Happy Index Investing in 2014

A feeling of deja vu. The Straits Times Index ETF roughly ended the same way it ended 2012, at $3.21.

As a real life case study, I have bought around 1,400 shares for Nikko AM STI ETF100 (G3B), at an average rate of roughly 100 shares each month. The average cost per share (excluding trading expenses) currently stands at S$3.2486, a little over a cent and a half higher than the price now (S$3.23) as I’m writing this post. Dividends collected came to a grand total of S$71.50 for 2013.

This is not Dollar Cost Averaging. I would have preferred to DCA, but we will have to wait for the Singapore Exchange (SGX) to reduce the standard board lot size to 1 unit before it is possible. Let’s keep our fingers crossed that we would be able to trade in lots of 100 units by this year, and in single units by 2015.

As you can see from my purchase log, I’m not too particularly about when I make the purchase in the month. Start of the month, end of the month, middle of the month – I’ve done it all. Heck, I’ve even forgotten during a month or two. As long as I have the discipline to stick my program, I’m guessing everything will average out over the course of my investment lifetime.

Here’s wishing you a Happy New Year! While wealth is important, there is nothing more important than good health, and happiness. May you have plenty of these two!

Nikko AM - Diversifying Your Investment Portfolio With ETFs

Part 2 of Nikko AM advertistment on Today newspaper. If you want to achieve the below easily, consider this :

POSB 
- Regular Savings Plan (RSP) @ 0% sales charge (until 31 Dec 2013)
- Minimum investment sum of $100 monthly
(not sure about the initial investment, $1000 if I'm not wrong)

Fund Name 
- Nikko AM Balanced Funds - MyHome Fund HomeGrowth
- 80% into the Nikko AM Singapore STI ETF; and
- 20% into the ABF Singapore Bond Index Fund.
- Management Fee 0.5% p.a. from Fund Factsheet

Extracted from POSB Website

How does RSP work?

- With a RSP you make fixed monthly investments, regardless of market conditions
You avoid the uncertainties of market timing, by not speculating on the “right” time to invest your capital as a lump sum
- By investing a regular sum each time, you have the benefit of “dollar cost averaging” through buying fewer investment units when prices rise but more units when prices fall
- Over time, your average unit cost is lower than the average market price of the security during the same period of time

Singapore REIT ETF?

Browsing through the search queries that brings visitors to my blog, I always come up plenty of content ideas. The area of Real Estate Investment Trusts (REITs) is one that I'm personally interested in.

Just a day or two ago, one of the the search keyword that led visitors to my Index Investing Blog is "drop in reits singapore". I guess somebody must have been spooked by the sharp drop on Thursday?

While the Straits Times Index dived 61.20 (1.77%), the FTSE ST Real Estate Index recorded a drop of 26.67 (3.17%) in comparison.

Now, does people seriously think that the only way REITs can go is up? The interest rate is low in the current environment, but it does not mean it will remain this way. Read about REITs' vicious cycle of interest rate risk here. If you're serious about REITs investing specifically in Singapore, pick up Building Wealth Through REITs by Bobby Jayaraman, and you'll know more about Singapore REITs than 90% of the investors out there. Learn, and understand what you're investing in.

Coincidentally, another search term that brought visitors here was "singapore reit etf". To the best of my knowledge, there is no such product. The closest one you can get is Phillip Singapore Real Estate Income Fund by Phillip Capital (fund size S$46m). 

Is it an ETF? No.

Will you incur additional expenses as a result? Yes.

Is it worth it? Depends on the individual.

From the perspective of a small-time investor who believes in both the capital-appreciation and dividends-paying characteristics of REITs, it is an accessible way to invest (e.g. S$200/monthly regular savings plan) and buy into 20 REITs or more. 

"Low" cost.

Instant diversification. 

Quarterly dividends.

No worries over REITs rights issue.

Of course, these come at the price of fund management fee / sales charge etc.

Lastly, there are global REITs ETFs (e.g. VNQI:US and VNQ:US) such as those offered by Vanguard. Do take note that you're going to take a severe hit (30%) in terms of tax withholding for dividends covered in my previous post.

On a side note, Vanguard has recently listed its first Hong Kong-domiciled exchange traded fund (ETF). Will they be coming the the shores of our beloved country? I sure hope so!

STI Stocks with the Highest Dividend Yields (2013)

Ever wondered where the dividends from STI ETF are coming from?

The five STI stocks that provided the highest indicative dividend yield at the Friday close are the same five STI stocks that maintained the highest indicative dividend yield at the end of 2012.

These five stocks were Starhub (CC3), SIA Engineering (S59), Singtel (Z74), Keppel Corp (BN4) and Singapore Press Holdings (T39).

Check out the full list of 30 STI stocks and indicative dividends yields in the link below :

http://gallery.mailchimp.com/f853114635eabc6cff8920e15/files/MyGateway_Feb25.pdf

Nikko AM Singapore STI ETF - Dividends

Does Nikko AM Singapore STI ETF pay dividends?
Yes!

Of course, you might ask : how do I check the dividends history?

1. Go to Singapore Exchange website.
2. Click on Company Disclosure.
3. Click on Corporate Action.
4. Under Company Name, select Nikko AM Singapore STI ETF.

Dividend History

31 Oct 2012 SGD 0.035
11 May 2012 SGD 0.03
28 Oct 2011 SGD 0.035
13 May 2011 SGD 0.03
15 Oct 2010 SGD 0.03
12 May 2010 SGD 0.02
13 Oct 2009 SGD 0.03

When S$300 Isn't Enough To Purchase A Single Lot of STI ETF

A common problem faced by novice investors like myself - what if S$300 isn't enough to purchase a single lot (100 units) of Nikko AM Singapore STI ETF [ticker symbol G3B], which is already the bare minimum?

[Example]
The price of Nikko AM Singapore STI ETF at closing today is S$3.26 - the market kind of rallied after US averted the fiscal cliff, for now. You realize that S$300 is not enough for you to purchase one lot. You simply save the money and wait for next month.

If you're investing and not speculating, you're in this for the long haul. Not being able to invest monthly shouldn't matter to you at all.

[Reading material]
Drizzt from Investment Moat is an excellent writer, and his article that I've linked would be a great read for all index investors. Do spend some time going through his other articles too. I'm sure there is something for everyone to benefit from.

Passive Index Investing - What To Buy?

In order to perform passive index investing in Singapore, two of the vehicles you have access to are listed below. Both are Exchange-Traded Funds tracking the Straits Times Index (STI).

What is an Exchange-Traded Fund?

An exchange-traded fund (ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features. [read more from Wikipedia here]

While I'm at this, let me add on a third ETF that would be useful to you, and is also one that I'm intending to blog a bit on in future.

[1] SPDR Straits Times Index ETF | Price via Yahoo! Finance

Fund Information :
The SPDR® Straits Times Index ETF ("STI 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 ("Index"). The Fund is listed and traded like any share on Singapore Exchange Securities Trading Limited.

Lot Size : 1,000
A minimum purchase is going to cost $3,210 based on 24-Dec-2012 price, excluding brokerage fees etc.

[2] Nikko AM Singapore STI ETF | Price via Yahoo! Finance

Fund Information :
The Nikko AM Singapore STI ETF will initially invest in a portfolio of Straits Times Index (STI) stocks listed on the Singapore Exchange. It will mirror closely the performance of the STI. The STI is a market-weighted stock market index based on the performance of the Singapore stock market. It comprises of the most well-known and frequently traded shares on the Singapore Stock Exchange. The Fund's investment objective is to replicate as closely as possible, before expenses, the performance of the Straits Times Index or upon the Manager giving three (3) months' prior written notice to the Trustee and the Holders, such other index which tracks the performance of Singapore listed equity securities. The Fund will seek to achieve its investment objective by investing all, or substantially all, of its assets in Index Shares in substantially the same weightings as reflected in the Index.

Lot Size : 100
A minimum purchase is going to cost $321 based on 24-Dec-2012 price, excluding brokerage fees etc.

[3] ABF Singapore Bond ETF | Price via Yahoo! Finance 

Fund Information :
ABF Singapore Bond Index Fund (the "Fund") will initially invest in a portfolio of high quality, Singapore government and quasi government bonds. It will mirror closely the basket of bonds in the iBoxx ABF Singapore Bond Index. The target tracking error of the fund is set at not more than 0.4% per annum.

Lot Size : 1,000
A minimum purchase is going to cost $1,180 based on 24-Dec-2012 price, excluding brokerage fees etc.