Thursday 21 January 2021

Portfolio Dissection EP.1 | Nikko AM STI ETF & SPDR STI ETF

I am coming up with a new series called Portfolio Dissections where I talk more about the individual stocks I hold, why I bought them and also whether will I be holding them in the long term or will sell them. Information are accurate as of released time and I hope you enjoy this new series. Please do give a thumbs up or subscribe to my channel if you like my content.


Let's have some introduction first, both Nikko AM STI ETF and SPDR STI ETF both target to replicate as closely as possible, before expenses, the performance of the Straits Times Index. The different names like Nikko AM and SPDR is because they are managed by different asset managers. Some differences between them would be that firstly, the fund size, secondly, the expense ratio, tracking error and dividends. There are many articles out there listing the differences so I wouldn't go too much into it.

So US has the S&P 500 similarly, SG has our very own STI ETF.

The top 10 holdings of STI ETF are as below with the top 3 being the Banks (DBS, UOB and OCBC) which already accounts for more than 30%.

So first, let's talk about Nikko AM STI ETF, it is actually the first thing that I started buying in 2017 through the POSB Invest Saver. So currently, it is not held in my CDP account but under DBS/POSB and I can access the holdings through my ibanking. At that time, I wanted to start investing but did not want to go through the whole process of creating a brokerage account and a CDP account, after researching, I found out about this term called dollar cost averaging.

Then coming across POSB invest saver really showed that DCA can be easily implemented. At that time in 2017, I was still a university student but I earned some pocket money through tutoring and decided to start a RSP. So at that time, I was consistently buying around just $100 monthly and slowly increased it to $300 monthly. I started it and did have some breaks in between the years hence the varying prices where I bought some units at $2.95 all the way to $3.43. Currently, in terms of P&L, about -$295 but dividends wise, I have received about $295 as well over the years.

After that, I googled and realized that there is also a SPDR STI ETF which has been around a longer than Nikko AM with a larger fund size. I decided to then but SPDR STI ETF in a lump sum and also a few months in the RSP with FSMone in 2020. I would think that both track the STI ETF and there are many comparison articles out there. For me, I would be holding them for the long term as dividends wise, they are paying pretty good depending on the prices you bought it. On average, it has generated about 3-4% for me which is a lot better than bank interest rates.

Should I still invest in SG particularly the STI ETF?

There have been many articles recently talking about the poor performance of STI ETF and that many have shifted over to the US or HK markets. For me, I like having a Singapore portfolio as a base first and also for dividends. If you do not like the STI ETF, you can look for REITs or Banks that can pay really good dividends and the dividends are not taxable. By also having a SG portfolio, you can slowly build on it and move towards the overseas markets as you have more capital. I moved towards buying US ETFs as I find the price volatility is higher meaning that the increase and drop daily is by the dollars whereas in the SG market, it is usually by cents, in terms of that and with me being 25 years old, I find myself wanting to take on more risks as the rewards could also be more.

Avoid Home Country Bias

Another point on why I moved towards the US market is because of this thing called the home country bias. You might feel that investing in SG market is a good idea because you are much more familiar with the companies or maybe have seen it before but thinking that and favoring companies from our own country over those from other countries or regions could be a mistake. Considering our smaller population and investing COMPLETELY in SG could result in a unbalanced portfolio although there are tax benefits to investing in SG. So after building a SG base, I wanted to venture out.

With that being said, I know that having too much risk can be detrimental to my portfolio as the value could be fluctuating in large amounts hence I will still be putting my money into the SG market particularly in REITs. For STI ETF, I will not be putting in anymore money in but will continue to hold on to my existing units. Hope you guys enjoy today's episode and do stay tuned for other episodes on this series! Appreciate a thumbs up and subscribe to my channel.

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