How To Invest In The S&P 500 (Singapore Edition)

How To Invest In The SP 500 Singapore

You’ve become tired of the poor returns that you’ve received from the Straits Times Index (STI). Most of your friends have been telling you to invest in the S&P 500 which provides much better returns!

STI vs SP 500

However, how do you go about buying the S&P 500 in Singapore? Here’s a guide to get you started.

How to invest in the S&P 500 in Singapore

Here’s a step-by-step guide to start investing in the S&P 500 in Singapore:

  1. Choose between ETFs or Mutual Funds
  2. Choose an ETF to invest in (if you decide to invest in an ETF)
  3. Choose a brokerage or robo-advisor that allows you to invest in the S&P 500

#1 Choose between ETFs or Mutual Funds

When you want to buy into the S&P 500, you are unable to buy the index itself!

SP 500 Index

Instead, you will need to buy into a fund that tracks the S&P 500 index. These funds will buy into the stocks that make up the index.

Here are the top 10 holdings in the S&P 500 (on 8 Nov 2020).

SP 500 Top 10 Holdings
Source: SPDR

This means that the fund that you invest in will buy all of these stocks according to their weightage.

Here are the 2 kinds of funds that you can invest in the S&P 500:

1. ETFs

Exchange traded funds (ETFs) are the more popular option to invest in the S&P 500 in Singapore. This is because they are seen to be lower cost options compared to mutual funds.

Moreover, they are available on stock exchanges. This makes it more accessible for you as an investor.

2. Mutual funds

Another type of fund that tracks the S&P 500 are mutual funds. These mutual funds were made popular by John Bogle in 1975. He was the pioneer of the S&P 500 Index Fund that allowed retail investors to buy into the S&P 500 Index.

However, it is hard to gain access to a S&P 500 mutual fund in Singapore. Popular funds like FXAIX, SWPPX and VFINX are unavailable to Singaporean investors. The only way to buy them could be via Interactive Brokers’ Mutual Fund Marketplace.

Interactive Brokers Mutual Fund Marketplace

It may be possible to buy these funds via your financial advisor, but it may be pretty hefty.

Infinity U.S. 500 Stock Index Fund (Lion Global)

The main mutual fund that is available to Singaporeans is the Infinity U.S. 500 Stock Index Fund. This fund is managed by Lion Global Investors.

Infinity U.S. 500 Stock Index Fund

There are 2 different classes to this mutual fund: SGD and USD. It may be better to invest in the SGD class since it helps to reduce your currency exchange risk.

Mutual funds are usually more costly in Singapore

Moreover, there are many additional costs when you invest in a mutual fund. These include (in Sep 2020):

  1. Initial charge (up to 2%)
  2. Expense ratio (0.71%)

It is usually more costly to invest in a mutual fund. In contrast, Vanguard’s S&P 500 ETF only has an expense ratio of 0.03%! As such, it may be more cost effective to invest in an ETF instead.

However, Endowus recently launched their Fund Smart portfolio. This allows you to buy into the Infinity U.S. 500 Stock Index Fund at a lower fee.

#2 Choose an ETF (if you decide to invest in an ETF)

If you’ve decided to invest in an ETF, you now have another headache. There are many different S&P 500 ETFs to choose from!

You can skip this step if you’ve decided to invest in a mutual fund.

Types of ETFs

Here are some of the S&P 500 ETFs that you can purchase in different exchanges:

1. SGX

In the SGX, there is only one S&P 500 ETF being listed. This is the SPDR S&P 500 ETF (S27) that is managed by SPDR.

S27 SGX Listing

There used to be a SGX-listed S&P 500 ETF (I17) by iShares as well. However, this fund has already been delisted on the SGX.

The SGX-listed ETF (S27) has many similarities as the SPDR ETF that is listed in the NYSE (SPY). You can view my head-to-head comparison between S27 and SPY.

2. New York Stock Exchange (NYSE)

There are 3 different S&P 500 ETFs that are listed on the NYSE. These ETFs are managed by different fund managers.

TickerETF Fund Manager
VOOVanguard
IVViShares
SPYSPDR
Other S&P 500 ETFs that only track part of the S&P 500 Index

There are many different S&P 500 ETFs on the exchange as well! However, these ETFs track a subset of the S&P 500 Index. Here are some examples:

  1. S&P 500 Growth Index
  2. S&P 500 MidCap 400
  3. S&P 500 SmallCap 600
  4. S&P 500 Low Volatility High Dividend Index
  5. S&P 500 Information Technology Index

All of these indexes are only targeting a subset of companies in the S&P 500. This is usually based on certain criteria that is set by that index. As such, you will not be investing in all 500 companies in the S&P 500!

The only 3 ETFs listed on the NYSE that track the entire S&P 500 index are VOO, IVV and SPY.

3. Irish-domiciled S&P500 ETFs listed on the London Stock Exchange (LSE)

The ETFs that I’ve previously mentioned are all domiciled in the US. However, there are other S&P 500 ETFs which are domiciled in Ireland. These are usually referred to as UCITS ETFs which are able to be listed on the European Stock Exchanges.

Here are some examples of the S&P 500 UCITS ETFs listed on the London Stock Exchange (LSE):

LSE TickerFund ManagerCurrencyType of ETF
VUSAVanguardGBPDistributing
VUSDVanguardUSDDistributing
VUAAVanguardUSDAccumulating
SPX5SPDRUSDDistributing
CSPXiSharesUSDAccumulating
IUSAiSharesGBPDistributing
IDUSiSharesUSDDistributing

The 3 main differences among these ETFs include:

  1. Fund manager
  2. Currency
  3. Type of ETF (Accumulating or Distributing)

Which ETF should I choose?

There are so many different ETFs, so which one should you choose? Here are 3 things you may want to consider:

1. Expense Ratio

The expense ratio is the fee that you will need to pay the fund managers when you invest in the ETFs. Here are the expense ratios of the ETFs that I’ve previously mentioned:

TickerExchangeFund ManagerExpense Ratio
S27SGXSPDR0.095%
VOONYSEVanguard0.03%
IVVNYSEiShares0.03%
SPYNYSESPDR0.095%
VUSALSEVanguard0.07%
VUSDLSEVanguard0.07%
VUAALSEVanguard0.07%
SPX5LSESPDR0.09%
CSPXLSEiShares0.07%
IUSALSEiShares0.07%
IDUSLSEiShares0.07%

All of the expense ratios are below 0.1%, which is really low! The UCITS ETFs tend to have a higher expense ratio than the NYSE counterparts.

Even though the costs seem really low, the extra fees that you pay for UCITS ETFs may eventually add up!

2. Dividend Withholding Tax

The dividend withholding tax is something that you may want to consider as well. These S&P 500 ETFs will issue a dividend to you. Your dividends will be taxed before they are distributed to you.

Due to the different tax treaties, you will incur different taxes based on the fund’s domicile. Here are the dividend withholding taxes that you will incur:

Fund DomicileDividend Withholding Tax
USA30%
Ireland15%

If you invest in an Ireland-domiciled ETF, you will incur a lower dividend withholding tax!

S27 and the NYSE S&P 500 ETFs are domiciled in the USA. As such, you will incur the higher withholding tax (30%). You will not be able to avoid this tax if you invest in the SGX-listed ETF.

It may be more cost efficient to invest in an Ireland-domiciled ETF as you will incur a lower tax.

3. Liquidity

If you are a frequent trader, an ETF’s liquidity may be something that is important for you. One way that an ETF’s liquidity is measured is by the average trading volume. Here are the average trading volumes for these ETFs (from Yahoo Finance):

TickerExchangeFund ManagerAverage Trading Volume
S27SGXSPDR353
VOONYSEVanguard3,175,000
IVVNYSEiShares3,703,000
SPYNYSESPDR73,653,000
VUSALSEVanguard247,000
VUSDLSEVanguard270,683
VUAALSEVanguard7,500
SPX5LSESPDR3,195
CSPXLSEiShares103,976
IUSALSEiShares109,723
IDUSLSEiShares253,641

The NYSE listed ETFs have a much higher liquidity compared to the LSE listed ones. And let’s not even talk about S27 which has such a poor liquidity!

With a poorer liquidity, it may be hard for you to buy or sell at your intended price.

NYSE or LSE listed ETF?

Here are the 3 factors side-by-side for these 2 types of ETFs:

NYSELSE
Expense RatioLowerHigher
Dividend Withholding TaxHigherLower
LiquidityHigherLower

You can invest in a UCITS ETF to reduce the dividend withholding tax you incur. However, the tradeoff you will incur is a lower liquidity and a higher expense ratio.

As such, you really need to consider which ETF you prefer to invest in!

If you’d like to know more about the taxations and returns of these ETFs, you can read this article by the New Academy of Finance.

#3 Choose a brokerage or robo-advisor that allows you to invest in the S&P 500

So you’ve decided which ETF or mutual fund you should choose. Now, you’ll need to find a brokerage or robo-advisor that allows you to purchase it.

1. Brokerage

Brokerages allow you to trade ETFs on the different exchanges. Here is a list of some of the brokerages you can use in Singapore:

BrokerageNYSELSE
FSMOne
POEMS
CGS CIMB
Saxo
Tiger Brokers
DBS Vickers
OCBC Securities
Interactive Brokers

Most of the brokerages do allow you to invest in the LSE.

FSMOne offers regular savings plans in the US stock exchanges

FSMOne also allows you to invest in either VOO or IVV via a regular savings plan.

FSMOne IVV VOO RSP

This is something that other regular savings plans like OCBC BCIP, Invest Saver or POEMS Share Builders Plan do not offer. As such, only FSMOne provides you with the option to dollar cost average into the S&P 500.

Some brokerages offer mutual funds

If you do wish to invest in a S&P 500 mutual fund, there are some options you can consider as well:

Interactive Brokers for international mutual funds

Interactive Brokers is an online brokerage that spans across multiple countries. As such, it is able to offer you access to certain mutual funds. One such example is the VFIAX mutual fund.

Local brokers for Lion Global Infinity 500 Mutual Fund

Some local brokers do offer you access to the Lion Global S&P500 mutual fund too. This includes:

  1. FSMOne
  2. POEMS

However, there may be a lot of hidden fees when you invest in this S&P 500 mutual fund. You may want to consider other low-cost methods of investing in the S&P 500 instead!

Other factors to consider

There are other factors you may want to consider when selecting which brokerage. This includes:

  1. Trading commissions
  2. Exchange rate
  3. Other miscellaneous fees
  4. Ease of depositing and withdrawing funds

As such, do try to take the time to see which is the best brokerage for you!

2. Robo-advisors

Here are 2 robo-advisors that allow you to invest in the S&P 500:

#1 Kristal.AI

Kristal.AI is an attractive option you may want to consider. They do not charge you any management fees if your total investment amount is less than $50k! However, Kristal.AI allows you to invest only in the SPY ETF.

Kristal AI SPY ETF SP 500

Moreover, there are some drawbacks when investing with Kristal AI:

1. You cannot invest in fractional shares

You are unable to invest in fractional shares using Kristal AI. The minimum number of units that you can purchase the SPY is 1.

Kristal AI Minimum Unit To Invest SPY

As such, this is similar to investing via a broker.

2. There is a time lag between initiating and executing the order

When you invest with Kristal.AI, you may experience a time lag. Your order may take up to 24 hours to be processed.

Kristal.AI Time Lag

The NAV that you see on the ETF’s page is based on the last market close price. As such, you will need to pay an extra 2% of the NAV as a buffer.

Kristal AI Minimum Amount To Invest SPY

This may be an added cost as you may be buying the ETF at a price higher than you intended to!

Kristal.AI may not be the best way to invest in the S&P 500 ETF

Kristal.AI provides an interesting method to invest into the S&P 500 ETF. You do not incur any transaction fees or management fees if your total invested amount is less than $50k.

However, the time lag and lack of fractional shares may make Kristal AI unattractive.

Kristal AI does keep your assets under your own name in custodian accounts under Saxo Markets and Interactive Brokers. This is a drawback as it prevents you from investing in fractional shares. However, you will be given more control of your assets in the unlikely event that Kristal AI closes down.

#2 Endowus Fund Smart

Endowus has included the Lion Global Infinity US 500 Stock Index Fund as part of their portfolios. Moreover, they recently launched Fund Smart which allows you to build your own portfolio.

This means that you can purely invest into this S&P 500 mutual fund!

Endowus Fund Smart LionGlobal Infinity SP 500

Endowus also has lower fees compared to normal brokers. You will incur a total of 1% in fees from both Endowus and the fund manager.

Endowus Fund Smart Fees

This is because Endowus rebates the trailer fees that they receive from the fund manager to you.

Endowus Trailer Fee Rebate

This will further help to reduce your cost of investing!

Endowus has a minimum investment requirement of $10k

To access this low-cost robo-advisor, you required to invest a minimum amount of $10k. This can be really hard for you if you only have a small sum to invest!

As such, investing in Endowus may not be something you can consider, especially if you are just starting out your investment journey.

Conclusion

There are so many ways for you to invest in the S&P 500. It can be really overwhelming at first when you are looking at all the options. However, the raw returns of all of these instruments should be the same!

This is because all of them should have the same allocation since they all track the same index.

As such, the major things you’ll need to consider are:

  1. The fees you incur
  2. The taxes you incur
  3. The liquidity and ease of withdrawal

This will help you to decide on the best option to invest into this index!


undraw pcsocial 16rw

Do you like the content on this blog?

To receive the latest updates from my blog and personal finance in general, you can follow me on Telegram and Facebook.

0 Shares:
You May Also Like