I am always worried about swap-based ETFs. I cannot sleep on it.
The Straits Times article "1 in 3 fund managers wary of synthetic ETFs: Survey" dated 23 June 2011 revealed that 1/3 of the fund managers are wary of synthetic ETFs such as swap-based ETFs. Synthetic ETFs whose underlying are derivatives always make me feel very uneasy. Sometimes I would have nightmare over it. I advice people to stay away from swap-based ETFs altogether. I've never recommended swap-based ETFs to my clients. Unfortunately, most ETFs on SGX are like this. There is no need to buy ETFs from SGX. Just open a local online broker and you can buy normal ETFs from overseas. Just make sure you only buy within the limits of any estate duty exemption applicable. For those who wants to know my views on swap-based ETFs, you can search the words 'swap based' using the left menu.
The article here on the hidden cost behind swap-based ETFs only make me feel more uncomfortable: HERE.
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