I’ve been researching the various apps available and decided I want to invest in 2-3 ETF indexes for the Long run. What’s is the best place to buy ETFs for least transaction cost? Any advice for my strategy? - Seedly
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Kenny

Asked on 13 Jun 2020

I’ve been researching the various apps available and decided I want to invest in 2-3 ETF indexes for the Long run. What’s is the best place to buy ETFs for least transaction cost? Any advice for my strategy?

Plan on doing it DCA style, monthly. So far I have been looking up Kristal AI, just that the options are limited I think?

If I do invest, my strategy is:

50% Vanguard Total USA Market ETF

50% some other global ETF In tech stock.

Suggestions/advice?

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Tan Wei Ming
Tan Wei Ming, Writer at Frugal Youth Invests
Top Contributor

Top Contributor (Jul)

Level 7. Grand Master
Answered on 02 Jul 2020

Hi. You might want to consider FSMOne's ETF RSP.

https://frugalyouthinvestsg.wordpress.com/2019/11/14/fsmones-etf-regular-savings-plan-and-kristal-ai-review-which-is-better-for-etf-rsp/

There are few reasons why I decided to use FSMOne’s ETF RSP instead of Kristal.AI even though the latter is free for the first US$50k are as follows. 

Firstly, you can buy fractional shares using FSMOne’s ETF RSP but not Kristal.AI. With FSMOne’s ETF RSP, you can buy into VOO with just $50. On the other hand, Kristal.AI requires a minimum amount of 1 share to start their Systematic Investment Plan. What this means is that if VOO is getting more expensive every month, with FSMOne’s ETF RSP you will receive less fractional shares while you have to fork out more capital to own that minimum 1 share of VOO with Kristal.AI. 

Secondly, even though Kristal.AI offers zero commission for the first US$50k which can be quite enticing for many, their commission structure is different from each other. Kristal.AI charges investors based on AUM while FSMOne charges based on trades commission. In the long run, once US$50k is hit, Kristal.AI will be more expensive as one has to pay more in fees when their portfolio gets bigger. On the other hand, for FSMOne, since investors are charged by the order amount, the cost will be cheaper in terms of percentage over the total capital outlay in the long run. 

You might argue that one should buy into Kristal.AI until it reaches US$50k and switch to other brokerages to continue their RSP but I believe in the long run and the convenience that one will have if they buy using FSMOne ETF RSP from the start. The deal breaker for myself is the minimum share of 1 for using Kristal.AI’s SIP in the sense that I have to fork out more capital if the share price goes up. I would rather own less of the shares than to fork out more cash.

Please take note of the pricing structure for FSMOne’s ETF RSP as below. For each ETF RSP buy order of VOO, the minimum commission is US$1 (excluding GST). In total, for any buy amount less than US$1250, you will be charged US$1.07 (including GST). In addition, please take note of Dividend Handling Fee of 1% of gross dividend subject to minimum of US$2.50. Dividend Handling Fee is charged every distribution. For VOO, since it distributes every quarter, one will incur US$10 minimum every year. To me, I do not think that Dividend Handling Fee is a cost as we do not pay FSMOne US$10 every distribution to receive the Dividend.

2 comments

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Sarah
Sarah

03 Jul 2020

What about FSM ETF RSP compare to DIY ETF-picking on FSM?
Tan Wei Ming
Tan Wei Ming

03 Jul 2020

It is the low commission that attracted me. US$1 or 0.08% whichever is higher. The cons is that it is bought on a fixed date so you really dont have the freedom to buy whichever date you like.
Ng Wei En
Ng Wei En, Analyst at Mastercard
Level 6. Master
Answered on 13 Jun 2020

Your strategy suggest diversification both geographically and thematically. Don't see an issue with that. Which would be a more cost-effective solution depends on how much you plan to DCA. Will need more info.

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Ng Wei En
Ng Wei En

13 Jun 2020

If you don't foresee yourself exceeding 25 trades per year or $50k AUM with Kristal.AI, then it is a good option since there's essentially no fees except for the FX conversion markup of 0.03%. I'm currently using it as well. I would say the choice of ETFs are decent considering their pricing structure.
Kenny
Kenny

13 Jun 2020

Thanks Wei En, agreed. Perhaps it's just cos I read about some ETFs that I couldn't find, but overall I think I'm ok. Any difference between a Nasdaq focused ETF (QQQ), or a Vanguard Total stock market? I read in some books total stock market is safer...