I was chilling at my desk while clearing leave on this year end break when I suddenly remember about the STI ETF.
I used to do a pretty regular update of the performance if you periodically dollar cost average into a single ETF that focuses on the biggest stocks in Singapore.
You can read about my past updates here:
- 2012 May – Oh Shit! I started DCA investing at the top of the bear market!
- 2014 Jul – Dollar Cost Average into STI ETF right before Great Financial Crisis Revisited -XIRR 4.95%
- 2014 Oct – A Lump Sum investment in STI ETF near the top of the Great Financial Crisis – XIRR 2.82%
- 2015 Mar – The dollar cost average into STI ETF at the peak achieves 5.5% XIRR over past 8 years. – XIRR 5.5%
- 2016 Aug – Passive Index Investing: What if you dollar cost average into STI ETF at the Stock Market Top? – XIRR 2.28%
- 2017 Nov – Your Returns if You Dollar Cost Average into the STI ETF
Whoa, I didn’t realize that I have been doing it since 2012, which is now almost 13-14 year ago. Time really flies.
I thought its good time to do a short update.
The Investing Idea and the Simulated Implementation.
I think we should also recap what I was trying to do back then.
The idea is pretty similar to some of the advise that I have been telling readers nowadays. You are a less sophisticated investor and you would like to not make investing a large part of your life. So a good way to build wealth is to be expose to enough equity and fixed income exposure, buy and hold and your wealth will build up over time.
There are various problems with picking individual stocks. Generally, not all stocks are able to earn better return than the index over the long term. Many stocks don’t survive as well! So how is a less sophisticated investor suppose to take care of this?
You invest in a portfolio of stocks, that has a certain criteria of entry and exit. The portfolio has the ability to let the components that does well to grow and grow. Those stocks that don’t do well will become smaller and smaller. The advantage of such a portfolio is that your wealth won’t get impaired because you pick the wrong group of companies that was suppose to good in your opinion but turns out to be wealth destructors eventually.
The STI ETF tracks the Straits Times Index or the 30 biggest stocks in Singapore. It is a country-focused ETF and does what it is suppose to.
I simulated what would happen if we invest $1,000 monthly into the STI ETF consistently.
This is what we call dollar cost averaging and by doing this, it spreads out the average buying cost. Dollar cost averaging is not the most efficient method to invest since the market generally goes up and you should lump sum all at the start. But you don’t always have $1 million at 25 years old and a less sophisticated investor may not have the mental capacity to hold something if they lump sum in.
The cost of each transaction is 25 dollars.
Kyith why is the cost 25 dollars???
Well…. last time that is the cost we have to deal with!
And now we see see ginna arguing about this what bull platform versus what cow platform is cheaper and this is more expensive, my brain goes into auto shutdown mode.
The cost works out to be 2.5% per transaction and not cheap but it is a one time cost so the cost will improve over time.
So how is the returns?
The STI ETF Components as of 2024
You can review the factsheet of the STI ETF here.
I used to not capture things like this but as time passes, I can kind of appreciate looking at the changes in the index components over time. No matter how hard I tried, I cannot find the index components in the past on Google anymore!
Here is the top 10 stocks in the ETF:
And here is the sector breakdown:
A country index usually evolves to what does well in the country. Some would wonder if 50% of this index is 50% made up of the banks, why not buy the banks since they are better?
You don’t ask me, but perhaps you ask more folks in 2007 would they hold banks with as high of a regard.
One of the things we cannot re-create is wipe the eventual good performance from our minds when we try to answer that 2007 question. But you touch your heart with some humility and answer that.
In the early days of 2007 when I first track this, the index was dominated by Jardine Matheson and Jardine Strategic, followed by Singapore Telecom. Some of the notable key features were SPH, M1 and Starhub. If I remember correctly Dairy Farm is a key feature as well.
At one point, we saw more REITs be part of the top 10 holdings.
The index today look so different.
These changes also tell you what did better and what eventually happen and it kind of understand that question about why not just buy some of the bigger and better components?
The Performance of Dollar Cost Averaging into the STI ETF:
I started tracking this with the first purchase in May 2007.
That was almost before the top before the great financial crisis. So you would have been invested for 17.8 years today.
We measure the performance using XIRR.
XIRR is trying to measure what is the “interest rate” of a stream of uneven inflows and outflows to see what is something equivalent to compare against other investments. It takes into consideration dividends, the timing of purchases, the size of the purchases and sale and the compounding effects.
Here are the past XIRR snapshots:
- 2014: 4.95%
- 2014: 2.82%
- 2015: 5.50%
- 2016: 2.28%
- 2017: 5.17%
- 2024: 5.49% (Updated)
There were some challenging periods where the XIRR fell to a low 2%.
I updated the simulation for the past 8 years and listed the XIRR as 5.49% yesterday.
Here is the summary that I will usually put in all my updates:
If we invest $1000 every month, with a $25 cost, our total cost would be $215,245 today. We would have accumulated 69k units and our average price will be $3.13.
At a price of $3.85, the current value of our units is $265,171.
The unrealized gain (because we didn’t sell) is $49,926.
Along the way, we collected a total dividend of $67,834.
Since we didn’t take out money, the simple return is that we probably made 54% over the 17.8 years period.
Sometimes, I learn little things that I may not be able to learn had I not done this exercise. The most interesting part was the role of dividend that play as a part of an index that on average have a dividend yield of 3%.
I filtered the transactions to only focus on the dividend payouts below:
The net cash flow will show the dividend payout to you from the ETF over time. The STI ETF pays a dividend twice a year.
What you will notice is that the amount of dividend snowballs from something not very useful of $29 for half a year to $5,828 for half a year.
The last yield on cost is like 5.5% when it was more like 2.8% at the start in 2007. Based on the unit cost of $3.85 today the annualized dividend yield is 4.4%.
But if you notice, the dividend progression is not one smooth line up. There were a few back-pedaling of the dividend per unit. Basically, the income is volatile.
If what you put in is small, the dividends is going to be small and if your capital is larger it gets more meaningful. As I was doing, I was slowly intrigued how much would the next semi-annual dividend be with another 6k injection.
I guess that is how dividend investor must feel.
Okay, time to head out and collect another monitor. Hopefully I can remember to do an update more frequently instead of wait 8 years later.
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Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.
Readers also follow Kyith to learn how to plan well for Financial Security and Financial Independence.
Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.
You can view Kyith’s current portfolio here, which uses his Free Google Stock Portfolio Tracker.
His investment broker of choice is Interactive Brokers, which allows him to invest in securities from different exchanges all over the world, at very low commission rates, without custodian fees, near spot currency rates.
You can read more about Kyith here.
