In the event you’ve been investing often into the S&P 500 ETF from right here in Singapore, there’s probability 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 likely one of the hottest inventory indices on the earth, representing the five hundred largest publicly traded firms in the USA. 

Over Chinese language New Yr, 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” 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 attempting to find out about investing from on-line finance “gurus” (particularly these based mostly 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 if you happen to’re not based mostly in the USA, 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 associates make is that they arrange a recurring funding by 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 if you happen to’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 isn’t tailor-made to international traders exterior 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 a view 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 Ebook of Frequent Sense Investing by John C. Bogle - is written by none aside from the founding father of Vanguard himself.
I've recommended this book since 2017 in my reading list here, and extremely advocate studying it if you have not already finished so!

So after I inform my associates 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 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 suggests the {dollars} you see in your funding account isn’t what your family members will get if you’re 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 similar to moomoo don’t provide entry to this since it’s listed on the London Inventory Trade, whereas the native ones like DBS Vickers or POEMS cost a recurring custodian price for it.

DCA into S&P 500 by a robo-advisor

For many who favor 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 well-liked robo-advisor.

Most individuals use EndowUs for this objective, given the agency’s aggressive advertising and marketing campaigns throughout social media and on public transport. What’s extra, it is likely one of 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.

After all, there are charges as properly. Once you spend money on any of those single funds, you’ll pay an all-in price from (ranging from 0.3% every year) to Endowus, in addition to the TER or fund-level price to the fund supervisor.

My associates 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.

Most Singaporean traders don’t know this, however there’s actually a greater means.

What’s SGX:S27?

Not everybody realises that SPY can also be listed within the Singapore Inventory Trade (SGX), via a secondary listing 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 realized about this not too long ago 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 individual CDP account.
• You’ll be able to make investments utilizing your Supplementary Retirement Scheme (SRS) funds for long-term development.

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

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

Keep in mind, if you evaluate your selection of S&P 500 funds, it is advisable 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 expenses the bottom expense ratio at 0.03%, folks neglect to consider custodian dealing with charges, platform charges and extra. Shopping for VOO on DBS Vickers, for example, this may price 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 expenses, since native brokerages don’t cost custodian expenses for SGX-listed securities! Your actual charges payable will rely in your selection of brokerage (e.g. charges are decrease on moomoo vs. DBS Vickers).

And if you happen to’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 properly. This can be a profit that you just received’t be capable to discover anyplace else.

SGX:S27 is the solely S&P 500 ETF which you can personal in your CDP account below your individual identify. All different S&P 500 funds accessible to Singapore traders at the moment are held below custody.

What’s extra, if you happen to’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.

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

And do you have to ever want your cash urgently, S27 has a regular 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 by way of EndowUs or POEMS will often 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 choice 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 technology.

Once you spend money on S27, you’re maintaining your cash right here too as an alternative of getting it circulation overseas to the US or London markets. If that issues to you, then you could wish to relook your selection of investments. Watch the video beneath to find out about your downsides if 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 if you happen to’ve been shopping for SPY on the US market otherwise you’ve been investing by your robo-advisory platform, you could wish to take into account 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 take a position for them.
Disclosure: None. This isn't a sponsored article, however if you happen to'll wish to get in contact about including in related sponsored hyperlinks on this piece, be happy to achieve out to me!