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        From Sectors and Smart Beta to Fixed Income, SPDR Exchange Traded Funds (ETFs) give you wide access to diverse investment opportunities. Find out more.

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        Top Tips for Trading ETFs

        ETFs can offer you the benefits of transparency, lower costs, and increased intra-day trading capabilities. Here are some tips you should bear in mind when employing ETFs to make use of these products as effectively as possible, and to ensure successful, cost-effective execution.

        Exchange traded funds (ETFs) share a lot of similarities with managed funds, but trade like stocks. They are a diverse, low-cost and tax-efficient way to invest. Discovering how to trade may allow you to take advantage of price movements and seek the best execution.

        Understanding the Basics

        Closing Price vs. Net Asset Value (NAV): ETFs are traded on the exchange during the day, so their price fluctuates with the market supply and demand, just like stocks and other intraday traded securities. The NAV is calculated by the standard methodology in the Product Disclosure Statement (PDS) and based on the underlying securities’ closing prices. Hence the ETF’s closing price could diverge from the official NAV and is therefore not the official valuation of the ETF.

        Liquidity is not limited to what you see on-screen/on exchange: ETFs are as liquid as their underlying market. Unlike individual stocks, which usually have a fixed supply of shares in circulation on the secondary market, ETFs have an open-ended structure and can be created/redeemed based on investor supply and demand.

        Learn more about the role of Market Makers/Authorised Participants for ETF liquidity

        Best Practices When Trading ETFs

        We believe that in order to make use of these products as effectively as possible and to ensure successful, cost-effective execution, there are a number of considerations that you should bear in mind when employing ETFs. Below are our top tips.

        Order Type
        Always use a limit order.         When buying on an exchange, limit orders provide better price control, consider using limit or stop-limit orders (especially in volatile markets).

        Time
        Try to trade when the underlying market is also trading. For Australian investors, it may be the case that the underlying market is closed. For example an investor wishing to purchase the SPDR S&P 500® ETF Trust, which trades in US equity markets. When buying an ETF where part or all of the underlying security’s market is closed, it is best to time the execution when a maximum of the underlying securities trade. All else being equal, this may help having lower bid-ask spreads at this point.

        Try to avoid trading in the first and last 10 minutes of the trading day. When markets are opening and closing, there is generally more volatility in prices, and as a result wider market makers’ spreads.

        Open, close and auction periods are often governed by specific rules. It is prudent to familiarise yourself with these rules. Placing a trade during these periods should generally be avoided unless the investor anticipating the trade is comfortable with those rules.

        Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) ("SSGA, ASL").  Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Web: www.ssga.com. 

         

        SSGA, ASL is the Responsible Entity and the issuer for the State Street Managed Funds, which are unquoted, and the SPDR® ETFs which are quoted on the AQUA market of the ASX or listed on the ASX. SSGA ASL is the AQUA Product Issuer for the CHESS Depositary Interests (or "CDIs") created over interests in the SPDR® S&P 500® ETF Trust (“SPY”) which were first quoted on the AQUA market of the ASX on 13 Oct 2014. State Street Global Advisors Trust Company (ARBN 619 273 817) is the trustee of, and the issuer of interests in, the SPDR® S&P 500® ETF Trust, an ETF registered with the United States Securities and Exchange Commission under the Investment Company Act of 1940 and principally listed and traded on NYSE Arca, Inc. under the symbol "SPY".

         

        This material is general information only and does not take into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure statement, available at ssga.com, before deciding whether to acquire or continue to hold the Funds. Target Market Determinations can also be found at ssga.com.  This material should not be considered a solicitation to buy or sell a financial product or security. 

         

        Investing involves risk including the risk of loss of principal. Diversification does not ensure a profit or guarantee against loss.

         

        Risk associated with equity investing includes stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions.

         

        ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETF’s net asset value. ETFs typically invest by sampling an index, holding a range of securities that, in the aggregate, approximates the full index in terms of key risk factors and other characteristics. This may cause the fund to experience tracking errors relative to performance of the index.  

         

        SPDR®, Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC, ASX® is a registered trademark of the ASX Operations Pty Ltd], these trademarks have been licensed for use by S&P Dow Jones Indices LLC and licensed for use for certain purposes by State Street. MSCI indexes are the exclusive property of MSCI Inc.(“MSCI”). MSCI and the MSCI index names are service mark(s) of MSCI or its affiliates and have been licensed for use for certain purposes by State Street.  The products referenced herein are not sponsored, endorsed, sold or promoted by any of these third party entities and none of these entities bear any liability with respect to the products or make any representation, warranty or condition regarding the advisability of buying, selling or holding any products issued by SSGA, ASL.

         

        There is no representation or warranty as to the current accuracy of, nor liability for, decisions based on such information.

         

        The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA ASL’s express written consent.

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