Why STI ETF?
There are thousands and thousands of low cost ETFs around the world.
How did you end up with the STI ETF as your one and only ETF for Passive Indexing?
I only know my own backyard
If you are a Singaporean studying/working in the US, and you have decided to embrace Passive Indexing, which ETF would you buy?
Same goes for if you are a Malaysian or Indonesian but is now a permanent resident or naturalised Singaporean - which ETF would you buy?
Mind you, if you are a US citizen, if you go by the same "my backyard logic" to pick your Passive Index ETF, you still have a problem!
There are 3 major indexes!
Dow Jones Industrial Average 30, S&P 500, and Nasdaq. Buy all 3 ETFs?
OK, lets say we leave out Nasdaq. Between DJIA 30 and S&P 500, which would you prefer?
Say that again.
Shy right? Especially if currently you own the STI ETF. (Don't worry, what you feeling now is called Cognitive Dissonance. Won't die one)
Bottom-up Country Picking
Singapore in the 70s and 80s was growing its GDP in double digits or high single digits. Do you think as a developed economy now, Singapore will ever hit high single digit GDP growth like when we were part of the 4 Asian Tiger economies?
But if we look at our emerging Asean neighbours, with a time frame of 20-30 years, do you think the SET, KLCI, JCI, PSE will outperform our STI?
Mind you, its still the same market returns we are talking. Just different indexing vehicle.
Imagine 2 Indonesian naturalised Singaporeans - one buy the STI ETF and the other the JCI ETF.
20 years later, STI ETF doubled; but the JCI turned out to be a 5 bagger... How?
And to add salt to injury, the Indonesian rupiah has strengthened against Sing dollars... Ouch! Song bo!
Top-down Global Focus
OK, you where got time to evaluate different economies one by one. That's why you've chosen Passive Indexing in the first place...
Don't worry if you never heard of Global Multi-Asset Portfolio or Global Market Cap.
But you do know a bit of history. (I hope)
The 19th century belonged to Europe - they colonised the world!
The 20th century belonged to USA - heard of US hegemony? Policeman of the World?
Now which region does the 21th century belongs to?
But Asia is a very big region!
Some will want to exclude Japan - its a slow train wreck... Hence we have MSCI Asia ex-Japan ETF.
Some don't want developing economies; only want "safer" developed economies - then you'll go for the MSCI Pacific Index which includes only Australia, New Zealand, Hong Kong, Singapore, and Japan.
Some will prefer the developing economies in Asia instead; and buy up several ETFs in the region to make their own "aggregated" Emerging Asia Passive Indexing Portfolio.
Some will argue the 3 most populous countries in Asia are China, India, and Indonesia. They will create their own "trinity" ETFs.
And so on.
Earn more; save more
Low cost is like saving more. Of course who doesn't like paying less for more?
Unless you have chosen the Global Multi-Asset Portfolio index - where there is no investor discretion involved - any choice of other indexes will involve an active decision by the investor.
Yes, even the "Look ma! No brains!" default decision to choose STI ETF is an active decision itself - just like deciding to do nothing is a decision by itself.
Call it luck or skill.
Your Low Cost Passive Index Portfolio consisting of one single STI ETF 20 years later has doubled! Whopee doo!
You were going to brag about it until you found out some idiot went YOLO on the Vietnam Index 20 years ago and is now sitting on a 10 bagger... What the fish!
Probably a newbie youth 20 years ago whose biggest strength was he didn't know what cannot be done!
Oh well... Don't compare... (But in your heart you pretty pissed you lost out to a noob)
What do most bei kambing Passive Indexes do?
They focus on the low cost side of the equation. That's the easy part.
Want to verify whether you are talking to a parrot or to the real McCoy when it comes to Low Cost Passive Indexing?
Ask them about the active selection (entry) process of their low cost ETFs - the earn more part. Wink.
Now you know why most financial bloggers are more comfortable talking about their save more bits. And for the precious few financial bloggers who are able to share, with actual track records, their outsized earn more sexy parts, they'll attract a HUGE following.
C'mom. We all know intuitively that it does not take brains to save more. We just need discipline. But to be able to earn more, that takes skill or loads of good luck.
Of course I've chosen luck.
Tomorrow is Thursday. Which reminds me, must remember to buy Toto quick-pick!
What luck! Just stumbled onto this article:
I think it provides a nice context and perspective to what I've written above. Wink.
SMOL 29 Sept 2016