I invested through the 2008 Financial Crisis and I was able to make a 17.5% return while most people lost a lot of money. I started with $200 per month. The crash allowed me to buy more units of STI ETF with the same $200 as they became cheaper. I increased the monthly investment amount from $200 to $400 as my salary increased.
Editor’ Note: I’ve stopped using this strategy as my investment capital and knowledge grew considerably over the years. $500 per month is used in the DCA tracking as an illustration purpose only.
Even though I no longer invest in it on a monthly basis (because I now have more capital to invest in lump sums), I still think this is a great way to start or for people who do not want or have time to monitor the market.
FYI: STI ETF returned 9% per year in the first 10 years of their existence.
How I Started Dollar Cost Averaging With STI ETF
It happened in 2007.
I was hungry for investing knowledge.
I was about one quarter into the book and something just drew all my attention to it. It promised a method for pure beginners who do not know anything about investing.
“With dollar cost averaging, you don’t have to be smart. You can be a total idiot and still win. You just buy every month, month after month. You buy during the good times. You buy during the bad times. You don’t care what the headlines are saying. You ignore the experts on TV. You don’t get jealous when you hear that one stock (out of 10,000!) tripled in price that day. A lot of other investors also bought the one that dropped by two-thirds on the very same day.”
Sounds good! It is a message for me.
The Chapter ended with this call to action:
“Index funds, dollar cost averaging, long-term investing. . . . You’ve probably heard all of this before. But have you done anything about it?”
Long story short, I went online to search for index funds in Singapore. Unfortunately I could not find anything in 2007. But I came across this term STI ETF. Isn’t this an index? Is it the same as an index fund?
I educated myself further that it is indeed an index fund, but with one more characteristic – it trades on a stock exchange.
But that’s not good enough because I am suppose to invest in it on a monthly basis (a.k.a. dollar cost averaging).
I found out that I could do that with Phillip Securities’s Share Builder Plan whereby I could invest minimally S$200 per month into STI ETF! Voila! (year 2007 only allow me to invest minimally S$200 although it has been revised to S$100 now).
How Does Automatic STI ETF DCA Strategy Work?
- Invest S$500 in STI ETF on a monthly basis (minimum S$100/mth) with any STI ETF monthly investment plans. For the purpose of this article I will use Phillip Share Builders Plan as an example.
- Once it’s set-up Phillip will buy as much shares as possible based on the investment amount (allows you to buy less than 1 lot) of S$500
- They will purchase on 18th of every month or the next market opening day.
- Commission cost of S$7
- Shares are custodised by Phillip and NOT in your CDP account
- Dividends are automatically reinvested in the following month
- Phillip tax dividends at 1%
Investment Performance Since 08
Over the past 10 years if you had DCA’d $500 per month even at the height of 08 financial crisis, you would have grown you investment from: $60,000 to $81,161.58!
And achieved a market-beating returns of: 5.84%
Monthly Portfolio Tracking
One of the biggest problems with beginner investors (even seasoned) is that they do not track their performance. Austrian-born American management consultant, Peter Drucker once said “what get measured gets done,” I find this to be very true for investment as well.
They would spend their time reading books, studying companies and making detailed analysis on stocks, yet they do nothing to find out whether their portfolio as a whole is achieving what they set up to do.
For those who wish to track their performance but don’t know how I got a good news for you. I have created this STI ETF ShareBuilder Plan. Download below.
Who Is This Strategy For
I must say this is one of the most idiot-proof ways of making returns. I do not need to spend a lot of time monitoring the market, nor I need to have the necessary knowledge and experience to beat the market.
- Investors with small capital who cannot start a proper investment portfolio.
- Investors who do not have the time and interest to do active investing.
- Investors who do not have the skills to pick stocks.
- Basically, investors who have better things to do than spending their time with the financial markets.
How To Set-up Your STI ETF Share Builder Plan?
I went down to one of the Phillip Investor Centres and opened an account. I have to set up a GIRO with Phillip and they will automatically take a fixed amount from bank account to invest in STI ETF.
That was how I started my journey. It felt good because I have taken care of my finances. At least a part of it.
There are four plans to choose from and it can be set up online:
- OCBC Blue Chip Investment Plan (BCIP)
- Maybank Kim Eng Monthly Investment Plan
- POSB Invest Saver
- Phillip Share Builder Plan
What About You?
Tell us what do you think about investing in STI ETF via dollar cost averaging. Do you have any doubts about this strategy or that you think the returns are too low to make the effort worthwhile
Either which, drop your comment below and I’ll be happy to answer them!