If you do a search on STI P/E chart, you can easily glean information online such as the charts below.



At its current P/E ratio of 13.36, it looks like it is below the long term average although it is not as low as the global financial crisis during 2008 though I would probably term that as a rare event.
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