Following the recent article, more Singaporeans turning into investors, there were a record number of new accounts opened in past 12 months. While the number of user have gone up, total stock market turnover for first 6 months actually dropped dramatically by 34% to $136 bil.
It seems strange that while there are more investors, total value of trades actually reduced instead of going up. Average daily turnover was down by 40% to under $1 bil from a year ago. One factor could be the world cup effect, where more punters are now focused on the soccer fever instead of watching the stock market. Another factor could be that many of these new account openings are young people who want to start trading but do not know where to start.
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
Singapore Stock Market Risks
The recent penny stock saga of Blumont, Liongold, Asiasons could have left a bad taste in investor’s appetite as well. In a way, it is good as it reminds people not to trade, but invest for the long term. However, many people with the wrong knowledge may just see it as another reason not to invest.
Exchange Traded Funds Classified as Specified Investment Products
Exchange Traded Funds (ETF) are touted as one of the best ways to gain diversification into the stock market. Even on SGX, one could use ETFs to diversify into say US through S&P 500 ETF, UK through FTSE 100 ETF and so on. However, all these was put to a stop when MAS classified ETFs based on foreign investments into Specified Investment Products (SIP). Investors need to go through a test to be able to trade in SIP instruments. In fact, turnover for ETF plunged by half to $1.08 billion.
MAS Should Consider Removing SIP Rules on ETFs
There are many complains involving the SIP tests, which includes irrelevant questions like Options that should not affect people genuinely interested in using ETFs for diversification. In fact, this SIP rules makes diversification even more difficult for everyday investors. The alternative would be to seek out ETF universe listed on the US Stock Exchanges which is very well developed but unfortunately levies a 30% dividend withholding tax on foreign investors, reducing the returns.
ETFs should be seen as a low risk manner to investing as they are generally based on indexes, which is broadly diversified. By doing so and educating the public more about the merits of long term diversified investing, hopefully there will be more interest in the SGX market.
About the Author
Calvin Yeo, CFA, CFP is the Managing Director of Doctor Wealth Pte Ltd (www.drwealth.com), which is is revolutionizing the financial advisory industry by building an online platform to provide high quality and comprehensive financial advice for free.