First off my apologies.
Quite a lot of you have asked for an updated article on the best ETFs to buy for Singapore investors (the last one was from 2021).
You know, for investors who don’t want to stock pick, and who just want to buy 1 ETF to get broad exposure to a country.
Took a while but I finally got around to writing it.
So here goes.
What are the Top 5 Stock ETFs to buy for Singapore Investors?
Top 5 Stock ETFs to buy for Singapore Investors in 2023
S&P500 (SPY)
1 year return: 15.6%
Expense Ratio: 0.09%
Assets under management: $423 billion USD
Let’s start with the most obvious one – that everyone should know about.
The S&P500.
If you only can own 1 ETF in your portfolio, I think there’s a strong argument to be made that it should be the S&P500.
I myself hold the S&P500 – it’s probably the best way to get broad exposure to the powerhouse that is the US economy (unless you want to overweight tech, then it’s the next ETF below).
What is the S&P500?
The S&P 500® Index (the “Index”) is composed of five hundred (500) selected stocks, all of which are listed on US stock exchanges, and spans over 25 separate industry groups.
I’ve extracted the 10 year chart below.
You can see how apart from some exceptions (like 2015, 2018, 2020 and 2022), the S&P500 has generally gone up over time.
That’s the thing with stocks, over a long enough period of time, they usually always go up – but you can juice performance a great deal by buying (or selling) at opportune times (and getting it right).
As you would expect, the S&P500 is very heavily weighted towards tech, with a close to 30% allocation.
Much of this is FAANG + NVIDIA + Tesla, which feature heavily in the Top 10 Holdings.
Would I buy the S&P500 ETF now?
Full disclosure that I hold the S&P500, as part of a broad based asset allocation.
I use ETFs to form the base of my portfolio for US, and then I stock pick individual names on top of that.
Will I buy more S&P500 today?
Probably not.
At 20x forward P/E ratio I don’t think stocks look particularly cheap.
The US economy is in a catch 22 situation – if the economy holds strong the next 12 months, the Feds will keep rates high (maybe hike even more). If the economy weakens then corporate earnings are going to drop.
Both scenarios aren’t exactly fantastic for stocks.
You’ll also note that under the surface, much of the S&P500 outperformance this year has come from a handful of tech stocks – FAANG + NVIDIA + Tesla.
Which means that for active investors you might be better off just playing the FAANG + NVIDIA instead of the entire index.
Honourable Mention: NASDAQ (QQQ) – Invesco QQQ Trust, Series 1
1 year return: 27.0%
Expense Ratio: 0.20%
Assets under management: $212 billion USD
Which brings us to the next ETF.
The NASDAQ ETF (QQQ).
If you don’t want to buy a broad S&P500 index, and you want something more exclusively focussed on tech / growth – QQQ is probably the one to look at.
Sector allocation to tech is a whopping 58% (vs 28% on the S&P500).
Would I buy the NASDAQ (QQQ) ETF?
In the spirit of full disclosure – I hold much more QQQ ETF than the S&P500.
Reason being simply that I want more exposure to the tech stocks than the rest of the S&P500.
Would I add more here?
We’ve had quite a massive runup in tech stocks the past 12 months.
At this point, it’s really just a momentum play on the FAANG + NVIDIA.
I don’t know how long that will last, but for as long as it’s playing out you do want the exposure.
What’s that saying from the Citigroup CEO in 2007?
“as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
Turns out when the music did eventually stop – he got fired.
So if you’re an active investor, you’ll want to keep your eyes peeled for signs of reversals in the coming months.
What about for passive investors?
I know a lot of you are passive investors and do not want to time the market.
That’s absolutely fine.
And if so, your decision is simple.
You just ignore everything that goes on in the financial media.
And buy x amount every month.
If you are a pure passive investor it frankly shouldn’t even matter for you whether stocks are up or down from last month – you’ll still go ahead and buy anyway.
Hang Seng Index – The Tracker Fund of Hong Kong (SEHK: 2800)
1 year return: 0.1%
Expense Ratio: 0.08%
Assets under management: $16.8 billion USD
If you just want to buy 1 ETF to get broad exposure to China, I think the Hang Seng Index is probably your best bet.
There are some others like FXI, but after a lot of evaluation I think the Hang Seng is still the best because of it’s low expense ratio (0.08%), and the largest China ETF with $16.8 billion AUM.
The main problem with the Hang Seng Index used to be that they had too much exposure to old world stuff like banks / real estate, and not enough exposure to tech.
Following recent adjustments, this has been solved and Tech allocation has been increased to a much more respectable 28%.
Although this is both a good and bad thing, depending on how you see it. ????
Top holdings are below, and include the notable names such as:
- Tencent Holdings
- HSBC
- Alibaba
- AIA
- ICBC / China Construction Bank
- Ping An
- China Mobile
Returns for the Hang Seng Index ETF
Performance has been understandably terrible – given the challenges faced by the China economy the past 2 – 3 years.
Even adjusted for dividends, the Hang Seng Index is pretty much flat for the past 1.5 years.
Will I buy this ETF today?
I shared my views on China with Patreons earlier this week, so do check it out if you are keen.
There is no doubt that China faces significant challenges in the mid term – in how to transition their economy away from real estate / infrastructure to consumption and new areas of growth (eg. Electric vehicles, clean energy etc).
How they manage that transition is the million dollar question.
But there are signs of a possible short term bottom, at least for 2H2023.
And valuations are very cheap.
There’s lots of blue chip China names trading at 7 – 9% yields out there, which is attractive enough that you’re basically getting paid to wait it out (fuller sharing on Patreon).
Personally I might prefer stock picking for China – I don’t think China’s capital markets are sufficiently developed to the point where you can get good performance just buying the index.
Just too much inefficiencies out there, unlike say the US.
Good for stock pickers, less good for indexers.
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STI ETF – SPDR® Straits Times Index ETF (ES3)
1 year return: 4.9%
Expense Ratio: 0.30%
Assets under management: $1.5 billion USD
Okay, I know a lot of Singapore investors are not fond of the STI ETF.
Especially when the 10 year chart looks like this – absolutely flat for the past 10 years with notable drawdowns.
I do want to point out that because the STI ETF is a dividend heavy index.
You need to adjust for dividends.
Once it’s adjusted for dividends, the chart tells a very different story.
You’re now up 45% the past 10 years, instead of being flat.
Will I buy the STI ETF?
The main problem with the STI is that it’s basically 46% allocation to the 3 local banks.
And 20% allocation to the REITs.
So if you just buy the 3 local banks and a bunch of blue chip REITs (as most Singapore investors do).
You’ve already replicated a great deal of the STI ETF just there – and saved yourself the 0.30% expense ratio.
Especially for Singapore investors, who should be relatively familiar with the local market.
Personally this is how I do it, so I don’t buy any allocation to the STI ETF.
iShares Core Nikkei 225 ETF (TSE: 1329)
1 year return: 21.5%
Expense Ratio: 0.045%
Assets under management: $8 billion USD
The Japan stock market has been red hot the past 12 months – up a whopping 21.5%.
After all that – and the Bank of Japan is still keeping interest rates at rock bottom during surging inflation, which reminds me of Jerome Powell back in 2021.
Whatever the case, this has been a good mix for stocks – and Japan stocks have garnered a lot of investor interest of late.
If you want some exposure to Japan, I think the Nikkei index is probably your best bet.
Expense ratio is very cheap at 0.045%, with $8 billion assets under management.
I’ve set out the sector breakdown below.
Given this is Japan the biggest sector is electronics (Tokyo Electron, Daikin etc), followed closely by retail (Fast Retailing – owns uniqlo).
All world index – iShares Core MSCI World UCITS ETF (IWDA)
1 year return: 17.5%
Expense Ratio: 0.20%
Assets under management: $58 billion USD
Now for the investors who really only want to buy 1 ETF.
Average into it for the next 30 years.
And then retire after that.
This is probably what you are looking for.
The IWDA, or iShares Core MSCI World UCITS ETF, is an ETF that tracks the global stock market for developed economies.
Here’s the geographic breakdown, it is understandably very Western dominated with US coming in at close to 70% of the index (next biggest is Japan at 6%).
Would I buy the IWDA All World ETF?
If there is one drawback, it is that the IWDA ETF doesn’t have as big an exposure to Asia as you would like (given that we are Singapore based investors).
Because of that, I think you’re better off just buying the S&P500, and then buying the Asia exposure yourself (either stock pick or via the ETFs above).
But I know that for many passive ETF investors, IWDA ranks very highly on their list of ETF to buy and forget about it.
Can’t fault them really.
Top 5 Stock ETFs to buy for Singapore Investors in 2023 – Which would I buy?
And there you have it!
The Top 5 Stock ETFs to buy for Singapore Investors in 2023:
- S&P500 (SPY)
- Hang Seng Index – The Tracker Fund of Hong Kong (SEHK: 2800)
- STI ETF – SPDR® Straits Times Index ETF (ES3)
- iShares Core Nikkei 225 ETF (TSE: 1329)
- All world index – iShares Core MSCI World UCITS ETF (IWDA)
- Honourable Mention: NASDAQ (QQQ) – Invesco QQQ Trust, Series 1
With one very honourable mention.
Which of the Top 5 Stock ETFs would I buy? (as a Singapore Investor)
Of the list of Stock ETFs above, I own the S&P500 (SPY), and I own the NASDAQ (QQQ).
Let me share my thought process below.
US Market – Why I buy ETFs
The way I see it, the US market is very sophisticated and very efficient, and you can capture a good part of the stock returns simply by buying those 2 ETFs.
I overweight the NASDAQ (QQQ) because I want more exposure to growth vs real industries, but frankly that’s just a personal preference.
I do stock pick as well, but I use the ETFs to form the base of my portfolio on top of which I overweight some names.
Am I passive or active with my ETFs?
I can be quite active with my US ETFs (at times) though.
For example if the macro climate changes to be negative for stocks (like in early 2022), I may take profit in some of the ETFs.
And when macro climate improves, I may add to the ETFs.
So I’m not really a pure passive investor in the sense of buying x amount of ETFs every month.
Rather I use the SPY and QQQ ETFs more as an instrument to get exposure to the US stock market – which I can scale in and out of depending on macro views.
But really, ETFs are just a tool.
What you do with it, how you buy in / sell, that’s entirely a personal preference.
No right or wrong.
Asia Markets – Why I don’t buy ETFs
Because Asian capital markets are less developed and less sophisticated, I tend to prefer stock picking for Asia.
Less efficient markets means indexing is less efficient, with more room to outperform for stock pickers.
In Singapore I buy the local banks and the blue-chip REITs, and then stock pick individual positions.
Broadly the same for China as well.
But again, there’s no right or wrong here.
I love investing, and I have absolutely no qualms about spending my weekends reading financial reports.
Investors who want a more passive fire and forget approach can check out the ETFs above – Hang Seng ETF, Nikkei ETF, or the STI ETF.
This article was written on 7 Sep 2023 and will not be updated going forward. For my latest up to date views on markets, my personal REIT and Stock Watchlist, and my personal portfolio positioning, do sign up as a Patreon.
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