Local and Expatriate Investing in Singapore – Part I

Over the past 3 years, I’ve spent thousands of dollars of my own money distributing books to teachers at Singapore American School, on the merits of indexed investing.

 The books were comprised of 15 different titles.  Call it a mission of a driven man, but I’ve been very surprised at the investment fees paid by local Singaporeans and expatriates—which is the only reason I’ve emptied my pockets to distribute free books on inexpensive, common sense investing.

When I first moved to Singapore, I searched for index investing alternatives for my expatriate and Singaporean friends.   I came across an article, ‘Buy Low Cost Index Funds‘,  by Mr. Tan Kin Liam (The Former Chief Executive at NTUC Income) but the indexed options he gave were still surprisingly pricey. 

It’s well known that investors stand the greatest statistical chance of stock market success when they buy index funds.  But a lack of financial education keeps many people buying their far more expensive cousins: actively managed mutual funds, also known as Unit Trusts.  What’s worse, is that many investment companies charge additional wrap fees on top of the excessive fees charged by unit trusts

When actively managed funds charge more than 1.5% annually, and then the investment service company takes a further 1.75% annually in advisor’s fees (See the Raymond James Freedom Account)  investors are giving away more than 3% annually.  If the stock market compounds at 9% annually, going forward, then investors are giving away 33% of their profits, when paying 3% in fees.  It shouldn’t be legal, but it is.

If the markets make 6% going forward (a rate of return many people would have been very happy with over the past decade) then investors paying 3% in fees are giving away 50% of their profits to fee-hungry firms.

 

 

What does this mean? 

Investors giving away 3% annually in fees are likely to make less than 1/3 of what they deserve over an investment lifetime, as you can see by the example below:

$10,000 at 6% annually =  $102,858.18

$10,000 at 9% annually = $314,094.20

Seemingly small fees make HUGE differences.

How about track records of indexed accounts?

In the U.S., more than 50% of pension funds are indexed.  Of the pension funds that aren’t indexed, nearly 90% have underperformed a combination of stock and bond indexes.

Investing with low cost, diversified indexes is a powerful strategy.  Most unit trusts/mutual funds are expensive.

And you don’t get what you pay for in the investment service industry.

It’s so bad in the U.S. that some companies are doing their best to educate their employees—trying to save them from paying excessive investment fees. Read More

While other people, like Yale University’s endowment fund manager, David Swenson, suggests that the systemic exploitation of individual investors (via unit trust/mutual fund fees) requires U.S. government action.  In his superb book, Unconventional Success: A Fundamental Approach to Personal Investment, he shows the industry for what it is:  a giant fleecing machine. 

If he saw what went on with offshore investment companies like Zurich, he’d rewrite the whole darn thing.  Massive early withdraw penalties with companies like Zurich ensure that you won’t move your money, even after you wise up to the drenching.

How about a comparison?

Over a short period of time, anything can happen with investments.  You might even have a high cost advisor who does well with your account over a short period of five years or so.  But over a lengthier period of time, an actively managed unit trust (mutual fund) account is like a swimmer wearing boots, while dragging a chunk of carpet through the water.  Eventually, the indexes are going to show him who’s boss.

Looking long term, if you had simply split $100 equally into 3 indexes (Canadian stock index, U.S. stock index, Canadian bond index) in 1976, it would be worth more than $3000 today, with no money added. Check it out here:  to see how this balanced portfolio of indexes would have weathered the 1987 market crash, the 2000-2003 crash and the 2008/2009 crash.

For Brits, Australians, New Zealanders and Singaporeans, you could create your own “home country bias”.   For example, instead of a Canadian bias (as with the indexed sample account above) you could have a home country bias with Singaporean, British, Australian or Kiwi indexes.

Historically, returns would have been similar to the Canadian example.

But how do you open an account and get started?

Those based in Singapore can open a brokerage account with DBS Vickers.  Instead of paying 3%+ as an annual investment fee, you could end up paying less than 0.3% while purchasing indexed products called exchange traded funds (ETFs)

The savings go to your bottom line.

In part II of this series, I’ll show you how to construct an account of inexpensive, diversified indexed ETFs through DBS Vickers. 

Donating to charity is great—but donating to the financial service industry is foolish.

 Read Part 2





Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I’m happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

You may also like...

47 Responses

  1. Do you do your investing in Canadian dollars? Singapore dollars? Or do you split your assets between the currencies? When you buys indexes are they through Canadian based firms?

  2. Nice post, Andrew. I am currently looking into how Canadians can save money by purchasing Vanguard ETFs through a low-cost broker instead of sticking with their bank mutual funds. It will be an interesting comparison.

  3. @The Biz of Life

    Great questions Biz,

    Personally, I get paid in Singapore dollars. But my brokerage at DBS Vickers (in Singapore)allows me to buy off the New York, Tokyo, Toronto or Singapore exchange. It's a bit like a Canadian at home buying, say, Coca Cola. Canadian money would get converted to U.S. to make the purchase off the New York Stock Exchange.

    My wife and I don't know where we'll end up eventually so our bonds are in U.S. short term government bond indexes and Canadian short term bond indexes. Our equities are somewhat diversified based on global capitalization: with a slight lean to the U.S. side. We own plenty of the first world international index (VEA) and my U.S. exposure is in common stocks only. My Canadian equity exposure is small, but growing. I own the high dividend yielding exchange traded index fund (XDV.TO) off the Toronto stock exchange.

  4. @Kevin@InvestItWisely

    Hey Kevin,

    I ran some number on that years ago. There's an account size threshold for Canadians (in Canada) where it makes sense to go with ETFs, and pay a commission on each purchase, versus paying relatively high expense ratios for bank offered indexes. But I forgot what it was! I look forward to your findings!

    Andrew

  5. @Kevin – I look forward to your findings as well. Put some dancing ants around that post and make it stand out 🙂

    @Andrew – great article and great generosity!

    BTW – speaking of books, did you start reading The Investment Zoo yet?

  6. @Financial Cents

    Hey Mark,

    I'm glad you mentioned that title again. I haven't started reading it, but I've written it down and pasted it on my computer.

    I've been working on a time consuming book project and haven't read anything other than what I've specifically needed for work and writing. Last night Wiley Publishing sent me my book contract. It's weird to think of Wiley's finance authors along with my own name: There's John Bogle, John Neff, Lawrence Cunningham (who wrote the Essays of Warren Buffett), Robert Hagstrom, Kenneth Fisher, Charles Ellis and…lil old me.

    In about 6 weeks, I'll be finished this madness of writing like a nut….and I'll look forward to enjoying The Investment Zoo.

    Thanks again for mentioning it Mark.

  7. Hey Andrew,

    Congrats on the book contract! I wish you continued success in your writing journey. Sounds like another milestone. Keep your readers (including me) posted.

    Cheers,

    Mark

  8. What a wonderful endeavor. Kudos-Now that's charity that is cutting edge!!!

  9. @Barb Friedberg

    Thanks Barb,

    And I enjoyed reading your blog about your family's finances. Your portfolio is really solid and the fact that you're also educating people about it is superb.

    • Anja says:

      There’s a difference beteewn passionate and condescending. I’ve never known you to be anything but the former. I do see your points, and I’ve read a lot of the research in support of a passive approach. Perhaps the difference in our views is only a matter of degrees and commitment.I’m an agnostic by nature so I have a hard time with absolutes (with very few exceptions.) While I see the benefits of regular contributions and rebalancing as part of a passive approach, I just can’t bring myself to ignore the larger economic or cyclical variables that can and do affect market returns. If I can sidestep an oncoming train, I’ll do so, even if it means I get off the tracks a little too early and get back on a little too late. I know that won’t be the way a lot of people will want to handle it, but I think we all need to adopt a strategy that fits our risk tolerance.Thanks for taking the time to share your knowledge here!

  10. larry swedroe says:

    Andrew

    Just wanted to let you know that I received copy of your book. Unfortunately you did not provide any contact information. Luckily found this in google search.

    Will try to get to it in near future.

    I hope you enjoy my new book, The Quest for Alpha and would appreciate anything you can do to help promote it.

    Best wishes

    Larry

  11. Wynblock says:

    Hi Andrew,

    I don't know if you can help me. I am totally new and ignorant with mutual funds and ETFs. I have read some article about mutual fund in the Philippines(i'm a Filipino) and i wanted to try as my first investment for the money i've earned in Singapore while working (small amount only). Is it possible to do it in Singapore (mutual fund as expat)?

    I would be glad to hear your advice thank you.

  12. Hey Wynblock,

    You might be interested in picking up a copy of my book. You should be able to find it in Kinokunia in about one week's time. It should give you a good foundation, and then you can buy exchange traded index funds through Singapore's DBS Vickers brokerage. This is the route I recommend.

    Andrew

  13. PY says:

    Hi Andrew,

    I am in my early 20s and just got into the working life as well as investing. With regards to the Singapore market, are ETFs such as the Lyxor S&P500 ETF a good index fund with low expense ratio? I'm trying to keep my investments within SGX to minimize dealing with other currencies.

    My investment is approximately:

    25% STI ETF

    25% S&P500 (or another US index fund)

    25% Emerging countries

    25% Bonds

    Any comments would be greatly appreciated.

    • PY,

      That looks like a fabulous, low cost account. I'm not familiar with the expense ratio on the S&P 500 index you mentioned, but just make sure it's lower than half a percentage point, and you'll be OK.

      Also, keep in mind that you take currency risk no matter who you buy your S&P 500 index through: whether through DBS Vickers, using the ticker symbol "SPY" (where you would pay roughly 0.09% as an expense ratio) or with the S&P 500 index you mentioned.

      Great job on constructing a really solid looking account PY!

  14. Babayan says:

    Hi Andrew,

    Do you recommend investing in Vanguard's range of index funds?

    Babayan

    • Hey Babayan,

      If you live in the U.S., I definitely recommend Vanguard.

      But if you live in Singapore, I don't recommend buying Vanguard indexes through an intermediary. I know that a company in Singapore offers a S&P 500 Vanguard index fund, but they nail their prospective investors with a fee that make the fund cost nearly 1% per year–and they also charge roughly a 2% sales fee on all purchases.

      Are you based in the U.S. or Singapore?

      • Babayan says:

        Hi Andrew,

        Thanks for replying. I am based in Singapore – I moved here earlier this year. It is unfortunate that Vanguard's establishment here in Singapore serves only institutional clients and not personal investors. You're right about not going through any Singaporean intermediary to purchase Vanguard funds. I think it should be possible to open an account directly with Vanguard in the US. After all, I see many of my colleagues here, invest in US markets through US based brokers like TD Ameritrade.

        Babayan

        • Babayan,

          You can certainly buy the Vanguard ETFs, but not the standard Vanguard indexes without actually residing in the U.S. But don't forget the Singapore market index that you can buy straight off the Singapore exchange. Considering that you're Singaporean, this should be a core of your portfolio.

  15. AnneG says:

    Hi Andrew,

    If we have ameritrade account, can we buy the Vanguard ETFs although we are residing in Singapore.

  16. Ben says:

    Hi Andrew,

    I'm a Singaporean, and I'm very new to stocks. But after reading, I think Index Fund is a very good place to put my very first dollar to. Do you think it is? And if so, what are the funds which you'll recommend? I'm going to open a DBS Vickers acct soon. And yes, I'm buying your book this weekend!

  17. Paulmcc says:

    Andrew,

    My wife, a Canadian and myself, an American, live in Kuala Lumpur. Are we eligible to open DBS Vickers accounts? If we are both eligible, which one of us should hold the account based on tax considerations?

    Paul

  18. Hi Paul,

    As a Canadian, your wife could open the account in her name. As an American, you wouldn't be able to.

    Cheers,

    Andrew

  19. Aaron says:

    Hi Andrew:

    I have currently purchased your book and looking to buy into Index Funds. I have a Citibank Brokerage account from Singapore that allows me to trade in the US and Singapore markets. I am a Canadian expat that used to work in Singapore but now lives and works in Malaysia. A couple of questions: Should I buy into Vanguard index funds through Citibank? Or just buy into the Singapore market?

    https://www.citibank.com.sg/gcb/investments/citi_
    Here are the fees on Citibank’s website.

    Thanks

    Aaron

    • Hi Aaron,

      Unfortunately, if you use Citibank, you won't be able to buy a Canadian bond index, and the Canadian stock index that you would buy (off the New York stock exchange, using Citi as your brokerage) has a very high expense ratio (for an ETF)

      Open an account with DBS Vickers and build a portfolio that will give you more of a home country bias. With it, you can buy everything that I recommended in my book. But with Citi, you can't. Citi won't give you access to the Toronto Stock Exchange. But DBS will.

      Cheers,

      Andrew

  20. dx says:

    hi Andrew,

    is there a part 2 to this series as mentioned in the post?

    • Hey dx,

      Sorry for not making this easier. Here it is! https://andrewhallam.com/2010/10/singaporeans-inve

      • dx says:

        Hi Andrew,

        Thanks for the link. It is actually my first time trying to start an investment portfolio after reading your book, however I am still confused over which brokerage firms to choose from. You recommended DBS Vickers as it is the brokerage that you use. However in my case, I actually do have a an existing trading account with my mom who works in UOB Kay Hian as a remisier(she earns 40% comm), and recently I have read about Stanchart's new online trading system which charges no minimum commission and seems to have better rates(which may change in the future), but it seems that our shares will be kept with SCB instead of CDP which makes it complicated.

        Would be interested to know what is your take on this. Should I go for DBS Vickers, UOB Kay Hian or Standard chartered, and would there be any difference if I want to purchase ETFs and Bonds as taught in your book? Thanks:)

  21. Hey Dx,

    I don't think it matters which brokerage you choose, as long as the commissions are reasonable, and you have access to the Singapore exchange and the New York exchange (which you likely would with any of those brokerages)

    The ETF ticker symbols would be the same, regardless of the brokerage you choose.

    I don't think I have a Singaporean reviewer for my book on Amazon. Do you have an Amazon account? And if so, would you mind reviewing my book? I would really appreciate that! Here's the link, in case you can: http://www.amazon.ca/Millionaire-Teacher-Wealth-S

    Thanks Dx!

    Andrew

  22. Edwin says:

    Hi Andrew,

    Just a quick question. Will I be able to purchase Vanguard ETFs through a local brokerage such as DBS Vickers? I am a Singaporean residing here, shouldn't be a problem right?

  23. Wouter says:

    Hi Andrew,

    I'm an expat from Europe, and been in Singapore a couple of years. As most europeans loyal to their banks, I have always been keeping my money hidden away in a savings account.

    I came across your website two weeks ago, and read lots of the articles. In the past two weeks, I've ordered read your book Millionaire Teacher and one other that you recommended "The smartest Investment book you'll ever read". I got them by post over the weekend and read straight through them. Even my wife, who hates finance and numbers, got excited and she's reading them now. Both in your book, and the other book, the concepts are explained in a very down to earth fashion (like the "dog on the leash") so begginers like me can understand and even feel confident in what to do next. So I gotta thank you for that!

    I've already opened my Vickers account and I'm looking forward to picking the right index funds.

    Besides your books, I've also been reading about the Permanent Portfolio (a concept pretty similar). I see that there are even US traded stocks, such as PRPFX, which track the permanent portfolio with relatively low fees. I'd love to hear your opinion about these.

    • Hi Wouter,

      I'm glad you liked my book. And I like the fact that you're reading beyond it and checking other ideas out.

      As for the Permanent Portfolio you gave me the ticker for, it has a higher expense ratio than I am used to (roughly 77 basis points, I believe) and it seems to have a high percentage of gold and silver.

      If gold and silver were your thing, it would be a lot cheaper to buy a gold or silver ETF.

      As for the indexing article you linked to, thanks for sending it. The article seems to suggest that it's easy to front run the components of an index fund if you're an astute investor. The trouble is that most professional investors are very astute. And yet, they still lose to the indexes despite all their formulas.

      If you're really taken by the argument in the article, you could buy a large cap index, mid cap index and small cap index, as well as two different sized international ETFs and a bond ETF. Rebalance those, and you have even further diversification…without a large cap bias. Will it beat a simple portfolio of a total international, total domestic and a bond index? I don't know. In the recent past (ten years) it would have, but there's no guarantee going forward.

      I like knowing that I have a really simple account costing me about 12 basis points a year (expense ratio 0.12%) which will beat most professional investors, regardless of what they do.

      Ironically, most professional investors don't have the guts to buy what's out of favor. Like most individual stock buyers, they too like buying recent winners. The human mind really isn't wired to invest very well. That's another great argument for rebalancing a bunch of indexes annually, and letting the profits bring you far further ahead of most professional investors, decade after decade.

      Cheers,

      Andrew

      • Wouter says:

        Andrew,

        Thanks for the message. I always value your wise words.

        I'm still in my research period and my total investing knowledge is about 2 weeks old now! But we all know that age doesn't matter, what matters is what you do with your time…

        I agree that the PRPFX has a higher expense ratio, still it seems to be performing pretty well, even during the down cycle. That's probably where the gold and silver played their parts.

        I agree on your view on the article. It takes some effort to overcome our desires to try to invest in something which is doing very good! I understand the yearly (or twice per year) rebalancing and how it plays out on the long run. Both books I mentioned above really helped me to understand this.

        So with my main chunk in my savings in the bank in Europe, and a nice salary (part in Singapore part in Europe, and I am flexible to change the ratio), this is what I was planning to do with it.

        I've set up a traders account in Singapore with DBS Vickers and in Europe one which is linked to my European account (through the same bank). I checked the fees for this bank and they are comparable, even slightly better than DBS Vickers. I do not want to loose too many transaction fees or exchange rate fees to move this chunk over to my Singapore account, especially now the Euro is pretty low.

        This would be my strategy:

        I'd put 25% on PRPFX (let's say I like competing with myself) from the European account (EUR -> USD)

        Put 50% in a balanced portfolio with 30% bonds, 70% index/ETF funds, bonds focusing on Singapore and the more stable European ones, and index/ETF mixed European/World/U.S./Singapore.

        Our experience with for example Ex-Yugoslavia, is that when a country does collapse or large scale wars break out, Gold is really the only thing to keep you safe. Though not a good investment as you mentioned in your book, I do believe I would work on having 25% in physical gold/silver.

        The money I receive per month through salary would go towards rebalancing, and I have maximized my Singapore withdrawal, to be used through DBS.

        I'm not much of a gambler, but I am competitive, that's probably why I split those 25% from the 50% and test out the PRPFX versus my main chunk.

        I'd appreciate any feedback or advice you might have

        • Hi Wouter,

          Putting 25% in the PRPFX fund doesn't make a lot of sense. If you want gold in your portfolio, or precious metals, ensure that it's just a small part of your portfolio. Twenty five percent is HUGE, and you are chasing a rising asset class. This is exactly the mistake many new (and old) investors make. Remember, never select a fund or stock or asset class based on how well it has recently performed, unless you want a very expensive education.

          Cheers,

          Andrew

          • Don't forget that if you want to invest well, you have to check your competitiveness at the door. Competitiveness works well in almost any other endeavor, but not this one.

            I recommend that you buy a copy of Larry Swedroe's latest book about mistakes investors make. It would be an awesome investment.

            As a man, you are genetically predisposed towards NOT being a good investor, based on ego and the desire to compete (two weaknesses women share less of). But if you can invest like a Buddha, using evidence based techniques to increase your success, you'll do very well. But that's easier said than done, for most males.

  24. Hi Edwin,

    I own some Vanguard ETFs myself through DBS Vickers. They're easy to buy from here.

    I'm sorry I didn't respond earlier. I missed your question!

    Cheers,

    Andrew

    • Edwin says:

      Just to double-check… These Vanguard ETFs you own through DBS Vickers are from the US stock exchange right?

      • That's right Edwin.

        If they make 10% in a given year, roughly 8% would come from capital gains and 2% from dividends.

        You'd make roughly 8% capital gains free, and pay roughly 30% witholding tax on the dividend. After taxes, you would clear about 9.4% if the ETF made 10%.

        • Edwin says:

          Thanks alot Andrew! That was helpful.

          I am turning 21 soon and plan to put my money which I have accumulated over the past two years into good use. ETFs are definitely on my list, will do some homework on the local and Vanguard ETFs before I make any purchase.

          Haven't read your book but gonna get it real soon!

          Thanks once again!

  25. Wouter says:

    Thanks for the tip on the Larry Swedroe book. It sounds like even though I've read about these common mistakes, it's still not that easy to actually avoid them consciously. I'll kick that competitive side whenever it's popping up again!

    I agree with you on the PRPFX thing. It might sound good to have this part in gold to help you through inflation periods, but if I'm going to have separate physical gold, there's no need to burden a long term portfolio with more of the same, giving much less returns over the longer period.

    I'm rebalancing and simplifying my plans, and this is what I'm thinking about:

    30% bonds (I'm 30), split between Singapore (A35 through Vickers) and Europe. I'm still trying to find a suitable European bond index to invest in, in the Euronext market. Any tips on what to look for?

    70% index / ETF, split between Europe, S&P500, VT and Singapore (ES3 through Vickers). For some reason I couldn't find "VT" in my drop-down list through my European account, but I was able to find "VTI", which is a "U.S. only" version of the VT. I'd say with a Singaporean/European/S&P500 part, I might not need the VT/VTI and I can simplify it even further.

    I'm being charged only 0.2% for all orders on Euronext, so I guess it makes sense to look for the best index funds / ETF within Euronext. All other orders outside Euronext cost me 0.6%. I was thinking to foxus my Europe section on Euro Stoxx 50, but seem to face difficulties finding it in my dropdown list through my bank in europe, for the Euronext market. Also for the S&P500 I see that there's quite a large selection. I'll need some time to understand the differences between them so I don't pick a wrong one. It looks like code "IVV" is what I'm looking for.

    Now I got familiar with my Singapore account, it's again a learning curve to get used to European accounts.

    Through my bank in Europe, I can't always search the list of stocks based on stock code, many times they are left blank and instead they use something called "ISIN-code". I still need to figure out how to find what I need with this system. Europe often tries to do things differently, and it almost always adds complexity 🙂

  26. Joy says:

    Hi Andrew,

    Are you into trading yourself?

    Regards,

    Joy

  27. Mitch says:

    Hi Andrew,

    The DBS Vicker link is broken, are you referring to this one?
    https://www.dbs.com.sg/personal/promotion/dbsv-reduced-comm-rates
    Just to be sure I got the right one. Thanks!

    • Hi Mitch,

      Unfortunately, these rates will go up and down many times over the next ten years, if DBS’s history is an indicator. The other offshore brokerages play the same games. So just pick a brokerage and stick to it.

      Cheers,
      Andrew

  28. Joseph says:

    Hello Andrew

    What’s your take on trading buying Vanguard 500 Index via TD Ameritrade? I notice there many account type of Vanguard from its site and how do one have access to it from Singapore.

    Thanks.

Leave a Reply