I've been reading many articles regarding why STI ETFs are great for beginners who wish to start their investing journey until I chanced upon this article recently. What are your thoughts? - Seedly
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Yeo Xue Ying

Asked on 06 Jun 2020

I've been reading many articles regarding why STI ETFs are great for beginners who wish to start their investing journey until I chanced upon this article recently. What are your thoughts?

I chanced upon this article from seedly https://blog.seedly.sg/dollar-cost-average-dca-sti-etf-returns and it staeed that for someone who invests $100/mth in DBS SRRP, his returns is a mere $900 after saving for EIGHT (!!!) years! Then, putting the money in endowment plans would have yielded higher returns. What are your views on the article?

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JG
Joey Gaeth
Level 5. Genius
Answered on 09 Jun 2020

Surely, the STI is under-performing the world markets. And certain components of the STI, for eg SIA/SATS/GentingSing/ComfortDelGro, have been significantly affected by covid, and it's up to your belief whether u think they'll rise up to the prices they were at back in Feb 2020.

I'd say, if u want to invest in sg stocks, go with dividend gains, and invest in REITs. Some REITs especially, have seen stock prices shooting up since 23March. Look at Mapletree Industrial Tr for eg and how large its trade voume and stock prices have been, it is going to enter the STI etf this 22nd June. If you feel unsafe to DIY reit individually due to this volatile&uncertain economy right now, go for Lion-Phillip S-REIT ETF, the only Singapore focused REIT ETF.

Instead of STI ETF, it's better to go for the S&P500 ETF (SPY/IVV/VOO). Or if you're looking at significant income growth, can consider QQQ ETF, if u belive the FAANG(+msft) stocks will continue going higher.

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Frankie Rappaport
Frankie Rappaport

20 Jun 2020

VUSD
Corleone
Corleone
Level 4. Prodigy
Answered on 06 Jun 2020

Note: I did not read the article. But I'm just sharing based on experience.

The STI constituents has typically and still is heavily focused on traditional sectors of the economy, think banks, real estate developers, telco and more recently REITs. While these sectors are resilient and important stakeholders in the economy, the growth trajectory isn't astronomical when compared to the new digital age industries. So the lack of tech/growth stocks in the STI is one of the shortcomings of the index, as in recent years, the tech industry has been a major driver of index performance. See SPX and Nasdaq in the US.

But, the traditional sectors generate relatively stable profit and returns for shareholders in the form of dividends. So one might suggest the relatively lower volatility of a STI etf will be a good choice to start with.

A home bias where one prefers to allocate a bigger proportion to STI etf is understandable, but do also note that if SG's economy does badly, the etf performance might fall (resulting in investment losses) and it'll be a double whammy if one also loses his/her job at the same time.

Don't put all your eggs in One basket. If you are looking for something with higher capital gains prospect (albeit with potentially higher volatility), do consider other country etfs, hk/China, US etc as well and do a diversified portfolio of these.

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Tay

20 Jun 2020

Hi! May I know if you have any recommendation on the portal / broker to invest in other countries etfs like hk and US. I note that for US stocks there is a 30% withholding tax.
Royalchem
Royalchem
Level 5. Genius
Answered on 20 Jun 2020

If u r contented with maybe 2-3% dividend per annum and safe investment. This is good.

Though i suggest u read up more if really interested in investing

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CT
Christabel Tan
Level 2. Rookie
Answered on 20 Jun 2020

Hello, i went to look at the article. From what I gather, the $900 only refers to dividend yields from the investment. The actual yield should be more.

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CH
CH
Level 7. Grand Master
Answered on 07 Jun 2020

1) don't just simply believe anyone. financial bloggers, financial advisers, paid courses, all has its own set of hidden agenda.

2) even a big market US, the index returned zero or negative during a period around 2000 to 2010. "the lost decade". hardly anyone will point this out.

therefore, it is important to learn more, form your own opinion and diversify well.

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Frankie Rappaport
Frankie Rappaport
Top Contributor

Top Contributor (Jul)

Level 9. God of Wisdom
Updated on 09 Jun 2020

Here:

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