Investing In Singapore’s Economy
In your working life, you may have heard this word ‘STI ETF’ being thrown around at the office or over lunch chats. This article serves to clear your doubts and gives you the easiest understanding of what the STI ETF is, why you should consider it and how to invest (one time or monthly).
The Straits Times Index, Exchange Traded Fund (STI ETF) was designed for passive investors who are just getting started. In fact, most Singapore financial bloggers and our Personal Finance SG Community actually advocate the STI ETF as one of the first products you should consider for this very reason – diversity at low cost. Let us break it down simply.
Straits Times Index (STI)
- The STI basically tracks the top 30 companies in the Singapore market which are traded
- These include DBS, OCBC, Singtel, Capitaland etc. (from a mix of industry verticals, you can find the full list below)
- Fun Fact: The STI is actually used as the ‘benchmark index’ for other funds to peg themselves to. For example, you are a better fund if you ‘outperform the index or a poorly managed fund who ‘underperformed the index’
Exchange Traded Fund (ETF)
- An ETF is a passively managed investment fund which is traded on the stock market
- Passively managed because it just tracks the index (for example, buys the top 30 companies based on a certain allocation) hence lower fees
- Traded on stock market indicates that it has high liquidity of buyers and sellers, which is a good thing for investors
Let us share with you more on why, and how you should probably look to the STI ETF as a passive way to get started. Again to be absolutely transparent, we are not sponsored or paid in any way to write this article.
Why should you consider the STI ETF?
For investing in the Singapore’s market, one can try the SPDR Straits Times Index ETF (Singapore; code: ES3) or Nikko AM STI ETF (Singapore; code: G3B).
Reason 1: These are local companies you see every day
The best investments to make are ideally in companies you know well or preferably interact with their goods and services. Here are 3 simple examples.
- DBS bank who happens to be the largest home loan providers and savings deposits in Singapore
- CapitaLand who owns a large majority of land and malls in Singapore we visit every day
- Singapore Telecommunications (SingTel) who happens to own a huge share of mobile data plans and broadband in Singapore
Reason 2: These companies have a regional presence
One big benefit of investing in these companies is that you are actually not only buying into Singapore’s economy. A ton of these companies are actually doing business outside of Singapore and are drivers in the growth stories in neighbouring countries like Indonesia and Malaysia. In the example above, CapitaLand has overseas investments and properties which are also contributing back to the HQ back here in Singapore.
Reason 3: Diversified across many industry verticals
No doubt, some people may argue that it is heavily focused on banking and finance (as with the Singapore economy) but at the same time, there are industries like Entertainment, Telcos and Real Estate also based in Singapore serving the region.
How To Buy The STI ETF?
There are two main funds that you can buy:
They largely have the same holdings, which are basically the 30 top companies in Singapore as described previously. You can view the full list below.
Method 1: Lump-Sum Investment
You can do this by using your brokerage account. Compare the lowest fees here. It’s usually between $10 to $25)
- Step 1: Have a Bank account with either DBS/POSB, OCBC, UOB or FSM/POEMS and a CDP (central depository) securities account (Free to set up)
- Step 2: Apply for a brokerage account with any of the providers as above, such as DBS Vickers or OCBC Securities.
- Step 3: Enter the amount that you are interested to buy for that counter and submit it
- Step 4: A few days later, your stock will be allocated to your CDP account which will be tracked on whichever platform you chose
Example: With DBS Vickers as the brokerage account ($25 per transaction)
Refer to the areas highlighted in the red ovals… and simply select the buy button from there. Look for ES3 and G3B.
Method 2: Monthly Investment
This option is actually simpler to setup compared the above method, primarily due to the idea that you won’t need a CDP account. The bank holds these funds on your behalf. You can also refer here to a table where we compare the different providers with different fees.
- Step 1: Have a Bank account with either DBS/POSB, OCBC, Maybank or POEMS
- Step 2: Apply through iBanking, the money that you invest will be deducted from your linked bank account
- Step 3: Towards the 15th of month, you will automatically buy the STI ETF based on your preference amount
- Step 4: Receive a monthly updated report on your investments and dividends quarterly
Example: With POSB Invest-Saver buying the NIKKO AM STI ETF
Click on the Setup of ETF RSP area
Set it up and it should look something like this!
Further Reading: Past Performance of STI ETF
Disclaimer: As always, past performance does not guarantee future returns! So do take this as a warning and do your own due diligence.
As of date 31 August 2017
Full Holdings of the SPDR STI ETF
|DBS Group Holdings Ltd||13.01||D05-SG||Financials|
|Oversea-Chinese Banking Corporation Limited||12.62||O39-SG||Financials|
|United Overseas Bank Ltd. (Singapore)||10.55||U11-SG||Financials|
|Singapore Telecommunications Limited||9.28||Z74-SG||Telecommunications|
|Jardine Matheson Holdings Limited||6.2||J36-SG||Industrials|
|Hongkong Land Holdings Limited||4.01||H78-SG||Financials|
|Jardine Strategic Holdings Limited||3.61||J37-SG||Industrials|
|Global Logistic Properties Limited||3.28||MC0-SG||Financials|
|Keppel Corporation Limited||3.27||BN4-SG||Oil & Gas|
|Thai Beverage Public Co. Ltd.||3.05||Y92-SG||Consumer Goods|
|Genting Singapore Plc||2.35||G13-SG||Consumer Services|
|Wilmar International Limited||2.21||F34-SG||Consumer Goods|
|Ascendas Real Estate Investment Trust||2.17||A17U-SG||Financials|
|Singapore Exchange Ltd.||2.12||S68-SG||Financials|
|City Developments Limited||1.87||C09-SG||Financials|
|Singapore Airlines Ltd.||1.77||C6L-SG||Consumer Services|
|Singapore Technologies Engineering Ltd||1.74||S63-SG||Industrials|
|CapitaLand Mall Trust||1.59||C38U-SG||Financials|
|Singapore Press Holdings Limited||1.48||T39-SG||Consumer Services|
|Comfortdelgro Corporation Limited||1.41||C52-SG||Consumer Services|
|UOL Group Limited||1.38||U14-SG||Financials|
|Jardine Cycle & Carriage Limited||1.36||C07-SG||Consumer Services|
|CapitaLand Commercial Trust||1.13||C61U-SG||Financials|
|Yangzijiang Shipbuilding (Holdings) Ltd.||1.04||BS6-SG||Industrials|
|Hutchison Port Holdings Trust||1.01||NS8U-SG||Industrials|
|Sembcorp Industries Ltd.||0.96||U96-SG||Oil & Gas|
|Golden Agri-Resources Ltd||0.84||E5H-SG||Consumer Goods|
|CapitaLand Commercial Trust Rights 2017-19.10.17 for Shares||0.03||CLOR-SG||Unassigned|