If you are a firm believer of the Random Walk Theory or the Efficient Market Hypothesis (EMH), you would want to invest in an index fund. Index funds have been widely available for a long time in US and Vanguard is the leading index fund provider. John Bogle who founded Vanguard is a strong believer that the Index is hard to beat in the long run. Thus, if you cannot beat the index, buy the whole index! Unlike US, Singapore has limited choices for investors who wants to invest in index funds. Nonetheless, here are 3 options that you may like to explore.
Infinity U.S. 500 Stock Index Fund
Lion Capital has liaised with Vanguard to offer Infinity U.S. 500 Stock Index Fund which is a feeder fund in the Vanguard U.S. 500 Stock Index Fund. This gives Singaporeans a valuable chance to invest in Vanguard’s managed funds. P.S. US calls it mutual fund whereas in Singapore, it is known as Unit Trust.
Preliminary charge: 2%
Management Fee: 0.475% p.a.
Annual Management Charge (Mother Fund): 0.23 %
Annual Expense Ratio: 1.09%
There are 2 options if you want to buy S&P500 Index Fund through Singapore Stock Exchange (SGX). These funds are known as Exchange Traded Funds - They are funds yet conveniently traded like stocks:
SPDRs
SPDRs which conveniently known as spiders (due to its abbrevation) actually stands for Standard & Poor’s Depository Receipts. The counter that can be traded in SGX is actually cross-listed from American Stock Exchange (AMEX). This means that a Singaporean investor actually purchase the shares from US through SGX, and hold it in Central Depository (CDP), Singapore. Thus, it will be convenient for the investor as he do not need to have a US trading and holding account. The value of SPDRs shares is 1/10 of the S&P500 Index and is managed by PDR services, a subsidiary of AMEX.
Counter name: SPDRS 10US$
Board Lot Size: 10
Currency: USD
Total Expense Ratio: 0.10% p.a.
Transaction Costs: Prevailing brokerage commissions (abt 0.33% and min S$25)
+ Clearing fees of 0.05% of the contract value
(subject to a maximum of SGD200);
+ Goods services tax of 7% on brokerage commissions and clearing fees.
iShares S&P 500
Very similar to the SPDRs, iShares S&P500 also tracks the S&P500 Index at approximately a value of 1/10 of the Index. The difference is that iShares S&P500 is listed in New York Stock Exchange (NYSE) while SPDRs is listed in AMEX. In addition, iShares is managed by Barclays Global Investor while SPDRs is by PDR Services.
Counter name: IS S&P 500 10US$
Lot Size: 10
Currency: USD
Total Expense Ratio: 0.09% p.a.
Transaction Costs: Prevailing brokerage commissions (abt 0.33% and min S$25)
+ Clearing fees of 0.05% of the contract value
(subject to a maximum of SGD200);
+ Goods services tax of 7% on brokerage commissions and clearing fees.
So which is the right choice? It really depends on your needs if you are choosing which of the above to invest in. ETFs will be convenient to buy and sell frequently if you are intending to trade short term as you can trade them like stocks. If you intend to buy a small amount on a regular basis, using the dollar-cost-averaing method, it is unwise to choose ETFs. This is because there will be cost of brokerage fees incurred each time you buy (a minimum of S$25, depends on your broker). In this case, it will be beneficial to look for institutions that have regular investment plans ($100/mth for Infinity U.S. 500 Stock Index Fund) as the charges will definitely be more reasonable. One such institution is Fundsupermart which has Regular Saving Plan (as they termed it) for regular contributors.
Disclaimer: The above viewpoint is strictly for information only and may not be suitable for your financial needs or goals. Please carry out more research or consult a qualified financial advisor to assist you. The Information is correct at the point of writing. The author, through this article, does not gain any monetary or other forms of benefit from any of the above mentioned institutions.
{ 2 comments… read them below or add one }
Hi, thanks for writing this article. It really clarifies what ETFs we can invest in Singapore.
Would also like to find out for SPDRs, you mentioned that it is sold in Board Lots of 10. May I know how much is that, is it 10,000 shares?
Hi penny, SGX has been introducing more ETFs lately so it is worthwhile to take a look at the following URL:
http://www.sgx.com/wps/portal/marketplace/mp-en/products/securities_products/etfs
The lot size is 10, which means 10 shares make one lot.
Currently, SPDRs is traded at US$250. Hence, one lot will cost you 10 x US$250 = US$2500
I do not recommend you to buy SPDRs since there is no volume on the SGX. It may be a problem selling them when you want to.