What Is STI ETF?
STI ETF in short refers to Straits Times Index Exchange Traded Fund. If you invest in STI ETF, your money is pooled with money from other investors and invested according to your selected ETF’s stated investment objective.
Why Invest In STI ETF?
STI ETF may be suitable for investors who seek medium to long-term capital appreciation via an index-based approach. STI ETI investors usually have a belief that it will provide them an exposure to the SGX stock market in a diversified, cost effective and yet easy to access manner. Below is a sharing of my thoughts why you should invest in ETFs. Besides that, I bumped across SGX.com to also share an image showing why investing in STI-ETF is a good choice as compared to buying the top 30 SGX stocks separately.
Why Invest In STI ETF? Reasons are as follows:
- Risk Diversification To Top 30 SGX Stocks in Singapore
- Half Yearly Dividend Payout
- Potential Capital Gain with historical track records of ~8-9% per annum.
- Easy Buy and Sell like a normal SGX stock.
- Lower Cost of Ownership
- Lower Investment Quantum for those with lesser capital
What Are The Risks Of Investing In STI ETF?
As said earlier, investing in STI ETF is definitely a good option for medium or long term type of investment. However, do note that there are also risks involved in investing STI ETF too. Like all other exchange traded funds, STI ETFs are not principal guarantee. This is particular true if for whatever reasons be it economic or financial or any unexpected national crisis may cause the SGX Stock market to plummet over a period of time. Therefore, the unit price of STI ETF will follow such down trending of the STI Index.
If you sell off your STI ETF units during this downturn period, you will lose money and may be losing more as compared to the dividends reaped during the good times. The catch here is to follow the basic investment principle. Never invest your money in STI ETF or any other forms of investment if this money is your emergency fund or it is for your immediate family expenses.
Which STI ETFs Are Available In Singapore?
In SGX stock market, we have choices of fund managers for their respective STI ETF namely
- SPDR STI ETF (ES3.SI) – The SPDR (Standard & Poor’s Depository Receipt) Straits Times Index ETF, Singapore’s first locally created exchange traded fund which was formerly named streetTRACKS STI ETF, seeks to generate returns that closely correspond to the performance of the Straits Times Index since 11 Apr 2002. The Fund is listed by State Street Global Advisor (SSGA) and traded like any share on SGX Singapore.
- Nikko AM STI ETF (G3B.SI) – The Fund is a collective investment scheme authorised under Section 286 of the Securities and Futures Act and is established under the terms of a trust deed made between DBS Asset Management Ltd (now known as Nikko Asset Management Asia Limited) as Manager and HSBC Institutional Trust Services (Singapore) Limited as Trustee. This STI ETF fund is incepted since 24 February 2009.
Nikko AM STI ETF vs SPDR STI ETF
|Updated on 1 Oct 2015||Nikko AM||SPDR|
|Fund Manager||Nikko Asset Management Asia Limited||State Street Global Advisors Singapore Limited|
|Stock Index||Straits Times Index||Straits Times Index|
|Fund Size||$87.41mil (as of 30 Aug 2015)||$354.83mil (as of 30 Sept 2015)|
|Expense Ratio (% of NAV per annum)||0.42%||0.30%|
|Board Lot Size (No of Units Per Lot)||100||100|