For those who’ve been investing repeatedly into the S&P 500 ETF from right here in Singapore, there’s a superb likelihood you’ve been doing all of it fallacious.
You’ve most likely heard the same old spiel on-line: make investments a set quantity within the S&P 500 each month ➡️ dollar-cost common ➡️ compound at 8 – 10% till you turns into a millionaire (or a multi-millionaire).
What's the S&P 500?The S&P 500 is without doubt one of the hottest inventory indices on the earth, representing the five hundred largest publicly traded corporations in america.
Over Chinese language New Yr, I heard a number of mummies speak about this when their friends have been asking what to do with their angbao monies. A lot of them have been echoing this “recommendation” based mostly on what that they had learn on-line, and these identical of us are panicking now that the S&P500 is beginning to dip.
On the opposite finish, there are the traders who’ve been shopping for up the S&P 500 exactly as a result of it’s down, or as a result of they automated their investments and proceed to remain the course regardless of the ups and downs.
For those who’ve been attempting to find out about investing from on-line finance “gurus” (particularly these based mostly abroad), you’d seemingly have purchased into both of the next by now:
- The SPDR S&P 500 ETF Belief (SPY)
- The Vanguard S&P 500 ETF (VOO)
However for those who’re not based mostly in america, you actually shouldn’t be blindly following such recommendation. That’s as a result of for Singaporean traders, there’s a significantly better method.
How can Singapore traders put money into S&P 500?
The most typical mistake I see my beginner pals make is that they arrange a recurring funding by their robo-advisor, or proceed to DIY put money into the S&P 500 by way of SPY or VOO.
Shopping for SPY or VOO from the US inventory market
This sometimes occurs for those who’re consuming content material from US creators or writers, the place Vanguard funds are sometimes touted as the perfect low-cost answer for particular person retail traders. Sadly, this recommendation just isn’t tailor-made to overseas traders outdoors of the US – together with us Singaporeans – as a result of it doesn’t take into the account the numerous different prices we now have to pay with a view to entry the US markets (which the locals don’t).
The world's most famous ebook on the subject of index investing - The Little E-book of Widespread Sense Investing by John C. Bogle - is written by none apart from the founding father of Vanguard himself.I've advisable this ebook since 2017 in my studying record right here, and extremely advocate studying it if you have not already carried out so!
So after I inform my pals in regards to the downsides of investing in these funds as a Singaporean investor, they’re often taken without warning:
- You’re paying for custodian charges as a overseas investor.
- You’re topic to dividend withholding taxes (and that’s why you obtain lower than your folks within the US, despite the fact that you’re each investing in the identical counter).
- You’re topic to property taxes – which implies the {dollars} you see in your funding account just isn’t what your family members will get in case you are not round.
For those who don’t thoughts investing by your self on a brokerage, then a greater different to SPY or VOO would be the CSPX (iShares Core S&P 500 UCITS ET). Sadly, most low cost brokerages resembling moomoo don’t supply entry to this since it’s listed on the London Inventory Change, whereas the native ones like DBS Vickers or POEMS cost a recurring custodian charge for it.
Nonetheless, switching away from SPY / VOO to CSPX alone will already allow you to halve your dividend withholding taxes from 30% to fifteen% and remove property taxes. You’ll nonetheless should pay for custodian charges although, though there’s one other option to skip that (extra on it beneath).
DCA into S&P 500 by a robo-advisor
For many who want to not DIY fully, one other generally used technique right here in Singapore is by establishing a recurring month-to-month funding in your most popular robo-advisor.
Most individuals use EndowUs for this function, given the agency’s aggressive advertising and marketing campaigns throughout social media and on public transport. What’s extra, it is without doubt one of the few choices obtainable for anybody wanting to make use of their CPF or SRS funds to put money into the S&P 500 as a substitute of money.
After all, there are charges as effectively. If you put money into any of those single funds, you’ll pay an all-in charge from (ranging from 0.3% every year) to Endowus, in addition to the TER or fund-level charge to the fund supervisor.
My pals who select to take a position their SRS funds within the S&P 500 by EndowUs have been paying 0.30% p.a. (to EndowUs) + 0.08% p.a. to BlackRock.
That’s a complete of 0.38% p.a. in charges.
Whereas paying 0.38% p.a. is a small charge if it at the very least lets you keep the course and sustain the self-discipline of investing repeatedly, this may add up in the long term as your portfolio grows – particularly because you’ll should pay the 0.30% platform charges to EndowUs yearly no matter whether or not you purchase/promote something. Are these prices one thing you need to scale back much more?
Most Singaporean traders don’t know this, however there’s actually a greater method.
What’s SGX:S27?
Not everybody realises that SPY can be listed within the Singapore Change (SGX), by way of a secondary itemizing that occured in 2001. In spite of everything, there hasn’t been a lot advertising and marketing or promoting campaigns round this, so think about my shock after I discovered about this just lately over dinner with the SGX of us themselves!
For Singaporean traders, the SPDR S&P 500 ETF (SGX: S27) provides a better option to acquire publicity to the U.S. inventory market with the next advantages:
- No have to pay custodian dealing with charges.
- You get to personal it in your individual CDP account.
- You may make investments utilizing your Supplementary Retirement Scheme (SRS) funds for long-term development.
Right here’s a fast comparability of standard S&P 500 funds amongst Singapore traders:
| S27 | SPY | VOO | Amundi Prime USA |
|---|
| Change | SGX (Singapore) | NYSE (USA) | NYSE (USA) | Euronext (Europe) |
| Index tracked | S&P 500 | S&P 500 | S&P 500 | Solactive GBS United States Massive & Mid Cap Index |
| Expense Ratio (p.a.) | 0.09% | 0.09% | 0.03% (least expensive) | 0.05% |
| Incepted in | 2001 | 1993 | 2010 | 2020 |
| Dividend Withholding Tax | No extra tax (already deducted at fund stage) | 30% | 30% | 15% (Eire-domiciled) |
| Dividend Remedy | Distributing | Distributing | Accumulating | Accumulating |
| Buying and selling Hours | SGX market hours (9 AM – 5 PM SGT) | US market hours (9:30 PM – 4 AM SGT) | US market hours (9:30 PM – 4 AM SGT) | Euronext market hours (3 PM – 12 AM SGT) |
| Can use SRS funds to purchase? | Sure | No | No | No |
| Can use CPF funds to purchase? | No | No | No | No |
However isn’t the 0.09% (p.a.) expense ratio the very best?!
Bear in mind, if you examine your alternative of S&P 500 funds, it’s good to consider all charges relevant to you rather than simply the fund-level charges.
In spite of everything, that’s exactly why VOO isn’t the best choice for non-US residents like us. Whereas Vanguard certainly fees the bottom expense ratio at 0.03%, folks overlook to consider custodian dealing with charges, platform charges and extra. Shopping for VOO on DBS Vickers, as an example, this may price you custodian charges of SGD 2 per quarter, which works out to be $8 per yr.
In distinction, investing by way of SGX:S27 comes with zero platform or custody fees, since native brokerages don’t cost custodian fees for SGX-listed securities! Your actual charges payable will rely in your alternative of brokerage (e.g. charges are decrease on moomoo vs. DBS Vickers), the place transaction charges can differ extensively. What’s extra, there aren’t any annual platform fees to fret about both, as in comparison with shopping for the Blackrock or Amundi choice on EndowUs.
And for those who’re shopping for by a CDP-linked brokerage like POEMS or DBS Vickers, then you definately get to personal S27 in your individual CDP account as effectively. It is a profit that you just gained’t be capable to discover anyplace else.
SGX:S27 is the solely S&P 500 ETF that you would be able to personal in your CDP account underneath your individual identify. All different S&P 500 funds obtainable to Singapore traders right now are held underneath custody.
Moreover, for those who’ve been considering of investing within the S&P 500 for the long-term utilizing your SRS funds, you sometimes couldn’t as a result of solely SGX-listed ETFs are eligible for SRS investing.
However now, you possibly can.
At present, SGX:S27 is the solely S&P 500 ETF obtainable for direct investments utilizing SRS monies.
In case you ever want your cash urgently, S27 has a normal T+2 cycle (about 2 enterprise days) for the funds to succeed in you as quickly as you resolve to promote, whereas investing within the Amundi Prime USA fund by way of EndowUs or POEMS will often take longer to clear at 5-7 enterprise days as a substitute.
Conclusion
The SGX of us instructed me that S27 has persistently ranked among the many most traded ETFs for SRS traders in Singapore, particularly given that it’s the solely choice obtainable. Sadly, many of the traders who commerce S27 are sometimes the older of us (who’re extra tuned into SGX choices) and that there’s an enormous hole in consciousness about S27 among the many youthful technology.
If you put money into S27, you’re preserving your cash right here too as a substitute of getting it stream overseas to the US or London markets. If that issues to you, then it’s possible you’ll need to relook your alternative of investments. Watch the video beneath to find out about your downsides if you put money into the S&P 500 as a non-US investor:
I like proudly owning counters in my CDP wherever potential, and have spare SRS funds to deploy, so I’ll undoubtedly be placing my very own cash into SGX:S27 now that I do know of its existence.
So for those who’ve been shopping for SPY on the US market otherwise you’ve been investing by your robo-advisory platform, it’s possible you’ll need to think about whether or not switching on to SGX:S27 makes extra sense for you.
With love,
Funds Babe
Disclaimer: That is an academic piece and NOT a purchase/promote suggestion. I'm not a licensed advisor and can by no means settle for my readers' cash to take a position for them.Disclosure: None. This isn't a sponsored article, however for those who'll prefer to get in contact about including in related sponsored hyperlinks on this piece, be at liberty to succeed in out to me!
