If you are interested to invest in the Straits Times Index (STI), it is available in SGX through the STI Exchange Traded Fund (ETF). It started in 2002 and is managed by State Street Global Advisors. STI is mainly a blue chip (major companies) index of the top 30 companies listed in SGX. As compared to S&P 500, it is a much narrower basket of stocks. Nonetheless, it is the most widely used indicator for Singapore market.
The Fund’s investment objective is to replicate as closely as possible, before expenses, the performance of the Straits Times Index. As this will disallow the Fund Manager to buy or sell based on his own judgement, it eliminates possible human errors or emotions in investments. And because of this mechanical investing style, the fund management fee is low (0.3% per annum) as compared to a typical actively managed fund (~1.5% per annum). Another advantage of ETF is that it can be easily traded (like stocks) via the exchange and thus, facilitates short term trading.
Although the ETF is convenient to buy and sell, it is better to buy and hold for the long term so as to have a longer time horizon as an edge. I believe using the dollar cost averaging (DCA) method (buying a fixed amount each month regardless of the ETF price) should be the initial and primary method of investing. It may sound boring but it is one of the safest and easiest, yet able to get reasonable returns for a person who knows nothing about investing. It eliminates the need for market timing and any form of analysis of specific companies in the stock market. One note to be taken seriously for DCA is that it takes great discipline to contribute regularly in buying the counter, especially when the market is not doing well. This is because the method actually takes advantage when the counter price is low (like a discount so you can buy more). If you are not able to do it, then it will defeat its purpose and thus, think thrice of the commitment level before you jump into it.
If you are interested in applying the DCA method for STI ETF, PhillipCapital has a Shares Builder Plan (SBP) where they accept a minimum of S$200/mth to purchase the ETF for you. The cost of each transaction is S$6 + GST (for investment <>www.poems.com.sg » Financial Services » Stocks & Shares » Share Builders Plan. I am currently suscribing to this plan, buying S$200 worth of STI ETF shares each month and I decided to do it long term. (Update: I have just increased it to S$400 in Apr 09!)
Here are some details about STI ETF:
Counter Name – STI ETF
Management fee – 0.30% per annum (max 1%)
1 Trading lot = 1000 shares
Currency – SGD
Performance of STI ETF (taken from the fund’s annual report on 30 Jun 07)
Moneytalk has a fantastic series of articles about STI ETF:
Dollar Cost Averaging for STI ETF
STI ETF 1st Dividends for 2009
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.
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hi,
i’m also kinda interested in the STI ETF esp since i’m a total newbie to investing.
I’m wondering if you would be able to clear my doubts on this…
wats the difference in buying STI ETF through POEMS vs DBS VICKERS?
is it the cost issue? since u mention $25 brokerage fee for POEMS, does it mean DBS VICKERS charge more??
Hi Joanna,
POEMS and DBS Vickers are both brokerage firms which means they help investors acquire the securities that we indicated and in return, we pay them commissions.
You can check their commission charges at their respective websites. What I have found is that both charge the same rate (for SG shares and online transaction):
First 50K = 0.28% (min = S$25)
Next 50K = 0.22%
Thereafter = 0.18%
Besides brokerage fees, they will also collect,
CDP Clearing Fees = 0.04% (max S$600)
SGX Access Fee = 0.0075%
GST = 7% of (brokerage + clearing fees + access fee)
Since both firms have the same charges, it would be down to their service quality and investment tools available for you. I am sure some of your friends or family members should have account with either one. Ask them to show you the trading platform and select the one that you feel comforatble with.
if you buy regularly from share building plan, that will cost you about 12.5% charge fee wouldn’t since you are actually buying 200 dollars worth of shares per month but the minimum brokerage commission is 25 dollars?
Hi William, I pay $6 + GST for the charges. Min $25 fee is for normal stock transactions but does not apply to Share Builder Plan.
=) sorry for that part smurfie, i have just read the article again. this seems to be quite a good investment rite?
No problem William. As for whether this is a good investment, it is rather subjective. It can be said to be the easiest way to invest and yet able to get a good return. But it definitely takes great discipline to keep investing. My recommendation is to increase the monthly investment amount such that the percentage cost will be reduced.
I found that my StiETF SBPlan in POEMS charged me higher than the market on 18 Sept. POEMS charged me $2.59027/share but on that day the price was lower than this for the whole trading day, day low was 2.40 and day high was 2.50. Please check yours
You are right. I am charged $2.59027 too. I will question POEMS and see what will be their explanation.
POEMS immediate reply:
“Upon receipt of your email, we had highlighted this issue to the management and are investigating on this issue.
We sincerely hope you will allow us more time for our investigation, and we will get back to you soonest possible to update you on the investigation results.”
I will update when they give an answer.
Here was POEMS’s explanation:
“Due to communication lapses, the respective counters, STI ETF and SGX, were not successfully executed on the 18th of Sep 2008. Therefore, the balance quantity was executed on the 19th Sep 2008. Please be informed that we will credit you with the rightful number of shares based on the weighted-average price of the SBP counter on the 18th Sep 2008.”
“…Please be assured that measures are taken to prevent this situation from occurring again.”
POEMS have reallocated the shares to me. Hope those affected are given a fair treatment. Glad that POEMS was honest about the mistake and willing to correct it.
Is the management fee transparent to me when I buy and sell ETF online?
So, what I will be charged are only brokerage rate, clearing fee, SGX trading fee and GST. Right?
Hi David, STI ETF fund manager should provide the management fee in the annual report. And yes to all the charges you mentioned.
Alvin, sorry I probably didn’t make my question clear. When the management fee will be charged and in what way the fee is charged? Suppose that I bought 100 lots in the morning and sold them in the afternoon. Will I be charged one year’s management fee? Or the fee will only be charged when they deliver me the dividend (subtract the management fee from the dividend)? Or the ETF management will just give themselves the management fee from the profit they made rather than directly charging me?
David, hope this will answer your question. Lifted from the prospectus:
“The Manager shall be entitled to receive for its own account out of the Deposited Property of the Fund as
soon as practicable after the last Dealing Day of every calendar quarter.”
“The remuneration of the Trustee shall be payable out of the Deposited Property quarterly in arrears in four installments as soon as practicable after the last Dealing Day of every calendar quarter.”
Deposited Property was defined as “all the assets, including Cash, for the time being held or deemed to be held upon the trusts of the Deed”
“To the extent possible, the Fund’s fees and expenses will be paid out of the dividends the Fund receives.”
Current expense is kept to 0.3% per annum. So the 0.3% will be paid in parts, 4 times a year. It will be paid out from the fund asset itself, especially from the dividends collected from the STI component companies.
Alvin, thank you for taking the time to find the answers. As a matter of fact, I can’t understand many parts of the prospectus though I’ve read them before posting my questions. Thank you for adding your explanation in the last paragraph in your reply.
Hi,
Have you guy received your STI ETF dividen on your POEMS Share Builder Plan, it was distributed on 11 Aug. I have not seen mine in SBP account. I think it supposed to be shown in SBP account on 13 Aug and be in time to reinvest the dividen on 18 Aug. Please check yours.