Investing from Singapore
Due to the lack of index mutual funds in Singapore (whether locally or overseas), Singapore based investors would be well served by building a diversified portfolio using traditional equity and bond ETFs in line with the Bogleheads philosophy.
However, investors should also be aware that there are a range of alternative investment options, robo-advisors, access to DFA funds, and similar that could also contribute to a diversified portfolio. This page will attempt to give a brief overview of these as well as the traditional 3-fund, diversified portfolio approaches in an effort to aid investors.
Singapore savings accounts
Bank accounts in Singapore are insured up to 75000 SGD.
However, investors looking to save the old fashioned way, that is "cash in the bank", do not have too many options due to the extremely low interest rates paid by banks. On average, most banks pay approximately 0.05% on cash held which does not hold up well against inflation.
As of 2019, the highest "no frills" savings rate is offered via the CIMB Fast saver account which pays 1% p.a. on a minimum deposit of 1000 SGD.
There are options to earn higher interest via various "hurdle accounts" offered by various banks which pay higher interest only if various conditions are fulfilled (such as a minimum spend on a related credit card, balance in a brokerage account, linked insurance policy/monthly increasing balances, and so on). Investors may consider these if they have higher cash needs or like to consolidate their spending through a single bank. More research can be done via each bank's website.
Key taxation considerations
Singapore has a favorable tax regime for most investors who enjoy flexibility in terms of access to various products. Hence the main concern for most investors is withholding Taxes levied on foreign dividends/interest payouts. Please refer to the section on Global ETFs for more details.
More details on taxation in Singapore is available from the Inland Revenue Authority of Singapore: Taxes on Investments in Singapore.
Currently, for retail investors, there is no tax payable on:
- Interest from fixed deposits
- Capital gains on shares
- Interest paid out by bonds (or debt)
- Dividends under the following criteria:
- Dividends from resident companies listed on the Singapore Stock Exchange, as shown in the statement from Central Depository Pte Ltd (CDP)
- Dividends from share buyback through Special Trading Counters (STC)
- Dividends from private resident companies
- NTUC Fair-Price dividends (except for dividends received through co-operatives)
- Singapore dividends from approved CPF investment Scheme agent banks, as shown in the Annual Dividend Statement (ADS)
- Singapore dividends from unit trusts
As for dividends from foreign sources, these are exempt on individual securities unless subject to the below.
However, the following dividends are subject to income tax:
- Dividends paid by co-operatives;
- Foreign-sourced dividends derived by individuals through a partnership in Singapore. Conditions may apply. For more details, please refer to Tax Exemption for Foreign-Sourced Income;
- Income distribution from Real Estate Investment Trusts (REITs) derived by individuals through a partnership in Singapore, or from the carrying on of a trade, business or profession in REITs.
Note on Real Estate: Please also note that Rental income from property is taxable as well gains on sale of property. This is a popular mode of investment among many older investors in Singapore and concerned individuals should take note.
Investors have the option to choose from a range of private brokerages and custody options. The 2 most common types are Central Depository Accounts (CDP), and Private Custody.
Central Depository Account (CDP)
The Central Depository Account, commonly known as CDP, is a personal custody account operated by the Singapore Stock Exchange (SGX) for safekeeping of all SGX listed stocks and bonds, purchased through the open market.
A CDP is also mandatory if an investor wishes to apply for Singapore Savings Bonds as there are typically offered only through local banks which interface with the CDP
These accounts are free to open and maintain and have the advantage of conferring direct ownership to the investor for the purposes of corporate actions etc. and are independent of the brokerage used. This means it is possible to use multiple services to trade yet have your holdings consolidated within the CDP in the investor's own name. However, please note that CDP trading tends to invite higher commission charges per trade.
Please note that the brokerage (for trading) and savings accounts (for payouts such as dividends and interest) need to be linked to the CDP manually at the time of account setup. CDP accounts can be opened either
- in person at the CDP customer care centre, or
- application via post, or
- through brokerages at the time of account setup
CDP brokerages include:
- Phillips Securities (POEMS)
- CIMB i*trade
- DBS Vickers
- UOB Kay Hian
- OCBC Securities
- Maybank Kim Eng
- KGI Securities
- RHB Securities
- Lim Tan Securities
A number of brokerages also offer custodian services for securities purchased within Singapore and are confined to the broker itself. Transferring securities between brokers routinely occur additional charges.
Custodians brokerages include:
- Interactive Brokers
- Standard Chartered
- TD Ameritrade
- Fund Super Mart (FSM)
Fee structures and comparisons of the various brokerages
The following table shows the situation as of October 2019:
|Broker||Saxo||Interactive Brokers||FSM||Standard Chartered||TD Ameritrade|
|Fees||0.01 USD/share||USD 0.005/share||0.08%||0.25%||$0.000119/share|
|Minimum commission||USD 4||USD 1||USD 8.80||USD 10||10.65|
Note 1: Some brokerages like FSM/POEMs may also charge additional fees for handling dividends and bond interests. Investors are encouraged to exercise due diligence before proceeding.
Note 2: For accounts over 100,000, Interactive brokers is by far the cheapest.
Getting started with equities
Introduction to the Straits Times Index
The Straits Times Index (STI) is the Singapore Stock market's benchmark index comprising of the 30 largest securities listed on the SGX.
Some key things to note about the STI:
- The index is heavily concentrated in a few sectors -
- 59% is financials and the 3 local banks alone represent ~40%.
- About 9% is telecoms. The sector is highly concentrated with 4 players covering a small population.
- Industrials are 13%, Singapore is a highly export driven economy and hence subject to trade tensions and global business cycles
- SGX equities have shrunk over time as the pace of de-listings have exceeds the pace of new listings.
As such, there is a lack of growth companies, most individual holdings are mature dividend players
- STI has lagged the US (NASDAQ/S&P) and hang seng (HK)indices by quite a margin over the last couple of decades so there is limited upside.
- IWDA/SWDA includes the components of the STI so an global market portfolio already offers exposure to SG
There are 2 ETFs available to investors who wish to invest in the STI index as part of the "local market 3 fund portfolio":
- SPDR STI ETF (SGX: ES3)
- Nikko AM STI ETF (SGX: G3B)
|SPDR STI ETF||Nikko AM STI ETF|
|Fund size||S$783.43 million||S$288.98 million|
|Tracking error||0.0453% (rolling 1-year tracking)||0.16% (3-year annualised)|
Investors also have the option of a "Regular Savings Plan" offered DBS, OCBC, And Philip securities which serves a similar function to an index mutual fund and investors can Dollar Cost Average over time by choosing specific counters to invest in.
Singapore listed ETFs
- SPDR Gold Shares ETF (GLD)
- The SPDR Gold Shares ETF invests in gold. The commodity has always been seen as a good store of value and is a popular asset class for investors.
- iShares MSCI India Index ETF (I98 [USD]/QK9[SGD])
- Another ETF listed on the Singapore stock exchange you might not know is the iShares MSCI India Index. This ETF is more focused and concentrated in India. It gives you an exposure to the mid-sized to large companies in this country. The iShares MSCI India Index ETF also has a good mixture of industries and holdings as computer, energy, utilities, financials, and telecommunication among many others. However, the ETF is quite expensive and alternative avenues may be avalilable to gain exposure to this ETF on other indices. TER: 0.99%
- Lion-Philip S REIT (CLR)
- The Lion-Phillip S-REIT ETF was one of three recently-listed Real Estate Investment Trust (REIT) ETF in Singapore. REITs, which are increasingly viewed as alternatives to investment in actual properties, are becoming more popular in Singapore. This has heightened interest in REIT ETFs. The Lion-Phillip S-REIT ETF is purely invested into REITs that are listed in Singapore. TER: 0.5%
- SPDR S&P 500 ETF
- The S&P 500 ETF is exposed to the stocks listed on the S&P 500 index. Similar to the STI ETF, the S&P 500 ETF is considered a country index. TER: 0.0945%
- NikkoAM-StraitsTrading Asia ex Japan REIT ETF (NikkoAM-STC Asia REIT)
- FTSE EPRA Nareit Asia ex Japan Net Total Return REIT Index (“the Index”) is a carve out of one of the most widely used global benchmark for listed real estate, the FTSE EPRA Nareit Global Real Estate Index Series. The Index is a tradable index covering the constituents of developed and emerging countries in the Asia ex Japan region by market capitalisation with a selection process that includes only companies qualified as REITs by international standards and passes certain trading liquidity thresholds. It is designed to represent the performance of qualifying REITS from China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand. TER: 0.60%
- FTSE China 50 UCITS ETF 1C (HD8)
- The ETF allows investors to gain exporue to the FTSE 50 China H shares index, however, cheaper alternatives may be found on the Hang Seng index instead. TER: 0.6%
Investing from Singapore using the Boglehead philosophy presents some challenges due to the lack of any tax treaty with the US. For more, see Nonresident alien investors and Ireland domiciled ETFs. Singaporean investors who are not US citizens or green card holders should generally avoid US domiciled ETFs.
Example Irish domiciled ETFs:
Getting started with bonds
Local bond ETFs
- ABF Singapore Bond Index FundA35
- The ABF Singapore Bond Index Fund allows you to gain access to Singapore dollar bonds issued by the Singapore Government or Singapore Government-linked entities (e.g. Housing Development Board, Temasek, and Land Transport Authority). The Index may also include Singapore dollar bonds issued or guaranteed by other Asian government, quasi-government or supranational organisations (e.g.Export-Import Bank of Korea, Korea Development Bank). These bonds are generally very highly rated for credit quality and can comprise a local bond option for the 3 fund portfolio. TER: 0.26%
- Nikko AM SGD Investment Grade Corporate Bond ETF(MBH)
- The ETF tracks the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index. The Index is designed to reflect the performance of SGD denominated non-sovereigns investment grade bonds. TER: 0.30%
- iShares J.P. Morgan USD Asia Credit Bond Index ETF (N6M[USD]/QL2[SGD])
- This ETF offers exposure to USD denominated bonds issued primarily by Asian governments and large corporations. TER: 0.30%
- iShares Barclays USD Asia High Yield Bond Index ETF (O9P[USD]/QL3[SGD])
- The iShares Barclays USD Asia High Yield Bond Index ETF seeks to track the investment results of an index composed of USD-denominated high yield bonds issued by Asian governments and Asian-domiciled corporations. TER: 0.50%
Singapore savings bonds
- Retail Bonds:
Notes on Central Provident Fund (CPF):
- CPF, short for Central Provident Fund, is a social security system that helps Singaporeans set aside savings for retirement.
- CPF savings can also be used for housing, healthcare, insurance as well as certain investments. Both employers and employees make monthly CPF contributions.
- By default, all working Singaporeans/PRs have CPF contributions from their salaries as well as employer match.
CPF contributions go into three accounts.
- Ordinary Account (OA): For housing, insurance, investment and education
- Special Account (SA): For retirement income and retirement-related investments
- Medisave (MA): For hospitalisation expenses, approved outpatient medical care, and approved medical insurance
The contribution table by age is as below:
|Age (years)||Employer's contribution(%)||Employee's contribution(%)||Total(%)||OA(%)||SA(%)||MA(%)|
|>35 - 45||17||20||37||21||7||9|
|>45 - 50||17||20||37||19||8||10|
|>50 - 55||17||20||37||15||11.5||10.5|
|>55 - 60||13||13||26||12||3.5||10.5|
|>60 - 65||9||7.5||16.5||3.5||2.5||10.5|
Source: Are You Ready, by CPF.
These accounts earn interest which may substitute for the "Fixed Income Component" of most investors' portfolios. These rates are as follows:
|CPF account||Interest rates (01 Jul to 30 Sep 2019)|
|Ordinary account||Up to 3.5%|
|Special account||Up to 5%|
|MediSave account||Up to 5%|
|Retirement account||Up to 5%|
Note: The above interest rates include 1% p.a. extra interest on the first $60,000 of combined CPF balances, of which up to $20,000 comes from the Ordinary Account (OA). Members aged 55 and above also earn 1% additional extra interest on the first $30,000 of combined balances, with up to $20,000 from the OA, thus earning up to 6% p.a. on their retirement balances.
When a Singaporean/PR reaches 55, a Retirement Account (RA) will be created for them.
The savings from Special Account (SA) and/or Ordinary Account (OA) up to the Full Retirement Sum (FRS) will be transferred to the RA to form a retirement sum. The retirement sum will provide a monthly payout from the payout eligibility age, which is 65 for members born on or after 1954.
When you an investor turns 55, you can withdraw:
- $5,000 or your Ordinary and Special Account savings above the Full Retirement Sum, whichever is higher, and
- any Retirement Account savings (excluding top-up monies, government grants, and interest earned) above the Basic Retirement Sum as long as you own a property.
Given the long lock-in period as well as the attractive interest rates, investors may consider topping up their CPF balances to take advantage of long term compounding.
CPF Lifelong Income For the Elderly
CPF Lifelong Income For The Elderly (CPF LIFE) Scheme is a life annuity scheme that provides Singapore Citizens and Permanent Residents with a monthly payout for as long as they live.
You can choose to receive your monthly payout anytime, from your payout eligibility age up to age 70. You will automatically be included in CPF LIFE to enjoy lifelong payouts if you:
- are a Singapore Citizen or Permanent Resident born in 1958 or after; and
- have at least $60,000 in your Retirement Account six months before you reach your Payout Eligibility Age (PEA)
Retail bond offerings
Singapore Savings Bonds (SSB) are a special type of Singapore Government Securities (SGS) with features that make them suitable for individual investors. Savings Bonds are fully backed by the Singapore Government. Investment is up to 10 years term. Savings Bonds pay interest every 6 months. Minimum Investment Amount is 500 SGD. Maximum Investment Amount is up to 200,000 SGD You can redeem your Savings Bonds in any given month before the bond matures, with no penalty for exiting your investment early. $2 transaction fee by the bank for each redemption request. You will receive the amount you requested in full, along with any accrued interest, by the 2nd business day of the following month.
You will need:
- CDP securities account
- Apply through DBS/POSB, OCBC and UOB ATMs or internet banking or mobile application
There are also a number of retail bond offerings available including
- Singapore Government Securities
- Singapore Government Securities (SGS) bonds pay a fixed rate of interest and have maturities ranging from 2 to 30 years. You can buy SGS bonds at a primary auction or in the secondary market. These are AAA Rated. Minimum investment amount is SGD 1000.
- Temasek Retail Bonds
- Astrea Private Equity Retail bonds
Example global bond ETFs, for foreigners or investors who seek to gain more global exposure to fixed income
- iShares Core Global Aggregate Bond UCITS ETF (AGGU/AGGG)
- The iShares Global Aggregate Bond UCITS ETF seeks to track the investment results of an index composed of global investment grade bonds. TER: 0.10%
- iShares Global Govt Bond UCITS ETF (IGLO/SGLU)
- The Fund seeks to track the performance of an index composed of local currency bonds issued by governments of developed countries. TER: 0.25%
- iShares US Aggregate Bond UCITS ETF (IUAA/SUAG)
- The Share class seeks to track the performance of an index composed of US Dollar denominated investment grade government, government-related, corporate and securitised bonds. TER: 0.25%
- iShares J.P. Morgan $ EM Bond UCITS ETF (JPEA/SEMB)
- The Fund seeks to track the performance of an index composed of US Dollar denominated bonds from Emerging Market countries. TER:0.45%
An example three-fund portfolio:
- ES3 (Only if the investor wishes to get SGD exposure to local equities, as STI is a subset of MSCI world tracked by SWDA)
Automated investing options
There are a number of robo-advisors that have come up in Singapore since 2016-17 built on the model of Betterment and Wealthfront in the US promising low cost diversification to investors by investing in overseas (typically the US market) for fees ranging from 0.5% - 1%.
Investors who wish to not do DIY may also consider these options. Some of the robo-advisors currently active as of 2019 include:
- FSM MAPS
- Philip Smart Portfolio
- Squirrel SAve
Some banks have also launched robo-advisor services to various consumers although the fees tend to be a little higher. Some examples include:
- OCBC Roboinvest
- UTrade Robo
- DBS digiportfolio (limited to high net worth investors for now)
- Connect by Crossbridge (also limited to HNIs only)
Investors also have access to Dimensional Fund Advisors as of 2019 through various full service, financial advice platforms such as:
Due to the Central bank's encouragement of fintechs in Singapore, there is a vibrant community of Peer-to-Peer and Alternative Lending firms that invest in a range of Assets such as move financing, trade bill discounting as well as SME loans etc.
Investors should exercise due diligence before investing in these firms as higher returns may be enticing but lead to higher risk. As of 2019, some examples include:
- Co Assets
- SeedIn, now called BRDGE
- Funding societies
- Moolah Sense
- Capital Match
- Nonresident alien's ETF domicile decision table
- Nonresident alien taxation
- Nonresident alien investors and Ireland domiciled ETFs
- Comparison of accumulating ETFs and distributing ETFs
- Non-US investors and ETF currencies