The best way to put money into the S&P 500 on SGX

Should you’ve been investing often into the S&P 500 ETF from right here in Singapore, there’s a great likelihood you’ve been doing all of it unsuitable.

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 without doubt one of 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 speak about this when their friends had been asking what to do with their angbao monies. Lots of them had been echoing this “recommendation” primarily based 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.

Should you’ve been attempting to study investing from on-line finance “gurus” (particularly these primarily based abroad), you’d doubtless 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 primarily based in the USA, 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 means of their robo-advisor, or proceed to DIY put money into the S&P 500 through 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 traders. Sadly, this recommendation will not be tailor-made to international traders 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 got to pay with the intention 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 Frequent Sense Investing by John C. Bogle - is written by none aside from the founding father of Vanguard himself.
I've advisable this e book since 2017 in my studying checklist right here, and extremely advocate studying it if you have not already achieved so!

So once I inform my pals in regards to 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 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 will not be what your family members will get if you’re now not round.

Should 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 comparable to 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 charge for it.

Nonetheless, switching away from SPY / VOO to CSPX alone will already enable 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 solution to skip that (extra on it under).

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

For individuals who want to not DIY solely, one other generally used methodology 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 goal, 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 accessible 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.

In fact, there are charges as nicely. Once 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 means 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.

Whereas paying 0.38% p.a. is a small charge if it a minimum of lets you keep the course and sustain the self-discipline of investing often, it will 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 cut back much more?

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

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 spite of everything, there hasn’t been a lot advertising and marketing or promoting campaigns round this, so think about my shock once 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 neater solution to achieve 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 personal CDP account.
• You’ll be able to make investments utilizing your Supplementary Retirement Scheme (SRS) funds for long-term progress.

Right here’s a fast comparability of widespread S&P 500 funds amongst Singapore traders:

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

Bear in mind, if you examine your selection of S&P 500 funds, it’s good to think about all charges relevant to you rather than taking a look at simply the fund-level charges.

In spite of everything, that’s exactly why VOO isn’t the most suitable choice for non-US residents like us. Whereas Vanguard certainly prices the bottom expense ratio at 0.03%, individuals overlook to think about custodian dealing with charges, platform charges and extra. Shopping for VOO on DBS Vickers, as an illustration, it will price you custodian charges of SGD 2 per quarter, which works out to be $8 per yr.

In distinction, investing through SGX:S27 comes with zero platform or custody prices, since native brokerages don’t cost custodian prices 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), the place transaction charges can fluctuate broadly. What’s extra, there aren’t any annual platform prices to fret about both, as in comparison with shopping for the Blackrock or Amundi possibility on EndowUs.

And for those who’re shopping for by means of a CDP-linked brokerage like POEMS or DBS Vickers, then you definately get to personal S27 in your personal CDP account as nicely. This can be a profit that you simply received’t be capable to discover anyplace else.

SGX:S27 is the solely S&P 500 ETF which you could personal in your CDP account underneath your personal identify. All different S&P 500 funds accessible to Singapore traders immediately 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 usually couldn’t as a result of solely SGX-listed ETFs are eligible for SRS investing.

However now, you possibly can.

In the present day, SGX:S27 is the solely S&P 500 ETF accessible 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 through EndowUs or POEMS will normally take longer to clear at 5-7 enterprise days as a substitute.

Conclusion

The SGX of us informed me that S27 has constantly ranked among the many most traded ETFs for SRS traders in Singapore, particularly given that it’s the solely possibility accessible. Sadly, many of the traders 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 era.

Once you put money into S27, you’re retaining your cash right here too as a substitute of getting it movement 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 if you put money into 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 means of your robo-advisory platform, you might need to take into account 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 wish to get in contact about including in related sponsored hyperlinks on this piece, be happy to succeed in out to me!