I have mentioned that I have been putting aside $400 every month into STI ETF, through POEMS Sharebuilder plan.
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I started the investment about 2-3 years ago and only contributed $200 per month. It was only about mid-2009 that I increased the contribution to $400.
We all know that due to the US Sub-prime crisis, the market took a beating and plunged. My STI ETF sank too. But I held on to the Sharebuilder plan, believing that dollar cost averaging will work better for me in a down market. Dollar cost averaging (DCA) is to use a fixed sum of money to buy a particular shares on a regular basis, instead of a lump sum investment. The strategy works like how Singaporeans go for shopping. When there is a sale, Singaporeans will buy in bulk the items that are on discount. Likewise, with $400 each month, I buy more when the stock price falls, and buy less when the stock becomes more expensive. Overtime, I get a big discount for the shares I buy.
You may say that I could have profited more if I have bought near the low of STI but I must say I did not know when the market will bottom and never will I in the future. What I must emphasized is that ordinary folks who do not know how to time the market, can invest in this way and gain very decent profits. Since it is so simple and relatively safer than many other strategies or asset classes, it is highly recommended for people who do not have the interest to follow the market but like to profit from equities.
Let’s talk about real life results: As of Dec 09 holdings, I have 3077 shares of STI ETF and a DCA price of $2.5448 for each share. STI ETF closed at $2.99 today. This would translate to a positive gain of $1369.63.
You may feel that the gain is small. But I want to stress that I have a gain despite buying near the peak and went through the entire market crash in 2007-08. How many people have their investment in the positive territory now? And I did not time the market. It was robotic, the bank just GIRO my contribution to the plan without me doing anything. Anyone can do it! If this is the worst time, my STI ETF will even perform better in better times.
If you are not convinced, do check out the annual reports released by SPDR. For your convenience, I took the performance table from the latest 09 annual report:
I feel that it is quite impressive if you compare to many other managed funds or unit trusts. And the management fee is only 0.3% per annum.
If you ask me if DBS STI ETF is better, I would say both are the same. But I would prefer StreetTracks because it has higher liquidity than DBS.
Liquidity is important when you want to sell your shares.