Hi! Newbie here! I'm about to make my first investment into ETF. I'd like to start with an ETF that tracks the S&P 500. My goal is long term, and for capital appreciation, not for dividends payouts. What are your suggestions? - Seedly
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Michelle Thavasi

Asked on 19 Apr 2020

Hi! Newbie here! I'm about to make my first investment into ETF. I'd like to start with an ETF that tracks the S&P 500. My goal is long term, and for capital appreciation, not for dividends payouts. What are your suggestions?

Would it make sense to invest in CSPX instead of VOO due to withholding tax of 30%? Or would the high liquidity of VOO outweigh the cons of the withholding tax implications? Also, as I'm only interested in the capital appreciation, would i be able to select an ETF that tracks the S&P 500 AND reinvests the dividends, therefore avoiding withholding tax altogether? As I understand it, Singaporeans do not need to pay on capital gains tax. Thanks for your help! Michelle.

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Shengshi Chiam, CFA
Shengshi Chiam, CFA, Personal Finance Lead at Endowus
Level 7. Grand Master
Answered on 21 Apr 2020

I would start with a broader index, that tracks not just the US markets, but the global index. including other developed markets and emerging markets.

VWRA/VWRD serves the purpose, and it is tax efficient. US listed is extremely bad because you are potentially paying 2 layers of dividend withholding taxes.

You can read up more about it here:

https://endowus.com/insights/an-inconvenient-truth-tax-on-us-listed-etfs-04c7532c5d/

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Michelle Thavasi
Michelle Thavasi

13 May 2020

Thank You!
megadisc

4d ago

Thank You!
Thank You!
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Penny Chong
Penny Chong
Level 5. Genius
Answered on 11 May 2020

S&P 500 is a good choice. You can try Interactive brokers for Ireland domiciled S&P500 ETF.

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Michelle Thavasi
Michelle Thavasi

17 May 2020

Thank You!
Thank You!
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Frankie Rappaport
Frankie Rappaport
Top Contributor

Top Contributor (Aug)

Level 9. God of Wisdom
Updated on 22 Apr 2020

Whether the 30% are relevant depends a bit on the total sums invested from a pragmatic view.

CSPX and VUSA should be liquid enough.

TD Ameritrade (among probably others) would let You reinvest dividends of ETFs free of charge:

https://www.tdameritrade.com/investment-products/dividend-reinvestment.page

The physically (important !) replicated 'accumulating' ETFs for SP500 would be:

VUAG or VUAA: Vanguard S&P 500 UCITS ETF (USD) Accumulating ISIN IE00BFMXXD54

CSPX pr CSP1: iShares Core S&P 500 UCITS ETF (Acc) ISIN IE00B5BMR087

Both are very cheap: TER = 0.07% per year​​​

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Michelle Thavasi
Michelle Thavasi

14 May 2020

But for the same reasons you stated about Vanguard having a very good rep and TER being low, and i liked that it was in USD and an accumulating ETF was what drew me towards this choice.
Michelle Thavasi
Michelle Thavasi

14 May 2020

I like your suggestion to do 50/50 though. Thanks again. :)
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jw
jw
Level 5. Genius
Answered 2d ago

I think there’s already some great answers here but I will like to add on one thing. Even if you choose an ETF that reinvest, the withholding tax still applies. It can’t be avoided this way.

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Jovan Lai
Jovan Lai
Level 4. Prodigy
Answered 2d ago

Hi Michelle,

S&P500 is a great choice, Warren Buffett himself recommends it.

The 30% tax is only on dividends, not capital gain which is not much when investing in assets that are primarily focused on capital gains.

While the rest focus on cutting cost from tax on the, in my opinion, minute amount of dividends, I think SPY and VOO provide better spread, liquidity being more commonly traded. It also has higher asset under management. These are important as it reflects a better representation of the true market.

Depending on what you look for, I prefer volatility to have opportunities to buy cheaper.

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PillowCase
Level 5. Genius
Answered on 19 Apr 2020

Hi there!

You could consider taking up a Regular Savings Plan with FSMone. There is the option of investing in ISHARES CORE S&P 500 ETF .

The minimum monthly investment amount is $50, or you could just invest a lump sum amount. Fees are relatively low too.

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Frankie Rappaport
Frankie Rappaport

22 Apr 2020

TD Ameritrade has 0.00 USD commission fees, so maybe cheaper than a RSP. Take notice that, whenever You switch currency because of Your trade, f.ex. SGD to EUR, or SGD to USD, You will be incurring a currency conversion fee by Your broker or bank, that is not visible on Your trade confirmation! So always use somthing like TransferWise (currently the cheapest) to switch currencies when You buy a non-SGD-denominated ETF.
Frankie Rappaport
Frankie Rappaport

22 Apr 2020

Same is true if You send f.ex. USD into any U.S. brokerage account using your SGD-denominated Singapore banking account
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Yh.lens
Yh.lens
Level 6. Master
Answered on 19 Apr 2020

Hello! I am currently invested in VTI due to the diversification and the entire VOO is also taken into consideration under VTI ( Total Stock Market). The 30% withholding tax is really not important if you are going for capital gains because the dividene yield of VOO is rather low anyway. If you are looking for low comission fees, you can try FSMone or Saxo Markets. For me I am buying VTI through Kristal.ai, with absolutely no fee. Do check it out if you want to!

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Michelle Thavasi
Michelle Thavasi

19 Apr 2020

Hi! Thanks for the reply! Appreciated!
Frankie Rappaport
Frankie Rappaport

12 May 2020

But the VOO dividend is not low: it is about 2% per year so over 20-30 years the minus 30% versus minus 15% only issue could be of some relevance.
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