Is STI ETF a Worthwhile Investment?

A lot of investors prefer investing in ETFs rather than Unit Trusts due to it's low fees. For Singaporeans, we may choose to invest in STI ETFs. There are two STI ETFs listed in the SGX, SPDR STI ETF and Nikko AM STI ETF. Today, I will show well Niko AM STI ETF holds up against the performance of 2 Unit Trusts, Aberdeen Singapore Equity and First State Dividend Advantage. It is not exactly an apple to apple comparison as First State Dividend Advantage is invested in Asia Pacific regions other besides Singapore.

Let's take a look at a 1 year chart. If we invest in $100 in each of them, at the end of a 1 year period ending Apr 25 2017, we would receive $117.50 from First State Dividend Advantage, $113.72 from Nikko AM STI ETF, $109.43 from STI Index and $116.11 from Aberdeen Singapore Equity.

                        Screenshot using Fundsupermart's Chart Centre function

1 year may be too short to judge the performance right? Ok, let's take a look at their 5 year chart. Now we can really see a huge difference in performance. If we invest in $100 in each of them, at the end of a 5 year period ending Mar 30 2017, we would receive $163.65 from First State Dividend Advantage, $122.01 from Nikko AM STI ETF, $106.60 from STI Index and $123.73 from Aberdeen Singapore Equity. To be fair to Nikko AM STI ETF, we may need to add back the dividends to account for the overall performance. If we add back say $15, the performance would be better than Aberdeen Singapore Equity. However, I can't confirm if the Chart already factors in the dividends for the ETF. I also added in SPDR STI ETF for this comparison and the returns is $122.69.

Finally, let's look at 10 year comparison chart. For this comparison, we will need to ignore Nikko AM Singapore STI ETF as it didn't experience the 2008-2009 market correction. The ETF only started after the huge correction. Almost 50% drop from 2008-2009. If we invest in $100 in each of them, at the end of a 10 year period ended Mar 30 2017, we would receive $191.31 from First State Dividend Advantage, $131.75 from SPDR STI ETF, $94.46 from STI Index and $138.86 from Aberdeen Singapore Equity.

I went to SPDR website and below is a screenshot from their website. Ouch! 2.86% annualised compounded returns inclusive of dividends over the last 10 year period. Would STI ETF return to it's former glory? How many 10 years do investors have? If you are an STI ETF investor, you will have to decide if the current returns are good enough for you. The 1 year return looks good but is it sustainable? When I compare the 1 year return with an Asia Unit Trust, it also underperforms.

When I started investing in Unit Trusts many years back using online platforms such as FSM, there was a sales charge of 1.5%. It subsequently reduced to 0.75% as my investment amount increases and now it is 0% for all investors. However, FSM has a quarterly platform fee for cash investments which I have since shifted out my cash investments to dollarDex. Similar to ETF, it is possible to do DCA with Unit Trusts. My investments with dollarDex are currently only bonds/money market and not equities. 

As with all investments, it is possible to lose money with Unit Trusts. I sold my equity funds at 5 figure losses when the market was bad. I have since recovered the losses with my bond funds. I did also make money with equity funds during my time with FSM. This Post is not a recommendation to buy the Unit Trusts mentioned as I myself might sell my equities (using CPF OA) soon. I only want to highlight the performance of STI ETF and compare it with Equity Unit Trusts performance for the past 10 years. For me, I won't touch STI ETF. Ever.