Because it is the oldest and largest STI ETF, SPDR STI ETF (stock code: ES3) would be preferable. It was founded in 2002 and has $1.6 billion in assets under administration as of October 13, 2021.
Both ETFs, however, track the same index and are likely to perform similarly over time.
Is STI ETF a good investment?
Because it comprises a portfolio of firms that represent Singapore’s future economy, the STI ETF can be an excellent long-term investment. Investing in the STI ETF exposes you to some of Singapore’s most well-known corporations, such as DBS and SingTel.
Does STI ETF pay a dividend?
Yes, the STI ETF pays dividends, and the amount you get is proportional to the ownership of the underlying companies and your unitholding. The STI ETF’s average dividend yield is roughly 3 to 4%.
Is the STI ETF a good investment?
The SPDR STI ETF (SGX: ES3) and the Nikko AM Singapore STI ETF are both inexpensive and simple to invest in (SGX: G3B). Investing in the STI ETF can be a good idea for a variety of reasons. All of the STI companies are blue-chip, which means they’re well-known, well-established, and well-protected.
Key differentiating point: Better performance over the years
Compared to Nikko AM STI ETF, SPDR STI ETF has demonstrated to have greater returns for all three performance comparison points (1 year, 3 years, and 5 years). Even when the market crashed in March 2020, SPDR STI ETF’s one-year performance was better than Nikko AM STI ETF’s.
How to buy SPDR STI ETF?
With your brokerage account, you can buy the SPDR STI ETF directly from the market. This puts the decision-making process in your hands; you choose when and how often you want to buy the ETF.
You can also invest in the SPDR STI ETF on a monthly basis using the following sites.
- POEMS Share Builders Plan (SBP): With just S$100 per month, you can get started. There are almost 40 different counters to pick from in addition to the SPDR STI ETF. A fee of S$6 will be charged if you have fewer than two counters. If you have a POEMS brokerage account, you can also set up a recurring plan to acquire the SPDR STI ETF on a monthly basis at the current account brokerage prices.
- FSMOne Regular Savings Plan: A regular savings plan with FSMOne can be started with just S$50 each month. FSMOne gives you the most options, allowing you to choose between the Nikko AM STI ETF and the SPDR STI ETF.
What is the STI ETF’s return?
The SPDR STI ETF returned 28.54 percent on an annualized basis over the past year (as at Sep 2021). The SPDR STI ETF has achieved an annualized return of 4.83 percent over the last five years.
The Nikko AM STI ETF had an annualized return of -8.99 percent during the past year (as at Nov 2020). The Nikko AM STI ETF has returned 3.02 percent annually over the last five years.
The Straits Times Index, on the other hand, had a 1-year return of -8.26% and a 5-year annualised return of 3.57 percent.
As you can see, both STI ETFs delivered a little smaller return than the benchmark STI. The Nikko AM STI ETF outperformed the SPDR STI ETF over the course of a year, but the SPDR STI ETF outperformed the Nikko AM STI ETF over the course of five years. Nonetheless, the differences between the two are not significant.
#5 Expense Ratio
The total expense ratio (TER) determines how percent of a fund’s assets are utilized for operations, including administrative and other costs. Typically, fund management costs make up the majority of a fund’s expense ratio. It goes without saying that the lower the expense ratio, the better for investors.
The SPDR STI ETF and the Nikko AM STI ETF both have a 0.3 percent annual cost ratio.
Despite the fact that both STI ETFs charge the same fee, SPDR receives more money due to its higher asset under management (AUM).
#6 Tracking Error
Performing worse than the market, even if we ignore management costs, is always frowned upon. However, outperforming the index by a substantial margin is not regarded as a good thing for ETFs. This is because its job is to as precisely as possible duplicate market results.
Tracking error is the difference in market returns that cannot be replicated. The SPDR STI ETF has a 1-year rolling tracking error of 0.1863 percent (as of September 2021), whereas the Nikko AM STI ETF has a 3-year annualised tracking error of 0.15 percent (as at Sep 2021).
The tracking error of the Nikko AM STI ETF appears to be slightly smaller. The two STI ETFs, however, report it in different ways. The SPDR STI ETF has a rolling tracking error of one year, while the Nikko AM STI ETF has a three-year annualised tracking error.
#7 Dividend
Dividends are frequently paid out by the stocks that make up the Straits Times Index (STI). In fact, Singapore stocks are regarded for paying some of Asia’s highest dividends. These dividends will be paid to the corresponding ETF, which will then distribute them to its shareholders.
Both the SPDR STI ETF and the Nikko AM STI ETF have a semi-annual dividend payout policy. This implies that when ETFs receive dividends from their assets, they are not paid out immediately. Instead, both STI ETFs keep the dividends and distribute them on a regular basis.
The SPDR STI ETF has a dividend yield of 2.52 percent, while the Nikko AM STI ETF has a dividend yield of 3.20 percent, according to the SGX ETF Screener.
Also see: How To Build A Dividend Income Portfolio In Singapore To Replace Your Wage
Why The STI ETF Makes A Logical Investment For Many
Beginners and experienced investors both can benefit from the STI ETF.
It provides a safe option for new investors to get started, even if they lack prior investing knowledge or experience. We also don’t have to keep a close eye on our assets and may pursue a passive investing strategy because our portfolio is instantly diversified with Singapore’s 30 strongest stocks. Of course, we may utilize this as a stepping stone to learning more about investing and eventually allocating a portion of our portfolio to individual equities in Singapore and beyond.
Indexes are also evaluated and updated on a regular basis, and any changes to the index will be reproduced by our fund managers. Fund management fees are often significantly lower than actively managed funds because fund managers are simply copying index adjustments.
It can be a terrific complementary passive investment technique for experienced investors to diversify our risk while taking on riskier investments in the market.
Is the STI index dividend paying?
Stocks in Singapore’s Straits Times Index (STI) are regarded for paying a respectable dividend. The STI’s dividend yield is 3.60 percent as of November 30, 2021. Other indexes, such as the Hang Seng Index (HSI) in Hong Kong and the S&P 500 index in the United States, pay only 2.53 percent and 1.35 percent (as of 14 December 2021), respectively.
While the dividends paid by STI are appealing, they only represent half (or less) of the picture. This is because we aren’t looking at the index’s growth, or total returns, which include price appreciation. Again, the HSI and S&P 500 have increased 21.66 percent and 17.66 percent, respectively, during the last five years, compared to the STI’s 4.7 percent total return.
Investors Who Benefit From Dividend Investing
There are various ways we can employ to develop our portfolio when we begin our investing adventure. Dividend investment is a lucrative and vital way to create income for many people.
Individuals in retirement or partial retirement, for example, may require monthly income to cover their living expenditures. Others pursuing FIRE (Financial Independence, Retire Early) may wish to consider diversifying their assets to include income.
Another way to look about income investing is that only well-established corporations with stable cash flows can afford to pay out regular dividends. As a result, when market downturns occur, such businesses may be well positioned to weather the storm.
However, because of their nature, such businesses may not be at the growth stage of their development. This is one reason why STI businesses’ total returns may lag behind those of the Hang Seng Index or the S&P 500 Index.
Even The STI ETFs Do Not Pay The Same Dividend Yield
While the STI pays a 3.6 percent dividend yield, this does not guarantee that we would earn the same income if we invest in a STI ETF. This is because we must invest in either the SPDR STI ETF or the Nikko AM STI ETF, which are the two STI exchange-traded funds (ETFs). The dividend we receive will be different and should be slightly lower due to additional fees and tracking issues.
The distribution yield of the SPDR STI ETF, for example, is 2.61 percent (as at 14 December 2021). While Nikko AM STI ETF does not explicitly indicate this, it should be rather close.
Also see: SPDR STI ETF vs. Nikko AM STI ETF: What’s The Difference Between These Two SGX-Listed STI ETFs?
Stocks On The STI Pay Out Different Dividend Yields
The Straits Times Index (STI) is comprised of 30 of Singapore’s largest and most liquid stocks. As previously said, such businesses often have robust cash flows and can pay out regular dividends, although they may not be high-growth. In addition, the STI includes seven REITs, all of which are known for paying out reasonable payments on a regular basis.
It should also be self-evident that each of the STI’s 30 constituents will pay a distinct distribution yield. Below is a list of the dividends paid by the various stocks on the STI:
*Unless otherwise noted, dividend yield is based on SGX Stock Screener data.
** CapitalandInvest is a new company that has yet to declare its first dividend.
Best-Yield STI Stocks
The five best yielding STI equities, as shown in the table below, are mostly REITs. This isn’t surprising, given REITs’ proclivity for paying out high dividends. They easily outperform the STI’s overall rate of 3.6 percent.
The remaining STI stocks, with the exception of Frasers Logistics & Commercial Trust, all saw their prices fall. DairyFarm International, in reality, has lost roughly a third of its worth. This is a cautionary lesson about not diversifying our investments, and it stands in stark contrast to the STI’s year-to-date total return of 10.4 percent (as at 30 November 2021).
Also see: A Complete Guide To Investing In Singapore’s Straits Times Index (STI) ETFs
What’s a good ETF to invest in?
“Start with index ETFs,” suggests Alissa Krasner Maizes, a financial adviser and founder of the financial education website Amplify My Wealth. “They have modest expenses and provide rapid diversity.” Some of the ETFs she recommends could be a suitable fit for a wide range of investors:
Taveras also favors ETFs that track the S&P 500, which represents the largest corporations in the United States, such as:
If you’re interested in areas like technology or healthcare, you can also seek for ETFs that follow a specific sector, according to Taveras. She recommends looking into sector index ETFs like:
ETFs that monitor specific sectors, on average, have higher fees and are more volatile than ETFs that track entire markets.
Is it possible to lose money in an ETF?
These funds can trade at huge premiums, and if you acquire one at a significant premium, you should expect to lose money when you sell it. ETFs, on the whole, do what they say they’re going to do, and they do it well. However, to claim that there are no dangers is to deny reality.
Are exchange-traded funds (ETFs) safer than stocks?
Although this is a frequent misperception, this is not the case. Although ETFs are baskets of equities or assets, they are normally adequately diversified. However, some ETFs invest in high-risk sectors or use higher-risk tactics, such as leverage. A leveraged ETF tracking commodity prices, for example, may be more volatile and thus riskier than a stable blue chip.
How much should I put in ETFs in Singapore each month?
You’ll need at least S$50 for ETFs, S$100 for unit trusts, and S$500 for managed portfolios to get started. You can also adjust the amount of your monthly investment at any time.