Author: February 16, 2023

Exchange-traded funds (ETFs) are investment vehicles that investors can trade on the stock exchanges and offer investors a range of benefits. ETFs provide investors access to various assets, such as stocks, currencies, commodities and more. While the process for investing in ETFs is pretty straightforward, understanding how long it takes for them to settle is essential. Generally speaking, ETF settlements take up to three days after purchase or sale on the market. The settlement period may be longer if your ETFs are held in a brokerage or mutual fund account.

How to settle ETFs

There are several steps to take to settle ETFs. Investors should know these to ensure ETFs are settled correctly and on time. It will also help investors to feel confident when investing in ETFs.

Choose a brokerage account

If you want to settle ETFs, the first thing you need to do is select a brokerage to work with, for example, Saxo Bank Group. Make sure you pick one with low commissions and fees, as these can add up over time. You should also check out their customer service record and read reviews from other investors before signing up for an account. Additionally, research which ETFs the broker offers and what trading tools they provide. This information will help you to make an informed decision about which broker is best for your trading needs.

Place your order

Once you have chosen your brokerage account, you can place your order for the ETFs you wish to purchase or sell. Make sure you are aware of any applicable fees or commissions, as well as the current market price of the ETFs, before placing your order. It’s also important to know any trade limitations, such as minimum and maximum amounts.

Monitor your order

After you have placed your order for the ETFs, it’s essential to monitor it closely for changes in price and performance. Doing so will help you decide when to execute the trade and settle the ETFs. You can track your order with a few clicks through most brokerages’ online platforms.

Settle the ETFs

When you are ready to settle your ETFs, you must ensure that all the necessary paperwork has been completed and submitted. It includes notifying your broker of any changes in ownership or tax information. Additionally, it’s essential to know any deadlines for settling the ETFs, such as a retirement or margin account. Make sure these dates are met to avoid any potential penalties or delays.

Receive the fund units

Once everything is set up and ready to go, you should receive your fund units within three days after purchase or sale on the market. If you have an account with a mutual fund provider, it may take longer for them to process the transaction and for you to receive your ETFs.

Understand the tax implications

When investing in ETFs, it’s essential to understand any potential tax implications. In Singapore, ETFs are taxed like any other investment, depending on the type of ETF and the investor’s tax rate. It’s essential to consult a financial advisor or accountant to determine what kind of taxes you may be liable for if you invest in ETFs.

ETF risks

There are several benefits to investing in ETFs; however, traders should also know about the risks. Knowing the risks involved will help you avoid them and help you maximise your chances of doing well and minimise losses.

Counterparty risk

Counterparty risk is when your broker doesn’t make good on the trades you conduct. If it happens, it can result in significant losses, so select a reliable broker and trade only with them.

Currency risk

Currency risk arises when trading ETFs denominated in different currencies. Exchange rates can fluctuate quickly, affecting your investments’ value. To reduce this risk, invest only in ETFs denominated in the same currency as your base currency.

Market volatility

ETFs are subject to market movements and changes in price over time. It’s essential to stay informed about market news and current developments to protect yourself against any sudden drops or spikes in prices that may affect your investments.