Okay, so you want to start investing right? A lot of passive investing advice online tell you to invest in Exchange Traded Funds (ETFs). I have heeded their advice after reading some books and some blog posts about it and doing my research. These are the reasons why I bought these ETFs.
- Low cost and diversified
- Start from a slow amount and dollar-cost average
- Takes little time for relatively high returns
- Global and Local Exposure
What broker do I use?
Firstly, passive investing is easy. You need a CDP account which you can open here. After that, you will need a brokerage account.
Currently, the one with the lowest fees on the market right now would be DBS Vickers Cash Upfront.
However, that is a CDP account, I use a custodian account because I also buy global ETFs for diversification. There are cases for and against diversification, which I will explain in the future. But for now, it is to go-to choice for passive investors.
The custodian account I go for is FSMOne only because I subscribe to their Regular Savings Plan and it offers very low fees.
*Fees: Buying Fee: 0.08% or min SGD 1, HKD 5, USD 1, whichever is higher (From FSMOne website)
I will review the account in the future, but I would say that I am very happy with their service thus far. I will continue to use them in the long run, as it is the basis of the dollar-cost averaging method.
What ETFs do I invest in?
I invest in 2 ETFs using the RSP from the FSMOne platform.
For the local stock market, I buy into the SPDR Straits Times Index ETF, otherwise known as ES3. Some investors may disagree with my choice of ETF, saying that ES3 is not very diversified and has not shown much growth over the years.
Although it is a salient point, I personally believe that I want to own part of the Singapore market also it gives me a very easy and compelling choice for diversification. I will further explain the pros and cons of this ETF in the future.
For the global stock market, many people recommend buying the S&P 500 ETF. FSMOne provides the IVV one. When I chose to diversify, I thought about buying IVV. However, on second thought, I wanted to expand globally. I did not want to just buy the US market.
Therefore, I went for Vanguard Total World Stock Index Fund ETF Shares, otherwise known as VT. This ETF allows me to diversify throughout the whole global market. I believe that in the long run, the global market will improve as the economy improves and global economies become more efficient.
Now I will explain why I bought these ETFs.
Why do I invest in ES3?
I invest in ES3 mainly because I want to diversify in the market I live in, which is the Singapore market. I strongly believe in the Singapore market, mainly for its stability. Our government and politics are stable leading to a relatively stable society. In addition, the ES3 allows me to dip my toes into the Singapore stock market.
Why do I invest in VT?
I invest in VT because it is the only stock offered by FSMOne to globally diversify into the stock market. I strongly believe that the global economy will grow in the long run.
Just buying one VT stock allows me to have a stake in that and reap the benefits of it.
Where do I invest?
As said before, I use the FSMOne broker. You have to apply for the RSP and decide how much you want to invest in the account every month.
After that, you will have to deposit that amount into your FSMOne account.
Every 8th of the month, the system will automatically deduct from your account. You can set a standing order for the amount to be topped up every month from your bank account.
Personally, I do not do that so I can keep track of my monthly payments manually.
That’s it. It is as simple as that.
How much do I invest?
Personally, I think this would depend on your cash flow and how much money you are willing to lose.
Every month, I will invest SGD$100 into ES3 and US$350 into VT.
These are amounts I am comfortable with.
The reason behind the lower amount for ES3 is because it has lesser growth potential as compared to VT. Therefore, I want to reap more benefits from a higher investment amount in VT.
These are why I bought these ETFs.
Disclaimer: Your mileage may vary. I am not a financial adivsor.