Why would you invest in ETFs in Singapore

techmanga June 27, 2021 0 Comments



Why would you invest in ETFs in Singapore?


Okay, so you probably know that you can buy stocks or shares in companies,right?For example, you can buy a bunch of Singtel shares in the hopes that the shareprice will go up in the future, and/or Singtel will share their profits withyou in the form of juicy dividends.The trouble is, there are more than 800 companies listed on the Singaporestock exchange. And you have things to do in life. How on earth do youresearch and choose the right companies to invest in?Well, you can’t. That’s why, instead of trying to bet on one superstarcompany, some people prefer to invest in an entire sector or asset class, evenan entire economy. You do that by buying index fund ETFs instead of individualstocks.Story continuesAn index fund typically tracks a stock exchange index, which is a fancy way ofsaying “a nice, diversified basket of X best-performing stocks”.Probably the best-known index is the S&P 500, which tracks the 500 biggestcompanies in the US stock exchange.In Singapore, we have the Straits Times Index, which tracks the top 30companies on SGX, mainly reliable “blue chips” like DBS, Singtel, Keppel andCapitaLand.There are a million indices out there. Some focus on regions (e.g. China),industries (e.g. tech or real estate), asset types (e.g. bonds), andinvestment outcomes (e.g. dividend yield).Back to top

1. SPDR STI ETF (SGX: ES3)


The whole point of buying ETFs is to NOT try to game the system. That’s whygeneric stock market index-tracking ETFs are still some of the most popularones around.As mentioned above, the Straits Times Index or STI is our very own index,tracking the 30 biggest companies on SGX, and therefore (indirectly)Singapore’s economy.Like all other stock market indices, the STI is diversified across differentindustries, so it’s about as safe as investing in the stock market can get.You’re putting your eggs in 30 different baskets here.There are 2 STI ETFs available in Singapore: The SPDR STI ETF and Nikko AM STIETF.What’s the difference? The SPDR STI ETF has been around for longer (2002 vs2009), and it’s also about twice the size of the Nikko AM STI ETF ($790m vs$315m). Due to its age and size, the SPDR STI ETF also tracks the STI moreaccurately.SPDR STI ETF expense ratio: 0.3%Back to top

3. ABF Singapore Bond Index Fund (SGX: A35)


Bonds have always been the uncool sibling to stocks, but it’s definitely anattractive type of asset for the risk-averse (and for those who seek a “safehaven” in a stock market crash).Plus, high-profile government / government-linked bonds like Singapore SavingsBonds, Temasek Holdings Bond and the Temasek-linked Astrea IV and V Bonds havewhetted Singaporeans’ appetite for bonds.Wouldn’t it be great if you could buy all those government-ish bonds all inone fell swoop, instead of having to camp at the ATM every time one comes out?The ABF Singapore Bond Index Fund lets you do that. It’s basically a “groupbuy” for a whole bunch of bonds issued by extremely credible entities: TheSingapore government and gov-linked entities like HDB, LTA and TemasekHoldings.While the returns may not exactly be jaw-dropping, you will get (pretty much)guaranteed bond coupon payouts.ABF Singapore Bond Index Fund expense ratio: 0.26%Back to top

4. Phillip Sing Income ETF (SGX: OVQ)


Singaporean investors have a heady love affair with dividend stocks. It’s soheady, in fact, that one might even call it an addiction… Which would explainwhy the tagline for the Phillip Sing Income ETF is “get your regular dividendfix”.Instead of trying to realise your passive income dreams by snapping upSingtel, DBS and CapitaLand shares all willy-nilly, the Phillip Sing IncomeETF is a neat way to get ALL the high-dividend stocks on SGX in one neatpackage.It tracks the Morningstar Singapore Yield Focus Index, which comprises the top30 dividend yielding stocks. Most of the big local names are in there: DBS,UOB, OCBC, as well as Singtel, ST Engineering, SATS and CapitaLand.You can expect an annual dividend yield of about 5%; dividends are paid outevery June and December.Phillip Sing Income ETF expense ratio: ≤0.7%Back to top

How to start investing in ETFs in Singapore


Investing in ETFs is simple. Generally there are 2 options: Either investing alump sum, or using a regular savings plan.

Conclusion: Should you invest in ETFs in Singapore?


To recap, ETFs are a good fit for you if you’re looking for low-cost, low-barrier-to-entry way to start investing.Generic market index (e.g. S&P 500 or STI) ETFs have diversification bakedinto their structure, so they’re great for the risk-averse, or those whosimply can’t be bothered to study the stock market. (However, if you’re optingfor a more “specialised” ETF like a REITs ETF or a gold one, your investmentwill be riskier than a “true” market index ETF.)That said, ETFs aren’t some kind of magical product guaranteed to make youmoney. As with just about every investment, your capital is never guaranteed.In the short term, especially, be prepared for the value of your ETFs tofluctuate. This is unavoidable if the economy slows down or if there are newregulations for a particular sector. So ETFs are really better for long-termpassive investors than for quick gains.Finally, ETFs generally do not give you returns worth bragging about. To be ahappy ETF investor, you have to okay with being average.Would you invest in ETFs in Singapore? Comment and let us know!

Why would you invest in ETFs in Singapore?


Okay, so you probably know that you can buy stocks or shares in companies,right?For example, you can buy a bunch of Singtel shares in the hopes that the shareprice will go up in the future, and/or Singtel will share their profits withyou in the form of juicy dividends.The trouble is, there are more than 800 companies listed on the Singaporestock exchange. And you have things to do in life. How on earth do youresearch and choose the right companies to invest in?[[nid:513497]]Well, you can’t. That’s why, instead of trying to bet on one superstarcompany, some people prefer to invest in an entire sector or asset class, evenan entire economy. You do that by buying index fund ETFs instead of individualstocks.An index fund typically tracks a stock exchange index, which is a fancy way ofsaying “a nice, diversified basket of X best-performing stocks”.Probably the best-known index is the S&P 500, which tracks the 500 biggestcompanies in the US stock exchange.In Singapore, we have the Straits Times Index, which tracks the top 30companies on SGX, mainly reliable “blue chips” like DBS, Singtel, Keppel andCapitaLand.There are a million indices out there. Some focus on regions (e.g. China),industries (e.g. tech or real estate), asset types (e.g. bonds), andinvestment outcomes (e.g. dividend yield).

1. SPDR STI ETF


The whole point of buying ETFs is to NOT try to game the system. That’s whygeneric stock market index-tracking ETFs are still some of the most popularones around.As mentioned above, the Straits Times Index or STI is our very own index,tracking the 30 biggest companies on SGX, and therefore (indirectly)Singapore’s economy.Like all other stock market indices, the STI is diversified across differentindustries, so it’s about as safe as investing in the stock market can get.You’re putting your eggs in 30 different baskets here.There are 2 STI ETFs available in Singapore: The SPDR STI ETF and Nikko AM STIETF.What’s the difference? The SPDR STI ETF has been around for longer (2002 vs2009), and its fund size is also much larger ($1,700m vs $496m), indicatingthat it’s more popular. Due to its age and size, the SPDR STI ETF also tracksthe STI more accurately.SPDR STI ETF expense ratio: 0.3 per cent

3. ABF Singapore Bond Index Fund


Bonds have always been the uncool sibling to stocks, but it’s definitely anattractive type of asset for the risk-averse (and for those who seek a “safehaven” in a stock market crash).Plus, high-profile government / government-linked bonds like Singapore SavingsBonds, Temasek Holdings Bond and the Temasek-linked Astrea IV and V Bonds havewhetted Singaporeans’ appetite for bonds.Wouldn’t it be great if you could buy all those government-ish bonds all inone fell swoop, instead of having to camp at the ATM every time one comes out?The ABF Singapore Bond Index Fund lets you do that. It’s basically a “groupbuy” for a whole bunch of bonds issued by extremely credible entities: TheSingapore government and gov-linked entities like HDB, LTA and TemasekHoldings.While the returns may not exactly be jaw-dropping, you will get (pretty much)guaranteed bond coupon payouts.ABF Singapore Bond Index Fund expense ratio: 0.25 per centALSO READ: 7 popular types of investment in Singapore (and tips to use themfor optimal gains)

4. Phillip Sing Income ETF


Singaporean investors have a heady love affair with dividend stocks. It’s soheady, in fact, that one might even call it an addiction… Which would explainwhy the tagline for the Phillip Sing Income ETF is “get your regular dividendfix”.Instead of trying to realise your passive income dreams by snapping upSingtel, DBS and CapitaLand shares all willy-nilly, the Phillip Sing IncomeETF is a neat way to get ALL the high-dividend stocks on SGX in one neatpackage.It tracks the Morningstar Singapore Yield Focus Index, which comprises the top30 dividend yielding stocks. Most of the big local names are in there: DBS,UOB, OCBC, as well as Singtel, ST Engineering, SATS and CapitaLand.You can expect an annual dividend yield of about 5 per cent; dividends arepaid out every June and December.Phillip Sing Income ETF expense ratio:≤ 0.7 per cent

How to start investing in ETFs in Singapore


Investing in ETFs is really easy because you’ve skipped all the hard work ofdoing market research and trying to pick stocks. All you need is a lump sum ofinvestment money and a brokerage account.We recommend either SAXO or POEMS as your brokerage since they have some ofthe lowest commission fees for SGX ETFs. Plus, there’s no minimum fee, so youcan invest just a small amount to try.A more newbie-friendly alternative is to go for a regular savings plan, whichis is sort of a subscription plan to your investment of choice.You don’t even have to open a brokerage account with this option! Just sign upfor either the DBS Invest-Saver or OCBC Blue Chip Investment Plan and set up arecurring contribution of at least $100/month. The bank will do the rest.After you get comfortable with investing, you can look into similar productsfrom brokerages, such as the POEMS Share Builders Plan, FSMOne Regular SavingsPlan or the SAXO Regular Savings Plan below.

Conclusion: Should you invest in ETFs in Singapore?


To recap, ETFs are a good fit for you if you’re looking for low-cost, low-barrier-to-entry way to start investing.Generic market index (e.g. S&P 500 or STI) ETFs have diversification bakedinto their structure, so they’re great for the risk-averse, or those whosimply can’t be bothered to study the stock market. (However, if you’re optingfor a more “specialised” ETF like a REITs ETF or a gold one, your investmentwill be riskier than a “true” market index ETF.)That said, ETFs aren’t some kind of magical product guaranteed to make youmoney. As with just about every investment, your capital is never guaranteed.In the short term, especially, be prepared for the value of your ETFs tofluctuate. This is unavoidable if the economy slows down or if there are newregulations for a particular sector. So ETFs are really better for long-termpassive investors than for quick gains.Finally, ETFs generally do not give you returns worth bragging about. To be ahappy ETF investor, you have to okay with being average.This article was first published in MoneySmart.9 Best Long-Term Investments In May 2021One of the best ways to secure your financial future is to invest, and one ofthe best ways to invest is over the long term. With the ups and downs thatcame during 2020, it may be tempting to cut loose in 2021. But the economy isstill recovering, and it’s more important than ever to focus on long-terminvesting and stick to your game plan.While many people think of investing as trying to make a short-term score inthe stock market, it’s long-term investing where regular investors can reallybuild wealth. By thinking and investing long term, you can meet your financialgoals and increase your financial security.Investors today have many ways to invest their money and can choose the levelof risk that they’re willing to take to meet their needs. You can opt for verysafe options such as a certificate of deposit (CD) or dial up the risk – andthe potential return! – with investments such as stocks and stock mutual fundsor ETFs.Or you can do a little of everything, diversifying so that you have aportfolio that tends to do well in almost any investment environment.

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