For those who’ve been investing commonly into the S&P 500 ETF from right here in Singapore, there’s a superb probability you’ve been doing all of it incorrect.

You’ve in all probability 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 among the hottest inventory indices on this planet, representing the five hundred largest publicly traded firms in the US. 

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. A lot of them have been echoing this “recommendation” primarily based 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.

For those who’ve been making an attempt to find out about investing from on-line finance “gurus” (particularly these primarily based abroad), you’ll 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 in the event you’re not primarily based 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 method.

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 sometimes occurs in the event you’re consuming content material from US creators or writers, the place Vanguard funds are sometimes touted as the perfect low-cost resolution for particular person retail traders. Sadly, this recommendation will not be 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 various different prices now we have to pay in an effort to entry the US markets (which the locals don’t).

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

So after I inform my associates concerning the downsides of investing in these funds as a Singaporean investor, they’re often taken unexpectedly:

• 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, regardless 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 will not be what your family members will get if you’re 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 Trade, whereas the native ones like DBS Vickers or POEMS cost a recurring custodian payment 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 eradicate property taxes. You’ll nonetheless need to 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 individuals who desire to not DIY completely, 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 objective, given the agency’s aggressive advertising and marketing campaigns throughout social media and on public transport. What’s extra, it is among 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.

After all, there are charges as properly. 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 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.

Whereas paying 0.38% p.a. is a small payment if it at the least lets you keep the course and sustain the self-discipline of investing commonly, this may add up in the long term as your portfolio grows – particularly because you’ll need to 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 in actual fact a greater method.

What’s SGX:S27?

Not everybody realises that SPY can also be listed within the Singapore 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 just lately over dinner with the SGX of us themselves!

For Singaporean traders, the SPDR S&P 500 ETF (SGX: S27) presents a neater option 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 may make investments utilizing your Supplementary Retirement Scheme (SRS) funds for long-term progress.

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, if you examine your alternative of S&P 500 funds, it’s worthwhile to think about 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 costs 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, 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 costs, since native brokerages don’t cost custodian costs 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 fluctuate broadly. What’s extra, there aren’t any annual platform costs to fret about both, as in comparison with shopping for the Blackrock or Amundi choice on EndowUs.

And in the event you’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 gained’t have the ability to discover wherever else.

SGX:S27 is the solely S&P 500 ETF that you could personal in your CDP account underneath your individual title. All different S&P 500 funds out there to Singapore traders at the moment are held underneath custody.

Moreover, in the event you’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.

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

In case you 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 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 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 technology.

While you spend money on S27, you’re retaining your cash right here too as an alternative of getting it stream overseas to the US or London markets. If that issues to you, then you might need to relook your alternative 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 positively be placing my very own cash into SGX:S27 now that I do know of its existence.

So in the event you’ve been shopping for SPY on the US market otherwise you’ve been investing by 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 in the event you'll wish to get in contact about including in related sponsored hyperlinks on this piece, be at liberty to achieve out to me!