Buying into different asset classes in Singapore

First let me start off with the most simple and straightforward asset class, which is Singapore equity. There are currently two Mainboard listed ETFs on the Singapore Exchange, SPDR STI ETF (ES3.SI) and Nikko AM STI ETF (G3B.SI). There are arguments supporting the former being a better choice of the two, citing reasons such as lower expense ratio, better index tracking, higher volume etc., which I don't think those really matter much if you take a long term view. However, I do want to point out one main difference in these two ETFs, which would be a decisive factor for many to choose which of the two to invest in, and that is their board lot size.

Nikko AM STI ETF board lot is 100 shares, which mean that the minimum investment is around $340 at current levels. On the other hand, SPDR STI ETF has a board lot size of 1000 shares, making the initial and subsequent cash outlay to be around $3300. Therefore buying into Nikko AM ETF makes it easier to invest monthly or to rebalance. Consequently, you would have to use Standard Chartered as your brokerage for such trades as they do not charge the minimum commission of $25 per trade.

Investors in Singapore faced a problem if they want to buy into other asset class, such as bonds. The purpose of including bonds in the portfolio is due to its negative correlation with stocks. However, a retail investor can't find a local bond investment product  that meets the requirements of high liquidity, low minimum investment amount, and denominated in SGD currency. One exception to this might be Singapore Government 30-year bond (PH1S) traded in board lot of 10 shares, making a minimum investment/rebalance amount of around $1000. I have read from certain blogs recommending UOB Kay Hian to transact this bond as its bid-ask spread is more reasonable compared to say DBS Vickers. Another fellow blogger also highlighted this to me, quoted from SGS site, "The SGS Primary Dealers are appointed to act as specialist intermediaries in the SGS and S$ money markets. Primary Dealers are obliged to provide liquidity in the SGS market by quoting prices on all SGS issues under all market conditions."However, the bid/ask spread might still be wide if there is low demand for them. Since I personally am not vested in this, I won't be able to comment much on this bond. A chart showing the negative correlation between this 30-year government bond can be seen below:

Moving on to the other asset class, Gold, there are options available in Singapore such as UOB Gold Savings Account. You can read more about it from the links I posted in the previous post. Why it might not be suitable for some is because of its administrative fees. Depending on the investment amount, the fees might work out to be around 3% annually.


For reasons such as liquidity, minimum investment amount etc., I decided to invest in the different asset classes via US ETFs. For US ETFs, the choice is abundant, as there are ETFs tracking all sorts of indices, such as the US Total Market index Wilshire 5000, US Large cap index S&P500, FTSE All World index, and the list just goes on. The drawbacks of investing in US ETFs include currency fluctuation and the initial "sales charge" which is derived from the currency exchange bid-ask spread. Standard Chartered FX spread is around 2%. One solution I have adopted is to forecast the USD amount you will need to rebalance in 6 or 12 months time,  and exchange a small amount every month, thus averaging out the fluctuations. Fortunately, USD is near an all time low against SGD, so it should not be much of a worry at the moment.


In the Permanent Portfolio model, there is a cash component as well. Rather than having this cash component in lying banks earning around 0.1% interest, I think there are better places to park them. I will elaborate more on this in my next post.