Index Investing In Singapore – An Update For 2017 And Beyond

The indexing investing landscape has changed a fair bit from four years ago when I started blogging. We have more tools at our disposal now. This means it is much easier to do what I did in the past, and it is also much easier to do MORE.

The Early Days

In the past, I chose to DIY a BogleHeads 3-fund portfolio partly in consideration of the simplicity in maintaining the asset allocation.

I have also mentioned that my deliberate tilt towards Singapore indexes is due to my home bias, and not because I have unwavering faith in our economy. If you prefer to go by pure market weightage, you can abandon the SG market since it compromises of such a small percentage in comparison to the global market.

I ended up with just three ETFs which suited me. I didn’t like having to manage the forex component of buying an ETF that is listed on the London stock exchange, although there was only one – Vanguard VWRD. The Singapore equities and bond components are listed on SGX which were easy-peasy to manage.

So now, my “new” portfolio can be sliced two ways.

Firstly, in terms of geographical location.
SG equities + SG bonds vs Global equities + Global bonds.

Secondly, in terms of asset type.
SG equities + Global equities vs SG bonds + Global bonds.

But hey, I could have done the same by buying individual global equities and bonds ETFs right? My answer is yes, absolutely. You just have to manage it.

Previously, I picked Vanguard VWRD ETF as my proxy into global equities since it has a significantly huge number of holdings, is less impacted by dividend withholding tax (you may prefer iShares IWDA) and is managed by a company that I believe in.

It does, however, aggregates performance of its global holdings because now we don’t see price movements within each geographical sector e.g. Europe, Asia Pacific, US etc. Some say slice and dice is better – lower total expense ratios perhaps? The ETF holdings may better reflect the global market than one-fund-to-rule-them-all.

The BogleHeads forum has a wealth of discussion on this and there is not definite answer as to which is better.

I do feel that the best days (enormous growth %) of Singapore is behind us and it would be too reckless to risk it all on STI ETF. A true globetrotter may choose to give up the SG components and go for simply global equities and global bonds instead.

Now is a good time for would-be index investors. Not in terms of timing the market, but in terms of the tools that are available at our disposal. Even the humble Singapore Savings Bonds can potentially take the place of ABF SG Bond Index Fund.

One thing I am slightly concerned about is whether the increase in options would actually overwhelm the novice investor? Are they actually fully aware of what they’re putting their money in?

For example, it is common for me to see comments and discussions on robo-advisors and folks are comparing returns in just a matter of months. Perhaps 1, 2 or even 3 percent is considered good/bad? My investment horizon is more like 5 to 20 years if I have to give a number.

There is not much of any secret sauce to them man. They are not AI that will definitely beat the market in both good times and bad times. Like what John Bogle has mentioned before, if there is smart beta, then there must be dumb beta. Wait till the bear comes and we’ll see who has the conviction to stay on with the robo-advisors. I say, throw the tough questions at the robo-advisors and clear your doubts if you have them. It’ll help you tremendously in time to come.

Bitcoins

Nah! Just kidding. Everyone is talking about it these days. I don’t think I want to do so in this post. Kthxbye!

P.S. More posts on index investing here.

Kevin

Kevin started Turtle Investor after hitting rock bottom at negative $25,755 net worth. Today, his monthly alternative income pays for all his daily expenses. He shares what actually works (and what doesn’t) for Singaporeans building wealth. Learn more about Kevin here.