Most investors know that stocks, also referred to as “equities,” generally offer the highest average returns over the long term. Naturally, there will be periods—even years—of volatility, where returns may fall short of the long-term average.
However, over rolling 20-year periods, global stocks tend to deliver average annual returns between 8% and 10%. The U.S., which hosts the world’s largest stock market, represents over 60% of the total value of all globally listed stocks, making it a market investors cannot ignore.
The simplest way to gain broad exposure to the U.S. stock market is through the S&P 500 Index, which includes the country’s 500 largest companies by market capitalization. The most straightforward approach to investing in the S&P 500 Index is to purchase an exchange-traded fund (ETF) that tracks it.
Fortunately, in Singapore, we have several options to invest in the S&P 500 Index. Here are three top ways to do so, along with their costs.
#1 SPDR S&P 500 ETF Trust Listed On The SGX
If you’re looking to purchase an S&P 500 Index ETF listed in Singapore, the primary option is the SPDR S&P 500 ETF Trust (SGX: S27), which is traded on the Singapore Exchange (SGX). This ETF is effectively the Singapore-listed version of the larger SPDR S&P 500 ETF Trust (NYSE: SPY) traded on the New York Stock Exchange.
This means it carries the same expense ratio and share price as its U.S.-listed counterpart. The ETF’s expense ratio is 0.0945% per annum, and shares on the SGX are traded in U.S. dollars. Currently, one share costs US$573.24 (based on the closing price as of November 1).
In Singapore, you can purchase individual shares of ETFs listed on the SGX without the “board lot” requirement that applies to individual company shares.
One important note: the SPDR S&P 500 ETF Trust is domiciled in the U.S., so buying SGX-listed shares still subjects you to a 30% dividend withholding tax on any distributions, as this ETF is a distributing share class.
#2 SPDR S&P 500 UCITS ETF Listed On Switzerland’s EBS
Another option for investors in Singapore is to purchase an S&P 500 Index UCITS ETF. UCITS stands for “Undertakings for the Collective Investment in Transferable Securities,” which is a regulatory framework for investment vehicles listed on European stock exchanges.
UCITS ETFs are particularly useful for international investors outside of the U.S., as they are domiciled in Ireland. Thanks to a double taxation treaty between the U.S. and Ireland, these ETFs benefit from a reduced 15% dividend withholding tax, half of the typical 30% rate applied to U.S.-domiciled ETFs.
One prominent UCITS ETF for tracking the S&P 500 Index is the SPDR S&P 500 Index UCITS ETF (EBS: SPYL). It is essentially the European equivalent of the SPY ETF listed in New York, but it is domiciled in Ireland and traded on Switzerland’s Electronic Bourse (EBS) exchange.
This ETF offers a lower expense ratio of just 0.03% per annum, and one share costs US$13.99. As an Accumulating (Acc) share class, it reinvests dividends back into the ETF instead of paying them out. This makes it ideal for long-term investors looking to compound their returns rather than receive regular dividend payouts.
While the SPYL is smaller than its London-listed counterpart, the iShares Core S&P 500 UCITS ETF (LON: CSPX), it offers a significantly lower expense ratio of 0.03% per annum, compared to iShares’ 0.07%.
#3 Invest Into S&P 500 Index Funds Through Robo-Advisors
Investors in Singapore can access the S&P 500 Index through index funds available on major robo-advisory platforms like Endowus, Syfe, or StashAway.
For instance, Endowus offers the iShares US Index Fund (IE) S&P 500, managed by BlackRock’s iShares. This fund tracks the S&P 500 Index and lets investors purchase shares denominated in Singapore Dollars. The fund has an expense ratio of 0.08% per annum. However, investors should also consider the platform fee charged by the robo-advisor, which can range from 0.15% to 0.60% depending on the account type.
A notable aspect of this fund is its use of S&P 500 futures contracts to replicate the index, rather than holding the underlying shares directly. Given the substantial size of the S&P 500 and the fund’s minimal tracking error, this approach should not be a significant concern for investors.
Finding The Right Balance Between Cost And Convenience
In summary, investors in Singapore have multiple ways to access the S&P 500 Index. Options 1 and 2 are ideal for DIY investors who prefer to use their brokerage accounts to purchase ETF shares directly, especially if they are price-sensitive.
However, if you prefer a more hands-off approach, option 3 allows you to invest in the S&P 500 Index via a robo-advisory platform, where you can set up an automatic investment plan for regular contributions.
Read Also: Robo Advisors In Singapore (2024): What You Need To Know Before Investing
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