Top 10 ETFs in Singapore: The total beginner's guide to investing in ETFs

Most of us have a vague idea that we should be investing at least some of our money to make it grow, but no one ever sits us down and outright tells us how exactly to do it.

If you've been dutifully putting money away in your savings account, yet wondering if there's something more you should be doing with that cash, then here's an easy answer: invest in ETFs, or exchange traded funds.

But what on earth are ETFs? And how do you invest in them in Singapore?

Disclaimer: This isn't financial advice. I'm just laying out the options for you. Don't be lazy-do your own homework!

10 popular ETFs in Singapore

If you already know all there is to know about ETFs and index funds, feel free to skip straight to the ETF section by clicking on the name of the ETF you like.

Otherwise, read on for some 101s on what on earth this whole ETF thing is about.

Why would you invest in ETFs in Singapore?

Okay, so you probably know that you can buy stocks or shares in companies, right? 

For example, you can buy a bunch of Singtel shares in the hopes that the share price will go up in the future, and/or Singtel will share their profits with you in the form of juicy dividends.

The trouble is, there are more than 800 companies listed on the Singapore stock exchange. And you have things to do in life. How on earth do you research and choose the right companies to invest in?

Well, you can’t. That’s why, instead of trying to bet on one superstar company, some people prefer to invest in an entire sector or asset class, even an entire economy. You do that by buying index fund ETFs instead of individual stocks.

An index fund typically tracks a stock exchange index, which is a fancy way of saying “a nice, diversified basket of X best-performing stocks”. 

Probably the best-known index is the S&P 500, which tracks the 500 biggest companies in the US stock exchange.

In Singapore, we have the Straits Times Index, which tracks the top 30 companies on SGX, mainly reliable “blue chips” like DBS, Singtel, Keppel and CapitaLand.

There are a million indices out there. Some focus on regions (e.g. China), industries (e.g. tech or real estate), asset types (e.g. bonds), and investment outcomes (e.g. dividend yield).

ETF vs unit trust - which type of index fund is better?

Technically, ETFs are not the only way to track the entire market. Index funds are also available in the form of unit trusts (sometimes called mutual funds).

Unit trusts are professionally managed funds and typically cost a lot more than ETFs. Not only do they require a higher initial investment, there are also annual management and commission fees of up to five per cent that eat into your potential profits. You can read more about unit trusts here.

On the other hand, ETFs are passively managed. There may be a fund manager, but his/her job is pretty hands-off (apart from putting the different stocks together to track the index).

Therefore, ETF fees are usually lower than that of unit trusts. Most charge less than one per cent, and you'll find a lot that are charging more like 0.3 per cent or 0.5 per cent.

ETFs are also traded like normal stocks on SGX, so there's nothing stopping you from buying just 1 lot of shares. You're really only restricted by your investment broker's commission fees.

(Don't worry, we'll cover the cheapest brokerages for buying ETFs at the bottom of this article.)

Now that you know the basics of investing in ETFs, here are seven well-known ETFs in Singapore to get you started.

1. SPDR STI ETF (SGX: ES3)

The whole point of buying ETFs is to NOT try to game the system. That’s why generic stock market index-tracking ETFs are still some of the most popular ones around.

As mentioned above, the Straits Times Index or STI is our very own index, tracking the 30 biggest companies on SGX, and therefore (indirectly) Singapore’s economy.

Like all other stock market indices, the STI is diversified across different industries, so it’s about as safe as investing in the stock market can get. You’re putting your eggs in 30 different baskets here.

There are 2 STI ETFs available in Singapore: The SPDR STI ETF and Nikko AM STI ETF.

What’s the difference? The SPDR STI ETF has been around for longer (2002 vs 2009), and its fund size is also much larger ($1,700m vs $496m), indicating that it’s more popular. Due to its age and size, the SPDR STI ETF also tracks the STI more accurately.

SPDR STI ETF expense ratio: 0.3%

2. Lion-OCBC Securities Hang Seng Tech US$ (SGX: HSS)

Interested in dipping your toes in the technology sector? The Lion-OCBC Securities Hang Seng Tech ETF allows you to have a hand in the 30 largest technology companies found on the Hong Kong Stock Exchange. 

Sounds good? Here are a few things you need to know: this ETF replicates the performance of the Hang Seng TECH Index (listed on the HKEX) which consists of companies such as JD.com, camera parts supplier to Huawei and Oppo — Sunny Optical, Chinese shopping platform Meituan, Tencent, GIF-sharing platform Kuaishou, Xiaomi, and more. It was listed on SGX in Dec 2020 in both SGD (SGX: HST) and USD (SGX: HSS). 

Here, we are referring to the more popular USD variant which goes by the counter HSS.

Trading lot size is pretty accessible at 10 units (which works out to be USD$69.50 + US$10+ fees at time of writing), which is great news for beginners.

Lion-OCBC Securities Hang Seng Tech US$ expense ratio: 0.45%

3. SPDR Gold Shares ETF (SGX: O87)

If you’re super paranoid about stock market crashes—there are always whispers of one—then you might be drawn to investing in gold as a “safe haven”.

Apart from going to the shop to buy gold bullion, you may be interested to know that there’s a gold ETF in Singapore. It’s called the SPDR Gold Shares ETF and it tracks the price of gold.

While buying a stock market-listed product doesn’t seem like a good way to evade a stock market crash, there are some benefits to buying your gold in ETF form. 

You can buy gold in more affordable units and do not have to find a Gringotts Bank-type vault to put all your gold bars and coins.

SPDR Gold Shares ETF expense ratio: 0.4%

4. iShares USD Asia High Yield Bond Index ETF (SGX: O9P)

This iShares USD Asia High Yield Bond comes with a higher risk BB credit rating, has higher price volatility, but also gives you potentially higher interest rates and income as well. 

First listed in Dec 2011, this ETF tracks the performance of an index called Bloomberg Asia USD High Yield Diversified Credit Index (USD). The latter is a basket of high yield bonds issued by Asian/ Asian-based governments and companies (excluding Japan) such as the Industrial and Commercial Bank of China (ICBC), Bank of Communications (BOCOM), The Islamic Republic of Pakistan, Celestial Miles Limited, Wynn Macau casinos, and more.

In 2021, this IS ASIA HYG US$ ETF became popular largely because of it’s terrible performance — with prices plunging from an all-time high of US$18,000 to US$16,000, attracting a value-for-money crowd.

The iShares Asia High Yield Bond ETF comes in a SGD version (SGX: QL3) as well, although it’s not as popular as its USD counterpart.

iShares USD Asia High Yield Bond Index ETF expense ratio: 0.5%

5. Nikko AM STI ETF (SGX: G3B)

As mentioned, the Nikko AM STI ETF is the other STI ETF in Singapore. 

In terms of objectives, it’s exactly the same as the SPDR one — to replicate the performance of the Straits Times Index, i.e. the 30 biggest companies on the Singapore stock exchange.

Considering it’s younger and smaller than SPDR, it’s remarkable that the Nikko AM STI ETF is able to match the more established SPDR STI ETF in price. Both ETFs have the same expense ratio of 0.3%.

However, the Nikko AM STI ETF has a larger tracking error, meaning it does not replicate the STI quite as faithfully as the SPDR. This means it can underperform OR outperform the STI itself.

Nikko AM STI ETF expense ratio: 0.3%

6. NikkoAM-StraitsTrading Asia ex Japan REIT ETF (SGX:CFA)

If you’re into property, the NikkoAM-StraitsTrading Asia ex Japan REIT ETF might pique your interest.

This ETF replicates the performance of the FTSE EPRA Nareit Asia ex Japan REITs 10% Capped Index–basically a basket of the highest performing Asian real estate investment products.

Top REITs that are currently in the NikkoAM- STC Asia REIT include mostly Singapore REITs such as CapitaLand Mall, Ascendas REIT, Mapletree, Frasers, Suntec, Keppel, Parkway Life, and more.

NikkoAM-StraitsTrading Asia ex Japan REIT ETF expense ratio: 0.55%

7. Nikko AM SGD Investment Grade Corporate Bond ETF (SGX:MBH)

Like to keep things safe? The Nikko AM SGD Investment Grade Corporate Bond ETF is a basket of investment-grade quasi-sovereign (partial government), Singapore and foreign corporate bonds which tracks the performance of the iBoxx SGD NonSovereigns Large Cap Investment Grade Index.

You can expect to see Temasek Financial (I) Limited, NTUC Income Insurance, DBS Group, OCBC, UOB, Changi Airport Group, and Manulife Financial Corporation.

Nikko AM SGD Investment Grade Corporate Bond ETF expense ratio: 0.26%

8. ICBC CSOP FTSE Chinese Government Bond Index ETF US$D (SGX:CYB)

ICBC CSOP FTSE Chinese Government Bond Index ETF US$D was listed on the SGX in Sep 2020. Its purpose is to replicate the performance of the FTSE Chinese Government Bond Index via a sampling strategy—the latter of which is made up of A1 investment grade 99.84% China government bonds

That means, the ICBC CSOP FTSE Chinese Government Bond Index ETF US$D is a smaller basket of China Government Bonds.

So, why so popular? China Government Bonds are generally popular across the board because of their attractive yield. The 2021 calendar year saw 6.321% in returns. Trading lot size is 10 shares at ~US$10 per share, which will somewhat bring you to US$108 + US$10 in fees.

 ICBC CSOP FTSE Chinese Government Bond Index ETF US$D expense ratio: N/A

9. ABF Singapore Bond Index Fund (SGX: A35)

Bonds have always been the uncool sibling to stocks, but it’s definitely an attractive type of asset for the risk-averse (and for those who seek a “safe haven” in a stock market crash).

Plus, high-profile government / government-linked bonds like Singapore Savings Bonds, Temasek Holdings Bond and the Temasek-linked Astrea IV and V Bonds have whetted Singaporeans’ appetite for bonds. 

Wouldn’t it be great if you could buy all those government-ish bonds all in one fell swoop, instead of having to camp at the ATM every time one comes out?

The ABF Singapore Bond Index Fund lets you do that. It’s basically a “group buy” for a whole bunch of bonds issued by extremely credible entities: The Singapore government and gov-linked entities like HDB, LTA and Temasek Holdings.

While the returns may not exactly be jaw-dropping, you will get (pretty much) guaranteed bond coupon payouts.

ABF Singapore Bond Index Fund expense ratio: 0.24%

10. Lion Phillip S-REIT ETF (SGX: CLR)

Another ETF in Singapore that’s bound to be a big hit with conventional Singaporean investors is the Lion Phillip S-REIT ETF, which focuses on high yield Singapore REITs (real estate investment trusts).

If you’re new to this whole REITs thing, they’re basically one of the most popular investment types in Singapore right now. 

When you buy REITs, you become part-landlord for the properties in that REIT portfolio, and can collect “rent” in the form of dividends. You can read more about Singapore REITs here.

The key benefit of this Singapore REIT ETF is that you needn’t worry about picking the “correct” REITs to invest in. That would expose you to too much concentration risk.

Instead, the Lion Phillip S-REIT ETF tracks the Morningstar Singapore REIT Yield Focus Index, so you can buy into the 25 top-performing S-REITs rather than putting all your eggs in one or two baskets. 

Lion Phillip S-REIT ETF expense ratio: 0.50%

How to start investing in ETFs in Singapore

Investing in ETFs is really easy because you’ve skipped all the hard work of doing market research and trying to pick stocks. All you need is a lump sum of investment money and a brokerage account.

We recommend either SAXO or POEMS as your brokerage since they have some of the lowest commission fees for SGX ETFs. Plus, there’s no minimum fee, so you can invest just a small amount to try.

A more newbie-friendly alternative is to go for a regular savings plan, which is is sort of a subscription plan to your investment of choice.

You don’t even have to open a brokerage account with this option! Just sign up for either the DBS Invest-Saver or OCBC Blue Chip Investment Plan and set up a recurring contribution of at least $100/month. The bank will do the rest.

After you get comfortable with investing, you can look into similar products from brokerages, such as the POEMS Share Builders Plan, FSMOne Regular Savings Plan, or the SAXO Regular Savings Plan below.

Conclusion: Should you invest in ETFs in Singapore?

To recap, ETFs are a good fit for you if you’re looking for low-cost, low-barrier-to-entry way to start investing.

Generic market index (e.g. S&P 500 or STI) ETFs have diversification baked into their structure, so they’re great for the risk-averse, or those who simply can’t be bothered to study the stock market. (However, if you’re opting for a more “specialised” ETF like a REITs ETF or a gold one, your investment will be riskier than a “true” market index ETF.)

That said, ETFs aren’t some kind of magical product guaranteed to make you money. As with just about every investment, your capital is never guaranteed.

In the short term, especially, be prepared for the value of your ETFs to fluctuate. This is unavoidable if the economy slows down or if there are new regulations for a particular sector. So ETFs are really better for long-term passive investors than for quick gains.

Finally, ETFs generally do not give you returns worth bragging about. To be a happy ETF investor, you have to okay with being average.

ALSO READ: What are T-bills ETFs and should you buy them?

This article was first published in MoneySmart.