Are your investments mostly in Singapore-listed stocks? Would you like to own shares in some of the world’s largest companies? Or are you a long-term investor who believes in owning a diversified portfolio of stocks and other securities?
If your answer to any of the above questions is yes, you may want to consider investing part of your savings in an exchange-traded fund (ETF) that tracks the S&P 500 stock index.
In Singapore, you can buy and sell State Street Global Advisors’ SPDR® S&P 500® ETF Trust1 via the Singapore Exchange (SGX: S27) for as little as US$420 at a time. To get started, you can use cash or the savings in your Supplementary Retirement Scheme (SRS).
The SPDR® S&P 500® ETF Trust – the first ETF to be issued in the US – is the world’s largest ETF with around US$380 billion in assets2. This means the units are easy to buy and sell due to the ETF’s popularity.
“In uncertain times like these, when there are concerns about global growth, interest rates and even political developments in many countries, it is especially important to have a diversified portfolio. By investing in the SPDR® S&P 500® ETF Trust, investors get to have the opportunity to gain exposure to the world’s largest economy and many of the world’s biggest companies,” says Jermyn Wong, Head of SPDR ETF Singapore at State Street Global Advisors.
What are ETFs and how do they work
ETFs, as the name suggests, are funds that replicate movements in the prices of a basket of securities. As ETFs are listed on stock exchanges, you can buy and sell them anytime during trading hours at prices that are displayed on screen.
Globally, investors can choose from thousands of ETFs that track everything from stock market indices to customised portfolios of stocks, bonds and commodities.
In the case of ETFs that track the S&P 500 index, the change in the ETF’s value will mirror changes in the prices of the 500 biggest stocks listed in the US.
Why invest in the S&P 500
The S&P 500 is a stock index that tracks the top 500 listed companies in the US, many of which are global titans with operations that span the globe. The companies that make up the index include Apple, Microsoft, Warren Buffett’s Berkshire Hathaway, Exxon Mobil and JPMorgan Chase.
The S&P 500 list is reviewed periodically to remove weaker performers and replace them with fast-growing companies.
For retail investors, investing in ETFs beats investing in single stocks because of the diversification they offer. Instead of having to monitor individual stock prices, investors are able to achieve passive exposure to the S&P 500 index with one single trade.
As you cannot invest directly in the S&P 500, which is a stock index, you can buy an ETF like the SPDR® S&P 500® ETF Trust, which charges a management fee of less than 0.1 per cent per annum.
Steady returns in the long run
The S&P 500 can be very volatile in the short term, but it has risen together with earnings over time. Numerous studies show that tracking the S&P 500 will likely result in investors earning higher returns, since ETFs perform better than over 90 per cent of actively managed US equity mutual funds over the nearly 30-year period3.
For investors who had purchased and held onto the SPDR® S&P 500® ETF Trust around the time it was listed on SGX in May 2001, they would have achieved an annualised return of 6.1 per cent in Singapore dollar terms, just slightly below the S&P 500’s average yearly gain of 6.2 per cent.
In US dollar terms, the returns to ETF holders would be even higher at an average of 7.6 per cent per annum.
Exposure to global titans
For investors who invest primarily in the Singapore stock market, which is dominated by banks and property-related stocks, another advantage of buying the SPDR® S&P 500® ETF Trust is the exposure to technology. Besides Apple and Microsoft, the S&P 500’s components also include Amazon.com, Google’s parent Alphabet, Meta Platforms and Tesla.
While more volatile than the large companies that make up the 30-stock Straits Times Index, technology stocks have offered better long-term growth prospects as seen from the S&P 500’s superior historical performance.
Buying the SPDR® S&P 500® ETF Trust is one way to diversify your portfolio to include blue-chip US stocks. This portfolio will change over time as faster-growing companies are added to the S&P 500 index while weaker performers are removed.
As you become more familiar with investing, you can diversify your holdings further by buying other stock market ETFs, stocks, bonds and perhaps even real estate.
Other benefits of taking the ETF route include the low annual management fees, although this will differ from fund to fund.
“Investing can be a harrowing experience given the huge amount of investment options and the flurry of conflicting advice found online. Investors should therefore look not just at the ETF but also the company behind it. State Street Global Advisors created the US’ first ETF and we continue to be at the forefront of financial innovation,” says State Street Global Advisors' Mr Wong.
State Street Global Advisors is the asset management arm of State Street Corporation, one of the oldest and largest financial companies in the US.
Besides the SPDR® S&P 500® ETF Trust, State Street Global Advisors has three other ETFs listed in Singapore – the SPDR® Straits Times Index ETF (SGX: ES3), the SPDR® Dow Jones® Industrial Average ETF Trust (SGX: D07) and the SPDR® Gold Shares (SGX: GSD), which lets investors track gold prices via an ETF.
For product and risk information, please refer www.ssga.com/sg
To learn more about the SPDR® S&P 500® ETF Trust’s history, please go to: https://www.ssga.com/sg/en/individual/etfs/insights/how-spy-reinvented-investing-story-of-first-us-etf
1 https://www.ssga.com/sg/en/institutional/etfs/funds/spdr-sp-500-etf-trust-s27
2 as of May 16, 2023
3 S&P Dow Jones Indices, “A Spider Spins a SPIVA Special, January 11, 2023.
State Street Global Advisors Singapore Limited (“SSGA”), 168, Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg. No: 200002719D, regulated by the Monetary Authority of Singapore). T: +65 6826-7555. F: +65 6826-7501.
All forms of investments carry risks, including the risk of losing all of the invested amount. Such activities may not be suitable for everyone.
The prospectus in respect of the offer of the units (the "Units") in the SPDR® S&P 500® ETF Trust (the "Fund") is available and may be obtained upon request. Investors should read the prospectus before deciding whether to acquire Units in the Fund. The value of Units and the income accruing to such Units may fall or rise. Brokerage commissions and ETF expenses will reduce returns. Units in the Fund are not obligations of, deposits in, or guaranteed by, SSGA or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount invested. Such activities may not be suitable for everyone. Past performance figures are not necessarily indicative of future performance of the Fund. Investors have no right to request SSGA to redeem their Units while the Units are listed. It is intended that holders of Units may only deal in their Units through trading on the Singapore Exchange Securities Trading Limited ("SGX-ST") or NYSE Arca Inc. (“NYSE Arca”). Listing of the Units on the SGX-ST or the NYSE Arca does not guarantee a liquid market for the Units. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
The SPDR® S&P 500® ETF (SPY) is a US domiciled ETF. The Singapore domiciled SPDR® S&P 500® ETF Trust (S27) was first listed on the SGX on May 4, 2001.
For more risk information, please visit www.ssga.com/sg
