A Basic Guide To Investing In STI ETF 2018
Someone said, first you work for money and after a certain point, make money work for you.
I confess.
I understand what it means but do not quite understand ‘how’ it is done..
Do you?
Cliched as it may sound, how do you make it happen? Let’s say, you saved close to $5000 five years ago and felt that someday you would sit on a pile of cash.
Well, fast forward 2018. Your money is virtually the same. The gain has been close to nothing. Whatever you saved was eroded and corroded by inflation.
What is it that factors in inflation and makes you ride on its cusp? There is a slew of wonder wizard apps talking about a rich array of financial instruments to choose from and robo advisors talk talking it all.
It is the good old STI ETF.
What is STI ETF
Potent and passive
STI ETF is potent, passive form of investment that holds promise…
Like their cousins, stocks and unit funds, STI ETF’s are securities specially created by fund managers to track the performance of a specific market index. Now, there are different types of markets you can choose to track. In Singapore, the most common market is the Straits Times Index (STI).
The STI is a blue chip index of 30 of Singapore’s best and biggest companies listed on Singapore Stock exchange.
The money smart blog describes STI ETF as such. With a history dating back to 1966, the STI tracks the performance of the top 30 companies listed on the Singapore Exchange. The 30 STI stocks represent five different sectors and 19 different industries, chosen to best depict Singapore’s diverse economy. The STI is represented by some of the largest businesses incorporated in Singapore, such as DBS, UOB, Singtel, Keppel Corporation and CapitaLand Limited. Of course, the tides change every year and some companies may be removed from the list while others are included.
If you are planning to work and also make your money work for you and are not ready to see saw the financial horizon, one of the cheapest and robust ways to do so is to invest into a mix of STI ETFs.
STI ETF gives you a twin delight
It is an index fund that trades on a stock exchange.
How do you invest?
From food to funds
If you are a beginner and feel that you would be a novice, hold on. It’s not all that difficult. While investing, keep in mind- diversification is key. Tap into the wisdom of crowds. Let me give you an example.
A few days ago, I had gone to Italy. While going to a restaurant, we found that even after reading the ingredients, it was difficult to make out what would a particular dish contain. Some food were good to the palate, some were harsh. The best solution was to order a full three or five course meal. The nasty foods could be offset by the good food.
What applies to food also applies to funds.
Simply put, it means rather than cherry picking a few companies, invest in all of them to earn an average return- a loss in one may be offset by the profit in the other. You feel that you are blindly investing but you are not.For a company to qualify to be among the 30 blue chip companies, it has to be really good in terms of revenues and profits. In case the company you invested in today does not do well tomorrow, an automatic rebalancing would be done in a way that companies that lie at the fringes would be knocked out of the list. Thus, there is a self weeding out function and you need not worry even if you are a novice in the game.
STI ETF’ s
From toe hold to foothold
For beginners who want to toe test before putting they put their foot in the water, ETF’s are the best option. Unperturbed and unshaken by any clouds that may loom at the financial horizon, ETF’s romp romp and trot ahead. The resilience of ETF’s defies market logic as it offers a bi- pronged pathway- investment at macro level and investment for long term.
First, when you invest in an ETF, you are investing at a macro level, in the country’s economy, since you are investing in the major blue chip companies of Singapore. The market predictors say that 2018/ 19 sets Singapore on the road to recovery. According to a report by DBS Ltd, https://www.dbs.com/aics/templatedata/article/generic/data/en/GR/122017/171212_insights_singapore_in_201819_better_times.xml, there is potential in the year ahead for the index to challenge its previous high and the recovery is set to be sustainable into 2018/19 as a global synchronised recovery gains further momentum. Better earnings growth should also be seen across all sectors to support further upside in the index as the economic recovery becomes more broad-based.
Second, if you are a beginner and cannot make sense of the bulls and bears of the market, STI ETF’s are again a good option as they give you the chance to invest – long term. STI ETF’s are not for people in the’ get rich quicker’ game.They are attractive as investments because of their low costs and the ability to buy and sell them on the stock market, making them the most popular type of exchange-traded product. You do not need to pay an initial fee upfront nor do you pay an annual management fee.
So, let us sum it up this way.
If you wish to protect yourself from selection risks, and invest effortlessly without much review or revision, STI ETF should sit comfortably nestled in your core portfolio.
I again confess.
STI ETF’s are a complex ball game.
But, who said investment was easy?
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