spend money on the S&P 500 on SGX

In the event you’ve been investing commonly into the S&P 500 ETF from right here in Singapore, there’s a very good probability you’ve been doing all of it unsuitable.

You’ve most likely heard the standard spiel on-line: make investments a hard and fast 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 the US. 

Over Chinese language New 12 months, I heard a number of mummies speak about 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 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.

In the event you’ve been making an attempt to study investing from on-line finance “gurus” (particularly these based mostly abroad), you’d possible 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 US, you actually shouldn’t be blindly following such recommendation. That’s as a result of for Singaporean traders, there’s a a lot better means.

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

The most typical mistake I see my beginner buddies make is that they arrange a recurring funding via their robo-advisor, or proceed to DIY spend money on the S&P 500 through 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 one of the best low-cost resolution for particular person retail traders. Sadly, this recommendation is just not 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 now we have to pay as a way to entry the US markets (which the locals don’t).

The world's most famous e-book 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 really useful this e-book since 2017 in my studying checklist right here, and extremely suggest studying it if you have not already performed so!

So once I inform my buddies concerning the downsides of investing in these funds as a Singaporean investor, they’re normally 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 pals within the US, though you’re each investing in the identical counter).
• You’re topic to property taxes – which implies the {dollars} you see in your funding account is just not what your family members will get in case you are not round.

In the event you don’t thoughts investing by your self on a brokerage, then a greater various to SPY or VOO would be the CSPX (iShares Core S&P 500 UCITS ET). Sadly, most low cost brokerages reminiscent of moomoo don’t provide 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 via a robo-advisor

For individuals who favor to not DIY completely, one other generally used technique right here in Singapore is by organising a recurring month-to-month funding in your most well-liked 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 without doubt one of the few choices out there 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 effectively. While you spend money on any of those single funds, you’ll pay an all-in payment from (ranging from 0.3% every year) to Endowus, in addition to the TER or fund-level payment to the fund supervisor.

My buddies who select to take a position their SRS funds within the S&P 500 via 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 traders don’t know this, however there’s actually a greater means.

What’s SGX:S27?

Not everybody realises that SPY can be listed within the Singapore Inventory Alternate (SGX), through 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 lately over dinner with the SGX of us themselves!

For Singaporean traders, the SPDR S&P 500 ETF (SGX: S27) gives a neater strategy to acquire publicity to the U.S. inventory market with the next advantages:

• No must 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 traders:

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

Bear in mind, while you examine your alternative of S&P 500 funds, you might want to consider all charges relevant to you rather than taking a look at 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 expenses the bottom expense ratio at 0.03%, individuals overlook to consider custodian dealing with charges, platform charges and extra. Shopping for VOO on DBS Vickers, as an example, it will value you custodian charges of SGD 2 per quarter, which works out to be $8 per 12 months.

In distinction, investing through SGX:S27 comes with zero platform or custody expenses, since native brokerages don’t cost custodian expenses 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).

And for those who’re shopping for via a CDP-linked brokerage like POEMS or DBS Vickers, then you definitely get to personal S27 in your individual CDP account as effectively. This can be a profit that you just received’t have the ability to discover anyplace else.

SGX:S27 is the solely S&P 500 ETF that you may personal in your CDP account underneath your individual identify. All different S&P 500 funds out there to Singapore traders right this moment are held underneath 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 sometimes couldn’t as a result of solely SGX-listed ETFs are eligible for SRS investing.

Immediately, SGX:S27 is the solely S&P 500 ETF out there for direct investments utilizing SRS monies.

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

Conclusion

The SGX of us advised me that S27 has persistently ranked among the many most traded ETFs for SRS traders in Singapore, particularly given that it’s the solely possibility out there. Sadly, a lot 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 era.

While you spend money on S27, you’re holding your cash right here too as an alternative of getting it movement overseas to the US or London markets. If that issues to you, then you might wish to relook your alternative of investments. Watch the video under to study your downsides while you spend money on 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 via your robo-advisory platform, you might wish to think about whether or not switching on to SGX:S27 makes extra sense for you.

With love,
Price range 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 wish to get in contact about including in related sponsored hyperlinks on this piece, be happy to achieve out to me!