fbpx

STI ETF: Price, Returns, Dividends, Investment Plans (2024)

Overview | How to invest | SPDR STI ETF vs Nikko AM STI ETF | STI ETF RSP Comparison | STI ETF Dividends | Risks | STI ETF Returns | Who should invest | FAQ

What is STI or the Straits Times Index?

The STI or Straits Times Index is a blue chip (major companies) index of the top 30 companies listed in SGX (Singapore’s Stock Exchange).

It is the most widely used indicator to represent the general Singapore stock market. When the media mentions that the Singapore stock market went up or down, they are taking reference from STI.

The STI dates back to 31 Aug 1998 when it was first introduced. It was constructed jointly by Singapore Press Holdings (SPH), SGX and a professor from NUS. In 2008, the STI was revamped, and FTSE provided their methodology to calculate the index constituents.

The STI components would be reviewed quarterly and are based on the capitalization-weighted approach. This means that the top 30 companies with the highest traded market value (stock price multiplied by the number of shares) are selected into the index.

Straits Times Index (STI) Constituents

STI ConstituentTickerIndex weight (%)
CapitaLand Ascendas REITA17U3.09
CapitaLand Integrated Commercial TrustC38U3.23
CapitaLand Investment9CI2.8
City DevelopmentsC091.05
DBS Group HoldingsD0519.05
DFI Retail Group HoldingsD010.37
EmperadorEMI0.55
Frasers Logistics & Commercial TrustBUOU1.19
Genting SingaporeG131.81
Hongkong Land HoldingsH781.94
Jardine Cycle & CarriageC071.15
Jardine Matheson HoldingsJ364.5
Keppel CorporationBN43.1
Mapletree Industrial TrustME8U1.4
Mapletree Logistics TrustM44U1.78
Mapletree Pan Asia Commercial TrustN2IU1.24
Oversea-Chinese BankingO3914.36
SATSS580.73
SeatriumS511.69
Sembcorp IndustriesU961.74
Singapore AirlinesC6L3.04
Singapore ExchangeS682.62
Singapore Technologies EngineeringS631.87
Singapore TelecommunicationsZ746.26
Thai BeverageY921.89
United Overseas BankU1111.32
UOL GroupU141.05
Venture CorpV031.28
Wilmar International LimitedF342.64
Yangzijiang Shipbuilding HoldingsBS61.27
Accurate as of 19 Aug 2023. Do note that Index Weight changes based on fluctuations of constituent’s share prices.

Read more: Is investing in the STI just about buying Banks and REITs?

What Is An Exchange Traded Fund (ETF)?

Most investors would understand a fund or a unit trust. It is where individuals pool their money together for a fund manager to decide where to allocate the capital and make returns on behalf of the investors.

An Exchange Traded Fund (ETF) is similar to a fund or a unit trust except for these two main differences:

  1. An ETF is traded on a stock exchange

This means that an ETF can be bought and sold just like a stock. There is no requirement to invest in the fund via a financial advisor or a funds platform. You just need a stock brokerage account to invest in an ETF.

Since the ETF is traded during market hours, the price of the ETF is continuously quoted, while a unit trust would only have one price for each market day.

  1. An ETF usually is a passive management

An ETF tracks a particular index, and the fund manager does not make any individual judgement on which stocks or assets to invest in. The ETF fund manager only needs to replicate the shares determined by the index, and follow the performance as closely as possible.

On the other hand, a unit trust fund manager selects the stocks in the portfolio and tries to get a higher return than the index that the fund is benchmarked against.

For example, if you are keen to invest in the top 30 companies listed on SGX, which is essentially the STI, you would have to invest directly into the 30 stocks. This would require a large amount of capital and a lot of effort to make sure the portfolio follows the index weights prescribed by FTSE, SPH and SGX.

If you’re interested in ETFs, read our: Beginner’s Guide to Investing in ETFs (+top 10 ETFs in Singapore)

How to Invest in the STI ETF?

There are three easy ways for you to invest in the STI ETF. I’ll share the details in this section, you can choose the option best suited for your financial goals.

1) Buy through a brokerage, like any other stock

You can invest in the STI ETF easily via any brokerage account that gives you access to the SGX market.

All brokers who are trading members of SGX will be able to deliver the STI ETF units into your Central Depository (CDP) account.

The market rate for brokerage commission in Singapore is 0.28% with a minimum of S$25, excluding SGX fees and GST. Including the fees and GST would usually end up at about S$28. You must invest in full lot sizes and one lot is equivalent to 10 units.

It may not be worthwhile to invest a small amount of money via these brokerages as your percentage cost may be too high:

  • Assuming the price of STI ETF is $3.
  • If you buy one lot of STI ETF worth S$30, you would still have to pay S$28 commission, which is almost 100% sales charge!

This is too expensive.

However, if you’re using a discount broker like Tiger Brokers or moomoo, your commissions may be lower.

The downside to buying the STI ETF through your broker directly is that it is a one-off transaction. For investors who prefer to dollar cost average their investment in the STI ETF, an alternative method would be to:

2) Invest Through Monthly Investment Plans

Instead of guessing whether the stock market is overvalued or undervalued, which most investors get it wrong all the time, you can choose to dollar cost average the STI ETF.

This means that if you set aside a fixed sum of investment capital, as little as $100 per month, you can invest in STI ETF gradually.

This is especially useful for people fresh out of school and does not have enough capital to begin investing. When STI ETF prices drop you buy more of it, and buy less of it when it gets expensive. Over time you would collect enough shares to make your returns meaningful.

The table below would bring you through the comparisons of 5 companies that provide this monthly investment plan for STI ETF.

STI ETF Regular Savings Plan (RSP) Comparison

FeaturesPOEMSOCBCPOSBMaybank Kim EngFSMOne
Minimum Investment Per MonthS$100S$100S$100S$100S$50
Available STI ETFSPDR STI ETF (ES3)Nikko AM STI ETF (G3B)Nikko AM STI ETF (G3B)SPDR STI ETF (ES3) and Nikko AM STI ETF (G3B)SPDR STI ETF (ES3) and Nikko AM STI ETF (G3B)
Buying Fees0.3% per annum of TPV or $1 per counted, whichever higher.0.3% or
$5 per counter, whichever higher
0.82%S$1 min. 1% for amount less than S$1,000. 0.18% for amount more than S$1,000. 0.08% or S$1 min
DividendsAuto Reinvestment
1% charge (min S$1 and cap at S$50)
Credit to OCBC bank accountCredit to POSB bank accountCredited to bank accountCredited to your cash holding in FSMOne
Selling FeesNormal brokerage fee applies (0.28% to 0.5%)0.3% or
$5 per counter, whichever higher
No sales chargeNormal brokerage fee applies (0.275% to 0.5%)0.08% or S$10 min

Now, let’s take a look at the differences in detail.

  • Minimum Investment Per Month

All companies offer the same minimum investment of S$100 per month, with exception of FSMOne where you can start with just $50 per month.

  • Underlying STI ETF 

POEMS only offers SPDR STI ETF while OCBC and POSB offer Nikko AM STI ETF. Maybank Kim Eng and FSMOne offers both SPDR and Nikko AM STI ETF.

  • Cost of Buying 

POEMS charges a monthly handling fee a minimum of $1 or 0.3% per annum of Total Portfolio Value (TPV), whichever higher. If your Total Portfolio Value is $1,000, you will be charged a fee of $1. That fee will be taken out from your investment amount, which means if you’re investing $100 per month into STI ETF, you’ll be purchasing only $99 worth of STI ETF, after handling fee.

Charges are capped at $8.88 if portfolio value is less than SGD40K and $5.88 if portfolio value is more than SGD40K.

OCBC is not by far cheaper at a minimum of $5. And as you surpass this minimum cost with a bigger investment per month, your cost can only go as low as 0.3%. (Young investors below age 30 enjoy a preferential flat rate of 0.88% of your total investment amount!)

POSB charges a flat 0.82% regardless of the investment amount, and this would be the best option for a small investor.

Similarly, Maybank Kim Eng also charges a flat 1%, but only for an amount less than S$1,000 per month.

Finally, FSMOne charges a fee of either 0.08% or min of $1.

  • Dividends

STI ETF historically pays out about 3% dividends per year.

POEMS is the only company that automatically reinvest the dividends into the STI ETF in the following month. You have learned about the importance of compounding effects to attain wealth. Reinvesting dividends is one of those ways to take advantage of this effect. When you start a monthly investment plan, you aim to do it for at least 5 years.

Yes, POEMS is relatively more expensive, but the compounding effect will dwarf the costs over the years.

OCBC, POSB, Maybank Kim Eng and FSMOne do not reinvest the dividends but distribute cash to your designated bank account. Do take note that dividend handling charges may apply.

  • Cost of Selling

POEMS, POSB, OCBC, Maybank Kim Eng and FSMOne allow you to redeem and sell part of your STI ETF holding.

You need to refer to procedures prescribed by the companies as they differ. Instead of selling the units for cash, you should be able to transfer the units to your CDP account*.

In terms of selling fees, POSB came out on top as it charges no fees.

POEMS and Maybank Kim Eng, as stock brokerage firms, would charge the prevailing brokerage fees. As you would have accumulated a substantial number of shares over the years, you should be able to avoid the minimum fees.

As such, the brokerage fee of 0.28% would be slightly cheaper than OCBC’s 0.3% selling charge.

FSMOne charges a minimum of $10 or up to 0.08% of the transaction amount when you sell.

Note: These monthly investment plans are all custodised accounts. This means that POEMS, OCBC, POSB, Maybank Kim Eng and FSMOne will hold the shares under their companies, and not in your CDP account. You need to pay an additional fee to transfer the shares to your CDP account. 

Which STI ETF Regular Savings Plan to choose?

If you want to invest less than $600 per month, go for POSB. If you want to invest more than $600 per month, go for POEMS.

Read more: STI ETF Monthly Investment Plans Comparison – Why POEMS Share Builder Plan is Preferred?

3) Use CPF To Invest In STI ETF

You can also use your CPF Ordinary Account to invest in STI ETF.

It is one of the four approved ETFs that can be invested under the CPF Investment Scheme (CPFIS). To do so, you need to apply for a CPFIS scheme account with one of the local banks and link it up with your brokerage account.

The process of buying the STI ETF using CPF monies is the same as you would do with cash, just need to indicate on your brokerage platform that you are using CPF to pay for the shares.

For CPF Ordinary Account, you can invest all the amount after the first S$20,000 into STI ETF.

Of course, you have to understand that the STI ETF may drop in value due to price fluctuations.

Hence, you must be willing to accept large drawdowns before deciding to invest in an STI ETF.

SPDR STI ETF vs Nikko AM STI ETF

SPDR STI ETFNikko Am STI ETF
Stock codeES3G3B
Inception Date11 Apr 200224 Feb 2009
Fund Size (AUM)S$1,541 MS$686.44M
Expense Ratio (aka Fees)0.26%0.30%
Dividend Yield4.02%4.27%
Tracking Error0.1573%
(rolling 1 year)
0.11%
(3years annualised)
5 years Performance3.5%3.42%
Data accurate as of 2 Jan 2024

Potential Returns from Straits Times Index (STI)

Is it worth it to invest in the Straits Times Index? Or are there alternatives to the STI ETF?

This is the question that every new Singapore investor will ask themselves at some time. After all, there are ‘gurus’ out there who often label Singapore’s market as a stagnant market. I’ve compiled annualised returns from both SPDR and Nikko AM STI ETFs here for your consideration:

SPDR STI ETF’s Returns

The 5-year returns from SPDR STI ETF is 3.5% as of 2 Jan 2024.

Nikko AM STI ETF’s Returns

The 5-year returns from Nikko AM STI ETF is 3.42% as of 2 Jan 2024

Risks of STI ETF

Investments are not without risks, this includes the STI ETF. The following spells out the risks, which may not be an exhaustive list

1. Country Concentration Risk

The STI ETF only invests in Singapore listed stocks, and hence, it is highly sensitive to changes to Singapore’s economic or political conditions. These stocks may also lack behind stocks listed in other countries should Singapore become a less worthy investment to pursue by investors.

2. Volatility Risk

The price of STI ETF would swing as much as other stocks. The degree of volatility can be extremely high during a stock market crash, and an investor must be willing to accept the potential price swings that come with the investment in STI ETF.

3. Tracking Error

STI ETF may not fully mimic its underlying index in terms of price and returns. The deviation is known as tracking error, and it is caused by reasons such as large bid and ask spread, transaction cost, and the liquidity of the underlying stocks. 

4. Liquidity Risk

The STI ETF, if unpopular, may face thin volume and becomes harder for investors to buy or sell the units. Market makers, which are financial institutions, should create liquidity for STI ETF.

But in the absence of these market makers and low interest from retail investors, the STI ETF may become illiquid and the buy and sell price spread may expand, and deviate greatly from the Net Asset Value of the Fund.

5. Managerial Risk

An ETF still requires fund management, even though there is no active decision making on security selection or asset allocation. The risk is that the fund management is fraudulent or has a high degree of negligence that the Fund fails to achieve the objective that it set out in the first place.

Who Should Invest In an STI ETF?

Now that we understand how the STI ETF works, the next question to ask is “Should I be investing in the STI ETF?”

We think that people who fall into the following categories would find the STI ETF a convenient way to invest.

  • You Have Small Investment Capital

With a small capital, you can still invest in 30 stocks. This would provide sufficient diversification for your investments. Should any particular stock or industry underperform, the overall STI ETF would not be greatly affected.

But if you invest in individual stocks with a small investment capital of say $1,000, that only allows you to invest in one stock. Investing in one ETF that owns 30 stocks is a safer approach than putting all that money into one stock.

  • You Do Not Know How To Pick Stocks

There has been sufficient literature and statistics to show that most investors, including the fund managers, are not able to beat the index by picking stocks.

Since even the professionals who do it full time are having difficulties to beat the index, the chance of a part-time investor beating the market should be even lower.

Hence, why not just invest in the index and you do not need to fret trying to beat it? There is a saying, “if you can’t beat them, join them!” You could have saved a lot of trouble and money by avoiding individual stocks altogether.

  • You Are Lazy To Pick Stocks

Picking stocks requires time and effort.

Not everyone enjoys pouring through annual reports and catching up on developments of the companies they are interested to invest in.

There is nothing wrong with that, and I know some investors openly declare their disinterest. In this case, ETFs are often the best instruments for them. They could park their money in index ETFs and grow their wealth over the long run while they enjoy other activities that life has to offer.

  • You Want To Beat CPF Ordinary Account Interest Over The Long Run

CPF OA was offering up to 2.5% interest per year between 1 October 2021 to 31 December 2021 (source). Comparatively, the annualised returns from SPDR STI ETF was 6.38% since its inception in 2002 as well as 8.25% Nikko AM STI ETF since its inception in 2009*. (as of Oct 2021)

*Do note that this difference is due to the performance of the STI ETF over different time frames, rather than how ‘good’ each of the ETFs are.

If you have excess capital in CPF OA or contributed to SRS accounts, and you do not mind taking more risks investing in stocks, you can consider utilising CPF OA monies to invest in STI ETF.

This ETF is approved by the CPF board for members to invest their CPF in. It is important to note that it is more likely for the STI ETF to beat CPF OA’s interest in the long run (more than 5 years), but in the short run no one can accurately predict the stock market, and you may have paper losses on STI ETF.

That said, you must have the ability to tolerate such losses and stay invested for the long run instead of selling in panic.

  • You Want To Invest In The Future Of Singapore

It was an amazing growth story, and today we have many established companies that have begun expanding their influence in Asia and other parts of the world. I am proud to see the Singapore Brand being admired by our neighbouring countries.

The world generally believes that Asia is the next growth story. Singapore appears to be in a good position as an East-meets-West hub and should benefit from the rising affluence of Asians. If this is true, as demand for goods and services grows in Asia, I believe some of our homegrown companies would be able to capture parts of the growth and make profits for shareholders.

Basically, if you are happy with a return of ~3-4% and prefer a more passive approach, then investing in STI ETF would suit you.

BUT… if you want a higher return (10%-15% annually), then you will need to learn how to pick your own stocks and manage your portfolio actively.

Click here to sign up for our “How To Invest For Profits” Webinar

Read more:

FAQ

Which STI ETF is better?

SPDR STI ETF (stock code: ES3) would be better because it is the oldest and largest STI ETF. It was introduced in 2002 with an asset under management of $1.6B as of 13 Oct 2021. 

However, both ETFs track the same index and would likely perform similarly in the same timeframe.

Is STI ETF a good investment?

STI ETF can be a good long term investment because it holds a portfolio of stocks representing the future economy of Singapore. By investing in STI ETF your investment is exposed to some of the most established companies in Singapore like DBS and SingTel. 

Does STI ETF pay a dividend?

Yes, STI ETF pays dividends and the amount of dividends you get is proportional to its underlying companies ownership and your unitholding. In 2023, SPDR STI ETF (ES3) had a dividend yield of 4.02% while Nikko AM STI ETF (G3B)’s was 4.27%.

Now, you may find a slight difference between the dividend payout of the STI ETFs and the actual STI. This difference is usually due to tracking errors and costs of the ETFs.

Another thing to note is that dividends are not paid out to STI ETF shareholders directly. Instead, each ETF have their own dividend distribution schedules.

  • Nikko AM STI ETF – Semi-annually, around May and October each year.
  • SPDR STI ETF – Semi-annually, but dates were not stated in the prospectus. Based on historical payouts, the distributions to investors were in Jan and Jul each year. But the recent distributions were in Feb and Aug.

Should I use CPF to buy an STI ETF?

It’s not wise to invest your CPF into STI ETF unless you are a seasoned investor. Even so CPF still provides one of the risk-free returns your investment can generate.  

Read more: Should You Invest Your CPF Money in Stocks?