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How To Invest In The S&P 500 in Singapore

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How To Invest In The S&P 500 in Singapore

Are you based in Singapore? Tired of meagre profits and thinking of dabbling your luck in better Stock Market options? What better option than investing in S&P 500? 

This article will explain the definition of S&P 500, Mutual Funds (MF), Exchange-Traded Funds (ETF), and how to choose an investment firm.

What is S&P 500

Standard & Poor's 500, or simply, S&P 500 is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the U.S.

Furthermore, it is also the most commonly followed index with a market cap of 33.4 Trillion USD (Dec 2020). Hotshot companies like Tesla, Apple, Johnson and Johnson are among its top 10 performers.

Similar to the other indices managed by S&P Dow Jones Indices, it is free-float capitalisation based but is in stark contrast to Russell 1000 which is strictly rule-based. 

The components of the S&P 500 index are selected by a committee based on eight primary criteria: 

  1. market capitalization
  2. liquidity
  3. domicile
  4. public float
  5. Global Industry Classification Standard and representation of the industries in the economy of the United States
  6. financial viability
  7. length of time publicly traded
  8. stock exchange.

Now, on to modes of investment.

The kinds of funds to invest in the S&P 500

The easiest way to invest in the S&P is through an index fund, either:

  • mutual fund (MFs), which is not available globally and costlier, or
  • exchange-traded fund (ETFs), popular, globally accessible and low-cost option.

MFs:

These are more costly in Singapore and are not widely available (accessible only via select brokerages from Singapore). Their cost depends on the additional charges incurred when buying an MF.

As of Sept 2020, extra charges included:

  • Initial charge (<0.2%)- initial cost of investment
  • Expense ratio (0.71%)- the fee charged annually to maintain your investment

The main MF available to Singaporeans is the Infinity U.S. 500 Stock Index Fund managed by Lion Global Investors.

ETFs:

The cheaper, widely accessible, popular option to invest in stocks.

Firstly, choose the specific S&P 500 in which you wish to invest. There are plenty!

Thereafter, one needs to consider 3 things prior to investing:

  • Expense ratio - the cost you pay while investing
  • Dividend withholding Tax - the tax on your dividends
  • Liquidity - this comes in handy if you are a frequent trader. It shows the ease and value comparability while trading the stocks matter.

Furthermore, the ETFs are available via various traders in the SGX (SPDR S & P 500 [S27]), NYSE (VOO, IVV, SPY), and UCITS/ LSE (VUSA, VUAA, etc).

How to invest in S&P 500 Singapore

Investments: MF and ETF

The differences among these ETFs include:

  • Fund manager
  • Currency
  • Type of ETF (Accumulating or Distributing)

Often, the best option to acquire either an ETF or an MF is through one of the widely available Brokerage Firms (local or global).

In choosing such a firm, one must consider the following:

  • Trading commissions
  • Exchange rate
  • Other miscellaneous fees
  • Ease of depositing and withdrawing funds

To conclude, whichever option you choose to go with, the investment  should always be done considering the weightage of the firm and careful comparison of the:

  • Fees you incur
  • Taxes you incur
  • Liquidity and ease of withdrawal

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