Buy low-cost index funds


Tan Kin Lian has this advice for us in his weekly column in My Paper: buy low-cost index funds. He cited an analysis done by John Bogle of the Vanguard Group.

According to Bogle’s analysis of 355 funds, which work in the same way as our unit trusts and more recently “structured products”, only a miserable 24 performed better than the market benchmark.

In other words, why should investors pay the professional fund managers who charge an arm and a leg in management fees when they could have easily parked their hard-earned money in index funds?

Index funds typically incur much lower costs than other types of funds.

Tan Kin Lian then went on to give a local example of a poor performing fund. It’s a structured product that generated a miserly 0.4% per annum return.

Now back to his advice on buying low-cost indexed funds. Do we have such products in Singapore? There are more than a handful.

According to Monetary Authority of Singapore list of authorised Collective Investment Schemes, these are some index funds that you can consider:

  • ABF Singapore Bond Index Fund from DBS Asset Management
  • US Dollar Nasdaq 100 Index Capital Protected Fund from HSBC Investments
  • Infinity European Stock Index Fund from Lion Capital Management
  • Infinity Global Stock Index Fund from Lion Capital Management
  • Infinity U.S. 500 Stock Index Fund from Lion Capital Management
  • Singapore Index Fund from Singapore Consortium Investment Management Ltd
  • ABF Pan Asia Bond Index Fund from State Street Global Advisors
  • StreetTRACKS Straits Times Index Fund from State Street Global Advisors

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  2. That is what Warren Buffet advises the average investor also, who know nothing about businesses and stocks and want to participate in the high returns of stocks over the long run.

  3. Infinity index funds are not exactly low cost. Their expense ratio are >1%. These are exorbitant considering that the funds are passively managed index funds.

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  5. You’re absolutely right. Paying a 1% expense ratio for an index fund is ludicrous.

    But let’s move on. You must be able to buy index funds in Singapore with expense ratios around 50 basis points, no?

    I have been surprised at how expensive funds are, in general, in Singapore. But I must not be looking in the right places.

    Are there cheap index funds available in Singapore? I can understand the ETF option, which is what I use, but for many of my local friends, that isn’t as convenient and they’re rather drip small regular sums into an investment product without requiring a brokerage account.

    Please offer your suggestions if you know.


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