ETFs are one of the most straightforward and cost-effective ways to begin our investment journey. ETFs have gained even more attention and appeal in recent years, and have now surpassed active investing in terms of popularity. There are currently around 7,600 ETFs listed around the world (as of 2020).
While many ETFs are designed to give wide market exposure, their diversity and complexity have grown over time. Aside from duplicating country indexes, ETFs for extremely particular business sectors, regions, and asset classes, as well as more intricate leveraged and synthetic ETFs, are now available.
What Is An ETF?
ETFs are traded on stock exchanges and aim to mirror an index’s performance. Broad country-based indices, such as the Straits Times Index (STI), Hang Seng Index, or S&P 500 Index, can be used. It can also mimic tighter indexes that monitor certain industries, geographic regions, or asset classes. We can purchase and sell them because they are listed on stock markets, just like we can buy and sell other stocks and bonds.
How To Invest In ETFs In Singapore?
Because ETFs are traded on a stock exchange, the most frequent way to invest in them is through a stock brokerage account, just like how we buy and sell stocks in Singapore. There are 45 ETFs listed in Singapore, according to the Singapore Exchange (SGX). Because some ETFs are listed in many currencies, the actual number may be lower. Apart from the Singapore Exchange, most local stock brokerage accounts also give us access to other major stock exchanges across the world. As a result, we can invest in ETFs registered on these foreign markets.
Regular Shares Savings (RSS) plans are another way to invest in ETFs in Singapore. In Singapore, there are now four RSS providers; some of them also allow us to invest in individual equities or ETFs that are listed on foreign exchanges.
Also see: A Step-By-Step Guide To Investing In Singapore Using Regular Shares Savings (RSS) Plans
Investing through robo-advisory platforms in Singapore is a third avenue for investors to obtain exposure to ETFs. In Singapore, there are at least 11 robo-advisory platforms, with nine of them employing ETFs as part of their offerings. The ETFs that robo-advisory platforms mostly employ are exposed to broad indexes listed in the United States.
#1 Low Barrier Of Entry For New Investors
ETFs are a great method for new investors to get started because they don’t require much in the way of investment knowledge or expertise. Investors would also save time by not having to constantly monitor or rebalance their portfolios.
#2 Low-Cost Method To Invest
When compared to actively managed funds, ETFs usually have cheaper management fees. This is because ETFs simply replicate the index and follow the instructions on what to invest in. We can save money by not hiring an active fund manager to pick stocks or time stock prices.
The S&P 500 ETF, for example, has a net cost ratio of 0.0945 percent. The overall expense ratio of the STI ETF is 0.3 percent. Generally speaking, the larger the ETF, the lower the expense ratio it may charge.
Also see: A Complete Guide To Investing In Singapore’s Straits Times Index (STI) ETFs
#3 Instant Diversification
We can theoretically create our entire portfolio with just one investment in an ETF, depending on the index that the ETF tracks.
For example, just investing in the S&P 500 ETF will provide us access to over 500 blue chip firms, accounting for roughly 80% of the market capitalization in the United States. Furthermore, this investment will be diversified to include IT (26%), healthcare (13%), consumer discretionary (12%), financial (12%), communications (11%), industrials (9%), consumer staples (6%), and other sectors.
#4 Passive Approach To Investing
We are removing the decision to pick equities from our hands by investing in ETFs. We’re merely allowing the index to determine which equities we should buy.
We will essentially get the market returns of the US market if we invest in a broad country index, such as the S&P 500. This manner, we don’t want to time or beat the market; instead, we just wish to earn market returns over time.
Another advantage of taking a passive strategy to investing is that we don’t have to keep such a tight eye on our money. This is due to the fact that most indexes have a process for selecting and deleting member stocks. This means that if a stock fails to meet the criteria, it is automatically withdrawn from the index and, by default, the ETF. This is why, unlike individual companies, a solid index (and the ETFs that track it) may last a long time.
#1 ETFs Always Underperform The Index
We can never expect spectacular gains when we invest in an ETF. As previously said, it’s the equivalent of electing to earn only the market return.
We also have to pay brokerage costs when we buy (or sell) an ETF. We must pay management fees and other expenditures when we invest in an ETF. As a result, we will never achieve the return that the index provides. We will, however, earn a return that is just little less than that.
Is it wise to invest in the Singapore ETF?
Investing in a Singapore ETF has a number of advantages. Because the fund managers have done the legwork for you, EFTs are the preferable option. Investing in Singapore EFTs saves you time, eliminates stress, and gives you a good return on your money.
ETFs still have costs to consider
In most circumstances, once you pay the trade charge, you can keep the stock or bond without paying any more costs.
Depending on whatever ETF you invest in and which brokerage firm you use, you may have to pay similar costs when buying or selling ETFs.
That management, no matter how insignificant, costs money. Expense ratios are paid on most ETFs to compensate these costs.
Not all investments are available
ETFs normally provide a good selection of assets, but you won’t be able to invest in everything with an ETF.
While industrialized markets may have a big range of bond ETFs, stock ETFs, and just about every other sort of ETF you can think of, emerging markets may not.
You may also want to make other types of investments that aren’t appropriate for ETFs.
If you want to acquire a specific rare vintage car or work of art, an ETF won’t be able to help you.
Harder to pick investments or investment mixes
Some people want to be very hands-on when it comes to their investing. Others will not invest in certain firms or asset classes because of their sustainability or values.
Some people, for example, will not invest in companies that offer meat or cigarettes.
It may be tough to find ETFs that invest in accordance with your very precise investing objectives. Stocks of companies you don’t wish to own may be included in ETFs.
You can find up owning certain investments in many ETFs due to their broad reach.
This may give you the impression that your asset allocation is different than it is. It may also put you at risk of being overly invested in specific companies or investments.
As a result, knowing what you’re investing in within each ETF is critical. Then you may assess your investments as a whole to ensure you’re getting the right amount of exposure.
Partial shares may not be available
You may not be able to acquire partial shares of ETFs depending on your brokerage business. While this isn’t a major issue, it can make investing more difficult.
If you wish to invest $500 per pay period with a brokerage that doesn’t accept partial ETF investments, you’ll need to figure out how many entire shares you can buy with the money you have.
Any money left over would have to be put aside until your next paycheck, when you’d have to figure out how many shares you could buy at the pricing of the next payment.
Because mutual funds allow you to purchase fractional shares, you might easily deposit $500 each week.
If partial shares are crucial to you while investing in ETFs, check to see if partial shares are offered with the brokerage firms you’re considering before opening an account.
In Singapore, how do I purchase Vanguard ETF?
Where may the Vanguard ETF be purchased?
- You can also purchase other trackers, such as the SPY (S&P500 tracker), which is offered by another company named SPDR.
In Singapore, what can you do with $100,000?
A family member recently approached me about putting some money into investing. Her goal is straightforward: to generate a bigger return than the banks’ minuscule interest rates.
We can all agree that bank interest rates are unpleasant, and the reason we keep our money there is because we have bills to pay and have usually set up some sort of GIRO plan for needs such as insurance or mortgage loans.
I believe that the majority of Singaporeans are aware of this truth. So, how, what, and where should we put our hard-earned money to work?
The Approach
While she is new to investing, she has heard of Singapore Savings Bonds (SSBs) and is aware that they are a nearly risk-free financial product with a potential yearly yield of more than 2%.
She’s also thinking about topping up her own CPF-SA after reading about it in a recent Straits Times piece about tax savings and how to establish a retirement portfolio.
Based on the facts I received, I believe she is searching for a prudent investment that can nevertheless yield greater returns than the banks.
Nonetheless, I promised her that I would think about it and that I would come up with some suggestions for her to consider.
To be clear, this family member is new to investing and has little knowledge of stocks, ETFs, or bonds, except from a Regular Savings Plan to which she has been contributing regularly.
The Research
I decided to build a diversified portfolio rather than placing all of my eggs in one basket after considering the options accessible to a beginning investor as well as her concerns. I came up with the following:
I can probably arrange the investable amount into three sorts of investments based on these accessible options:
- Conservative investing products that offer steadiness in the face of market volatility
- Products that can outperform in good market situations and hold up well in bad market conditions.
- Products that have the potential to offer bigger returns but also have a higher level of volatility
This is similar to how FSMOne analyzes a client’s risk profile and allocates assets accordingly.
Because I don’t have detailed knowledge about this family member’s risk appetite, the investment time horizon is long, and she is new to investing, I’m using a balanced investor strategy. According to the balanced investor strategy, I will advise her to invest 50 percent in equity and 50 percent in fixed income. She can then allow for a +/- 10% overweight or underweight in equity or fixed income as a result.
In Singapore, where can I buy sp500?
What is the best way to get started investing in the S&P 500? Make an account with a broker. Many banks in Singapore make it simple to do so. To avoid tax consequences, purchase a Vanguard ETF VUSA through the London Stock Exchange rather than a US-based one.
Is voo available in Singapore?
To purchase VOO ETF, I recommend using a normal regulated brokerage. There are no custodian fees or account inactivity fees with standard chartered. Commissions are very reasonable, with a minimum of $10.
ABF Singapore Index Fund: What Is It?
A wealthy individual may consult a private banker for guidance and management of his or her government and corporate bond portfolio. Unfortunately, the average investor has access to only a small number of bond options. In that instance, a Bond Unit Trust or Bond ETF would be a better choice because he can diversify his portfolio with less money.
In comparison, I favor a Bond ETF over a Bond Unit Trust because the former has far lower fees than the latter. Compounding effects can be beneficial, but compounding expenses can be detrimental!
Because it invests primarily in sovereign and quasi-sovereign bonds issued or guaranteed by the government of Singapore or any government of the People’s Republic of China, Hong Kong Special Administrative Region, Indonesia, Korea, Malaysia, Philippines, or Thailand, the ABF Singapore Bond Index Fund is classified as a low-risk product.
The majority of the portfolio assets as of 30 April 2017 were Singapore Government bonds, which have been rated AAA for at least 19 years by all three main credit rating agencies (Standard & Poor’s, Moody’s, and Fitch). Furthermore, Singapore Government Bonds are among the highest-yielding AAA-credit-rated government bonds in the world. The Fund also buys quasi-government bonds from companies like HDB, Temasek, and LTA. These Singapore Government and Quasi-government Bonds are both categorized as risk-free.
Overall, the ABF Singapore Bond Index Fund is an excellent choice for the patient investor who enjoys moderate and steady returns.
Are ETFs suitable for novice investors?
Because of their many advantages, such as low expense ratios, ample liquidity, a wide range of investment options, diversification, and a low investment threshold, exchange traded funds (ETFs) are perfect for new investors. ETFs are also ideal vehicles for a variety of trading and investment strategies employed by beginner traders and investors because of these characteristics. The seven finest ETF trading methods for novices, in no particular order, are listed below.
Is it possible to make money with an ETF?
Let’s say you’re just getting started with investing and decide to put aside $400 every month to get a 10% yearly return. You’d have roughly $2.124 million after 40 years.
Of course, 40 years is a long time to put money into something. If you don’t have that much time to save, you’ll have to up your monthly investment amount. If you only have 35 years to save, for example, you’ll need to invest roughly $650 each month to reach $2 million.
If you can leave your money invested for more than 40 years, on the other hand, you won’t need to save nearly as much each month to become a multimillionaire. For example, if you invest for 45 years, you’ll need to save little over $225 per month to reach a total savings of $2 million.
While making money in the stock market takes time, the Vanguard S&P 500 ETF might help you get there faster. You can make more than you expect by simply investing consistently and giving your money as much time as possible to grow.
