SRS investment options

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smoulder
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SRS investment options

Post by smoulder » Sun, 25 Jul 2021 1:02 pm

As the title says - what do you suggest?

As some background, my regular investments are in ETFs - I currently hold CSPX, CNDX & IWM which I plan to hold for decades. And I'm also testing the waters with Syfe REITS.

So I'm looking for similar alternatives among SRS enabled investments - the 2 US ETFs listed on SGX, S27 (tracks S&P500) and D07 (tracks DJIA) have abysmally low trading volumes and also have the 30 percent tax on dividends thingy.

In the end, if I feel that the options available don't really suit my investment style, I may just scrap the idea of investing through SRS.

Note - I'm a PR, so the max I can invest here is 15.3k/yr.

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Re: SRS investment options

Post by malcontent » Mon, 26 Jul 2021 1:45 am

Since you already invest in CSPX, why not just invest in S27? Yes, the 30% dividend tax is there, but you are paying 15% dividend tax on CSPX. The current dividend yield on the S&P 500 is 1.25% so you are talking about a 0.1875% difference per annum, not even 2 tenths of a percent off your total return. That’s still better than the cheapest unit trust, Lion Global, that also tracks S&P 500.

I am personally investing my entire SRS in S27 and have been pretty happy with it. Roughly speaking, you can expect at least a 1% cost upfront, about 1/3% in exchange rate, 1/3-2/3% in share price spread and 1/3% in commissions & fees, but after that it’s just the usual small SRS fees from there. If the alternative is to let your SRS sit there, then it’s a no brainer.

You can then reduce your CSPX exposure by the same amount and redeploy it to other investments you can’t access with your SRS.

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Re: SRS investment options

Post by malcontent » Mon, 26 Jul 2021 9:26 am

Regarding liquidity of S27, every time I’ve done a trade it has been filled by an institutional buyer, essentially a market maker who provides liquidity for these shares on the SGX, but with a spread.

Make no mistake, S27 is one in the same as SPY traded on the NYSE, it is just dual listed here. The market maker has access to after hours trading of the same shares in the US and is able to arbitrage between the two.

Because of SGX trading rules, for online trades you can only bid +/- 30¢ from than the last done price (unless you call your broker and pay a higher commission to submit an override… that can be done).

So, there is never really a liquidity problem, just a price spread problem. I usually look at the after hours trading of SPY and decide whether to place an order. A lot depends on the last done price, since my order is subject to 30 cent limit.

Looking at the live prices this morning, S27 has a 2,000 share bid at 438.01 and 1,420 share ask at 438.99… that is actually a pretty tight spread, less than 0.5% between bid and ask. The after price of SPY is 438.60… so that means even if you took the 438.99 ask, you are paying less than 0.1% in the spread.

That is about as good as you are ever going to get, but the one issue that I see is that the last done is currently 438.00 and the most you could try is 438.30 without calling your broker.

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Re: SRS investment options

Post by singaporeflyer » Mon, 26 Jul 2021 10:05 am

Why not via a robo like endowus or stashaway?

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Re: SRS investment options

Post by smoulder » Mon, 26 Jul 2021 10:51 am

Thanks mal. Good perspectives. The tax part is probably something I might overlook because of the low expense ratio and the income tax savings. As for the Lion's S&P500 UT - the various extra charges are a bit of a turn off.

The other thing is that one of the alternatives is not to put anything in SRS at all - continue investing that 15.3 K plus more in my regular portfolio. I certainly don't plan to hold on to cash sitting idle in a bank account when it could be used to invest. It really all depends on what the options are for investing and whether they meet my requirements.
singaporeflyer wrote:
Mon, 26 Jul 2021 10:05 am
Why not via a robo like endowus or stashaway?
What are your own thoughts on this? I had a look at Endowus and it looks like they don't invest in ETFs which are by nature low cost. So you are basically losing some of your gains to various charges from the funds house.

To be honest, I've not yet delved into Stashaway. I will take a look.
Last edited by smoulder on Mon, 26 Jul 2021 12:27 pm, edited 1 time in total.

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Re: SRS investment options

Post by singaporeflyer » Mon, 26 Jul 2021 11:03 am

smoulder wrote:
Mon, 26 Jul 2021 10:51 am
Thanks mal. Good perspectives. The tax part is probably something I might overlook because of the low expense ratio and the income tax savings. As for the Lion's S&P500 UT - the various extra charges are a bit of a turn off.
singaporeflyer wrote:
Mon, 26 Jul 2021 10:05 am
Why not via a robo like endowus or stashaway?
What are your own thoughts on this? I had a look at Endowus and it looks like they don't invest in ETFs which are by nature low cost. So you are basically losing some of your gains to various charges from the funds house.

To be honest, I've not yet delved into Stashaway. I will take a look.
I took the 80-20 for SRS and they use the below funds. Just started few months ago

We can also use the fund smart option and customize the funds that we need to be use for SRS
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Re: SRS investment options

Post by smoulder » Mon, 26 Jul 2021 11:14 am

SF, I personally prefer not to invest in UTs because of the higher costs associated. Outside of my investments in Singapore, I have a fairly large chunk of investments back in India - that's pretty much the only place I have some exposure to UTs and I will eventually trim that down.

Edit : now that I'm reading up a bit more into Endowus, they seem to claim that they are able to give investors funds which are equivalent in expenses to ETFs. Something which I will probably try to read up on.

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Re: SRS investment options

Post by malcontent » Mon, 26 Jul 2021 3:19 pm

I agree, UT in Singapore are horribly uncompetitive, the cheapest ones are actually feeder funds - they just take overseas funds with ultra-low expenses and repackage for Singapore, adding on their own expenses (for doing little more than making it available locally!). I can’t comment on robos, but certainly they are also adding some additional expenses as well. Being a passive DIY type of investor, I don’t see robos in my future.

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Re: SRS investment options

Post by singaporeflyer » Mon, 26 Jul 2021 3:39 pm

We should set up a small telegram or whatsapp group for people who are interested in investing / SRS

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Re: SRS investment options

Post by smoulder » Mon, 26 Jul 2021 4:42 pm

malcontent wrote:
Mon, 26 Jul 2021 3:19 pm
I agree, UT in Singapore are horribly uncompetitive, the cheapest ones are actually feeder funds - they just take overseas funds with ultra-low expenses and repackage for Singapore, adding on their own expenses (for doing little more than making it available locally!). I can’t comment on robos, but certainly they are also adding some additional expenses as well. Being a passive DIY type of investor, I don’t see robos in my future.
I guess that you probably could consider a robo's costs analogous to the costs that you incur when you buy or sell ETFs through your trading app. Not necessarily the same cost, but analogous.

singaporeflyer wrote:
Mon, 26 Jul 2021 3:39 pm
We should set up a small telegram or whatsapp group for people who are interested in investing / SRS
I would be interested for sure. It looks like there are a few folks here who have some great ideas about how to invest.

By the way, I was reading up on Stashaway vs Endowus. One of the things that might be of concern for someone putting their money in Stashaway is the US estate tax because they put your money into US domiciled ETFs. Anything below 60k usd is exempted, but most of the folks here will have significantly more than that, at least eventually.

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Re: SRS investment options

Post by singaporeflyer » Mon, 26 Jul 2021 10:19 pm

smoulder wrote:
Mon, 26 Jul 2021 4:42 pm
malcontent wrote:
Mon, 26 Jul 2021 3:19 pm
I agree, UT in Singapore are horribly uncompetitive, the cheapest ones are actually feeder funds - they just take overseas funds with ultra-low expenses and repackage for Singapore, adding on their own expenses (for doing little more than making it available locally!). I can’t comment on robos, but certainly they are also adding some additional expenses as well. Being a passive DIY type of investor, I don’t see robos in my future.
I guess that you probably could consider a robo's costs analogous to the costs that you incur when you buy or sell ETFs through your trading app. Not necessarily the same cost, but analogous.

singaporeflyer wrote:
Mon, 26 Jul 2021 3:39 pm
We should set up a small telegram or whatsapp group for people who are interested in investing / SRS
I would be interested for sure. It looks like there are a few folks here who have some great ideas about how to invest.

By the way, I was reading up on Stashaway vs Endowus. One of the things that might be of concern for someone putting their money in Stashaway is the US estate tax because they put your money into US domiciled ETFs. Anything below 60k usd is exempted, but most of the folks here will have significantly more than that, at least eventually.
Let me know if whatsapp or telegram is comfortable and I will create a group for few of us who are interested in longterm investment in the stock market.

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Re: SRS investment options

Post by malcontent » Mon, 26 Jul 2021 10:31 pm

If you read up on the amount of estate tax paid each year, it’s a very low number - - they haven’t found a good way to enforce it.

Let’s say before you pass you have given a signed withdrawal slip to your significant other and you have a joint account where the funds can be deposited. Let’s also say you’ve given your SO the ID/PW to log in and sell everything prior to submitting that withdrawal form. Do you really think anyone is going to be the wiser? There is no FATCA form for that!

Where people mess up is when the SO is caught unaware and submits the death certificate to claim the proceeds from the US brokerage account. If you at least named the SO as the beneficiary, and if the broker doesn’t know any better, you might still get away with it.

However, with no named beneficiary, this is when it is almost certain that estate tax comes up, because it has to go through probate in the court system, lawyers and tax people get involved and usually there is no escape.

Of course, I don’t recommend that anyone try something like what I’m describing above, that would be illegal… it’s just an interesting hypothetical that happens to match the reality happening on the ground which may not even be intentional in many/most cases.

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Re: SRS investment options

Post by malcontent » Mon, 26 Jul 2021 11:53 pm

singaporeflyer wrote:
Mon, 26 Jul 2021 3:39 pm
We should set up a small telegram or whatsapp group for people who are interested in investing / SRS
I’m not sure there is a whole lot to discuss, but I could be wrong.

My investment strategy is super simple, it can be done with just two passive index ETFs. Essentially, 80-85% broad US and 15-20% Emerging Asia, and nothing else. My non-equity is in cash or ultra-short term bonds. What else? Nothing. Zero. Nada. Zilch.

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Re: SRS investment options

Post by malcontent » Tue, 27 Jul 2021 1:23 am

smoulder wrote:
Mon, 26 Jul 2021 4:42 pm
I guess that you probably could consider a robo's costs analogous to the costs that you incur when you buy or sell ETFs through your trading app. Not necessarily the same cost, but analogous.
I find it very hard to believe that robos can be as cheap as the ETFs they are building your portfolio with, they have to get a cut somewhere, or else it wouldn’t be worth it for them.

Maybe they are analogous with some local ETFs that have higher expenses than the overseas ETFs they are using? But then, I invest overseas ETFs myself, so it’s back to my first argument.

The other thing I don’t like about robos (and any other advisors for that matter) is they way over complicate things… I’m sure this means more transactions for them, but I don’t like complexity. It just doesn’t add value. It is a well known (but little talked about) fact that advisors use complexity as a way of justifying their fees - despite it not doing you any good.

If there is one thing I’ve learned over my nearly 30 years of investing, it’s to keep things real simple. My only regret is not realizing this sooner.

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Re: SRS investment options

Post by smoulder » Tue, 27 Jul 2021 12:18 pm

malcontent wrote:
Mon, 26 Jul 2021 11:53 pm
singaporeflyer wrote:
Mon, 26 Jul 2021 3:39 pm
We should set up a small telegram or whatsapp group for people who are interested in investing / SRS
I’m not sure there is a whole lot to discuss, but I could be wrong.

My investment strategy is super simple, it can be done with just two passive index ETFs. Essentially, 80-85% broad US and 15-20% Emerging Asia, and nothing else. My non-equity is in cash or ultra-short term bonds. What else? Nothing. Zero. Nada. Zilch.
I am moving towards a fairly similar investment strategy.

Having said that, I can easily foresee setting aside something like 100k just to try my hand at more active trading. When I'm retired - just for the thrill and quite likely to keep my mind occupied at least some of the time.

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