How do I invest in index funds (NOT ETFs), tracking indexes like the S&P500 or the MSCI World index in Singapore? - Seedly
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AMA Christopher Tan

Anonymous

Asked on 23 Jan 2019

How do I invest in index funds (NOT ETFs), tracking indexes like the S&P500 or the MSCI World index in Singapore?

How do I invest in index funds (NOT ETFs), tracking indexes like the S&P500 or the MSCI World index in Singapore?

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Hi Anonymous, thank you for your question. It all depends on whether you are an accredited investor or a retail investor. If you are an AI, you are able to buy into the Vanguard series of index funds. An AI is is one that has a $2 mil networth or a preceding year income of $300,000. If you are a retail investor, unfortunately, there is no index funds in Singapore that is worth you investing into. I will explain what I mean "worth" in a moment.

Since 2004, I have been talking to every CEO of Vanguard Singapore to bring in their Vanguard funds for the retail investors. Specifically, there were 4 CEOs I spoke to over the course of the past 15 years. Three of the CEOs could not do it because there was simply not enough demand. In their words, very few financial advisers/banks would want to sell index funds as the management fees are low and financial advisers and other financial institutions do not get a commission or trailer fees from it. When the 4th CEO came to Singapore, we made progress. I spent significant amount of time working with the management team in Singapore as well as their worldwide leadership to try to bring the retail tranche to Singapore. The funds were even registered and we were already to launch. But unfortunately, there was a change in leadership direction at Vanguard and Vanguard at the very last minute decided to pull out of Singapore and set up their Asia Pac office in Hong Kong instead.

The 2 UTs that were mentioned below - Fidelity America A Fund and Threadneedle Global Equity Income Fund are unfortunately not index funds. These funds are benchmarked to the mentioned indexes, but they are not index funds. They do not track the index, they are active funds trying to beat the index by picking stocks. Benchmarked to the index means that they compare their performance to the index, but they do not follow the index. The funds also have 1.5% management fee which is far higher than the typical index fund of say 0.2%-0.4% p.a.

Having said that, there are a few index funds in Singapore that are not "worth" investing into. They are the LionGlobal infinity fund series. They have the MSCI world and S&P 500 index fund but they are not worth investing into because the total expense ratio (TER) is simply to high for an index fund. The TER is at 0.81% and 0.72% respectively.

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Fatty Finance
Fatty Finance

30 Jan 2020

Hi Christopher, unfortunately, I do not have access to Dimensional. One way to access it is via MoneyOwl which you manage. But after adding all the fees (advisory, platform) the total expense ratio increases from 0.3-0.4 to 1.13-1.23
Fatty Finance
Fatty Finance

30 Jan 2020

I did not mean to post so fast as I hit the enter button too soon. Continuing on my comment. So similarly, if I do not want any financial advice and I just want to buy an index fund and I am not an AI, I would only have LionGlobal infinity fund series as a choice. The underlying vanguard funds have 0.2-0.4 however because people like me do not have access, we have to pay a premium of 50 basis points to LionGlobal just to own a Vanguard index fund. The point is: poorer people cannot be choosers. I just want to thank you for trying to convince every single Vanguard CEO. Thanks for advocating for low costs investments to retail investors. Keep going!
Frankie Rappaport
Frankie Rappaport
Top Contributor

Top Contributor (Jul)

Level 9. God of Wisdom
Answered on 07 Feb 2020

Cheap ETFs are (mostly) the better solution, also tradable during all opening hours of the exchange. cost reducing is so important.

my thinking:

https://seedly.sg/questions/what-is-your-general-investing-philosophy-strategy

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Luke Ho
Luke Ho, Money Maverick at Money Maverick
Level 7. Grand Master
Updated on 07 Jun 2019

The average index fund all-in expense is actually around 0.4 - 0.7% (Source: SPIVA) so I think its okay if you want an index fund at that expense ratio.

I would personally prefer index funds to ETFs because they force you to commit, lower tracking error amongst other benefits, even with a little bit more fees. Not easy to get though, as described below.

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Christopher Tan
Christopher Tan

24 Jan 2019

Hi Luke, thanks for your comment. The total expense ratio (TER) of the Vanguard funds that we use for our clients is between 0.2%-0.3% p.a., lower than the 0.4-0.7% that you mentioned. As for the Dimensional funds that we use for our clients, TER is between 0.4%-0.5% p.a.
Luke Ho
Luke Ho

24 Jan 2019

Hooo. It's good not to settle for less (returns).