Index Investing - Conservative Investment?

[valuestalker]

Hi,

In my short journey of speculation and later converted to investment, i came to appreciate more on Index investing.

In my opinion, index investing should be a part of conservative investor's portfolio, replacing mutual funds.
To be honest, I don't have any index investment at the moment.
I am starting to study on this topic by reading or rather listening to "common sense investing"

I am interested to know if anyone started in this index investing journey? What do you think of ETF and index fund?

[yeokiwi]

Index investing?? I only use it to invest my CPF ordinary account and the only ETF index fund that is approved is the Streettracks STI ETF.

Same as buying a stock, it depends on the entry price and the underlying fundamentals of the index stocks.
But, it sure beats the hell out of many active funds due to low expense ratio.

[PassiveReturns]

I believe in this way of investing too. But unfortunately, unlike in the US investing eco system, there are actually very few choices for Singapore investors. I say this is because there are only streetTRACKS Straits Times Index Fund, DBS Singapore STI ETF, and a United SSE 50 China ETF that are priced in SGD. I am not fond of other ETFs which are sold in USD because over a long term, USD value is going to depreciate much much more.

I do hope SGX can introduce more ETFs that priced in SGD in different variety, such as sector ETFs, different bond ETFs, commodities ETFs and many more.

For the time being, I will only be investing in STI ETFs, preferably the DBS one.

[kazukirai]

Hi Passive-san, care to share why the DBS one and not the Streettracks one?

I'm also thinking of going into the STI ETF on a managed DCA basis (in the sense that I don't DCA every month but according to a signal which is counter cyclical) but mostly because I can't touch the CPF funds, it's not even keeping par with CPI and also to use as a benchmark against my own other portfolio. It's going to be a kind of experiment for me on whether my own value picking can do better than index holding. (kind of like an artificial competition for myself since as long as they both generate positive returns, I win).

I'm also considering the POEMs sharebuilder plan because it also to pick and choose certain blue chips instead of the entire STI. There are some stocks in the STI that value investors wouldn't touch with a ten-foot pole but having said that, if not for Genting, the STI probably wouldn't be where it is today.

[PassiveReturns]

Hi there kazukirai. I prefer the DBS one is because it allows me to buy/sell in a smaller lot size (100 shares per lot) based on my limited capital. It is also a lot more flexible for me to adjust and manage my passive index investment. I will also be updating it in my blog on this later on.

To add on, I find that index investment in mutual funds/unit trusts in Singapore is still very very expensive. The expense ratio may be low, but the management fee and front load can cost a bomb !! So currently I will stay away from investing in them until the industry begin to lower their fees and charges.

[valuestalker]

Thanks for some info there.
Any comparisons or studies in the total cost from the available index funds or ETFs (management, platform, transaction etc)?

I am considering to invest in HK, STI due to low PE and exposure to global recovery.
At the same time also looking at SSE due to long term growth (preferably in RMB nomination if available) and to hedge against prospect of undervalue (yes, i believe it is undervalue) RMB.

[PassiveReturns]

Hi there valuestalker. I am not sure if there are any studies or comparison on the cost of the funds available in Singapore. One good source to find out more is http://sg.morningstar.com/ap/main/default.aspx

For HK investment, I understand that HK Dollor is pegged against USD too, so when USD goes down in value long-term wise, HKD will also be going down. Please correct if I'm wrong on this.

[valuestalker]

Hi Passive Returns,

Yes, you are right.
However, in my post, i referred to RMB instead of HK$.
For HK & STI, i prefer to invest in SGD instead.

I believe in long term when China domestic market is strong enough, RMB will have to appreciate to tame the inflation.
However, this is not to say that SGD won't appreciate stronger at the same time.

Just my way of hedging against potential appreciation of RMB while investing in China growth in SSE.

[PassiveReturns]

Hi valuestalker, mind to share how to go about doing that ?

Thks and best rdgs,
P.R.

[valuestalker]

Hi PR,

As mentioned in my post, i didn't own any index funds or ETFs.
But my idea is to invest in STI & HK index fund or ETF in SGD and SSE index fund in RMB.

Appreciate if anyone can share any info on the above.
Thanks;