4 Things We Learned About ETF Investing From The SGX X DollarsAndSense ETF Symposium
A week ago, DollarsAndSense team up with SGX to co-organise an ETF symposium – Investing In ETFs In The COVID-19 World. This 3-day ETF symposium was shown on Facebook Live on 15, 16 & 17 July, with each day taking 90 minutes. Spreading this virtual event over three days allowed us to keep each day’s session short and to have unique themes for each of the days.
In the week’s edition of 4 Stocks This Week, we take a slight deviation from our usual feature of four companies, and instead, focus on 4 lessons that we learned about ETF investing during this 3-day event.
#1 When Measuring The Performance Of An ETF, Assume That Dividends Are Reinvested
During the panel discussion on Day 1, one of the questions that were asked was “How the Straits Times Index (STI) has not recovered to its high achieved before 2008.”
To that, our panelist, Jermyn Wong, Head of Asia ETF Business Development, Nikko Asset Management Group, pointed out that as one of two ETFs that track the STI, this was a common question that he frequently gets.
When looking at the ETF return, investors sometimes fail to consider the returns that they would have got had they reinvested their dividends. As some of us would know, many Singapore companies and ETFs give dividends regularly to their investors. However, investors sometimes overlooked the fact that dividends paid out, had they been reinvested, and would have amounted to a higher return for investors.
For example, since its inception in February 2009, the Nikko AM STI ETF (SGX: G3B) would have given its investors a return of 8.49% p.a. This is with the assumption that all dividends that are given out are reinvested back into the ETF.
So even though the ETF may not have seen a sharp price increase, when you consider total return (assuming that dividends are reinvested), the returns are higher than the trading price of the ETF would suggest.
#2 Gold ETFs Can Give Your Portfolio A Higher Return At A Lower Risk
Higher return with lower risk?
That seems to go against the traditional norm that we are taught about when it comes to investing, but that is what some evidence suggests Gold can help us in when we construct our portfolio.
In his Day 2 session, Robin Tsui, VP, APAC Gold Strategist at State Street Global Advisors. shared with us this interesting piece of information when it comes to portfolio construction.
The table above shows that with a small percentage of our portfolio allocated to Gold, annualised return of a blended portfolio can increase, while the standard deviation and maximum drawdown of the portfolio reduces. This is an interesting observation because it shows that Gold, when utilise correctly within our portfolio, can increase potential returns while providing a level of protection for our portfolio.
Personally, I like to think of Gold like what salt does to a dish. When used at the right amount, salt can add flavour to a dish. However, just because salt makes a dish taste better doesn’t mean the more salt you add, the better the dish is. The same logic applies to how Gold can enhance the performance of a well-constructed portfolio.
If you are thinking about adding a gold ETF such as the SPDR Gold Shares (SGX: O87) to your portfolio, we would advise you to watch Robin Tsui session about gold ETF on Day 2 first before thinking about how Gold can be added to your portfolio.
#3 Diversify Your Investments Through The Use Of REITs
In the asset allocation framework shared with us by Adam Wong, Editor-In-Chief at The Fifth Person, Cash, Bonds, Stocks & Real Estate are mentioned as the key pillars of what we should include in our asset allocation mix.
When it comes to real estate, buying individual properties that can easily cost $1 million or more to generate rental income may not be feasible for many retail investors. As such, REITs are a good option for us to gain exposure to real estate and to earn rental income, without the hassle of having to manage a property or multiple properties.
For those new to REITs investing, one way to get instant and diversified exposure to REITs in Singapore would be through REITs ETFs such as the Nikko AM REITs ETF (SGX: CFA/COI).
#4 Don’t Ignore China
Our Day 3 session was centered around investing in China and judging by the panel discussion that took place, it’s clear that investing in China is not a topic that investors can afford to ignore. In fact, our panelists for that day appear to agree that it’s not a matter of if, but when, China will be the biggest economy in the world.
While China has grown rapidly over the past decade, the China growth story is far from over. For Singapore investors who want investment exposure to China technology companies, ETFs like the Lion-OCBC Securities Hang Seng TECH ETF (SGX: HST/HSS).
Another new ETF, the Lion-OCBC Securities China Leaders ETF will be listed on the exchange on 2 August 2021 for investors who want to participate in China’s growth story.
As a virtual event, the video recordings are still available on Facebook. You can click on the link above to watch each of the 90-minute sessions. The event is free for all and no registration or sign-up is required.
You can watch the sessions for each day here.
Day 1: Dividend Investing. Watch it here.
Day 2: Multi-Assets Investment. Watch it here.
Day 3: Investing In China. Watch it here.
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