Vanguard has released some cheap ETFs on the Toronto stock exchange which you could purchase through a DBS Vickers brokerage.
I’ve outlined the process of building low cost ETF in my post, Expatriate Canadians Investing in Singapore Find a Cheaper Option. If you haven’t read this blog post, please read it before venturing to the rest of the article below.
For the bond component of my portfolio, I have been using the ishares short term Canadian bond index, ticker symbol XSB, for the past ten years. The expense ratio is 0.25 percent, but Vanguard has lowered the bar, introducing an ETF option with an expense ratio of just 0.15 percent.
How much money could this save?
If you own $100,000 of the short term Canadian bond ETF (XSB) then you are paying $250 in expense ratio fees. With Vanguard’s short term Canadian bond alternative (VSB) you would be paying just $150 in hidden costs. Other than the cost, the Vanguard product is virtually identical.
Why am I not switching from XSB to VSB?
Despite the obvious advantages of owning VSB, I won’t be selling XSB, and I want to explain why.
If I sold in favour of the cheaper exchange traded fund, I would save roughly $900 per year in expense ratio fees (based on the size of my XSB holding) but to sell my XSB holdings in favour of VSB would cost me roughly $7000 in commission transaction costs: roughly $3,500 to sell and then another $3,500 to buy. It’s the cost of switching in and out of $700,000 in Singapore.
I didn’t switch, but you may want to.
If your holdings in XSB are relatively small, then the switch could make sense for you. If you’re switching less than (roughly) $50,000 it will cost you about $60: $30 to exit XSB and $30 to enter VSB.
I will be buying VSB from now on
Although I won’t be selling my XSB holdings, when I wish to add to my bond holdings in the future, I’ll be adding money to VSB and not XSB.
Regardless of what you choose to do, VSB is a cheaper purchasing option for your short term Canadian bond content.