Top 10 ETFs for Investment in Singapore in 2024

What Are Exchange Traded Funds (ETFs)?

Exchange-Traded Funds (ETFs) in Singapore are a type of investment product that tracks the performance of various assets, such as stocks, bonds, commodities, or a mix of different investments, and are traded on the stock market. They are traded on stock exchanges and offer a convenient way to diversify a portfolio without the need to purchase individual securities. ETFs can be passively managed, aiming to replicate the performance of a specific index, or actively managed by portfolio managers who make decisions about how to allocate assets. They are popular for their flexibility, as they can be bought and sold throughout the trading day like stocks and are typically more cost-effective than traditional mutual funds due to lower expense ratios.

Why Consider ETFs for Investment in Singapore?

Diversification and Risk Management

ETFs offer an efficient way to achieve diversification across various investment portfolios, asset classes, sectors, and geographies. This instant diversification helps to spread risk and reduce the impact of any single underperforming asset on the overall portfolio. ETFs can include low risk assets such as government bonds and money market funds, which help in reducing the overall risk of the investment portfolio.

Cost-Effectiveness

One of the key advantages of ETFs is their cost-efficiency. With lower expense ratios compared to actively managed funds, ETFs ensure that investors retain more of their investment returns.

Liquidity and Flexibility

Listed on stock exchanges, ETFs can be bought and sold throughout the trading day, just like individual stocks. This liquidity and flexibility allow investors to quickly respond to market opportunities or changes.

Transparency and Simplicity

The holdings of ETFs are transparent, and their performance closely tracks the underlying index. This simplicity and transparency make ETFs an accessible investment for a wide range of investors.

Global Access and International Diversification

Singapore's ETF market provides access to international markets, allowing investors to diversify their investments globally without the need for direct international trading expertise.

Investors in Singapore seeking a straightforward, cost-effective, and flexible approach to investing, ETFs present a smart and strategic choice to navigate the dynamic world of finance.

How to Choose the Best ETFs?

Selecting the best ETFs for investment in Singapore involves a strategic approach that aligns with your investment goals and risk tolerance. Start by identifying the asset classes you want to target, such as equities, bonds, or commodities. Additionally, consider the minimum investment required for each ETF, as this can vary significantly between different funds. Next, consider the geographical focus and sector you are interested in, as ETFs offer exposure to various regions and industries. Evaluate the ETF's historical performance and compare it with the benchmark index it tracks. Look for ETFs with lower expense ratios, as fees can significantly erode returns over time. Check the liquidity of the ETF by reviewing its trading volume to ensure you can easily buy and sell shares. Finally, consider the fund family’s reputation and the ETF’s management team. By conducting thorough research and considering these factors, you can make informed decisions and choose ETFs that are best suited for your portfolio.

While the steps mentioned above may seem time-consuming, they are crucial for a sound investment strategy. Understanding and analyzing your options can have a significant impact on your investment success. If you find the process overwhelming or want to get a head start, consider our list of the top 10 ETFs for investment in Singapore in 2024. These selections have received substantial attention from market investors this year and can help you narrow down your choices. Incorporating ETFs into your investment strategy can be a key component of effective wealth management, helping you achieve your financial goals.

For sure, apart from the Singapore-listed ETFs mentioned in the table, you also have the option to buy ETFs that include ETFs listed on other international exchanges in your investment portfolio. For example, the iShares Core S&P 500 UCITS ETF (IVV) and other popular ETFs traded in the global markets.

The table contains detailed information about the ETFs listed below.

SPDR® Straits Times Index ETF (ES3)

The SPDR Straits Times Index ETF (ES3), the first ETF in Singapore, has established itself as a leading investment vehicle for those looking to invest in ETFs in Singapore. The ETF is designed to track the performance of the Straits Times Index (STI), a globally recognized benchmark index and market barometer for Singapore. It seeks to replicate the performance of the top 30 largest and most liquid companies listed on the Singapore Exchange. This provides investors with a diversified exposure to Singapore's leading companies and the opportunity to participate in the country's long-term growth potential through ETF investment.

The STI ETF is known for being cost-efficient, with an expense ratio of 0.30%. Over the past year, the STI ETF has performed well, reaching a high of 3.430 and a low of 3.028. This indicates the strength and potential returns it offers to investors. The share price has been consistently increasing and is approaching its highest levels of the year, making it stand out for its high liquidity, enabling easy trading for investors.

Investment in Singapore through the STI ETF allows investors to tap into the country's economic growth and gain exposure to its leading companies. The STI ETF holds a significant place in Singapore's investment landscape and is widely regarded as a key tool for both domestic and international investors to access the Singapore market. With its comprehensive representation of the STI, the ETF reflects the performance of Singapore's economy and provides insights into the market's direction.

SPDR® Gold Shares (O87)

The SPDR Gold Shares is a gold-backed Exchange Traded Fund (ETF) that primarily tracks the price of gold bullion, offering investors a straightforward way to invest in gold without the need for physical storage. This ETF is designed to reflect the performance of gold, less the Trust's expenses, and is listed on the Singapore Stock Exchange, providing exposure to the gold market in both USD and SGD.

In light of the recent gold market trends that have captured the attention of investors worldwide, this ETF presents an attractive option for those looking to participate in the gold market. The expense ratio of the ETF is 0.40%, which is relatively low compared to the costs associated with owning physical gold, including purchase, storage, and insurance fees. This makes the SPDR Gold Shares an efficient and cost-effective way for investors to gain exposure to gold, benefiting from its performance without the logistical challenges of physical gold ownership.

iShares Barclays Cap USD Asia HY Bd ETF(O9P)

The iShares USD Asia High Yield Bond ETF (O9P) is an investment fund that aims to mirror the performance of USD-denominated high yield bonds issued by Asian governments and corporations, excluding Japan. The ETF offers diversified exposure to the Asian high yield bond market, which is known for potentially higher income compared to investment-grade bonds. It tracks the Bloomberg Asia USD High Yield Diversified Credit Index, providing a cost-effective way to invest in a wide range of high yield bonds.

The ETF has a competitive expense ratio of 0.50% and boasts an asset scale of over USD 1 billion, making it one of the larger funds in its category. It is well-regarded for its transparency and liquidity.

ABF Singapore Government Securities Bond Index ETF (A35)

The Nikko AM ABF Singapore Bond Index Fund ETF is an investment fund designed to track the performance of the iBoxx ABF Singapore Index. This index is a benchmark for investment returns of debt obligations denominated in Singapore dollars, issued or guaranteed by the government of Singapore or other Asian governments, including those from China, Hong Kong SAR, Indonesia, Korea, Malaysia, the Philippines, or Thailand. The ETF seeks to closely correspond to the total return of this index, providing investors with exposure to a diversified portfolio of Singaporean investment-grade government bonds.

The ETF has a management fee of 0.15%, which is relatively low compared to some other ETFs, making it an attractive option for investors looking for cost-effective exposure to the Singapore bond market.

Nikko AM Singapore STI ETF(G3B)

The Nikko AM Singapore STI ETF is an exchange-traded fund that aims to replicate the performance of the Straits Times Index (STI) as closely as possible before expenses. The STI is a key benchmark index that represents the largest and most liquid stocks listed on the Singapore Exchange, providing a comprehensive reflection of the Singapore market's performance.

This ETF has a competitive management fee of 0.20%, which is lower than the average fee for similar products in the market.

Nikko AM SGD Investment Grd Corp Bd ETF(MBH)

The Nikko AM SGD Investment Grade Corporate Bond ETF is an exchange-traded fund that tracks the performance of the iBoxx SGD Non-Sovereign Long Corporate Index NR SGD. This index represents the performance of Singapore dollar-denominated investment grade corporate bonds, excluding Singapore Government Securities, and provides investors with exposure to a diversified pool of high-quality corporate debt instruments. With a management fee of 0.35%, the ETF offers an efficient way to access this segment of the market.

Demonstrating a robust growth trajectory, despite market fluctuations, the ETF has maintained a consistent upward trend since the end of 2022. It has achieved an approximate growth of 13%, showcasing its resilience in the face of market volatility. This performance underlines the ETF's ability to deliver steady returns and underscores its appeal as an investment vehicle for those seeking exposure to a stable and diversified portfolio of corporate bonds.

Lion-Phillip S-REIT ETF(CLR)

The Lion-Phillip S-REIT ETF is an exchange-traded fund that provides investors with exposure to a selection of high-yielding Real Estate Investment Trusts (REITs) listed in Singapore. It aims to replicate the performance of the Morningstar Singapore REIT Yield Focus Index, which is designed to screen for REITs with superior quality and financial health that offer high dividend yields.

The ETF operates with a management fee of 0.50%.

Lion-OCBC Securities Hang Seng TECH ETF(HST)

The Lion-OCBC Securities Hang Seng TECH ETF is an exchange-traded fund that seeks to closely replicate the performance of the Hang Seng TECH Index. This index is a benchmark for the technology sector in Hong Kong, representing a dynamic and innovative segment of the market that includes companies involved in various tech-related fields.

The ETF has a management fee of 0.45%.

NikkoAM-Straits Trading Asia ex Japan REIT(CFA)

The NikkoAM-Straits Trading Asia ex Japan REIT ETF is an exchange-traded fund that aims to replicate the performance of the FTSE EPRA Nareit Asia ex Japan REIT NR SGD Index. This index is a benchmark for real estate investment trusts (REITs) in the Asia-Pacific region, excluding Japan, and provides investors with exposure to a diverse range of income-generating real estate assets across the region.

The ETF has a management fee of 0.70%.

ICBC CSOP FTSE Chinese Gov Bd Idx ETF(CYB)

The ICBC CSOP FTSE Chinese Government Bond Index ETF is an exchange-traded fund that aims to closely replicate the performance of the FTSE Chinese Government Bond Index. This index provides exposure to Chinese government bonds, which are debt securities issued by the People's Republic of China, offering investors a way to gain access to the Chinese fixed income market.

The ETF features a management fee of 0.25%.

Strategies for Investing in ETFs in Singapore

Long-Term Investment Strategies

ETF Moving Average Strategy: The ETF moving average strategy is a technical analysis method that uses moving averages to generate buy or sell signals. For instance, investors in Singapore might consider the SPDR® Straits Times Index ETF, which tracks the performance of the Straits Times Index, a benchmark index representing the top-listed companies on the Singapore Exchange. By monitoring the ETF’s price in relation to its 60-day or 120-day moving average, investors can make informed decisions on when to enter or exit positions, aiming to capture medium-term trends. Long-term investing requires a significant financial commitment, as it involves setting aside disposable income for future financial goals such as retirement or education.

ETF Dollar-Cost Averaging (DCA): Dollar-cost averaging is a time-tested strategy for long-term investors looking to mitigate the impact of market volatility. By investing a fixed amount in an ETF at regular intervals, such as the Nikko AM Singapore STI ETF, which seeks to replicate the performance of the Straits Times Index, investors can spread out their investment over time, reducing the risk of making a large purchase at a market peak.

Core-Satellite Strategy: The core-satellite approach allows investors to diversify their portfolio by allocating the majority of their assets to a core ETF for stability and a smaller portion to satellite ETFs for growth opportunities. For example, a core holding could be the Nikko AM SGD Investment Grd Corp Bd ETF, which provides exposure to a broad range of investment-grade corporate bonds in Singapore, while satellites could include the Lion-OCBC Securities Hang Seng TECH ETF, focusing on the technology sector’s growth potential in the Hang Seng Index.

Short-Term Trading Strategies

Market Timing: Short-term investors in ETFs in Singapore need to be alert to the constantly shifting market sentiments, which can be influenced by a variety of factors including economic data releases, policy changes, and global events. By staying informed and reacting promptly to these developments, investors can capitalize on short-term market movements in their ETF investment. For instance, the SPDR Gold Shares may see increased demand during times of economic uncertainty, providing a chance for short-term gains.

Technical Analysis: Utilizing technical indicators such as the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD), investors can identify trends and potential reversals in the short term. These tools can provide entry and exit points for trades based on historical price action and volatility, enhancing the strategic approach to ETF investment in Singapore.

Event-Driven Trading: Investors also focus on company earnings reports, policy announcements, and other events that can have a near-term impact on ETF prices in Singapore. The release of quarterly results for companies within the Nikko AM Singapore STI ETF's portfolio can lead to sharp price reactions, offering opportunities for quick trades based on the market's reaction to the news in Singapore.

Diversification Strategies for Investment Portfolios

Asset Class Diversification: Investors can allocate their assets across different investment portfolios, including equities, fixed income, commodities, and real estate. This strategy allows for the spreading of risk by investing in various asset types, which may respond differently to market conditions.

Geographic Diversification: Investors can mitigate risks associated with investments concentrated in a single region or country by choosing ETFs that provide exposure to different parts of the world. This approach helps in spreading geographic risk and gaining access to a broader range of economic opportunities.

Sector Rotation: This strategy involves allocating to sectors that are expected to perform well based on economic cycles or market trends. It allows investors to shift their investments to areas of the market that are currently experiencing growth or are anticipated to grow in the future.

Risks and Considerations

When investing in ETFs, Singaporean investors should consider multiple risks and factors in their investment decisions, and regularly review and adjust their portfolios to adapt to changing market and economic conditions.

For investors with a conservative risk profile, Singapore Savings Bonds offer a safe and flexible investment option, providing a stable return with minimal risk.

Financial institutions in Singapore are required to assess the investment knowledge and experience of investors before selling specified investment products.

Market Risks

The value of ETFs is inherently tied to the performance of the assets or indices they track, making them susceptible to market fluctuations. Investors should be aware of the potential for significant volatility, especially in sector- or region-specific ETFs where localized events can lead to sharp price movements. Additionally, interest rate changes can significantly impact bond ETFs, while currency fluctuations can affect the performance of international ETFs when converted back to SGD.

Regulatory Considerations

The regulatory landscape is crucial for ETF investment. Investors should stay informed about guidelines and regulatory changes set by the Monetary Authority of Singapore (MAS), as these can influence ETF operations, compliance, and trading mechanisms. Financial institutions in Singapore are required to assess the investment knowledge and experience of investors before selling specified investment products. While regulatory transparency and standards protect investor interests, they may also introduce additional compliance costs.

Economic Factors

Economic factors broadly affect ETF performance. Inflation can erode the real returns of fixed-income ETFs, while economic growth rates influence equity ETF performance. For international ETFs, currency exchange rate fluctuations are a key consideration, as they can impact the value of returns when converted to SGD.

Conclusion

In conclusion, the selection of the top 10 ETFs for investment in Singapore provides a diverse and strategic approach to portfolio diversification. These ETFs, tailored to various investment goals and risk profiles, underscore the potential for both local and international exposure within the Singaporean market. By carefully considering these options, investors can make informed decisions and capitalize on the efficiency and flexibility that ETFs offer in the dynamic world of finance. of the opportunities presented by the ETF market in Singapore, while also mitigating potential risks.