Are you interested in investing in an ETF in Singapore? It is an attractive option because it is just like investing in both mutual funds and stocks. While it is like a mutual fund because it is a collection stocks or bonds, it is also akin to a stock because you can buy and sell it in the local market.
An ETF can help you meet several investment goals. It can help you diversify your portfolio. ETF investing is also a cost-efficient option because it is a passive investment – that means lower costs compared to an active fund. It is also easier to add or sell in an ETF investment. The option to actively trade ETFs mean the money you invested remain liquid. In the event of a looming market crash, you can easily respond to it so you can minimise your losses.
ETF Investors also get to enjoy higher visibility when it comes to the monitoring of the securities of the fund and how it is performing in the market. After all, an index is usually out there for everyone to see and track.
The goal of ETF investing is to track the performance of indices in the market – like the Straits Times Index or STI for short.
Why investing in STI ETF in Singapore is a good idea
There are so many indices in the market, why do you think investing in STI ETF in Singapore is the best idea?
Here are a couple of reasons.
It practically represents the economy of Singapore.
The STI consists of the top 30 companies in the local market. If you want to know how the stock market in this country is doing, this is the index that you have to look into. These companies are reviewed on a quarterly basis – specifically their respective market capitalisation.
When you invest in the STI ETF in Singapore, you will be a part-owner of the companies that are included in the index. Since it is the top 30 companies in the local market, there is a high chance that your invested money will grow. As long as the market demand is high, these companies will continue to increase the supply – thereby increasing their revenue. When their profit increases, the value of the shares will go up. As part-owner of the company, you are bound to benefit from it.
It is doing very well this year.
The truth is, it is considered to be the strongest benchmark in Asia – with a 5.6% gain so far this year. It is quite high when compared to the average returns from other indices like the 2.5% gain for the Nikkei 225 and Hang Seng Index. As it continues to be the most active ETF in the market, you can really expect more gains for the rest of the year.
2 ways to invest in STI ETF in Singapore
Now that you know why you should invest in the STI ETF in Singapore, the next question should involve your options to invest.
There are two main options.
SPDR STI ETF (stock code: ES3)
This was introduced back in 2002 and is managed by the State Street Global Advisors. This is a leading ETF asset management company in the US. It has a fund size of 326 million. The SPDR STI ETF charges 0.3% of the total expense ratio of the net asset value and has an average annual return of 6.29% for the past 5 years. When it comes to the tracking error, their annual rate is 0.029%.
Nikko AM STI ETF (stock code: G3B)
This was introduced a bit later, in 2009. It is managed by Nikko Asset Management – a DBS subsidiary. The fund size of this option is smaller at 92.9 million but it offers a higher average annual return at 6.85%. This might seem like a better option but you have to know that their annual tracking error is 0.2% – something that experts believe might be intensified because they only started in 2009. The charge is also higher at 0.42%.
Consider all the details before you make a choice between the two. Based on the performance, the SPDR might be a better option. They have been trading the longest and have a lower annual tracking error rate. But the higher average annual return of the latter might make it appealing to some investors.
Other ETF investments to consider in Singapore
Apart from the STI ETF in Singapore, there are other options to invest in ETFs.
This is considered to be the most popular ETF in the US. The SPDR S&P 500 ETF tracks the S&P 500 Index – the most popular index in the global market. This index includes companies like JP Morgan, Apple, Facebook, Microsoft, and Johnson & Johnson. Currently, it rose $0.85 (+0.36%) with a year-to-date gain of 5.96%. If you want to put your money in the international market, this is one of the best options. It is considered to be one of the most liquid and traded ETF in the global market.
United SSE 50 China ETF
China is considered to be the second largest economy in the world – and it is fast rising to the top. If you want to put your money where it is sure to grow, look for an ETF that tracks the best companies from this country. The United SSE 50 China ETF tracks 50 blue chips – all of which are traded in Shanghai. At the moment, this ETF is going down. This is probably a good time to buy in you have no plans of withdrawing your investment in the long term. It has proved its resilience by providing a 24.9% return even after a stock market trouble in 2015.
CIMB FTSE ASEAN 40
If you are looking for diversity, this is the ETF that you want to invest in. This investment monitors the largest corporation across Asia. That means one local economy might fail but there are other countries to save your investment from total loss. The CIMB FTSE ASEAN 40 is also currently going down – just like the United SSE 50 China ETF. However, it does have a 2.98% 3-month return and if holding it steady as it entered 2017. If you can afford to hold your money in this fund for quite some time, it could reap significant returns. Especially with India, Thailand and Indonesia expected to outperform in Asia this year.
Consider diversifying your portfolio with these ETF options. It might help if you consider your investment goals and measure your risk tolerance when choosing between the ETF in Singapore that you will invest in.Recommend0 recommendationsPublished in