Need some enlightening on my STI ETF Nikko AM? - Seedly
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STI ETF

nainaii

Asked on 30 Oct 2020

Need some enlightening on my STI ETF Nikko AM?

Current price: $2.50

average price:$3.12

I have been using RSP $300 - 500 monthly since 2019 and stopped recently due to the current crash and STI is kind of one of the worst-performing indexes.

Hope to seek advice from sifus here.

What are your thoughts?

Thank you.

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Chen Zhirong

Chen Zhirong

Level 5. Genius

Answered on 04 Nov 2020

Am fedup with people calling STI the worst Stock Market. Yes: https://www.straitstimes.com/business/companies-markets/singapore-neck-and-neck-with-thailand-for-asias-worst-stock-market it is one of the biggest losers from Covid-19.

But consider 2002-2010 (figures for 2000-1 not available - you're welcome to find them and prove me wrong). STI's total gain was 117% or annual, 10.19%: https://lifefinance.com.sg/do-dividends-matter-in-investing/

S&P Europe 5350 did 18% overall or 1.63%

MSCI Emerging Markets did 263% overall or 20.2% annually.

How do you think the US did? -8% or -0.83% annually!

Ok so that was a pretty crappy decade, let's look at 2000-2020 overall.

US did 233% or 6.2% annually. SG did 241% or 7.05% annually.

HOWEVER, if you look only at the past ten years, the US performed twice as well as SG.

So what does this mean? Throw away SG and buy US stocks? Now, far be it for me to be nationalistic/patriotic when buying stocks. Nah it's just basic principles. BUY LOW SELL HIGH. If you refer to the news article about STI being Asia's biggest loser, you'll find that it's trading at the lowest multiples in a decade.

The simple fact is that if you think SG is one of the "worse" then you're just not looking at the right time period. Although frankly, the only reason I look at SG is because of Buffet's principle of investing in one's circle of competence. I live in SG and know how it's doing. Looking at how SG dealt with Covid vs US, the Chinese companies coming over here and etc... it's obvious to me who's going to win the next decade.

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Adding on to what Chen ZhiRong said:

First you have to understand what index does. Index shows the performance of a country GDP. However, is that the true value of Singapore? Based on how US and SG handles COVID situation, you will expect non-tech companies to be recovered faster in Singapore than in US.

Secondly, you have to understand the nature of STI. They are made up of cyclical companies such as Capitaland, HKLand that perform better in bull run. Sadly, there is no tech stocks which undermined the growth potential of STI.

If technicality is too difficult, just simply observe STI pattern. There is an overall increasing trend.

What causes the sharp dip?

1998 - Asian Financial Crisis

2003 - SARS

2008 - Lehman brother Global Financial Crisis

2020 - COVID

From this alone, the smarter move is to continue DCA

However, why most people dislike STI?

  1. It is concentrated on banks and REITS.

  2. It is outdated: there is no growth tech stock

  3. Some poor performing companies: I guess most are glad to see that SPH is being kicked out of STI and added in Keppel DC REITs

  4. STI does not show the true performance of Singapore's GDP: 99% of Singapore's business is SMEs.

My advice to you:

  1. Continue to invest in STI.

  2. Invest in REITS ETF in your RSP/ syfe - There is a reason why investors love SG Reits

  3. Read the historical trends of financial statements of each company in STI. Truly Understand why people hate STI

  4. I will caution people investing on S&P 500 if you have yet to. You can research about Warren buffet indicator where US market value exceeds US's GDP​​​

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Terence Lee

Terence Lee

Level 3. Wonderkid

Updated on 31 Oct 2020

I read some of the answes below n am astonished at why ppl r falling into the panic trap. Don't sell at all. I repeat: DON'T sell at all.

Instead, buy even more man, for this is the time to buy when prices r all-time low. The Nikko am STI consists of stocks in multiple different sectors n not just reits. I would be slightly worried if it consists of only the latter, cos rentals are unlikely to recover that fast- if ever.

When the index recovers a few years, u're in for a big bull.

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Clint Ng
Clint Ng

4w ago

Absolutely agree with u.
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Frankly, I don't understand why you want to stop since you are investing via RSP, which basically means you are DCA-ing into STI.

Just use this low price period to accumulate more STI stocks. Don't tell me you only wanna start buying in again when it's at high?

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I'm more or less in the same situation. Almost sold it but decided not to realise my loss since I'm in no hurry for the cash. Decided to just sit back and collect the semi-annual dividends while waiting for the price to recover a bit before selling. I stopped my DCA to allocate my capital elsewhere in the US market esp when it tanked during the peak of Covid-19. Now I'm up about 20% but I know ppl who've done even better!

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Well the principle for this would be time in market is more important than timing the market...

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I DCA into STI ETF ($600/month) for 3.5 years since 2017. It's pretty lacklustre so I don't regret selling them off at a 20% loss a few months ago & cycled the capital into high quality US companies.

If you don't know what to do with capital after you sell it, I'd suggest you stay put. However, if you think about why we invest, more often than not, we are investing for the future and want to see our money having meaningful growth.

So likewise, the companies we invest in must be creating products and services that are contributing to the world's future e.g. battery technology, edge computing, electric vehicle, autonomous technology, remote working, SaaS, etc...and there's simply more opportunities to find such companies listed outside of Singapore.

Even if you don't stock pick, a good US or Irish-domiciled ETF would give you the exposure to these companies. As the companies grow, these ETFs will grow too.

All the best to you!

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I have going through back and forth on this to advise a friend, but I don't have a good answer.

My own portfolio of sgx listed reits and stocks has a better return than the STI itself, but I am trailing behind the S&p 500. Just to illustrate, I think my four year total return is 36% vs - 3% to STI, whereas the S&p 500 four year return is 48% (using stock cafe calculations).

In terms of where it goes, frankly I think the STI is currently so beaten down, that's not that much room for it to go a lot lower.

However, when I look at the overseas indices, which are going up and up, to being better than how they started 2020, I do think there is some sort of bubble in them. So the possible loss when there is a covid wave 3 is considerably higher.

On my own, I still won't touch the STI etf as an investment because I can consistently do better (even though its also around - 4% for 2020 vs - 20% for sti). I think there is value in the STI stocks (but not all, have to pick and choose).

I have however setup stashaway and endowus to do regular savings plans for my srs and cpf oa accounts to see how they will compare vs my own sg portfolio in future years.

So I don't think you should sell it, but I would advise to try balancing it with other indices like S&p 500 to average it out.

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Thaddeus Ong

Thaddeus Ong

Level 2. Rookie

Answered on 04 Nov 2020

Lol i dont get why so many people still even bother with the STI. It's by far one of the worse performing indices in the world. As a long-term investor, the only way to be hugely successful is to look at potential risk to returns, and weighing in opportunity cost at the same time.

Sure, even if you DCA into the STI at more attractive prices here today and average down and the market recovers strongly from here, you are looking at a potential 10-20% return over the next few years at best? And I would say, given how it performed versus the S&P in the last few years (one of the greatest bull-runs in the US), I'm not pinning my hopes on the STI at all.

You should be looking at assets that give you an assymetrical risk:reward ratio. What I mean by this is, investing $1000 today, you can risk $1000 but if your potential gain is $10,000 then thats a 10:1 R:R ratio. You'll never get that in the STI. I would put some money in assets that allow that. In today's environment, it would be Bitcoin, Ethereum etc. With more and more companies and institutions gaining interest and accumilating Bitcoin, there is a real chance of a 10x investment over the next in years. Its not worth wasting time and sleep over the STI for a few % points returns.

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Wilson Yeoh

Wilson Yeoh

Level 3. Wonderkid

Answered on 04 Nov 2020

If you do not have other SG market portfolio then I would suggest you to continue and average it down.

Reason being having to diversify into different market and having this ETF it's a good mix of sectors and compinies.

And if you were to sell it and create another portfolio you have to spend the time to analyze the different companies and also your sum of money will not be much to create a substantial portfolio.

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Always have long term perspective.

But i agree what u said "worst performing index"

Just have a comparison, from 1987 to present:

STI index 908.9 to 2517 (2.7x)

S&P500 267 to 3369 (12×)

HSI 2877 to 24933 (8x)

Of course, no hurry to sell because of panic. Maybe should DCA to another market?

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Casey

Casey

Level 5. Genius

Updated on 31 Oct 2020

I am in the exact same situation as you, and I just sold it off this month.

This is my thought process:

(1) Even if were to hold it until breakeven, how long would that take for the STI?

(2) If my aim is to eventually sell it when it breaks even, that means ETF Nikko AM is not something I would hold long term, then why continue to hold it in my portfolio for subpar returns considering the opportunity costs.

(3) If I'm selling it, what am I going to do with this additional cash? Have I done enough research and identified some other companies/industries that are in demand and riding the digitalisation trend right now and could possibly "grow faster" than the STI, which I would then deploy this additional capital?

Only you would know the answer to these questions, and whether you are comfortable with the conclusion that you reach.

As for me, I'm thinking about opportunity costs, and if fundamentals of certain components in my portfolio change, I'm not afraid to re-allocate my capital.​​​

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CH

CH

Level 7. Grand Master

Answered on 31 Oct 2020

Agree with @Min. it does not make sense to hold cash now. If you think you have better opportunity elsewhere, can consider to sell STI and buy into a new fund.

But beware, there will be fluctuations even in US markets. And there are periods in US market where growth is 0.

Lets say if you buy S&P500 now and by next year it stay stagnant or drop 10%, will you be able to stomach the drop?

Depends on your investment thesis and horizon, but this is what I am doing: continue to DCA into STI at lower amounts while diversify into global broad based index.

Hope this helps.

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Just continue holding, you won't realise the loss until you sell it. you should consider buying more now to average down. once you break even or profit, sell away

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M

Min

Level 5. Genius

Answered on 30 Oct 2020

What is your investment horizon? The market moves in cycles. Down now does not mean down forever. If you DCA, times like these are good in bringing your average price down.

Does it align with your investment goals? If you think another fund or index can perform better from now onwards, you can consider liquidating and buying into a different fund. But to hold as cash? Not so good idea. It is best if you have holding power during times like this.

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