You don’t even need a CDP account to use this method. Simply apply through your iBanking account and enter the fixed monthly amount you want to commit to purchasing the ETF each month. Dollar-cost averaging is the term for this method. The bank will then assist you in purchasing the shares with the monthly amount you specify. To begin investing, you only need a minimum of $100.
Which STI ETF is better?
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%.
What is the best way to invest in the STI?
A potential merger between CapitaLand Commercial Trust and CaptiLand Mall Trust is also in the works. CapitaLand Commercial Trust will also make space for another entrant once this is accomplished.
The STI Reserve List
When stocks are removed off the STI, a reserve list of five stocks is inserted to take their place. The five stocks currently on the STI reserve list are:
What Is An ETF?
An Exchange Traded Fund (ETF) aims to passively replicate the performance of the index it tracks, such as the STI. The ETF manager’s role is to guarantee that the ETF continues to closely track the index by completing rebalancing and other chores, rather than to make active investments to increase your investment returns.
ETF costs are cheaper than traditional mutual funds, also known as unit trusts, because ETFs do not aim to beat the market through active trading. You can buy or sell ETFs at any moment because they are traded on the stock market.
The ETF will often have a tracking error while attempting to duplicate the index’s performance. This is primarily because of the following factors:
I When constituent stocks are deleted or put into the index, transaction expenses for buying and selling them are incurred.
What Is A STI ETF?
Also see: Why We Think The STI ETF Should Be Your First Stock Investment
The difference is that they are managed by two different businesses, SPDR and Nikko AM, as their names suggest. In essence, they are both attempting to accomplish the same goal and should yield similar results. For further details, consult the fund fact sheets for both SPDR and Nikko AM ETFs.
The main distinction will be in how successfully they track STIs and the costs they charge. Because an ETF’s duty is to closely monitor the performance of its chosen index, any divergence, even “good” ones, should raise suspicions that the ETF isn’t doing its job correctly.
These ETFs, like the STI, are market-weighted, which means the value of the stocks they hold is proportional to the company’s capitalisation (total market value). As the stocks on the STI are reviewed, added, or withdrawn from the index over time, these STI ETFs will purchase and sell the corresponding stocks to reflect the changes.
Also see: Should a Beginner Invest in Mutual Funds or ETFs?
How To Start Investing In The STI ETF?
Because both the SPDR and Nikko AM ETFs are traded on the Singapore Exchange, you may simply buy them through a stock brokerage like you would an individual stock.
We’ve developed a step-by-step guide to buying your first stock for those who haven’t done so before, as well as a full list of online stock brokerages in Singapore and their fees.
Regular Shares Savings (RSS) plans, also known as monthly investing plans, are another good option to invest in a STI ETF over time with as little as $100 per month in starting money.
FSMOne ETF Regular Savings Plan, OCBC Blue Chip Investment Plan, Phillip Share Builders Plan, and POSB Invest-Saver are the four financial institutions that provide RSS plans.
The convenience of this strategy (you set up an RSS plan online or at an ATM), the fact that it is recurring, and the fact that it allows you to practice dollar-cost averaging implicitly are all advantages.
Also see: How To Invest Using A Regular Shares Savings (RSS) Plan: A Step-By-Step Guide
You can also invest in a STI ETF with your CPF Ordinary Account. It’s one of four ETFs that the CPF Investment Scheme allows you to invest in (CPFIS). You must open a CPFIS scheme account with one of the local banks and link it to your brokerage account in order to do so.
Buying the STI ETF using CPF funds is the same as buying it with cash; you only need to specify on your brokerage platform that you are paying for the shares with CPF. After the initial $20,000 in your CPF Ordinary Account, you can invest as much as you want.
We can invest in individual stocks in Singapore if we have gained experience with the STI ETF and have developed our knowledge and confidence. We can also diversify our portfolio by purchasing stocks listed in the United States and Hong Kong.
Also see: How Can Singaporeans Begin Investing In The United States, Hong Kong, Or Other Major Overseas Stock Markets?
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.
In Singapore, how do I purchase an ETF?
ETFs are one of the most straightforward and cost-effective ways to begin our investment journey. ETFs have gained even more attention and appeal in recent years, and have now surpassed active investing in terms of popularity. There are currently around 7,600 ETFs listed around the world (as of 2020).
While many ETFs are designed to give wide market exposure, their diversity and complexity have grown over time. Aside from duplicating country indexes, ETFs for extremely particular business sectors, regions, and asset classes, as well as more intricate leveraged and synthetic ETFs, are now available.
ETFs are traded on stock exchanges and aim to mirror an index’s performance. Broad country-based indices, such as the Straits Times Index (STI), Hang Seng Index, or S&P 500 Index, can be used. It can also mimic tighter indexes that monitor certain industries, geographic regions, or asset classes. We can purchase and sell them because they are listed on stock markets, just like we can buy and sell other stocks and bonds.
How To Invest In ETFs In Singapore?
Because ETFs are traded on a stock exchange, the most frequent way to invest in them is through a stock brokerage account, just like how we buy and sell stocks in Singapore. There are 45 ETFs listed in Singapore, according to the Singapore Exchange (SGX). Because some ETFs are listed in many currencies, the actual number may be lower. Apart from the Singapore Exchange, most local stock brokerage accounts also give us access to other major stock exchanges across the world. As a result, we can invest in ETFs registered on these foreign markets.
Regular Shares Savings (RSS) plans are another way to invest in ETFs in Singapore. In Singapore, there are now four RSS providers; some of them also allow us to invest in individual equities or ETFs that are listed on foreign exchanges.
Also see: A Step-By-Step Guide To Investing In Singapore Using Regular Shares Savings (RSS) Plans
Investing through robo-advisory platforms in Singapore is a third avenue for investors to obtain exposure to ETFs. In Singapore, there are at least 11 robo-advisory platforms, with nine of them employing ETFs as part of their offerings. The ETFs that robo-advisory platforms mostly employ are exposed to broad indexes listed in the United States.
#1 Low Barrier Of Entry For New Investors
ETFs are a great method for new investors to get started because they don’t require much in the way of investment knowledge or expertise. Investors would also save time by not having to constantly monitor or rebalance their portfolios.
#2 Low-Cost Method To Invest
When compared to actively managed funds, ETFs usually have cheaper management fees. This is because ETFs simply replicate the index and follow the instructions on what to invest in. We can save money by not hiring an active fund manager to pick stocks or time stock prices.
The S&P 500 ETF, for example, has a net cost ratio of 0.0945 percent. The overall expense ratio of the STI ETF is 0.3 percent. Generally speaking, the larger the ETF, the lower the expense ratio it may charge.
Also see: A Complete Guide To Investing In Singapore’s Straits Times Index (STI) ETFs
#3 Instant Diversification
We can theoretically create our entire portfolio with just one investment in an ETF, depending on the index that the ETF tracks.
For example, just investing in the S&P 500 ETF will provide us access to over 500 blue chip firms, accounting for roughly 80% of the market capitalization in the United States. Furthermore, this investment will be diversified to include IT (26%), healthcare (13%), consumer discretionary (12%), financial (12%), communications (11%), industrials (9%), consumer staples (6%), and other sectors.
#4 Passive Approach To Investing
We are removing the decision to pick equities from our hands by investing in ETFs. We’re merely allowing the index to determine which equities we should buy.
We will essentially get the market returns of the US market if we invest in a broad country index, such as the S&P 500. This manner, we don’t want to time or beat the market; instead, we just wish to earn market returns over time.
Another advantage of taking a passive strategy to investing is that we don’t have to keep such a tight eye on our money. This is due to the fact that most indexes have a process for selecting and deleting member stocks. This means that if a stock fails to meet the criteria, it is automatically withdrawn from the index and, by default, the ETF. This is why, unlike individual companies, a solid index (and the ETFs that track it) may last a long time.
#1 ETFs Always Underperform The Index
We can never expect spectacular gains when we invest in an ETF. As previously said, it’s the equivalent of electing to earn only the market return.
We also have to pay brokerage costs when we buy (or sell) an ETF. We must pay management fees and other expenditures when we invest in an ETF. As a result, we will never achieve the return that the index provides. We will, however, earn a return that is just little less than that.
Is the STI ETF a dividend payer?
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).
What is the number of ETFs in STI?
You have made the decision to begin investing in the Straits Times Index (STI).
But you don’t have enough money to buy individual equities, and you realize that exactly replicating the index will require a lot of work.
- Consider index investing as a viable option for your investment strategy and time horizon.
- Learn how to invest in Singapore’s top 30 firms with the STI ETF.
- Recognize the distinctions between Dollar Cost Averaging (DCA) and Lump Sum Investing.
You now have the option of choosing between two STI Exchange-Traded Funds (ETFs):
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.