Should you’ve been investing commonly into the S&P 500 ETF from right here in Singapore, there’s probability you’ve been doing all of it fallacious.
You’ve in all probability heard the same old spiel on-line: make investments a hard and fast quantity within the S&P 500 each month ➡️ dollar-cost common ➡️ compound at 8 – 10% till you turns into a millionaire (or a multi-millionaire).
What's the S&P 500?The S&P 500 is without doubt one of the hottest inventory indices on the earth, representing the five hundred largest publicly traded firms in the US.
Over Chinese language New Yr, I heard a number of mummies discuss this when their friends have been asking what to do with their angbao monies. A lot of them have been echoing this “recommendation” primarily based on what they’d learn on-line, and these similar people are panicking now that the S&P500 is beginning to dip.
On the opposite finish, there are the traders who’ve been shopping for up the S&P 500 exactly as a result of it’s down, or as a result of they automated their investments and proceed to remain the course regardless of the ups and downs.
Should you’ve been making an attempt to find out about investing from on-line finance “gurus” (particularly these primarily based abroad), you’d doubtless have purchased into both of the next by now:
- The SPDR S&P 500 ETF Belief (SPY)
- The Vanguard S&P 500 ETF (VOO)
However when you’re not primarily based in the US, you actually shouldn’t be blindly following such recommendation. That’s as a result of for Singaporean traders, there’s a significantly better means.
How can Singapore traders spend money on S&P 500?
The commonest mistake I see my beginner mates make is that they arrange a recurring funding by their robo-advisor, or proceed to DIY spend money on the S&P 500 through SPY or VOO.
Shopping for SPY or VOO from the US inventory market
This usually occurs when you’re consuming content material from US creators or writers, the place Vanguard funds are sometimes touted as the perfect low-cost resolution for particular person retail traders. Sadly, this recommendation just isn’t tailor-made to international traders outdoors of the US – together with us Singaporeans – as a result of it doesn’t take into the account the various different prices we have now to pay with a view to entry the US markets (which the locals don’t).
The world's most famed e book on the subject of index investing - The Little Guide of Widespread Sense Investing by John C. Bogle - is written by none apart from the founding father of Vanguard himself.I've really useful this e book since 2017 in my studying record right here, and extremely suggest studying it if you have not already accomplished so!
So once I inform my mates concerning the downsides of investing in these funds as a Singaporean investor, they’re often taken unexpectedly:
- You’re paying for custodian charges as a international investor.
- You’re topic to dividend withholding taxes (and that’s why you obtain lower than your pals within the US, despite the fact that you’re each investing in the identical counter).
- You’re topic to property taxes – which suggests the {dollars} you see in your funding account just isn’t what your family members will get in case you are now not round.
Should you don’t thoughts investing by your self on a brokerage, then a greater different to SPY or VOO would be the CSPX (iShares Core S&P 500 UCITS ET). Sadly, most low cost brokerages akin to moomoo don’t provide entry to this since it’s listed on the London Inventory Change, whereas the native ones like DBS Vickers or POEMS cost a recurring custodian price for it.
DCA into S&P 500 by a robo-advisor
For many who want to not DIY fully, one other generally used methodology right here in Singapore is by establishing a recurring month-to-month funding in your most popular robo-advisor.
Most individuals use EndowUs for this goal, given the agency’s aggressive advertising campaigns throughout social media and on public transport. What’s extra, it is without doubt one of the few choices obtainable for anybody wanting to make use of their CPF or SRS funds to spend money on the S&P 500 as an alternative of money.
In fact, there are charges as properly. Whenever you spend money on any of those single funds, you’ll pay an all-in price from (ranging from 0.3% each year) to Endowus, in addition to the TER or fund-level price to the fund supervisor.
My mates who select to take a position their SRS funds within the S&P 500 by EndowUs have been paying 0.30% p.a. (to EndowUs) + 0.08% p.a. to BlackRock.
That’s a complete of 0.38% p.a. in charges.
Most Singaporean traders don’t know this, however there’s the truth is a greater means.
What’s SGX:S27?
Not everybody realises that SPY can be listed within the Singapore Inventory Change (SGX), through a secondary itemizing that occured in 2001. In any case, there hasn’t been a lot advertising or promoting campaigns round this, so think about my shock once I realized about this just lately over dinner with the SGX people themselves!
For Singaporean traders, the SPDR S&P 500 ETF (SGX: S27) presents a better approach to achieve publicity to the U.S. inventory market with the next advantages:
- No must pay custodian dealing with charges.
- You get to personal it in your personal CDP account.
- You’ll be able to make investments utilizing your Supplementary Retirement Scheme (SRS) funds for long-term development.
Right here’s a fast comparability of standard S&P 500 funds amongst Singapore traders:
| S27 | SPY | VOO | Amundi Prime USA |
|---|
| Change | SGX (Singapore) | NYSE (USA) | NYSE (USA) | Euronext (Europe) |
| Index tracked | S&P 500 | S&P 500 | S&P 500 | Solactive GBS United States Massive & Mid Cap Index |
| Expense Ratio (p.a.) | 0.09% | 0.09% | 0.03% (most cost-effective) | 0.05% |
| Incepted in | 2001 | 1993 | 2010 | 2020 |
| Dividend Withholding Tax | No extra tax (already deducted at fund degree) | 30% | 30% | 15% (Eire-domiciled) |
| Dividend Therapy | Distributing | Distributing | Accumulating | Accumulating |
| Buying and selling Hours | SGX market hours (9 AM – 5 PM SGT) | US market hours (9:30 PM – 4 AM SGT) | US market hours (9:30 PM – 4 AM SGT) | Euronext market hours (3 PM – 12 AM SGT) |
| Can use SRS funds to purchase? | Sure | No | No | No |
| Can use CPF funds to purchase? | No | No | No | No |
However isn’t the 0.09% (p.a.) expense ratio the very best?!
Keep in mind, if you evaluate your selection of S&P 500 funds, it’s essential to consider all charges relevant to you rather than taking a look at simply the fund-level charges.
In any case, that’s exactly why VOO isn’t the most suitable choice for non-US residents like us. Whereas Vanguard certainly expenses the bottom expense ratio at 0.03%, folks neglect to consider custodian dealing with charges, platform charges and extra. Shopping for VOO on DBS Vickers, as an example, this can value you custodian charges of SGD 2 per quarter, which works out to be $8 per 12 months.
In distinction, investing through SGX:S27 comes with zero platform or custody expenses, since native brokerages don’t cost custodian expenses for SGX-listed securities! Your actual charges payable will rely in your selection of brokerage (e.g. charges are decrease on moomoo vs. DBS Vickers).
And when you’re shopping for by a CDP-linked brokerage like POEMS or DBS Vickers, then you definately get to personal S27 in your personal CDP account as properly. It is a profit that you just received’t have the ability to discover anyplace else.
SGX:S27 is the solely S&P 500 ETF you can personal in your CDP account beneath your personal title. All different S&P 500 funds obtainable to Singapore traders at this time are held beneath custody.
What’s extra, when you’ve been considering of investing within the S&P 500 for the long-term utilizing your SRS funds, you usually couldn’t as a result of solely SGX-listed ETFs are eligible for SRS investing.
At present, SGX:S27 is the solely S&P 500 ETF obtainable for direct investments utilizing SRS monies.
And do you have to ever want your cash urgently, S27 has a typical T+2 cycle (about 2 enterprise days) for the funds to succeed in you as quickly as you determine to promote, whereas investing within the Amundi Prime USA fund through EndowUs or POEMS will often take longer to clear at 5-7 enterprise days as an alternative.
Conclusion
The SGX people informed me that S27 has persistently ranked among the many most traded ETFs for SRS traders in Singapore, particularly given that it’s the solely choice obtainable. Sadly, a lot of the traders who commerce S27 are usually the older people (who’re extra tuned into SGX choices) and that there’s an enormous hole in consciousness about S27 among the many youthful technology.
Whenever you spend money on S27, you’re holding your cash right here too as an alternative of getting it circulate overseas to the US or London markets. If that issues to you, then it’s possible you’ll wish to relook your selection of investments. Watch the video beneath to find out about your downsides if you spend money on the S&P 500 as a non-US investor:
I like proudly owning counters in my CDP wherever attainable, and have spare SRS funds to deploy, so I’ll undoubtedly be placing my very own cash into SGX:S27 now that I do know of its existence.
So when you’ve been shopping for SPY on the US market otherwise you’ve been investing by your robo-advisory platform, it’s possible you’ll wish to contemplate whether or not switching on to SGX:S27 makes extra sense for you.
With love,
Finances Babe
Disclaimer: That is an academic piece and NOT a purchase/promote suggestion. I'm not a licensed advisor and can by no means settle for my readers' cash to take a position for them.Disclosure: None. This isn't a sponsored article, however when you'll wish to get in contact about including in related sponsored hyperlinks on this piece, be at liberty to succeed in out to me!
