Index Fund Singapore

Index Fund Singapore – Review of Popular ETFs for Beginner Investors

Investing is a part of our life. You need to put your hard-earned savings to grow so you may live better in the future. ETFs(Exchanged-Trade-Funds) and index funds are popular stock market investment vehicles among many investors.

 

ETFs vs. Traditional Index Fund

The main difference between an ETF and index funds is, you can buy and sell an ETF anytime during business hours on an exchange like the Singapore stock exchange. Yet, there is only one quote a day for index funds so that you can buy it for a price at a day.

You may realize they have more similarities than differences. If you are one of the following types, you should consider putting some money in ETFs or index funds.

Read also How to Start Investment in Singapore.

 

 

Consider Investing in ETFs or Index Funds If You Are a:

1. Novel investors

As a newbie investor, you may have seen and heard some scary stories about investing, be they are excited or unhappy. You feel confused about how to invest. Then, an ETF or index funds are ideal for you as it is a pool of stock market or index funds investments covering a wide range of assets. You don’t have the headache of choosing.

2. Too busy to invest 

Investing involves research and analysis. Time is what you have to take in investing in the stock market. An ETF or index fund is a passively managed fund mimicking stocks investments like the strait times index. The STI index covers thirty companies of the largest capitalization in Singapore.

3. Regular investors

An ETF or index fund reduces the toils if you invest frequently. You have already invested in a stock market embracing the major companies.

4. Cost-conscious

Many ETFs or index funds charge a lower cost(expense ratio) than other actively managed funds(mutual funds). That said, investors may enhance their returns by cutting costs. But you should look at the information before investing because each fund has its expense ratio different from others.

 

7 Popular ETFS for Beginner Investors

Some of the following are the most popular ETFs and index funds in Singapore. You will have some insights into each one of them.

 

1. SPDR STI ETF(ES3.SGX)

Objectives: The ETF or Exchange Traded Funds is the first locally established fund and listed on the Singapore stock exchange. The fund invests in the top thirty companies of the Straits Times Index. Now individual investors can join for the profits of all the foremost corporations at a small cost. Like all other stock market indices, the STI is diversified across different industries, so it’s about as safe as investing in the stock market can get. 

Investment scope: The index, established in 1966, tracks the local conglomerates’ performance and is a proxy to the local economy. It covers all major industries in Singapore, e.g., Finance, Industrials; Telecommunications; Airlines; Transportation; Energy, Consuming; and Real Estate. 

The management seeks to invest in the same weight as the index’s; therefore, more than 75% of the fund goes to finance, real estate, and industrial industries. 

You may recall familiar brands, to name a few: DBS; OCBC; Dairy Farm; CapitaLand; Singapore Airlines, and Singapore Communications and Exchange. A fund investor buying the fund is buying all the companies from the STI Index.

Figures: The fund value is S$298 million as of June 30, 2021. The expense ratio is as low as 0.30%. The ETF or Exchange Traded Funds doesn’t require any sales charge, and its fund manager is State Street Global Advisors Singapore Limited.

Performance: The one-year return from July 01, 2020, to June 30, 2021, is 24.35%. The fund’s annualized return is 6.49% as of June 30, 2021, since the fund’s inception(Apr 11, 2002). The dividend yield is 2.55%.

 

2. Nikko AM STI ETF(G3B.SGX)

Objectives: Like SPDR’s, Nikko is listed on the SGX and invests in the Straits Times index components. The ETF also offers diversification benefits to investors by investing in more than 80% of the fund in finance, real estate, industrials sectors. 

Figures: The fund value is S$581 million as of June 30, 2021. Besides, though the expense ratio is 0.30%, other charges apply 1. 0.20% per year of a management fee. 2. Up to 0.045% per year of trustee fee. No sales charge is necessary. The fund manager is Nikko Asset Management Asia Limited. 

Performance: The one-year return from July 01, 2020, to June 30, 2021, is 24.32%. Since the inception date, the annualized return is 8.49% as of June 30, 2021(Feb24, 09). The dividend yield is 3.29%.

 

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

Objectives: The Singapore-listed index fund invests based on the IBOXX ABF Singapore Bond Index. It is the first locally established and traded bond. The investments are quality investment types and were previously available to institutional investors only. Individual bond investors can share the profits through the fund.

Investment scope: The fund focuses on the bonds of the Singapore Government and its agencies. It also includes the Export-Import Bank of South Korea and highly rated corporations. 

Yet, the local government and its agencies still constitute almost 90% of the investments. Except for the Singapore Government, the bond issuers include Housing Development Board, Temasek, and Land Transport Authority. 

Figures: The Singapore dollar-dominated fund’s value is S$1 billion as of Aug 17, 2021. Of these assets, more than 30% belong to the maturity of over ten years. The expense ratio is lower of 0.26%, but the index fund charges a management fee of 0.15% and a trustee fee of 0.045%. The fund manager is Nikko Asset Management Asia Limited.

Performance: The one-year return from July 01, 2020, to June 30, 2021, is -2.8%. The annualized return is 2.69% since inception(August 31, 2005). The current dividend yield is 1.07%. 

 

4. Philip Sing Income ETF(OVQ.SGX)

Objectives: The ETF is a Singapore dollar-denominated bond. Listed on the Singapore stock market, the fund invests according to the Morningstar Singapore Yield Focus Index components. 

It also aims to model the same stocks and weightings of the top thirty companies from the index. The strategies are to maximize income and profit from long-term capital appreciation. The fund manager uses discretionary allocation methods to enhance the return. 

Investment scope: The index composes of locally registered conglomerates listed on the SGX. Some familiar names include Genting Singapore, DBS, Mapletree Industrial Trust, Great Eastern Holdings, Hong Leung Finance, and Singapore Exchange.  All the high-dividend stocks on SGX are in one neat basket. 

Figures: The fund manager is Philip Capital Management(Singapore) Limited. List on Oct 29, 2018, the fund’s value is about S$66 million as of Aug 17, 2021. The expense ratio is 0.70% per annum. 

Performance: The past one-year return is 20%. The return since inception is 3.9%. The current dividend yield is 2.84%. 

 

5. Lion Philip S-REIT ETF(CLR.SG)

Objectives: The fund models on the investments of constituents from the Morningstar Singapore REIT Yield Focus Index. The manager adopts investing in companies of the index for quality income. It is a Singapore-listed and local dollar fund. Lion Global Investors Limited is the manager of the ETF.

Investment scope: As the fund name implies, the investees are real estate conglomerates registered in Singapore. They consist of Frasers, Suntec, Ascott, Mapletree, CapitaLand, OUE real estate trusts. Of these, holdings of retail and commercial shares take more than forty percent of the total portfolio.

Figures: Listed on Oct 30, 2017, Lion Philip S-REIT ETF’s fund size is S$220 million as of Aug 17, 2021. The management fee is 0.5% per annum.

Performance: As of Aug 17, 2021, the one-year return is 2.54%, while the return from the inception date is 7.25%. The current dividend yield is 4.5%.

 

6. SPDR S&P 500 ETF(S27:SGX)

Objectives: The US dollar-denominated fund seeks to invest in line with the constituents of the S&P 500 index listed on the New York Stock Exchange. The 500 companies from the index cover twenty-five industries across the United States and represent US economic development. 

Investment scope: The passively managed ETF seeks to benefit from the growth of the companies like Apple, Microsoft, Berkshire Hathaway, Tesla, Bank of America, Goldman Sachs, and Johnson & Johnson.

Figures: established on Jan 22, 1993, the total value is S$310 billion as of Aug 17, 2021. The fund collects 0.0945% for the expense ratio.

Performance: The one-year return from July 1, 2020, to June 30, 2021, is 40.62%. The annualized return since the inception date is 10.41% as of June 30, 2021. The current dividend yield is 1.64%. 

 

7. SPDR S&P Gold Shares ETF(087:SGX)

Objectives: The fund is a standalone trust holding gold bullion and issues shares of undivided ownership relating to a real estate trust. The price of the trust reflects the value per share after the expenses. It trades on NYSE, ARCA, Singapore Exchange, and Hong Kong Stock Exchange. 

The ETF offers investors access to the gold market without holding hard gold. Besides, it is tradable all day. The cost of owning a share of the ETF is lower than the physical gold.

Figures: Established on Nov 18, 2004, the fund offers dual currencies to investors: US Dollar and Singapore Dollar. The expense ratio is 0.4%. The fund’s net asset value is S$44 billion.

Performance: The annualized one-year return from July 01, 2020, to June 30, 2021, is -0.68%, while the annualized return since the inception date is 8.25%.

 

Read also Gold Investment in Singapore: Price and How to Get Started.

 

Investment Figures on Screen

 

How To Invest In ETF And Index Funds

Investing requires careful planning because it is a long-term game, and you should be clear about your risk tolerance – how much you can put up with the ups and downs of your investments.

How are the basic steps you can do to begin:

1. Time horizon: You should make a term plan for your investments to reach your goals

2. Risk level: What is your risk preference, and how much can you tolerate the risks caused by the investment tools? Stocks and commodities have higher risks than bonds and ETFs, and index funds.

3. Cost of investments: Once you have sorted out the tools, costs play an essential part in reaching your goal. You may have to postpone your dreams because higher costs like expense ratio, management fees, broker or fund managers fee and transaction costs can eat into your return over time.

4. Opening and Choosing a  brokerage account: You should select a broker’s or fund manager’s financial strength and efficiency in carrying out your plan. It is a long-term commitment. An excellent financial institution with a strong financial background is the priority.

5. Finally, a good financial advisor is your indispensable source for everything you need to know before you act.

 

Comparisons of seven ETFs and an Index Fund

Funds Objectives Category Risk Annualized return since inception & dividend yield Expenses per annum
SPDR STI ETF(ES3.SGX) To invest in the top thirty companies of the Straits Times Index  Equity Mid-to-High 6.49%;

Dividend: 2.55%

0.30%
Nikko AM STI ETF(G3B.SGX) To invest in the top thirty companies of the Straits Times Index  Equity Mid-to-High 8.49%;

Dividend: 3.29%

Expense ratio: 0.30%;

Management fee: 0.2%;

Trustee fee: 0.045%

ABF Singapore Bond Index Fund(A35.SGX) Based on IBOXX ABF Singapore Bond Index, to provide stable and quality income through investing mainly in Singapore’s Government and government agencies. Bond Low 2.69%;

Dividend: 1.67%

Expense ratio: 0.26%;

Management fee: 0.15%;

Trustee fee: 0.045%

Philip Sing Income ETF(OVQ.SGX) To provide stable income and capitalize equity appreciation through investing in components from Morningstar Singapore Yield Focus Index. Equity Mid-to-High 3.9%;

Dividend: 2.84%

Expense ratio: 0.7%
Lion Philip S-REIT ETF(CLR.SG) To provide quality income through investing in the constituents from the Morningstar Singapore REIT Yield Focus Index. Equity Mid-to-High 7.25%;

Dividend: 4.5%

Management fee: 0.5%
SPDR S&P 500 ETF(S27:SGX) To invest in the stocks from the S%P 500 Index for capital appreciation. Equity Mid-to-High 10.41%;

Dividend: 1.64%

Expense ratio: 0.0945%
SPDR S&P Gold Shares ETF(087:SGX) To invest in gold for appreciation. Commodity Very High 8.25% Expense ratio: 0.40%

 

Our Verdict

The value of an ETF can fluctuate depending on economic circumstances like slowing down or new regulations that affect certain sectors; so it’s better suited as a long-term investment vehicle than something short term. 

As with just about every investment, your capital is never guaranteed. But, ultimately, what makes it a great investment is its low-cost, low-barrier-to-entry way to start investing. 

ETFs are great for the risk-averse or those who simply can’t be bothered to study the stock market, but, keep in mind that returns are not worth bragging about, and so investors would have to keep a modest expectation every time. 

 

Our Takeaways

Leverage is one technique of enhancing your profit from investing, but you need careful analysis for yourself. 

  • ETFs are like a basket of stocks or securities that are listed on the stock market and are used to track assets or index
  • ETFs are safer than direct stock market investments since indices are less volatile than individual stocks
  • The price that you pay for an ETF is its market value depending on its performance on the stock market.

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