Methods to spend money on the S&P 500 on SGX

In case you’ve been investing repeatedly into the S&P 500 ETF from right here in Singapore, there’s an excellent probability you’ve been doing all of it improper.

You’ve most likely heard the standard 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 among the hottest inventory indices on this planet, representing the five hundred largest publicly traded firms in the USA. 

Over Chinese language New 12 months, I heard a number of mummies discuss this when their friends have been asking what to do with their angbao monies. Lots of them have been echoing this “recommendation” based mostly on what they’d learn on-line, and these similar of us are panicking now that the S&P500 is beginning to dip.

On the opposite finish, there are the buyers 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.

In case you’ve been attempting to study investing from on-line finance “gurus” (particularly these based mostly abroad), you’d probably 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 the USA, you actually shouldn’t be blindly following such recommendation. That’s as a result of for Singaporean buyers, there’s a significantly better manner.

How can Singapore buyers spend money on S&P 500?

The most typical mistake I see my beginner buddies make is that they arrange a recurring funding by way of their robo-advisor, or proceed to DIY spend money on the S&P 500 by way of SPY or VOO.

Shopping for SPY or VOO from the US inventory market

This usually occurs for those who’re consuming content material from US creators or writers, the place Vanguard funds are sometimes touted as the very best low-cost resolution for particular person retail buyers. Sadly, this recommendation isn’t tailor-made to international buyers outdoors of the US – together with us Singaporeans – as a result of it doesn’t take into the account the various different prices we’ve to pay to be able to entry the US markets (which the locals don’t).

The world's most famed guide on the subject of index investing - The Little E book of Frequent Sense Investing by John C. Bogle - is written by none apart from the founding father of Vanguard himself.
I've really helpful this guide since 2017 in my studying listing right here, and extremely suggest studying it if you have not already carried out so!

So once I inform my buddies concerning the downsides of investing in these funds as a Singaporean investor, they’re normally taken abruptly:

• You’re paying for custodian charges as a international investor.
• You’re topic to dividend withholding taxes (and that’s why you obtain lower than your folks within the US, though you’re each investing in the identical counter).
• You’re topic to property taxes – which suggests the {dollars} you see in your funding account isn’t what your family members will get in case you are now not round.

In case you 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 Alternate, whereas the native ones like DBS Vickers or POEMS cost a recurring custodian payment for it.

DCA into S&P 500 by way of a robo-advisor

For many who choose to not DIY solely, one other generally used technique right here in Singapore is by organising a recurring month-to-month funding in your most popular robo-advisor.

Most individuals use EndowUs for this objective, given the agency’s aggressive advertising campaigns throughout social media and on public transport. What’s extra, it is among the few choices accessible for anybody wanting to make use of their CPF or SRS funds to spend money on the S&P 500 as an alternative of money.

In fact, there are charges as nicely. If you spend money on any of those single funds, you’ll pay an all-in payment from (ranging from 0.3% each year) to Endowus, in addition to the TER or fund-level payment to the fund supervisor.

My buddies who select to speculate their SRS funds within the S&P 500 by way of 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.

Most Singaporean buyers don’t know this, however there’s in reality a greater manner.

What’s SGX:S27?

Not everybody realises that SPY can be listed within the Singapore Inventory Alternate (SGX), by way of a secondary itemizing that occured in 2001. In any case, there hasn’t been a lot advertising or promoting campaigns round this, so think about my shock once I realized about this not too long ago over dinner with the SGX of us themselves!

For Singaporean buyers, the SPDR S&P 500 ETF (SGX: S27) provides a neater technique to achieve 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 in style S&P 500 funds amongst Singapore buyers:

However isn’t the 0.09% (p.a.) expense ratio the very best?!

Keep in mind, once you evaluate your selection of S&P 500 funds, it’s essential to consider all charges relevant to you rather than simply the fund-level charges.

In any case, that’s exactly why VOO isn’t the most suitable 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 illustration, this may value you custodian charges of SGD 2 per quarter, which works out to be $8 per 12 months.

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 precise charges payable will rely in your selection of brokerage (e.g. charges are decrease on moomoo vs. DBS Vickers).

And for those who’re shopping for by way of a CDP-linked brokerage like POEMS or DBS Vickers, then you definitely get to personal S27 in your individual CDP account as nicely. It is a profit that you simply gained’t have the ability to discover wherever else.

SGX:S27 is the solely S&P 500 ETF which you could personal in your CDP account below your individual title. All different S&P 500 funds accessible to Singapore buyers right this moment are held below custody.

What’s extra, for those who’ve been pondering of investing within the S&P 500 for the long-term utilizing your SRS funds, you usually couldn’t as a result of solely SGX-listed ETFs are eligible for SRS investing.

In the present day, SGX:S27 is the solely S&P 500 ETF accessible for direct investments utilizing SRS monies.

And must you ever want your cash urgently, S27 has an ordinary T+2 cycle (about 2 enterprise days) for the funds to succeed in you as quickly as you determine to promote, whereas investing within the Amundi Prime USA fund by way of EndowUs or POEMS will normally take longer to clear at 5-7 enterprise days as an alternative.

Conclusion

The SGX of us informed me that S27 has persistently ranked among the many most traded ETFs for SRS buyers in Singapore, particularly given that it’s the solely choice accessible. Sadly, many of the buyers who commerce S27 are usually 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 spend money on S27, you’re protecting your cash right here too as an alternative of getting it move overseas to the US or London markets. If that issues to you, then you might need to relook your selection of investments. Watch the video under to study your downsides once you spend money on the S&P 500 as a non-US investor:

I like proudly owning counters in my CDP wherever doable, 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 way of your robo-advisory platform, you might need to contemplate whether or not switching on to SGX:S27 makes extra sense for you.

With love,
Finances 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 speculate for them.
Disclosure: None. This isn't a sponsored article, however for those who'll wish to get in contact about including in related sponsored hyperlinks on this piece, be happy to succeed in out to me!