Since I first posted a pseudo-guide on index investing with Standard Chartered, it has gone to be become the most popular post on this blog. I guess people are interested in content like this e.g. Bogleheads 3-Fund Portfolio In Singapore and would probably like to see more.
With the smaller board lot size of 100 units come 2015 (that’s like in one month’s time), now would be an excellent time to take a look at Singapore Exchange, and what we can do if our goal is to construct a basic, simple, no-frills, Bogleheads 3-fund portfolio. I would be using Standard Chartered Online Trading platform to illustrate this.
This post is meant for an absolute newbie investor to show how simple it is to start investing. I don’t emphasize too much on the choice of funds as my focus was on the simplicity of how fast and easy it can be done.
What Is Bogleheads 3-Fund Portfolio?
A three-fund portfolio is a portfolio which does not slice and dice, but uses only basic asset classes.
It would typically consist of three components –
- Domestic (Singapore) stock index fund
- International stock index fund
- Bond index fund
The majesty of simplicity, Bogleheads call it. The essence of the 3-Fund Portfolio is to use low-cost funds that represent the entire markets. Cash is not considered within the portfolio.
Domestic Stock Index Fund
We can choose between SPDR STI ETF (E3S) or Nikko AM STI ETF (G3B), both of which are exchange traded funds that track The Straits Times Index via physical replication. Physical ETFs replicate the return of the indices through the purchase of physical securities, whereas synthetic ETFs replicate the return through the implementation of total return swaps or other derivatives. Also, you may like to find out what is an exchange traded fund if you are not familiar with it.
Chosen Fund : SPDR STI ETF (E3S)
International Stock Index Fund
It is slightly more tricky when it comes to the International Stock Index Fund component.
At first glance, Vanguard’s Total World Stock ETF (VT) looks like a great option. [What is Vanguard?] Based on the official write-up, it covers approximately 98% of the world’s investable market capitalization and is suitable as a core holding. About 50% of the fund’s portfolio is invested in U.S. stocks, 40% in international developed stocks, and the remaining 10% in emerging-markets stocks.
However, the problem arises due to the fact that it is U.S. domiciled. As non-US, Singaporean investors, our dividends are taxed at a hefty 30%. I know because my dividends from Apple shares were subjected to the same treatment. Moreover, investments exceeding $60,000 are subjected to estate tax liabilities.
As an workaround, let’s take a look at Ireland-domiciled Vanguard ETFs instead which are not subjected to dividend withholding tax. However, I do believe that the dividends are withheld at source in the US at Irish treaty rates. Wait for me to get my dividends and I’ll post the outcome here at my blog.
Since we are interested in only global index funds, let’s take a closer look at Vanguard FTSE All-World UCITS ETF (VWRL) (tracks FTSE All-World Index) which is listed on the London Stock Exchange. From the fact sheet, looks like conceptually it is rather similar to Vanguard’s Total World Stock ETF (VT) apart from the fact that index it is tracking does not include small-cap companies.
Note that the trading currency is available in both British Pounds (VWRL) and US Dollars (VWRD). As the base currency of the ETF is in USD, this means that dividends will be distributed in USD, making the VWRD a slightly less hassle-free option.
Just to give you something to think about : If you want an alternative that is listed on the SGX, check out db x-trackers MSCI World Index UCITS ETF (tracks MSCI Total Return Net World Index) which is a non-physical replicated ETF.
Chosen Fund : Vanguard FTSE All-World UCITS ETF (VWRD)
Bond Index Fund
Left with the Bond component, a simple (but not necessarily the best) option is ABF Singapore Bond Index Fund (A35) which also happens to be the only Singapore Bond ETF.
While Andrew Hallam has suggested that Singaporeans has CPF money which could possibly be used as the bond component of the portfolio, do take note that CPF money is rather inflexible in the sense that it is subjected to various restrictions resulting in the possibility of being unable to be used for re-balancing when the need arises.
Chosen Fund : ABF Singapore Bond Index Fund (A35)
Asset Allocation For Bogleheads 3-Fund Portfolio
Now that we have decided on our three funds, an easy way to allocate assets is to use our age as the bond component, and split the rest evenly between the international and domestic stock component.
Assuming that my age is currently 30, a possible allocation can look like this :
SPDR STI ETF (E3S) : 35%
Vanguard FTSE All-World UCITS ETF (VWRD) : 35%
ABF Singapore Bond Index Fund (A35) : 30%
Standard Chartered Online Trading Platform
With your Standard Chartered Online Trading account, you should be looking at something like this after logging in.
e$aver Account (SGD)
This can be any account you set up with the bank to fund your trading activities. This account is externally accessible, meaning you would be able to transfer money here via POSB / UOB / etc. e$aver account is suitable for this purpose because it has no minimum deposit, no minimum balance, no lock-in period and no monthly fees.
Securities Settlement Account (SGD)
You need to transfer money into this account from your e$saver Account (for example) before you can make a trade.
FCY Securities Settlement Account (USD)
You need to transfer money into this account from your e$saver Account (for example) before you can make a trade for USD denominated shares / funds / etc, such as VWRD.
Securities Trading Account
This account shows the combined value of your holdings.
First, you would have to transfer money from your banking account e.g. e$saver into the settlement accounts. If you are transferring into your USD securities settlement account, you would be presented with the indicative exchange rate before the fund transfer is executed. By the way, the rates suck.
Next, you can place a trade for the 3 chosen funds e.g. E3S [SGX], A35 [SGX] and VWRD [LSE]. Client commission for SGX trades are 0.2% while other markets are at 0.25%. Even though you won’t be able to “find” VWRD to place it on your stock watch, you are still able to place a trade by keying in the stock code.
This means you will have to use a quick Google to grab the current price. Bloomberg is one such source. Also, I had looked in Bogleheads forums in which some investors revealed that the UK Stamp Duty is indicative only but not imposed.
Based on current prices, and assuming that you are able to trade in board lot size of 100 units, you will end up with something like this if you invest $10,000 at one go, following the asset allocation given in the above example of a 30-year-old investor.
That’s it, and we’re done! We have created a Bogleheads 3-Fund Portfolio in our sunny little island. No matter what country you’re in, and what nationality you are, I’m sure you would be able to find the relevant index funds or ETFs. Are you a Boglehead?
Note
This post should be regarded with slight caution as it is written when the author is slightly intoxicated. Information shared here is based on my own personal experience and of course shall not be taken as advice on what you should or shouldn’t buy.
Hi turtle, good that you help to advertise vwrd. Its the best choice currently. I just have 2 small gripes:
1. UK inheritance tax. Its a problem for higher networth people.
2. When one passes away, will the spouse/children know how to handle vwrd and its dividends on scb platform? This is a concern for me because although the 3rd fund diversifies the portfolio, it actually adds risk for me in terms of post-death management.
– momo
Hi momo,
Glad to see you here. 🙂
I have been thinking about the estate duties as well. Question is, how do they check? In the event of natural death, I could have Pre-educate my spouse to log into my account and withdraw everything.
The other point as highlighted in hardware zone forum: in the event of sudden death. Your life insurance would have cover the estate duties. you just need to work out the sum assured.
I’m too lazy to look into the details of Uk inherent tax to fully understand who it affects but my opinion is that as we age, we should have lesser foreign stock so it’s not much of a big issue.
Just my two cents.
By the way, hope you are doing well! Best of health and merry Christmas!!
Hi momo and Max,
Interesting and important point raised regarding the death/inheritance tax. I’ll be honest and admit I haven’t looked that deeply into this aspect but I’m certain it’ll be critical when it comes to a large portfolio.
Thanks guys for sharing!
Regards,
Turtle Investor
Hi Kevin,
Great post! Thanks for showing the step by step of how to purchase foreign shares. You’re right that the withholding tax is held at source in the US at 15% instead of 30%. This is even more obvious if you look at the annual report of the S&P Etf that is Ireland-domiciled. If you take the withholding tax (non claimable) expenses and divided by the dividend income, the effective tax rate is very close to 15%.
What is even more interesting is that the annual report for Ishare high yield bond have an effective tax rate of close to zero. Comparing if one is to hold a high yield bond etf in US, you get a significant tax saving because the double tax agreement between UK and US for interest income is zero. My understanding is that UK will not withhold tax on dividend and what the etf payout is considered dividends. Perhaps i should buy one and try it out myself.
However i find myself hard to understand why should a young investor hold high yield bond. The correlation between high yield bond and equities are rather high as shown in this link.
http://www.portfoliovisualizer.com/asset-correlations?s=y&startDate=12%2F01%2F2006&timePeriod=4&symbols=SPY+HYG&endDate=12%2F01%2F2014&numTradingDays=60
Hi Turtle,
Thanks for the post, great summary.
Can you explain why you choose SPDR STI ETF (E3S) over Nikko AM STI ETF (G3B). Is it because the total expense ratio is 0.09% lower for E3S?
Hi Norman,
Yes indeed. Lower expense ratio, higher trading volume. The only advantage (for me) that Nikko has over SPDR was its 100 lot size which is going to become obsolete in Jan 2015. I’m still holding on to Nikko AM STI ETF as of now, but I can see myself switching to SPDR soon.
Regards,
Turtle Investor
Hi Turtle,
Thanks for your reply. So you mean you are considering selling your Nikko AM STI ETF shares or just not purchase it anymore starting from Jan 15?
Hi Norman,
I will sell all my Nikko AM STI ETF, use the money to buy SPDR STI ETF and future purchases will also be SPDR STI ETF.
I find no reason to use Nikko AM STI ETF in 2015 – why pay more for the same thing? My guess is that it will still continue to exist for the sake of POSB Invest-Saver as well as Nikko AM MyHome funds etc.
Hi Kevin,
Great help for newbie once again from you!
Anyway, I saw your portfolio and just wondering whether why you do not have (VWRD) in your portfolio. Mind sharing your thinking behind it?
Cheers,
Naro
Hi Naro,
Nice seeing you here! Well ermm.. My asset allocation page was last updated in June, oops! My equities portion now include STI ETF, VWRD and REITs.
Regards,
Turtle Investor
Hi, I’m plotting the charts of both VWRD and VTI on Google Finance and realised there is a significance in their returns. Are you able to shed some light on this?
Hi Raymond,
VTI is US-only. Kind of a misleading fund name, isn’t it?
VT and VWRD should see much more similar returns.
Best Regards,
Turtle Investor
I see. Personally has been implementing my own modified “Permanent Portfolio”, 25% US Stocks (VTI), 25% World Stocks (VEU), 30% bonds (TLT) and 20% gold (IAU) for 2 years+ now. I looked up the factsheet of VWRD and VEU, seems that I can convert both my VTI and VEU holdings to just VWRD, as US Stocks make up 50% of VWRD. I suppose if US Stocks rise they would rebalance as well to keep the holdings to 50%? Do you have any idea if that is how it works? Thanks.
Ah, I see as well. Interesting variation of permanent portfolio with 50% on equities instead of a 25% cash component. More volatility I would assume? Yes, it would seem you are correct (for the moment only), although your current setup would incur slightly less expense ratio, plus VWRD does not include small-cap companies.
As far as I know, VWRD does not restrict US holdings to a particular percentage e.g. 50%. It is simply weighted accordingly by tracking the FTSE All-World Index. If Apple, Exxon, Microsoft and Google (top 4 holdings, which all happen to be in US) etc all does exceedingly well, you will expect the US stocks % to be more than 50%.
Investing in a single global index tracker means we don’t get to choose how much goes to where. To do so, you would have to slice and dice, and stick to your method instead. Also, many index funds portfolio specifically do it your way not because they can choose the desired allocation, but because the expense ratio is lower.
Yes, will have more volatility. I do hold a separate cash reserve in times of crisis though.
Although my way has lower expense ratio, but my dividends for both VTI and VEU are taxed at 33%! Hence I’m seriously considering switching both to VWRD instead.
Hi Turtle, I’ve been reading in HWZ about people who have opened foreign currency accounts in Standard Chartered and are using those to transfer between the foreign currency SSA. Would this be a better way to fund foreign currency transactions given SC’s unfavourable exchange rate?
For example, deposit GBP or US$ which you have changed at a favourable exchange rate straight into the Foreign currency account to avoid SC’s unfavourable exchange rate.
Have you tried it and can you give your comments?
Hi erwin,
I haven’t read too much on HWZ to be honest. That’s a rather innovative way to reduce exchange rate losses. Unfortunately, I have not tried it before but it could be worth a shot! Do you know of people who have done this?
Hi Erwin!
I think it’s ridiculous for banks to charge such a wide spread for currency conversions. A better solution I had found was to use PhillipCapital. Basically, I transfer SGD to my poems account, convert to USD, then transfer it to my citibank USD account. At that time, I was using the free citibank global transfer to move money to the US for my studies.
When I wanted to start investing, I was planning to do exactly what you mentioned; open a USD account with SC and exchange currency using PhillipCapital. Then I found out about Interactive Brokers.
The last time I checked, for every SGD10,000, compared with IB, SC will give me about USD65 less, while PC will give me about USD8 less. The spreads at PC is larger, but I had sometimes managed to execute limit orders at mid-spot rates.
The awesome thing about IB is that their spread is almost always about 1 pip, and they show me exactly how much commission they have charged me. So far, it has been around SGD2.66. If convert more than 25k USD, it will be even cheaper. I have been using IB to change USD and then buy ETFs in UK and US.
Based on my rough estimate, by factoring in trading commission and currency exchange cost, investing $1000 a month using IB will cost about the same at SC. However, the more you invest above $1000, the cheaper it is at IB. This is because % commission at IB is much lower than SC, but IB has a very low minimum commission.
Hope my sharing helps!
P.S. For both PC and IB, I just use regular bank transfer to their local accounts.
Great share Ken! Glad to see input from folks who have actually done this. Thanks!
Best Regards,
Kevin L.
Hey Ken.
i read with great interest on this particular post. i am still looking for the most cost efficient way to move USD around.
How much does POEMS charge you for moving from PC>CitiB?
and their SGD/USD spread?
Hi Kevin
First off, wanted to thank you for your informative blog! I feel like I have learnt so much from you and am going to give index investing a try. I understand that the brokerage fee for Standard Chartered is 0.2% for SGX and 0.25% for all the rest. If i intend to DCA monthly, I did not see any, but do you know if I will incur any other costs for the frequent transacting? What would you recommend?
Thanks again.
Best
Nick
Hi Nick,
Thanks for your kind comments. The things I wrote on this blog are what I would have wanted to see when I just started out. Figured my experience would be able to help others. Index Investing is certainly a viable strategy, among many others. If you feel that it works for you, that’s fantastic!
Not too sure what you mean, but you can’t do genuine DCA with Standard Chartered. You buy in board lots for SGX, instead of making a fixed amount (e.g. $100) worth of purchase. Nope, no additional charges besides those that are shown to you before you execute the trade.
Best Regards,
Turtle Investor
Hi Kevin,
Thanks for the informative article, VWRD is one ETF which I have never took notice but will surely keep a look out in future. Currently holding onto VTI, which I am thinking if I should let it go.
I wanna ask you and everyone here, if any of you have SRS account and how you invest from it.
I have been investing to ES3 and A35 from my SRS account, since quite a substantial portion of my investment allowance goes into this SRS account annually (max $12750).
If you also have SRS account, do you compute them into the 3-fund ratio calculation, or exclude them, since they should not be touched till 62 years old (otherwise 5% penalty kicks in)? As I also follow Andrew Hallam’s post, I have an account in DBS vickers which also allow me to link my SRS account.
Thanks in advance for any comment and wishing everyone a happy new year!
Hi walter,
Appreciate you leaving a comment here. Unfortunately, I do not invest using SRS and won’t be able to offer any personal experience to share with you. However, if I were have a substantial amount in SRS, I would still attempt to use a 3-fund approach for my SRS money.
Hi,
Thank you for yet another informative write up.
I’d like to ask about the 30% withholding tax for dividends when investing in US stock markets.
Is there an option to automatically re-invest all dividends? Dividends will be used to purchase more shares. Is this option available when purchasing the VT ETF?
Hi KS,
There is no such option that I am aware of.
Hi, I have a thinkorswim singapore account and they will automatically reinvest the dividends for you
To invest in VWRD, do we need to set up a USD account and fill up W-8BEN?
Hi Hans,
Yes, you would need to do both.
hi Kevin
thank you for such a great blog and sharing so much valuable information! 🙂
question, VWRD is listed on LSE, so we still need to fill up W-8BEN?
Hi Ken,
Hmm, good question. As far as I can remember (I could be wrong earlier) there is no need. Dividends are already taxed at source, so whatever the amount that is declared as distribution for VWRD, you get the full amount. You don’t really “see” dividend withholding tax in action.
But, since you’re setting up your brokerage account, why not just get it over and done with and fill it up? Then you can have access to the US markets whenever you want.
Any update guys? Do we still need to fill up a W-8Ben form if VWRD is listed on LSE?
Many thanks
This may be a stupid question with reagrd to ducking the US estate tax.
1) Do brokers open a joint account,
2) if affirmative, then is US estate tax still payable if we have a joint account and the first holder passes away.
3) What happens if we open a company in Singapore for investing in US markets. Will the company be liable for taxes on capital gains.
Oh my!
I’m so sorry but I have no idea how this comment slipped through without me realizing it. But wow, I’m truly stumped by your questions.
Would probably need quite a bit of Googling to find the answers as I totally have no clue when it comes to taxes, except perhaps for dividend withholding tax. It does sounds like you seem to have put some thought into it. Perhaps you know more than me already?
The answer is still yes for #2, but you would need to have more than $11 million to be liable.
https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns
In your post you state “Left with the Bond component, a simple (but not necessarily the best) option is ABF Singapore Bond Index Fund (A35)”
Could you please expand of why you feel that A35 is not the best and what in your view is.
Thank you.
Hi Ryan!
To clarify, I don’t know what is best, but I do know of other options besides holding just SG bonds. I know Bogleheads who prefer their bond component to be split-mix of both international and domestic bonds, which is essentially your 4-fund Bogleheads portfolio.
I personally have a local bias, which explains why I lean towards the 3-fund version. SG Abf Bond ETF is rather “risk-free” in my humble opinion, if you look at the holdings. It lets me collect dividends, sleep well at night, and becomes my tiny warchest in times of crisis.
Another index investor (Sg context), Andrew Hallam, has suggested that CPF money could possibly make up the bond component but I don’t like it as it has limited flexibility when it comes to rebalancing.
Kevin L.
hi Kevin
is there also an international bond etf you would recommend if one wishes to get greater geographical diversification?
thanks
Hi Ken,
Not specifically, as I have always preferred SG bond ETF for local bias and thus haven’t looked too much at international bond ETFs. Perhaps I’ll follow up with a comment or new post in future if I come across any useful resources worth sharing!
hi Kevin,
thank you and appreciate your reply 🙂
For Bond Index Funds,
recently I came across iShares Global AAA-AA Government Bond UCITS ETF.
was wondering what are your thoughts on this if one wishes to geographically diversify the bond segment of the portfolio
or how about directly buying into 30 year SGS bonds?
also what threshold do you look out for before rebalancing your 3-fund boglehead portfolio?
thanks so much for your thoughts as always 🙂
Hi Ken K,
iShares Global AAA-AA Government Bond UCITS ETF looks like a decent ETF to me. Ireland-domiciled, physical replication, low expense ratio. iShares is a big player, too. To me, it has good coverage of developed countries in US, Canada, Europe and Australia. If I wanted to increase diversification, it would probably be something I will consider buying.
To be honest, I haven’t given much thoughts on buying 30-yr SGS bonds directly so I shall not comment on it.
As for my threshold, I look out for 5% deviation e.g. my STI ETF is allocated at 30%, I rebalance if it goes below 25% or exceeds 35%. A reader has kindly pointed out Larry Swedroe, for your reading pleasure.
http://awealthofcommonsense.com/larry-swedroe-525-rebalancing-rule/
Thank YOU for leaving a comment, too!
Regards,
Kevin L.
Hi, thanks for patiently replying all our newbie comments 🙂 I learn from not only your articles but also your comments section! I have a question too now: If VWRD dividends are taxed 15% and SC exchange rates are terrible, why would you invest in a world fund? Purely for diversification?
If we were to cash out subsequently (say for retirement), would that be taxed at 15% as well? It’s horribly high O_o seems to violate the tenet of index investing to keep costs rock bottom
Hi, thanks for your informative articles for newbies like me 🙂 and thanks also for your patience in answering questions!
I have one too:
If the tax rate on VWRD dividends is 15%, does that mean that whatever we cash out (say for retirement) will also be taxed at 15%?
That would be wayyyyy too much to pay :S
what would be the main reason why anyone would have a fund taxed so heavily? Diversification? Capital gain?
Hi Lyn,
Thanks for leaving a comment (or two, heh). The tax rate on VWRD is not 15%, it is actually less, but I’ll leave the explanation to another blog post that is coming up. Yes! For diversification, and the simple answer is I don’t have to pick stocks when I can invest in the entire world, and get global market returns. The long answer is here :
https://www.turtleinvestor.net/beginners-guide-to-index-investing-singapore/
This tax only applies to dividends. When you sell your ETF such as VWRD, it is not taxed, so you can rest easy. You can think of it another way, at current VWRD yield of 1.92%, 15% of it = 0.288%, the tax thus increases your fund expense by 0.288% percent. A price i’m willing to pay for total world diversification in a single fund. In fact, Singapore actually makes up 0.5% of VWRD!
Thanks for your quick reply! (and sorry about the duplicate post >.<)
No worries Lyn. My newest blog post might be of some interest to you as it talks about Dividend Withholding Tax.
https://www.turtleinvestor.net/get-to-know-dividend-withholding-tax/
Regards,
Kevin L.
Hi Kevin,
It’s a great article for non-savvy investors who want to enjoy the fruit of stock market in a relatively safe way. I do like it a lot. Thanks for your sharing effort.
I need your suggestion on the execution .
1/ Is there a good time to start this Bogleheads portfolio? or just start when we want even when STI is at peak ? with lump-sum approach?
2/ If I have $10000 to start with, I will split it according the suggested portfolio. Can you suggest how should I add more money coming from my monthly salary? Should I add this extra cash monthly or should I accumulate the monthly salary to a big enough amount then add to the portfolio?
When adding additional cash to the portfolio, should we pump to the under-performed fund of the portfolio to balance it?
I think in some way we must coordinate the timing of this additional cash pump and quarterly( or bi-annually) portfolio balance.
Appreciate your effort.
Hi Ryan,
I do not have the answers that you seek. Timing is one thing that no one can grasp perfectly. What I can tell you is what I did.
I went lump sum in, split evenly into 3 parts. At the moment, I accumulate my monthly cash addition and hold it for evaluation every quarterly. Thinking of half-yearly instead will probably do as well. If the portfolio crosses the rebalancing threshold, I put in my cash and rebalance. I don’t follow an exact procedure (I don’t worry about doing it ‘wrong’) but it’s safe to say I’m always buying the poor performing component.
Best Regards,
Kevin L.
Hi Turtle!
I’m just thinking, I’ve been with POSB Invest Saver for both A35 and G3B for more than a year now. I understand that people don’t have good impression of it due to the 1% commission for G3B and 0.5% for A35. But I feel comfortable with it as I am not a person with discipline to buy stocks every 3 months! But I do balance my POSB invest saver every now and then. Do you think it’s a bad idea to use it? Or I should go into brokerage account and deposit my shares into CDP? I don’t use SCB brokerage as they do no deposit my shares into CDP. POSB don’t either! But I think I trust them more in case another “Financial Crisis 2008” comes along! =)
Hi Julian,
The fact that you are aware of the shortcomings of POSB Invest Saver, and why you chose to use them speaks volumes. You have justified your decision extremely well, and chances are, you will be much better off than many other people who do not invest at all.
My personal opinion is that I don’t think POSB Invest Saver is a “bad” idea as it does suit a certain audience. I just feel that there are lower cost options, especially with the smaller board lot of 100 now, that investors who are more hands-on are free to try out.
May I know how do you “balance your POSB Invest Saver” since you invest in both ETFs? I’m curious as I’ve never used them. I thought the FAQ said that you could only sell off your entire holdings? The rule must have changed!
Hi! I balance it by adjusting my purchase once in a while. For example i may be putting $400 into G3B and $100 into A35. When stocks go up high enough and goes over my allocation of 80/20, I reduce my G3B to $300 and increase my A35 to $200 till it balances again the following month.
Regarding your mention of $100 board lot, only SCB do not have a min charge. But SCB do not deposit my shares into CDP too. Therefore, unless my month purchase is more than $1800 (min charge of vickers is $18), I think i will stick to POSB. At least to me it’s kind of brainless to put a few hundreds into it from my giro!
Hi Julian,
Thanks for sharing! That seems like a good way of rebalancing your portfolio. I never thought of that! Yes, just GIRO it! Set and forget can be very powerful indeed.
Hi Kevin, could IWDA and SWDA on LSE be replacements for VWRD? Also I’m quite confused between IWDA and SWDA as I thought they are following the same index with different currency but it seems like they have very different performances? Why is this so?
Thank you! =)
http://www.bloomberg.com/quote/SWDA:LN
http://www.bloomberg.com/quote/IWDA:LN
Hi Jackson,
For your first question, I would think it is possible for SWDA to be a replacement for VWRD. At quick glance, I think the re-invested dividends is an attractive trait if you prefer it. Huge fund size, low expense ratio and physical replication too. Must point out that MSCI World Index does not include emerging countries, so whether it is better or worst is anyone’s guess!
For your second question, to be honest I have no idea, sorry! If I find anything I’ll follow up with a comment.
Regards,
Kevin
Hi Turtle,
I have just started working and have been considering investing in both G3B and A35. However, since my investment for G3B is higher than $500, I was thinking of using OCBC for G3B while A35 via POSB (bobian). Is that a good idea?
In addition, I’ve been mulling over starting a a brokerage account but from what I understand online, I need to pass the SGX test before eligible to open an account?
Regards,
AY
Hi YA!
As long as you’re comfortable with 2 brokerages, I don’t see any problems! By nature I just prefer simplicity (i.e. stick to one) but again, no right or wrong here.
I’m a out-of-touch when it comes to opening a brokerage account. Why not give the brokerage a quick call and ask? Sorry! Not of much help to you.
Hi Turtle,
Just to check what is the difference between VWRL and VWRD, other than being different currency? I see that you trade using VWRD any particular reason? 🙂
Also, i realized when using SC for trading VWRD, they do not register the code over, and you have to manually input in the buying page. Any idea why?
Cheers
Jeremy
Hi Jeremy,
Dividends are issued in USD so using VWRD (although it has lower volume than VWRL if I recall correctly) make things easier to manage by keeping everything in USD. That’s a question for StanChart and to be honest, I have no idea why that is so. Sorry!
Hi, when you place trade for VWRD, are the prices quoted in GBP or SGD?
Hi,
It is in USD.
Thanks Kevin. Say I want to allocate $30,000 SGD to the VWRD, how do I find out how much SGD will that be, given that the VWRD is quoted in USD?
Hmm. Sorry, I don’t quite get you so I shall just answer as I know it.
Using Google to convert S$30K gives US$21165.51
Using Google to find VWRD gives US$63.55
Thus, with S$30K I can probably buy abt 333 units as of now.
Hi Kevin, yup you answered my question! But, will the exchange rate used by SC be the same as that of Google?
Hi Lazy Singaporean,
Nope, it won’t. SC will use its own (rather lousy) exchange rate.
Hi Kelvin,
noob question here… I noticed that on the SCB place order page, we have to put down the order price ourselves. I don’t quite get that part, why do we need to key in the price ourselves? What if we made a mistake? Wouldn’t SCB just give us the quoted amount?
Hi Michael,
Well, sometimes! A trading platform is nothing more than matching buyers and sellers with the prices they are willing to pay/accept. We all have to be responsible for our mistakes.
To quote Andrew Hallam, a “Market” order means you will accept the market price for the shares. For lower liquidity ETFs it might pose a problem, since bid/ask spread could be higher.
Going with a “Limit” order means you can enter the maximum price you wish to pay. For example, I placed a limit order 2 days ago to buy VWRD at $62.25 as I was willing to pay up to this price, max. StandChart will still attempt to match the best priced sellers for me, though. My order eventually got filled at $62.13.
Likewise, many many months ago, I placed a limit order to sell Nikko AM STI ETF. Someone butter-fingered and probably placed the limit buy order incorrectly as $3.4-ish instead of $3.1-ish. My sell order was next in line and was matched to his buy order. I was a happy man that day.
Hi Kelvin,
thanks for he answer. I get it now. Was wondering if i want to buy VWRD, do I need a USD settlement account? Right now I only have a FCY SECURITIES SETTLEMENT ACCOUNT in GBP…
I would believe yes, since VWRD is traded in USD. So are the dividends.
Good day Kevin,
I’m from neighbourig Malaysia and have been seeking tax-efficient ETFs for broad asset allocation too – non-REIT Stocks, REITs and 20 Year US Treasuries.
Thank you for a great article – VWRD fits my need for a simple “world” ETF.
Like U, i’ve also been buying specific SGX-listed REITs (and MY+US REITs). However, i just want to simplify moving forward.
Have U come across any tax-efficient ETFs for a Singaporian/Malaysian – like VWRD for general stocks?
Those withholding tax for US-listed are really painful, especially when REITs are generally for net DY% (to me lar :P).
Still hunting,
MK
Hi Mun Keong,
Nice to see a friendly neighbour here 🙂 Thanks for your kind words. I doubt there is any tax efficient world ETFs for us.
We both have the same problems when investing globally. Not so sure what do you mean by “general stocks”? We have our respective ETFs tracking our indexes in our home country, isn’t it?
By nature, any world/global index ETF is roughly 50% US-based, which gets subjected to dividend withholding tax no matter what happens. Only a matter of more, or less tax. We can optimize but I don’t see a solution in sight, which is why I chose VWRD.
Hi Kevin,
I’m planning to invest 5,000 SGD into a 25% ABF SG bond, 35% STI ETF and 35% VWRD portfolio.
My question is: is it advisable to purchase VWRD with a small capital of just 2000 SGD? Or should I wait til my portfolio grows bigger in size before I consider VWRD.
Simple calculations:
2,000 SGD in VWRD converted to 1424 USD. At 65 USD per stock, I can purchase roughly 22 stocks of VWRD.
Thank you.
Hi Matt!
Not exactly in the position to give any advice haha. For myself, I didn’t consider whether a small portfolio size would affect my decision to hold VWRD or not. I just went ahead and created my portfolio, stashed away few hundred bucks on a monthly basis, and tried my best to re-balance the allocation either quarterly or half-yearly basis.
One possible reason I can think of is that some preferred to keep things simple in the beginnning. No USD currency to care about, no need extra settlement account, no need fret about poor exchange rates. I know of some who would rather keep STI ETF 70% and ABF SG Bond 30% and totally forgo the international component.
With standard chartered online trading its easy to include the global part. Thanks for the information I think I know what to do now! Merry Christmas in advance
Merry X’mas too! I doubt that I helped you much but I guess you already had an idea in mind 🙂
Hi Kevin,
Happy New Year, although its 10days late haha.
Say, how often do you rebalance your portfolio? And how?
Rgds
Matt
Hi Matt,
I used to do it quarterly but now, I think half-yearly would be fine too.
Honestly, I don’t exactly know which is best but the general idea is to reduce fees – buy the lagging component with “Fresh money”, rather then to sell the top performing ETF and buy the poor performing one.
Hi Kevin,
Do you mean buy the lagging component until it hits the original percentage of your portfolio (say 30% for STI ETF)? That way you would buy low right
Yes Matt, that is what I’m doing. It automatically ensures that I’m always buying “lower” compared to the other components in my portfolio.
I found the thread useful, so just chipping in…
For those who wanna invest in VWRD through SCB Online trading platform and concerned about the indicative stamp duty on UK ETFs (as shown on SCB fees webpage), fear not…
I have purchased 1 lot of VWRD thru SCB just to try it out and the contract note confirms that no stamp duty is imposed on the trade.
Info is correct as at the date of this post.
Cheers,
KH
Thanks for sharing, KH!
Hi Kevin, I’m looking for advice on my portfolio. It’s currently split between VT (global shares index), ES3 (local shares index) and A35 (local bond index) and some individual local shares.
I read your previous posts on taxable dividends for US holdings and am slightly concerned that it may not have been the right choice to go with VT.
Two questions:
1. Should I buy another ETF for global exposure? I see that VWRD is also recommended.
2. If I want to add a REIT for greater diversification, since there’s no local Reit ETF, would you recommend a global one from Vanguard?
Much appreciated.
Hi Aurora,
Global exposure isn’t a problem for you. In any case, VT has even greater diversification as VWRD/VWRL. The problem is that when it comes to handling dividends, because VT is US-domiciled, US-based dividends are taxed at 30%. For Ireland-domiciled, 15%. I have a post on that, you can probably search for it 🙂
I’m not too familiar with global/US REITs but the same issue with dividends withholding tax exist. And US REITs are very different from Singapore with different yield level as well. That’s why I generally steer clear of them. Sorry, can’t help you much with question two. Philip Capital does have a REIT fund if you’re interested.
Hi Kevin,
To get around the US inheritance tax, my friend recommended going on Toronto stock exchange and buying VXC.TO – Vanguard FTSE Global All Cap ex Can ETF.
Currently I already have VT. What is your advice?
Hi Lauren,
I can’t really give specific advice related to taxes as I have really basic understanding of it across different countries.
I heard from the members in my Index Investing Facebook Group that Toronto exchange is one valid option. Personally, I use London Exchange (VWRD), not just for the inheritance tax issue but also the dividend withholding tax issue. To me, it all depends on cost and convenience depending on what you live now, in future, and your nationality.
Hi Kevin . what is your recommendation for India Etf? Dividend tax point of view, India etf listed in sgx and listed in lse, which is more preferable?
Hi KH,
I have not done any research on India ETFs. For dividend tax POV, you are going to be interested in where the ETF is domiciled rather than where it is listed. Then, you can compare the country-of-domicile tax agreement with Singapore (try Googling online) to see which is more preferable.
Hi Kevin, thanks for the blog post. I personally do not have a SC account. Do you have any experience buying on the LSE through other brokerage houses and if so, should this Vwrd be available elsewhere as well?
Thanks!
I believe the major exchanges e.g. London would be available on most brokerages in Singapore. Maybe give them a call to find out?
How do you purchase VWRD now? Still using SCB but spending 5k on it each time?
I still purchase/rebalance VWRD via SCB but I don’t have a fixed number to whether it is $5K or any other fixed amount. If it crosses my threshold/criteria, I would do it.
Hello Kevin,
In selecting a global equity etf, I also came upon choosing between IWDA and VWRD when I stumbled upon your blog.
Some thoughts on Vanguards unique ownership structure and said advantage.
“The Vanguard Group, Inc. is owned by its US-domiciled funds, which are owned by their shareholders.”
https://www.institutional.vanguard.co.uk/portal/site/institutional/uk/en/about-vanguard/about-us##key-facts
The thing is, to my knowledge, Vanguard UK is a subsidiary with none of the advantages that the Vanguard Group has as far as ownership structure goes.
“Disclaimer: please bear in mind that when investing with Vanguard Europe you are NOT investing with the American cooperative non-profit organisation. Vanguard Europe is an independent subsidiary. In my humble opinion their philosophy matches the American parent company exactly. However, it is not a cooperative non-profit organisation in and of itself.”
http://jlcollinsnh.com/2014/01/27/stocks-part-xxi-investing-with-vanguard-for-europeans/
IWDA is slightly cheaper now with a TER of 0.2 vs 0.25%, and I’m considering a 10% EM fund such as EIMI with A TER of 0.25%. These 2 iShares are also accumulating, most agree that’s better when you are in you’re “accumulating years”. This eliminates any costs and time spent on reinvesting dividends..
https://www.bogleheads.org/wiki/EU_investing#Accumulating.2Fcapitalizing_vs._distributing_ETF_share_classes
Let me know your thoughts
Hello!
Thank you for the information! I, too, had to decide between IWDA and VWRD/VWRL. To be honest, I wasn’t aware that the Vanguard UK structure differed from the US one, but I have to admit I was won over by the philosophy.
Mainly, I chose VWRD because of the simplicity – one fund is all I need, despite it not having small caps. On the CONs side, it has slightly higher expense ratio, and IWDA has a far larger fund size. With regards to dividends, my personal preference is to receive them, so I didn’t had a problem there.
It looks like you have thought through your options, and to me, either options (whether it is VWRD or IWDA) would work perfectly well.
Hi Kevin! I’ve been reading your blog for some time now but only just got around to starting a portfolio (because student life ended and work life began $.$). I’m really excited to try your strategy but I have a question: why the STI? I plotted the performance of ES3 against VWRD, IWDA and the S&P500 and the latter three far outperformed the STI both in the long term and in recent years.
I know it’s important to hold local stocks but as you’ve pointed out before the STI has numerous issues including a lack of diversity and being overweight on financial stocks. Personally, I’m thinking of just buying a combination of VUSD and VWRD (historically the S&P 500 has performed the best) to make up the equity component of my portfolio and just ignore the STI entirely. I’ll buy local stocks individually based on other criteria.
Let me know what you think and thanks for consistently providing great insights :)!
Hi Zech,
My personal choice is a traditional allocation of local equities, local bonds, and global equities i.e. BOGLEHEADS 3-FUND PORTFOLIO, and I don’t take into consideration their past performances. No other special reason besides local bias.
A 2-fund portfolio would work just fine, and is actually pretty common! Just have global equities and global bonds, perhaps?
I think more importantly, you must be convinced that your strategy will work, and then stick to it. Is your core portfolio indexing? How does the local stocks i.e stock picking come into play? End of the day, are you using a passive or active approach? As long as you have these answers for yourself 😉
Thanks for the quick reply :)! I’m think I’m going with a hybrid approach: most of my portfolio will comprise of the 3 (or perhaps, as you suggested, 2) fund portfolio which I’ll build till retirement but a substantial amount will be actively managed local stock picks.
Part of the reason is that I generally want a lazy peace-of-mind solution to investing but at the same time I want the thrill of actively investing (medium term). Part of it is because I’m young and can afford to be stupid and think i can beat the market. But another part of it is that I’ve read widely on active investing strategies that I’m excited to try. In fact, I’m not sure you’ve heard of/tried meetinvest before (I’m in no way affiliated to them), but it allows you to apply one or more famous investment strategies (Buffet, Greenblatt, Levermann etc.) to various markets including Singapore and automatically pick stocks. And for free! Worth a check if you’ve the time 🙂
Kevin, hi, Happy New Year! Hope Singapore is not so hot this time of the year. I understand, that you live in Singapore and therefore, want to keep part of your investment in S’pore, however, you also diversify to VWRD.lon. Why you didn’t choose the similar world bond fund as well, instead of S’pore based AB? And have you considered the world bond fund? If yes, which one and what was the show stopper for you?
Hi Alexey,
Singapore is always warm and humid despite the rain 🙁 Happy New Year!
When deciding my portfolio, I was torn between a 3-fund or 4-fund portfolio. Eventually, I think I went along with the 3-fund because I had that little bit of local-bias as I was just starting out, and wanted to keep my portfolio is mostly SGD currency. Plus, ABF is as good as risk-free if you look at the holdings, which was a plus for me back when I started. 3-fund is simpler than 4-fund, too.
I haven’t reviewed the components of my portfolio since then, and now that you mention it, perhaps it is time to re-look at this area. Afraid I don’t have recommendations for world bond fund for you. Share with me if you do have something in mind 😉
Hi Kevin
Thanks for sharing all that knowledge. I am a newbie in investing and I got some basic questions. Appreciate if you could provide the answers.
1. Which platform has the lowest fees now? Still SCB?
2. You mentioned that if we purchase Vanguard’s Total World Stock ETF (VT), dividends are taxed at a hefty 30%. How does that work? Do we need to file in the dividends in our annual IRAS tax filing? Or is it automatically included?
3. When we buy VWRD, does the platform automatically show us the actual value in SGD?
4. If I am 30 years old today, I will purchase bonds with 30% allocation. In the future, do I rebalance based on my age (ie as I grow older, I allocate more % to bonds) OR based on the asset values to maintain the 30% bond allocation?
Thanks!
Steven
Hi Steve,
1. As far as I know, yes – SCB.
2. No filing required. Automatically deducted from dividends.
3. Referring to SCB? It shows in USD. You would first have to convert SGD into USD in a separate step. Purchases would then deduct the funds from your account.
4. There is no hard rule. End of the day, it is what you are comfortable with. Personally, I try to rebalance based on age. When I age, my % bonds go higher and higher.
Hi just wondering, the 3 fund portfolio, with the VWRD heavily into USA market, and STI ETF very influenced by USA market, how do we mitigate that “too much USA” exposure?
I might be wrong w/ the above, so would like to hear out 🙂
Hi Turtle,
I’m newbie in investing & would like to know where can I buy the bond?
Hi Josh,
ABF Bond Index Fund is an ETF that can be purchased on all major brokerages in Singapore.
http://www.nikkoam.com.sg/etf/abf
Thank you Kevin. I’ve always admired your articles which introduced me to the Bogle’s 3 Fund allocation. I’ve done a little data analysis at https://inquirerdesilentio.wordpress.com/ and indeed I believe the Bogle method is the way to go.
Thank you silent inquirer for your kind words!
You are welcome 🙂
Hi Kevin,
Eye opener on the VWRD, thanks for sharing so much.
I would like to ask a few relating queries:
1) Last I heard, seems like there is Corporate Action charges by SCB. Is there any such charges for each quarter dividend that you have received?
2) SCB has started charging minimum fees, is it still be wise to do DCA if only have small amount of capital?
3) What do you think of Think&Swim vs SCB?
Hi Jon,
1) No such charges that I’m aware of. Perhaps you can provide a source of that info?
2) $10 min. seems to be the norm now. Personally, I would avoid frequent trades. Perhaps quarterly or half-yearly for me.
3) No experience with ThinkOrSwim so I can’t really comment, sorry!
Thank you Kevin for the reply!!
Hi Kevin,
First of all thanks for selflessly sharing. It makes the job so much easier for us who are just getting started (and pretty late at that).
Silly question – why do you buy ABF and not Singapore Savings Bond directly?
Not a silly question at all. I used to buy ABF for easy rebalancing etc and back in the days there was no Singapore Savings Bond.
Hey Turtle, Thanks so much for this post, It was especially valuable to a young investor that has just started working. At the current stage, I have already brought some local ETF(thru monthly invest saving) and some local blue chips. I was actually googling to find out a global fund in which I am able to diversify my current portfolio and I found VWRD. However, I hope you can clarify some questions
1. Is there any broker that ables Regular savings plan, such as investing something like 1k/month into VWRD rather than 1 lump sum(which i don’t have)
2. which broker is the best in terms of cost? I did my research FSMOne is cheap in terms of cost but dosent seem to offer VWRD but the US version of it (VT) hence taxed 30% :(. The others such as SEXO seem to have annual fees.
Any other advice would be greatly appreciated.
Hi James,
Thanks for reading. To be honest, I haven’t been keeping up with local brokerage options and have no idea to the answer for your question! This is due to myself largely depending on robo-advisors now. Sorry!