Top 7 ETFs in Singapore — The Total Beginner’s Guide to Investing in ETFs
Most of us have a vague idea that we should be investing at least some of our money to make it grow, but no one ever sits us down and outright tells us how exactly to do it.
If you’ve been dutifully putting money away in your savings account, yet wondering if there’s something more you should be doing with that cash, then here’s an easy answer: Invest in ETFs, or exchange traded funds.
But what the hell are ETFs? And how do you invest in them in Singapore?
Disclaimer: This isn’t financial advice. I’m just laying out the options for you. Don’t be lazy — do your own homework!
7 popular ETFs in Singapore — have you heard of these?
Here are 7 popular generic ETFs in Singapore.
|ETF in Singapore||What it tracks||Expense ratio|
|SPDR STI ETF||Top 30 companies on SGX||0.3%|
|Nikko AM STI ETF||Top 30 companies on SGX||0.3%|
|ABF Singapore Bond Index Fund||Singapore govt + quasi-govt bonds||0.26%|
|Phillip Sing Income ETF||High dividend stocks on SGX||≤0.7%|
|Lion Phillip S-REIT ETF||High dividend Singapore REITs||0.6%|
|SPDR S&P 500 ETF||Top 500 on US stock market||0.0945%|
|SPDR Gold Shares ETF||Price of gold bullion||0.4%|
If you already know all there is to know about ETFs and index funds, feel free to skip straight to the ETF section by clicking on the name of the ETF you like.
Otherwise, read on for some 101s on what on earth this whole ETF thing is about.
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 share price will go up in the future, and/or Singtel will share their profits with you in the form of juicy dividends.
The trouble is, there are more than 800 companies listed on the Singapore stock exchange. And you have things to do in life. How on earth do you research and choose the right companies to invest in?
Well, you can’t. That’s why, instead of trying to bet on one superstar company, some people prefer to invest in an entire sector or asset class, even an entire economy. You do that by buying index fund ETFs instead of individual stocks.
An index fund typically tracks a stock exchange index, which is a fancy way of saying “a nice, diversified basket of X best-performing stocks”.
Probably the best-known index is the S&P 500, which tracks the 500 biggest companies in the US stock exchange.
In Singapore, we have the Straits Times Index, which tracks the top 30 companies on SGX, mainly reliable “blue chips” like DBS, Singtel, Keppel and CapitaLand.
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), and investment outcomes (e.g. dividend yield).
ETF vs unit trust — which type of index fund is better?
Technically, ETFs are not the only way to track the entire market. Index funds are also available in the form of unit trusts (sometimes called mutual funds).
Unit trusts are professionally managed funds and typically cost a lot more than ETFs. Not only do they require a higher initial investment, there are also annual management and commission fees of up to 5% that eat into your potential profits. You can read more about unit trusts here.
On the other hand, ETFs are passively managed. There may be a fund manager, but her job is pretty hands-off (apart from putting the different stocks together to track the index).
Therefore, ETF fees are usually lower than that of unit trusts. Most charge less than 1%, and you’ll find a lot that are charging more like 0.3% or 0.5%.
ETFs are also traded like normal stocks on SGX, so there’s nothing stopping you from buying just 1 lot of shares. You’re really only restricted by your investment broker’s commission fees.
Now that you know the basics of investing in ETFs — here are 7 well-known ETFs in Singapore to get you started.
1. SPDR STI ETF (SGX: ES3)
The whole point of buying ETFs is to NOT try to game the system. That’s why generic stock market index-tracking ETFs are still some of the most popular ones 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 different industries, 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 STI ETF.
What’s the difference? The SPDR STI ETF has been around for longer (2002 vs 2009), and it’s also about twice the size of the Nikko AM STI ETF ($820m vs $315m). Due to its age and size, the SPDR STI ETF also tracks the STI more accurately.
SPDR STI ETF expense ratio: 0.3%
2. Nikko AM STI ETF (SGX: G3B)
As mentioned, the Nikko AM STI ETF is the other STI ETF in Singapore.
In terms of objectives, it’s exactly the same as the SPDR one — to replicate the performance of the Straits Times Index, i.e. the 30 biggest companies on the Singapore stock exchange.
Considering it’s younger and smaller than SPDR, it’s remarkable that the Nikko AM STI ETF is able to match the more established SPDR STI ETF in price. Both ETFs have the same expense ratio of 0.3%.
However, the Nikko AM STI ETF has a larger tracking error, meaning it does not replicate the STI quite as faithfully as the SPDR. This means it can underperform OR outperform the STI itself.
Nikko AM STI ETF expense ratio: 0.3%
3. ABF Singapore Bond Index Fund (SGX: A35)
Bonds have always been the uncool sibling to stocks, but it’s definitely an attractive type of asset for the risk-averse (and for those who seek a “safe haven” in a stock market crash).
Wouldn’t it be great if you could buy all those government-ish bonds all in one 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 “group buy” for a whole bunch of bonds issued by extremely credible entities: The Singapore government and gov-linked entities like HDB, LTA and Temasek Holdings.
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%
4. Phillip Sing Income ETF (SGX: OVQ)
Singaporean investors have a heady love affair with dividend stocks. It’s so heady, in fact, that one might even call it an addiction… Which would explain why the tagline for the Phillip Sing Income ETF is “get your regular dividend fix”.
Instead of trying to realise your passive income dreams by snapping up Singtel, DBS and CapitaLand shares all willy-nilly, the Phillip Sing Income ETF is a neat way to get ALL the high-dividend stocks on SGX in one neat package.
It tracks the Morningstar Singapore Yield Focus Index, which comprises the top 30 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 out every June and December.
Phillip Sing Income ETF expense ratio: ≤0.7%
5. Lion Phillip S-REIT ETF (SGX: CLR)
Another ETF in Singapore that’s bound to be a big hit with conventional Singaporean investors is the Lion Phillip S-REIT ETF, which focuses on high yield Singapore REITs (real estate investment trusts).
If you’re new to this whole REITs thing, they’re basically one of the most popular investment types in Singapore right now.
When you buy REITs, you become part-landlord for the properties in that REIT portfolio, and can collect “rent” in the form of dividends. You can read more about Singapore REITs here.
The key benefit of this Singapore REIT ETF is that you needn’t worry about picking the “correct” REITs to invest in. That would expose you to too much concentration risk.
Instead, the Lion Phillip S-REIT ETF tracks the Morningstar Singapore REIT Yield Focus Index, so you can buy into the 25 top-performing S-REITs rather than putting all your eggs in one or two baskets.
Expense ratio: 0.6%
6. SPDR S&P 500 ETF (SGX: S27)
Speaking of concentration risk, if your investment portfolio is 100% Singapore-based — even if they’re diversified ones like STI ETFs — you may want to balance it out with some global assets. You know, just in case a tsunami devours our entire island or something.
And as far as global stock market indices go, you won’t find a better-known one than the Standard & Poor 500 index.
The S&P 500 compiles the top 500 companies on US stock exchanges, including many multi-national companies (so it does have some geographical diversification despite being US-based).
While there are heaps of S&P 500 ETFs out there, it’s not necessary for us to buy them on overseas stock exchanges — the SPDR S&P 500 ETF is available right here on SGX, and it’s got a really low expense ratio to boot.
SPDR S&P 500 ETF expense ratio: 0.0945%
7. SPDR Gold Shares ETF (SGX: O87)
Finally, if you believe the whispers about an impending stock market crash — there are always whispers — then you might be drawn to investing in gold as a “safe haven”.
Apart from going to the shop to buy gold bullion, you may be interested to know that there’s a gold ETF in Singapore. It’s called the SPDR Gold Shares ETF and it tracks the price of gold.
While buying a stock market-listed product doesn’t seem like a good way to evade a stock market crash, there are some benefits to buying your gold in ETF form.
You can buy gold in more affordable units and do not have to find a Gringotts Bank-type vault to put all your gold bars and coins.
SPDR Gold Shares ETF expense ratio: 0.4%
How to start investing in ETFs in Singapore
Investing in ETFs is simple. Generally there are 2 options: Either investing a lump sum, or using a regular savings plan.
Lump sum investment
Compare and sign up with a suitable investment brokerage. If needed, open a CDP account. After you’re all set up and have funded your investment account, proceed to buy the ETFs of your choice via the brokerage’s investment platform.
You can invest any amount you like, but you will probably have to pay a minimum commission of at least $10 each time you buy.
For buy-and-hold investors, consider DBS Vickers Cash Upfront as it has one of the lowest commission fees (0.12%, min. $10). Unlike other low-commission brokerages, your ETF shares are held in your CDP account under your name, not in a generic custodian account. However, if you sell your ETFs, you’ll be charged the normal DBS Vickers fee, which is much higher.
The trouble with this method is that you will feel a bit stressed about timing your purchase. What if the STI ETF share price falls the day after you put in $10,000!?!? This happens to a lot of people; you just have to grit your teeth and focus on the long-term.
Regular savings plan
A less heartache-inducing way to invest in ETFs is to opt for a regular savings plan, which is basically a “subscription” to your investment of choice.
You can break down that $10,000 lump sum into 10 parts, buying $1,000 worth of STI ETF shares every month. Some months will be more expensive and some months cheaper, but the point is that you’ll be buying your ETF at the average price over 10 months.
Right now, there are 3 options: OCBC Blue Chip Investment Plan, DBS/POSB Invest-Saver, and POEMs Share Builders Plan. We’ve done a comparison of these 3 RSPs here.
The important things to check are (a) whether the programme has the ETFs you want, and (b) how much the commission fees are. If the RSP fees turn out to be too high, then you might be better off with the lump sum method.
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 baked into their structure, so they’re great for the risk-averse, or those who simply can’t be bothered to study the stock market. (However, if you’re opting for a more “specialised” ETF like a REITs ETF or a gold one, your investment will be riskier than a “true” market index ETF.)
That said, ETFs aren’t some kind of magical product guaranteed to make you money. As with just about every investment, your capital is never guaranteed.
In the short term, especially, be prepared for the value of your ETFs to fluctuate. This is unavoidable if the economy slows down or if there are new regulations for a particular sector. So ETFs are really better for long-term passive investors than for quick gains.
Finally, ETFs generally do not give you returns worth bragging about. To be a happy ETF investor, you have to okay with being average.
Would you invest in ETFs in Singapore? Comment and let us know!