Seeking advice for investing in Singapore

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Topic Author
sam4206
Posts: 2
Joined: Tue Apr 20, 2021 1:16 am

Seeking advice for investing in Singapore

Post by sam4206 »

Country of Residence: Singapore

International Lifestyle: Indicate if you expect to move country before retiring or in retirement, or if you regularly change country either for work or for other reasons.

Currency: SGD (Singapore Dollar) (1USD≈1.33SGD)

Emergency funds: Yes, kept in a savings account that can be withdrawn anytime.

Debt: Not in any debt

Age: 19

Desired Asset allocation: 80% stocks / 20% bonds
Desired allocation to stocks outside your of country of residence: not sure, since the local market is very small relative to US and global markets

Size of current total portfolio: low five-figures

Singapore also offers a mandatory savings scheme called CPF, in which employers have to contribute a portion of their salary into their CPF account, and employee contributions are roughly matched by employers. The money in the CPF account cannot be withdrawn until over thr age of 65.

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Questions:
I recently decided to start educating myself on investing and read "The Little Book of Common Sense Investing" by John Bogle and "The Bogleheads Guide to Investing" as well as "The Bogleheads Guide to the Three Fund Portfolio". However, a lot of the content and knowledge in these books refer specifically to investors in the US. As an investor living in Singapore, I am unable to invest directly in US stocks and funds such as the highly recommended Vanguard Total Stock Market Index Fund and other index funds.

1. What are viable and recommended alternative index funds to invest in? Seeing as the US stock market generates much larger returns than the global market, is it possible to still invest in the US stock market?

2. The wiki page for non-US investors recommends Ireland ETFs. I was wondering why ETFs are recommended instead of passively managed mutual funds, or are there considered to be the same thing?

3. Is there any upsides to investing in the Singapore domestic stock market? It is smaller and much less diverse than the global or US market, so it seems to me that there is not much benefit from doing so.
Valuethinker
Posts: 48954
Joined: Fri May 11, 2007 11:07 am

Re: Seeking advice for investing in Singapore

Post by Valuethinker »

Have you done a search on "Singapore" and "Singapore investing" on threads here?

We have had a lot of posters from Singapore.

I would say you want to hold a global equity ETF or fund. Index tracker. Low cost. Information here can help you decide which fund domicile to choose -- probably Ireland, not usually US because that can lead to long term tax problems.

Don't try to pick which countries will be the winners of the future. I would not (did not) predict what happened to China from 1979 and Deng Tsiao-peng's (sp?) reforms. The US is c. 60% of world index, and that's enough. The US"won" the 20th century and its stock market reflects that. In the 21st century it was US companies that "won" the internet - but that might not be true over the rest of the century.

One thing is ETFs typically select Developed Markets and Emerging Markets. In that case, you want 2 ETFs in a ratio that puts c. 15% into EM (over half of that 15% will be PRC + Taiwan). Given that you live in an "Emerging Market"** you can afford to be light - 0% would be OK, 10% probably a better strategy (anywhere between 0%& 10% will have next to no impact on your final performance).

20% bonds is prudent. With that asset allocation you don't need to think about it again before say your mid 30s. Just rebalance, periodically. How the CPF works I am not sure - is it just a mixed fund of bonds and stocks? Is any return level guaranteed?).

** you have a country with a GDP per capita above many countries in Europe - probably well above the European median GDP per capita. And I missed visiting Singapore last year (because of the virus) but I know how advanced it is. Emerging Market is just a stock market classification for example one index provide counts South Korea as developed, and another as emerging.
TedSwippet
Posts: 5166
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Seeking advice for investing in Singapore

Post by TedSwippet »

Welcome.
sam4206 wrote: Tue Apr 20, 2021 1:41 am Country of Residence: Singapore
If you have not already found it, we have a wiki page entirely devoted to investing from Singapore:

Investing from Singapore - Bogleheads
sam4206 wrote: Tue Apr 20, 2021 1:41 am 1. What are viable and recommended alternative index funds to invest in? Seeing as the US stock market generates much larger returns than the global market, is it possible to still invest in the US stock market?
The wiki lists plenty of suggestions for funds you can use, including S&P 500 tracker funds. As for "the US stock market generates much larger returns than the global market", you might want to read up on recency bias.
sam4206 wrote: Tue Apr 20, 2021 1:41 am 2. The wiki page for non-US investors recommends Ireland ETFs. I was wondering why ETFs are recommended instead of passively managed mutual funds, or are there considered to be the same thing?
Some countries have access to locally managed mutual funds or equivalent (for example, OEICs in the UK), but ETFs tend to be available everywhere, so the wiki has to concentrate on what will cover most investors. If Singapore offers mutual funds or similar and these do what you want, then by all means hold them.

By and large though, a passively managed tracker ETF and a passively managed tracker mutual fund that track the same index will generate the same investor returns. The only difference is the wrapper in which the assets -- stocks, bonds, whatever --- are held. (The F in ETF stands for Fund!)
sam4206 wrote: Tue Apr 20, 2021 1:41 am 3. Is there any upsides to investing in the Singapore domestic stock market? It is smaller and much less diverse than the global or US market, so it seems to me that there is not much benefit from doing so.
Sometimes investors get local tax benefits from investing in home-country stocks, but I believe Singapore does not tax investment income, in which case no difference for you. Beyond this, some investors simply prefer their home country stocks (search for "home country bias" for a full explanation). The larger an investor's home market, the less extra risk a home country bias adds.

Only you can decide whether or not overweighting Singaporean stocks is something you want to do.
oken
Posts: 219
Joined: Thu Oct 10, 2019 7:00 pm

Re: Seeking advice for investing in Singapore

Post by oken »

Welcome!
sam4206 wrote: Tue Apr 20, 2021 1:41 am Singapore also offers a mandatory savings scheme called CPF, in which employers have to contribute a portion of their salary into their CPF account, and employee contributions are roughly matched by employers. The money in the CPF account cannot be withdrawn until over thr age of 65.
You can withdraw from CPF at 55 if you are able to fund your RA to FRS or above.
Remaining can be withdrawn in cash, or left in OA (2.5%pa) or SA(4%pa).
CPF life is also a really really decent annuity that starts payouts from 65, or you can delay to 70 for a higher payout.
sam4206 wrote: Tue Apr 20, 2021 1:41 am Questions:
I recently decided to start educating myself on investing and read "The Little Book of Common Sense Investing" by John Bogle and "The Bogleheads Guide to Investing" as well as "The Bogleheads Guide to the Three Fund Portfolio". However, a lot of the content and knowledge in these books refer specifically to investors in the US. As an investor living in Singapore, I am unable to invest directly in US stocks and funds such as the highly recommended Vanguard Total Stock Market Index Fund and other index funds.
Value and Ted have pointed you in the right direction. You actually can invest directly in US stocks. Most brokers allow us to invest in US stock market, but as was mentioned in response to Q2, it isn't quite recommended due to Dividend Withholding Tax and potential Estate Tax. The wiki shows some calculations of how ireland-domiciled ETFs are cheaper because of that.
sam4206 wrote: Tue Apr 20, 2021 1:41 am1. What are viable and recommended alternative index funds to invest in? Seeing as the US stock market generates much larger returns than the global market, is it possible to still invest in the US stock market?
The ireland-domiciled equivalent of VT is VWRA.
The ireland-domiciled equivalent of VOO is VUAA.
US already takes up about 60% of VWRA, so it seems to me more prudent to diversify the rest instead of overloading on US.
sam4206 wrote: Tue Apr 20, 2021 1:41 am2. The wiki page for non-US investors recommends Ireland ETFs. I was wondering why ETFs are recommended instead of passively managed mutual funds, or are there considered to be the same thing?
I can't find a place to buy cheap passive mutual funds unfortunately. Some Robos have allowed access to DFA, but the costs are still higher than just DIY with Vanguard ETFs. VWRA is about 0.22. Buying DFA with EndowUs or MoneyOwl will cost you about 0.8 in total.
sam4206 wrote: Tue Apr 20, 2021 1:41 am3. Is there any upsides to investing in the Singapore domestic stock market? It is smaller and much less diverse than the global or US market, so it seems to me that there is not much benefit from doing so.
Less worries about currency fluctuations. But that's more of a concern when you are in the withdrawal stage I think.
But yes, generally, I would rather be in the global market than just the SG market.

Check out Interactive Brokers. They are known for low fees, and they have a lower rate for young investors. (Up to 25 I believe.)
Topic Author
sam4206
Posts: 2
Joined: Tue Apr 20, 2021 1:16 am

Re: Seeking advice for investing in Singapore

Post by sam4206 »

Thanks for the replies, everyone.

I read through the wiki and I roughly found a few funds that I would want to invest in. For my equities, I was thinking of an allocation as follows:
70% US
20% International
10% Emerging Markets
Would this be considered to be overweighting too much on the US market?

I am also curious about the difference between ETFs and how to pick the more suitable or profitable one. Between these 3 funds,
IWDA - iShares Core MSCI World ETF USD Acc
VWRA - Vanguard FTSE All-World UCITS ETF USD Acc
SWRD - SPDR MSCI World UCITS ETF USD Acc
the IWDA and VRWA seem very similar with identical TER (0.22%), the only real difference I managed to find was that the VWRA includes China assets while IWDA doesn't. Would this make a significant difference in final performance of my portfolio, given that I am already going to put in roughly 10% into emerging markets (EIMI)?

Additionally, the SWRD and IWDA track the same index and have almost identical asset allocations, but the SWRD has a much lower TER of 0.12% versus the TER of 0.22% of the IWDA. Would it be simplistic to assume that the SWRD would be a definite better investment choice than the IWDA?

Thanks!
oken
Posts: 219
Joined: Thu Oct 10, 2019 7:00 pm

Re: Seeking advice for investing in Singapore

Post by oken »

sam4206 wrote: Tue Apr 27, 2021 10:11 pm Thanks for the replies, everyone.

I read through the wiki and I roughly found a few funds that I would want to invest in. For my equities, I was thinking of an allocation as follows:
70% US
20% International
10% Emerging Markets
Would this be considered to be overweighting too much on the US market?
VWRA tracks global markets and has about 60% to US, and 12% to emerging markets.
sam4206 wrote: Tue Apr 27, 2021 10:11 pm I am also curious about the difference between ETFs and how to pick the more suitable or profitable one. Between these 3 funds,
IWDA - iShares Core MSCI World ETF USD Acc
VWRA - Vanguard FTSE All-World UCITS ETF USD Acc
SWRD - SPDR MSCI World UCITS ETF USD Acc
the IWDA and VRWA seem very similar with identical TER (0.22%), the only real difference I managed to find was that the VWRA includes China assets while IWDA doesn't. Would this make a significant difference in final performance of my portfolio, given that I am already going to put in roughly 10% into emerging markets (EIMI)?
VWRA tracks global, meaning developed and emerging markets.
IWDA and SWRD track only developed markets. China is classified as an emerging market and explains why it is included in VWRA and not IWDA or SWRD.

If you're buying VWRA, you really don't need EIMI unless you intend to overweight emerging markets.
If you're buying IWDA or SWRD, you may want EIMI for emerging market exposure.
In both cases, US markets are already included, and there is no need to buy any separate ETFs for US or international markets.
sam4206 wrote: Tue Apr 27, 2021 10:11 pm Additionally, the SWRD and IWDA track the same index and have almost identical asset allocations, but the SWRD has a much lower TER of 0.12% versus the TER of 0.22% of the IWDA. Would it be simplistic to assume that the SWRD would be a definite better investment choice than the IWDA?

Thanks!
IWDA is by Blackrock, and is the older ETF. They have a higher ER but also a larger trading volume. So easier to buy and sell.
SWRD is by State Street I think and is newer. Lower ER but also lower volume.

Personally, I think throwing everything into VWRA and kicking back with your favourite beverage is a valid investment strategy.
Hustlinghustling
Posts: 321
Joined: Mon Jul 25, 2016 12:09 am

Re: Seeking advice for investing in Singapore

Post by Hustlinghustling »

oken wrote: Wed Apr 28, 2021 4:00 am
Personally, I think throwing everything into VWRA and kicking back with your favourite beverage is a valid investment strategy.
Agree. VWRA already gets you pretty close to the OP's desired breakdown
bluebereft
Posts: 7
Joined: Fri Apr 30, 2021 9:56 am

Re: Seeking advice for investing in Singapore

Post by bluebereft »

I also invest from Singapore.

It's much easier to just use VWRA. You wouldn't need to rebalance between developed and emerging markets. There's no need to buy another etf for the US market.

I used to get it with Standard Chartered but there might be cheaper brokers now. The only con is that it's somewhat troublesome if you want to DCA and rebalance.

If you are willing to pay a bit more for the convenience of being able to DCA and auto-rebalance, you can outsource that work to a robo for an additional 0.5-0.6%. DIY will always be cheaper. Autowealth takes the most passive approach, but invests in the US ETFs (VT etc), which have dividend withholding taxes. Endowus has Dimensional funds, which are the next closest equivalent to the vanguard funds (albeit slightly more expensive), but the DFA funds have a slight factor tilt. Just be sure not to pick a robo that does any "tactical" or "strategic" allocation (eg Stashaway or Syfe) - basically active investing.

It's up to you how much you want to put in locally, though the STI is actually quite a narrow pool of companies.
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