I'm a fresh grad, new to investing here. Does it make sense for me to invest in both STI ETF and Robo-Advisors to diversify? What should the split be in terms of how much to invest? - Seedly
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Anonymous

Asked on 06 Oct 2018

I'm a fresh grad, new to investing here. Does it make sense for me to invest in both STI ETF and Robo-Advisors to diversify? What should the split be in terms of how much to invest?

Hi! I'm looking to take out around $350-$400 of my salary to invest. Have read through a number of Seedly articles, but I'm still confused.

  1. Does it make sense for me to diversify by buying STI ETF + Robo-Advisors (Global ETF)? What's the benefit of diversifying, if I'm looking to hold this for the next 5-10 years when according to what I read, there's generally an upward trend in terms of returns? (As compared to only buying STI or only Global ETF)
  1. How should I decide the split?

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    Yeah this makes sense :) and this is Actually what I kind of do also... along with other individual stocks.

    so largely you invest in both the local market (where you live) in this case Singapore... and also the global market which is often rooting from companies in the US... which robo advisors often buy the ETFs from.

    A split to me would be leaning 70% global (USA and Asia ex japan) and 30% sti etf, because to me, much of my market exposure here in the local market comes from our daily lives already, working here etc.

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    Kenneth Lou

    Kenneth Lou

    13 Aug 2020

    Yeah haha this was dated in 2018. been awhile since!
    Frankie Rappaport

    Frankie Rappaport

    13 Aug 2020

    Ouch, sorry
    Thank You!
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    Mm perhaps you can have a read through Andrew Hallam's millionaire teacher book where he talked about a couch potato strategy using Etfs (global equity, local country Etf and a bond one) before you proceed further. I'll suggest vanguard for their low costs if you can get access to them via an offshore broker. Hope this helps

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    Yea it make sense. To invest in own country and also invest globally. Diversifying through ETFs are good because if you start with a small amount of capital, you cannot invest in a whole lot of companies. ETF allows you to buy into more companies and also spread your risk. If one industry example IT/Healthcare and so on are not doing well, the other companies or industries will still be doing ok and your ETF wont drop too badly. For split, you have to think yourself. Like how much risk are you willing to take and are the returns for the risks worth for you. You can do half half split if we are not including bonds.

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    I would recommend not investing in the STI as the growth is too stagnant! If you only have $350-$400 every month to invest, just put it into a robo advisor and they will help you to diversify your portfolio!

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    Hello!

    The purpose of diversifying is to eliminate as much as risk possible so that only market risk (risk that cannot be diversified away) remains.

    With a budget of around $400, I would put it all in a robo advisor. Reason being is because i cannot ascertain how much risk i'm minimsing by getting both portfolios. On the other hand, if I use a robo adviser (Stashaway for example, which I use) I can be certain of the risk that I'm taking up through their portfolio's risk index. Do let me know if you need a referral code. Hope this helps!

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    Samuel Wong

    Samuel Wong

    Level 3. Wonderkid

    Answered on 12 Aug 2020

    Warren Buffett recommends retail investors to just invest 90% in S&P 500 and 10% in Short-Term US Govt Bonds. If your investment horizon is long (20+ years) don’t waste time (and money) investing in the STI

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    Frankie Rappaport

    Frankie Rappaport

    13 Aug 2020

    Very good advice from you and Warren. I would substitute the stability part (bonds) with physical gold and split the 90% part into 60% U.S. & 30% China
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    MT2020

    MT2020

    Level 7. Grand Master

    Answered on 25 Feb 2020

    Yeap yap, it is a good idea to diversify as the sti etf only focus on the top 30 companies in Singapore while robo- advisors will allow you to invest in stocks from all over the world via the different etfs.

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    Frankie Rappaport

    Frankie Rappaport

    Level 10. Unicorn

    Answered on 06 Feb 2020

    Enter you example choices into Bigcharts charting online and look what came of STI versus SP500 (dividends possibly not acknowledged within these charts). Diversification reduces risk. MSCI World (that is still very U.S. tilted) is one good choice for a start, you don't need a robo if you do all by yourself. to diversify more (less U.S., but then - for the past - less returns!) you could choose f.ex. ETFs for SP500 and an "MSCI World ex-USA", something like that.

    Or concentrate on cheap single country ETFs of the "leading" strong countries:

    U.S. (SP500)

    Scandinavia

    Australia

    Singapore (S-REIT ETFs)

    Japan (Nikkei 225)

    China (best ETF??? maybe PGJ, more risky: tech heavy CQQQ)

    disclaimer: all private opions, total losses possible with any strategy​​​

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    1) Have a diversified portfolio not just in geographies, but also asset class, and sectors.

    2) Diversifying means that you're trying to reduce risk by not putting all your eggs in one basket.

    We do this by trying to negate too much positive correlation and volatility in the portfolio.

    3) This can mean adding bonds, property, commodities into your portfolio other than just 100% equity.

    4) There are 6 major global markets you can invest in.

    • US

    • UK

    • Europe excluding UK

    • Japan

    • Asia excluding Japan

    • Emerging Market

    (There are a few others that are quite niche, I won't cover that)

    We have the added advantage of investing in purely Singapore. Which is a very microscopic area to invest in, and I would personally avoid for equities, but love for bonds (due to our top notch investment grade rating)

    So when you want to diversify globally, I would suggest picking funds that individually invests in these markets than a total global fund.

    This is so you can choose your percentage of allocation for each region, and over and under weight them as you see fit.

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    Good idea. I also diversify across different robo advisors, since all of them claim to have the best algorithm/optimisation etc.

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