The Straits Time Index (STI) is a market-weighted index that tracks the top 30 stocks in Singapore. It comprises of some of the large and well established companies in Singapore such as Singtel, DBS, UOB, and OCBC. As such, it is a general indicator of the performance of the Singapore stock market. Think of it as a basket of 30 eggs.
The STI ETF is designed to track the index and replicate the performance of the STI. There are two different fund managers managing the STI ETF, namely SPDR STI ETF (managed by State Street Global Advisors) and the Nikko AM Singapore STI ETF. Both let you trade the STI at a fraction of the cost than owning each stocks individually.
Besides the similarity of both funds tracking the STI ETF listed on SGX, there are a few differences.
|SPDR STI ETF (ES3.SI)||Nikko AM STI ETF (G3B.SI)|
|Managed by||State Street Global Advisors||Nikko Asset Management|
|Inception date||11 April 2002||24 February 2009|
|Expense Ratio||0.3% of NAV||0.39% of NAV|
|Lot Size||1000* (100 in January 2015)||100|
|Fund Size||SGD 425.95M||SGD111.14M|
|Tracking Error||0.07% (1y)||0.27% (3y)|
What does these differences tell you? If you are looking to invest for a longer term, go for SPDR STI ETF as it has a lower expense ratio than Nikko AM. However, currently it is sold in lot of 1000 and could be out of reach for some. You can purchase in lot of 100 from Nikko AM, though you can buy the same from SPDR ETF in 2015.
There are different ways which you can invest in STI ETF. Let’s look at the popular ones.
|OCBC BCIP||POSB Invest-Saver||POEMS SBP||DIY using SCB|
|Underlying ETF||Nikko AM STI ETF||Nikko AM STI ETF||SPDR STI ETF||Both|
|Fees||0.3% or $5 (whichever is higher)||1%||For amount less than $1,000, $6. Otherwise 0.2%/$10 (Whichever is higher)||No Min Commission, 0.2%|
|Selling||Odd lot||Full redemption||Odd lot||Odd lot|
From the table, you can see that SCB has the lowest fees, albeit having to dollar cost average manually.
If you are those who don’t have the discipline to do it manually every month, OCBC seems like a good alternative if you can set away more than $500 monthly. For amount lesser than $500, POSB Invest Saver will be more cost-efficient. Do note that, however, if you want to sell your holdings, POSB requires you to do a full redemption where you do not have the flexibility to redeem partial like the others.
POEMS Sharebuilder plan, a more costly option, reinvest your dividend automatically as compared to the rest where you have to do it manually.
In short, to decide which is the best option for you:
Step 1: Decide if you are a discipline investor who can regularly buy into the STI ETF manually
If Yes, go for the DIY option under SCB. If not, go to step 2.
Step 2: Decide the amount you can set away monthly
Less than $500: POSB Invest Saver is cheaper
$500-$3,333: OCBC BCIP
More than $3,333: POEMS SBP
Do note that, however, POEMS SBP has other charges such as a 1% net dividend charge subject to min $1 capped at $50.
Make your own decision and decide which is the best plan for you to invest in STI ETF!