How to invest in the US’s top 500 companies (for SG & international investors)

Photo by William Iven on Unsplash

Warren Buffett famously said that regular layman investors should just buy the S&P500 ETF, instead of individual stocks. This is because nobody has the time and capacity to monitor individual stock price movements and corporate news. This is great advice except that the price of said ETFs are fully valued (read: expensive). The index made more or less a V-shape recovery since the Covid crash in February.

Still, pundits are saying that the index will still have growth potential. The top companies in the S&P 500 and Nasdaq are some of the biggest industry leaders in the world – the FAANG companies and others, like Tesla, Intel and Berkshire Hathaway. They have immense growth potential because of their sheer size, branding, and resources to acquire competitors and expand operations throughout the world.

So how does a Singapore retail investor buy the ETF? Here are 4 options:

  • On the Singapore stock exchange, local investors can buy the S&P SPDR S27.SI. According to an expert on Seedly, the minimum no. of lots is 10. So, at a price of say $336, you will need to spend a minimum of $3,336 (not including fees) and be taxed 30% of dividend earned. That said, I understand that few international investors buy the S&P 500 ETF for dividends, or any US stock for that matter. US stocks are attractive because of growth.
  • But, for conservative investors like myself, it could add up. An alternative would be to buy the CSPX.L. It is an Irish-domiciled ETF and dividend tax on this stock is at 15% – that’s 50% more dividend earnings you can take home, compared to buying Vanguard’s VOO or SPDR’s S27.
  • A third option is to buy the S&P 500 ETFs through a regular savings plan through Fundsupermart. For as little as $50 a month, investors can buy into US ETFs (including counters tracking the S&P 500) as well as other ETFs on the Singapore and Hong Kong exchanges. Fees are pegged at $1 for each purchase. This can add up especially if you are depositing small amounts. It would make more sense to allocate around $500 a month.
  • The last option, and the most cost efficient for a small investor, is Syfe’s Equity100.  Robo advisor, Syfe, launched this new portfolio recently in July. This portfolio invests into:
  1. QQQ: According to Syfe, this “tracks the Nasdaq-100 index of the 100 largest nonfinancial companies” such as Apple, Netflix and Amazon
  2. CSPX.L: As mentioned above in point (2)
  3. EFA: This ETF track “the performance of large- and mid-cap developed market equities, excluding the U.S. and Canada” and it includes stocks like Nestle and AIA
  4. XLP: Tracks “consumer staples sector of the S&P 500 Index” such as Coca Cola and Walmart.

There are 16 more ETFs under the portfolio, but Syfe doesn’t reveal them on its website.

I haven’t invested in this product just yet, but I’m seriously considering. For a small lump sum and the luxury of zero-fee monthly contributions, Syfe is value for money as it charges 0.65% for management fees. On top of that, you get a $10 credit bonus (although a friend has feedback that he still has not receive this even after using Syfe for a month plus).

[UPDATE: I’ve signed on for Syfe and my friend has gotten his bonus. If you found this article useful, please use my referral code: SRPSMJ98P. Both of us can get the bonus ranging from $10 to $100, depending on the deposit amount starting from $500.]

If you have more around, say, $8,000, it might be more worth it to just buy an S&P500 ETF off the stock market. Syfe’s management fees would cost more than $50 for a year.

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