Tuesday, March 26, 2013
Making The Most Of Index Investing
Objective : Achieve Index Returns
To me, there are two key ways to get the most out of index investing.
1. The Simple Act of Re-balancing
I don't invest all my spare funds into STI ETF. I keep a sizable portion (30%) of my money as cash, and invest the rest (70%) into ETF. A bond ETF would have been better than cash for low correlation with stocks but the 1,000 lot size makes it pretty inflexible.
Besides serving the purpose as a buffer during wild fluctuations in the stock market, when stock market crashes it provides you with valuable funds to BUY into STI ETF at low prices! In the reverse scenario, when stock prices surge, re-balancing forces you to sell STI ETF and take profits. It is almost like a blinking flashlight in your face when you see your portfolio percentage that is heavily skewed.
Be greedy when others are fearful. Be fearful when others are greedy.
2. Index investing is about the amount of time I have in the market, rather than timing the market
As long as the selling price (when I retire) is higher than the average price I purchase STI ETF, it will do. The assumption is that the stock market is cyclical in nature and will not remain in a depressed state for an extremely long period of time, such as in the case of Japan.
To keep the average price low, I buy into STI ETF on a monthly basis regardless of the price movements. Furthermore, STI ETF gives dividends twice yearly, further driving down the average price the longer I hold it in my portfolio.
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Hi, I am also interested in buying the STI ETF. How do you buy the STI ETF monthly? Is it via Standard Chartered bank? If so, what is the cost (transaction/maintenance) for having an account at Standard Chartered? Thank you.
ReplyDeleteHi tsubame,
ReplyDeleteYes, I buy STI ETF (Nikko AM) via Standard Chartered Online Trading Account. Do note that it is a custodian account. Also, no contra trades allowed.
For transaction cost, SGX 0.20% ; Other Markets 0.25%. You may like to check out Standard Chartered website for more information.
To give you an idea, a typical transaction would look like this :
Nikko AM Singapore STI ETF Order Price : $3.34
Order Quantity : 100 share(s)
Trade Consideration : $334.00 [$3.34 x 100]
Client Commission : $0.67 [$334.00 x 0.2%]
SG Clearing Fee : $0.13
Client GST : $0.06
Total Transaction Amount : $334.86
Hi, i just also opened a standard chartered trading account and looking into buying STI ETF. how is the dividend paid out? Is it posted by check or automatically deposited into your trading account?
ReplyDeleteHi Couchto5kgirl,
ReplyDeleteThe dividend is deposited into my trading account. Enjoy Indexing!
Hi, looks like you prefer Nikko AM STI ETF over SPDR STI ETF? Also, there is Bid Price, Ask Price, which price to use if I wish to buy? Appreciate your kind advice. Thanks!
ReplyDeleteHi boonchin.ng,
DeleteIt is not that I prefer Nikko AM STI ETF over SPDR STI ETF. Nikko AM STI ETF is available at 100 units per lot, unlike SPDR STI ETF which is 1,000 units per lot. If I could afford to fork out $3,000 monthly, I'd rather get SPDR STI ETF for the lower expense ratio.
Are you are asking the question because you do not understand the terms? The internet is your best friend! One explanation can be found here : http://usatoday30.usatoday.com/money/perfi/columnist/krantz/2006-08-25-bid-ask_x.htm If you understand what the article is saying, you should have the answer to your question.
Enjoy Indexing!