The last time I updated my STI ETF actions were back in Sept 2015. Below is another update of my buying since then. Buying low sounds simple but it is not easy. But I'm quite satisfied based on the chart below.
Showing posts with label STI ETF. Show all posts
Showing posts with label STI ETF. Show all posts
Friday, 24 June 2016
Sunday, 20 September 2015
My own STI ETF investing update
Sometimes people asked me if I implement the POSB BCIP, which I advocate, and my answer is no.
This is because I know that I am conditioned to buy the STI ETF when it falls, but I cannot say the same for others who are new to investing (and usually these are the people suited to index investing). Below shows the different points at which I bought the STI ETF in 2015:
Although my plan is to invest roughly once every month, you can see that there were no purchases during mid April to end June. And there were 3 purchases within the span of a month in mid Aug to early Sept alone.
If the STI undergoes further correction, I'll expect myself to be buy more. So I do hope in the near future, there are opportunities to accumulate the STI at even cheaper prices.
This is because I know that I am conditioned to buy the STI ETF when it falls, but I cannot say the same for others who are new to investing (and usually these are the people suited to index investing). Below shows the different points at which I bought the STI ETF in 2015:
Although my plan is to invest roughly once every month, you can see that there were no purchases during mid April to end June. And there were 3 purchases within the span of a month in mid Aug to early Sept alone.
If the STI undergoes further correction, I'll expect myself to be buy more. So I do hope in the near future, there are opportunities to accumulate the STI at even cheaper prices.
Thursday, 5 February 2015
Returns for investing in STI index for the past 10 years
In an earlier post, I did some backtesting to find out the estimated returns of investing in the STI ETF once every 6 months.
In order to "simulate" an even more real life scenario, I backtested the returns of investing in the SPDR STI ETF through "POSB Invest-Saver", an monthly investment plan with the option to invest in Nikko AM STI ETF or ABF Singapore Bond Index Fund. This is the most cost efficient option for someone who invests in small amount monthly, e.g. $100.
The reason for using SPDR STI ETF is because it has a 10 year history data to work with (Nikko AM STI ETF was introduced in 2008). I used price data from Jan 2005 to Dec 2014, and investment was made roughly once every 4 weeks.
Results
With $100 monthly investment, an internal rate of return (IRR) of 6.4% was achieved. Let's not forget in this 10 year period, the 2nd worst global financial crisis in history happened in 2008, and also the rather serious European crisis in 2011.
The backtest spreadsheet can be found here.
With a 10-year track record (and numerous historical studies highlighting the long-term growth of equity markets worldwide), I think the risk of making meagre returns or loss by investing in stock indices is quite slim. Of course, future performance is not guaranteed, and this is the inherent risk in investing.
P.S. If one is still not persuaded by the returns of this investing method, perhaps one could consider alternatives like this or this that give returns of 20% annually, a year or two of holding period, with the returns "guaranteed".
In order to "simulate" an even more real life scenario, I backtested the returns of investing in the SPDR STI ETF through "POSB Invest-Saver", an monthly investment plan with the option to invest in Nikko AM STI ETF or ABF Singapore Bond Index Fund. This is the most cost efficient option for someone who invests in small amount monthly, e.g. $100.
The reason for using SPDR STI ETF is because it has a 10 year history data to work with (Nikko AM STI ETF was introduced in 2008). I used price data from Jan 2005 to Dec 2014, and investment was made roughly once every 4 weeks.
Results
With $100 monthly investment, an internal rate of return (IRR) of 6.4% was achieved. Let's not forget in this 10 year period, the 2nd worst global financial crisis in history happened in 2008, and also the rather serious European crisis in 2011.
| Total Cash Outlay | $12,906.69 |
| Portfolio Value (+dividends collected) | $17,387.56 |
| ROI | 34.72% |
| IRR | 6.43% |
The backtest spreadsheet can be found here.
With a 10-year track record (and numerous historical studies highlighting the long-term growth of equity markets worldwide), I think the risk of making meagre returns or loss by investing in stock indices is quite slim. Of course, future performance is not guaranteed, and this is the inherent risk in investing.
P.S. If one is still not persuaded by the returns of this investing method, perhaps one could consider alternatives like this or this that give returns of 20% annually, a year or two of holding period, with the returns "guaranteed".
Friday, 12 September 2014
Why pick individual stocks?
From my own observation, people who pick/buy stocks do so for the following 2 reasons
This translates to a 26% in absolute gains or an internal rate of return (IRR) of 10.25% over a 6.5 year period. This is a strategy that even a high school student can execute, just buy the index every six months! No need to read annual reports, examine charts, listen to financial news, stock tips etc, and you can beat the returns of banks interest (0.05%), bonds and inflation rate (~3%).
Spreadsheet of the above calculation available here.
What I am trying to show here is that we should not belittle the returns of index investing. Yes it will be boring and takes a lot of discipline to stick with it (Even I sold of portion of my ETF recently to invest in stocks). But the above result speaks for itself.
Back to the original topic, for those of you who pick stocks, you better be sure that you are beating the returns of the index. Else you are probably "paying expenses" just to enjoy the thrill of stock picking.
- They enjoy either the thrill or promise of their stocks' prices skyrocketing, and probably can't sit back and do nothing while hearing stories from their friends how well their stocks are doing.
- They want to beat the returns of the index.
It is easy to see which group you belong to. If you belong to the 2nd group, you will know the annualised returns of your stock portfolio. Else you probably belong to the 1st group.
One possible index investing scenario
Take for example, an investor who invest 1000 shares in the SPDR STI ETF every 6 months, and he started just before the financial crisis in 2008, which is around May 2008. Thereafter, the index dropped by a whopping 50%.
Taking into accounts of dividends payout (which is not re-invested) and excluding commission charges, the result as of September 12th 2014 is as follows:
| Total capital invested | $40,730 |
| Portfolio Value + Dividends | $51,319 |
| Profit | $10,589 |
This translates to a 26% in absolute gains or an internal rate of return (IRR) of 10.25% over a 6.5 year period. This is a strategy that even a high school student can execute, just buy the index every six months! No need to read annual reports, examine charts, listen to financial news, stock tips etc, and you can beat the returns of banks interest (0.05%), bonds and inflation rate (~3%).
Spreadsheet of the above calculation available here.
What I am trying to show here is that we should not belittle the returns of index investing. Yes it will be boring and takes a lot of discipline to stick with it (Even I sold of portion of my ETF recently to invest in stocks). But the above result speaks for itself.
Back to the original topic, for those of you who pick stocks, you better be sure that you are beating the returns of the index. Else you are probably "paying expenses" just to enjoy the thrill of stock picking.
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