Investing In US Indexes? Here Are U.S. Focused ETFs That You Can Invest On The SGX: SPDR S&P 500 US$ (SGX: S27); SPDR DJIA ETF (SGX: D07)
For new investors who want to gain exposure to the stock market, ETFs are one of the easiest ways to get started on your investment journey. When you invest in an ETF, you invest in a basket of stocks that the ETFs invest in. Similar to stocks, ETFs are traded on an exchange so you can buy and sell them like regular stocks.
While there are ETFs for specific business sectors, regions and asset classes, most beginner investors should probably start by investing in an index-based ETF. This is an ETF that will closely track the performance of an index that you want to invest in.
For example, in Singapore, the Straits Times Index (STI) serves as the benchmark index for the Singapore Exchange (SGX), and it comprises the 30 largest and most liquid stocks on the SGX. So, when you invest in an ETF such as the SPDR STI ETF (SGX: ES3) or the Nikko AM STI ETF (SGX: G3B), you are investing in all the stocks that are part of the STI.
Besides investing in ETFs focused on stocks that are in Singapore or Asia, there are also a couple of ETFs listed on the SGX that are tracking US indexes. This means if you want to invest in a portfolio of U.S. stocks, you can invest in these US indexes through some of the ETFs that are listed on the SGX.
SPDR S&P 500 US$ (SGX: S27)
As its name suggests, the SPDR S&P 500 US$ (SGX: S27) is an ETF that tracks the performance of the S&P 500. So, before you think of investing in it, you first need to know the stocks that make up the S&P 500.
The S&P 500 is a market capitalisation weighted index that tracks the performance of the 500 largest publicly-traded companies in the U.S. A look at the SPDR S&P 500 ETF monthly report shows that as of 28 February 2021, top holdings within the ETF are Apple (6.02%), Microsoft (5.46%), Amazon (4.10), Alphabet (3.73%) and Facebook (1.92%).
You can see just how well diversified this ETF is. Despite being the biggest companies in the world, Apple, Microsoft, Amazon, Alphabet & Facebook combined for just slightly about 20% of the ETF. Johnson and Johnson, a company with a market capitalisation of about US$428 billion, only comprise just 1.30% of the ETF.
As of 28 February 2021, here’s the top 10 holdings for the SPDR S&P 500 ETF.
Since the start of the year, the SPDR S&P 500 has delivered a return of 9.28%. It has an expense ratio of 0.09% p.a.
SPDR Dow Jones Industrial Average ETF (SGX: D07)
The SPDR Dow Jones Industrial Average (DIJA) ETF (SGX: D07) tracks the performance of the Dow Jones Industrial Average (DIJA). Unlike the S&P 500, the DIJA comprises only 30 blue-chip U.S. companies. As such, the DJIA could be seen as less diversified than the S&P 500 but would hold a higher weightage in each of the companies that are part of its index.
It’s also worth pointing out that unlike the S&P 500 which is a market capitalisation weighted index, the DJIA is a price-weighted index. This means that stocks with higher prices get a higher weightage in the index compared to stocks with a lower price. The result of this is that companies like UnitedHealth Group (price: US$367.07) and Goldman Sachs (price: US$327.64) have a higher weightage in the index as compared to Apple (price: US$123), despite having a much smaller market capitalisation.
As of 28 February 2021, here’s the top 10 holdings for the SPDR DIJA ETF.
Since the start of the year, the SPDR DIJA ETF has delivered a return of 10.70%. It has an expense ratio of 0.16% p.a.
Read Also: Complete Guide To ETF investing in Singapore