August 15

6 years after investing in the POSB ETF, an honest review

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First, my disclosures

In July 2021, I sold off all $14,000 of the POSB STI ETF (Exchange Traded Fund) that I had accumulated since September 2016, and got a negative 3% return.

But in July 2021, I also started investing in the STI REIT ETF, buying $200 of it each month. Today, I hold 3095 units, or about $4000 worth of it.

The STI REIT ETF's constituent holdings
The STI REIT ETF’s constituent holdings

Well, it doesn’t make for pretty reading.

Today’s article is to give you a more well balanced view of whether you should invest in the POSB ETF.

The myths out there

Let’s first start with the myths. There is one that I want to particularly look at.

POSB offers you a way to dollar cost average, leading to better returns

Of course, the industry best practice is that you should dollar-cost average (DCA) your investments over time.

posb etf review
The idea behind Dollar Cost Averaging with the POSB ETF

Dollar cost averaging is a way whereby you can extend your time in the market, rather than timing the market. It’s a very effective way to ensure that you don’t buy high and sell low, but instead continually buy over a period of time so that you’re catching the highs, and the lows.

That’s the attraction of something like the POSB ETF, where you’re able to dollar-cost average by buying regularly, monthly. Each month, you may buy $200 of the ETF. Let’s say you were in March. The ETF costs $2 per unit. You get 100. But in the next month, the markets dropped. The ETF now costs $1 per unit. You buy 200 of it this time.

Over a short time (say a year), you will find yourself perhaps anxious and scarred from the rise and fall in prices. But over a long time (like 3 years), the market will rise.

In theory.

But I didn’t get good returns

That’s a myth, especially for Singapore markets. For the 5 years that I bought the STI ETF, the Singapore ETF, went sideways, rather than upwards. There were no significant breakout points where I could exit with a healthy return.

The STI ETF has gone exactly nowhere in the past 5 years (data from SGX)
The STI ETF has gone exactly nowhere in the past 5 years (data from SGX)

Eventually, I cut my losses.

What I learnt about the Singapore markets was that as much as the 30 stocks making up the STI ETF had great, industry-leading companies such as DBS, there were others which dragged it down. Companies like SIA, Hongkong Land, were prime examples of companies who were there because of their size, rather than their greatness.

What you can learn is that the DCA might work for markets like the US, but here in Singapore, it may not work as well.

The good

Still, I don’t want to give an entirely negative review, without stating some of the positives that the POSB ETF helped me with.

It’s a great way to start

As a starry-eyed young 20-year-old who didn’t know what I was doing, but had some cash to spare, starting with the monthly purchase of the STI ETF was a great way to start. I didn’t have to make decisions about what individual stock to buy.

I simply had to register my subscription, and every month, whatever I felt, it would buy. It reduced so much friction to the notion of investing, and helped me to get started in the markets.

It's incredibly easy to make the Regular Savings Plan through the app
It’s incredibly easy to make the Regular Savings Plan through the app
Signing up for a regular savings plan is really easy
Signing up for a regular savings plan is really easy

It also led me to nurture my interest in the stock markets. There’s nothing more motivating to checking out the markets, than knowing that you’ve significant skin in the game.

It nudges you to save

Thaler and Sunstein’s book, Nudge, has had a significant way on the way I’ve seen the POSB ETF.

The premise of their argument has been about nudging people to make ‘better’ choices, through gentle nudges in the right direction. They realised that for people who wanted to save for their retirement, for example, they often had the intention, but found it difficult trying to decide which pension plan they should buy, how much they should contribute, and the like.

So they made it easier by making it default opt-in. This raised the numbers who were registered in pension plans.

Letting yourself invest in the POSB ETF is a brainless exercise. Or as Charlie Munger, the billionaire partner of Berkshire Hathaway’s Chairman Warren Buffett once said – it’s doing – sit on your ass investing.

Do that. You will be glad you sat on your ass.

The interface is very user-friendly

POSB, today owned by DBS, has really upped its internet banking game. It is today, in my view, the undisputed leader in Singapore, in terms of the variety of transactions that you can make online.

There’s a caveat though. Whilst you can do it on the bank’s app, I would ideally recommend that you do it on a desktop.

Simply look at the two other banks’ internet banking interfaces, and you would probably be able to tell why. I hold accounts with CIMB, UOB, OCBC, and my internet banking experience with them hasn’t been great.

With OCBC, it's not too clear where you can start a regular ETF savings plan
With OCBC, it’s not too clear where you can start a regular ETF savings plan

You definitely cannot invest in a monthly ETF with UOB, through its online banking. The OCBC offers you such an option, but it’s buried within the site, and not easy to find.

Subscription to the ETF is very easy with DBS though. Within 3 minutes, you can start getting invested.

Here are 2 reasons why I love the DBS internet banking interface.

Firstly, it’s designed with you, the customer in mind. DBS’ recent slogan has been “Live More, Bank Less”. With many of its internet banking features, it is making this possible. From the outset, the headers are designed clearly for what you need to do, not what the bank needs to do. Need to invest? Click the Invest button.

These clear banners are a big difference to what other banks like UOB have designed their interfaces. Log into UOB, and the only thing you can see is your bank balance, and transactions. Basic. You want to do more?

Head down to the branch.

Secondly, I’ve really loved how DBS has made it clearer how your funds are building (or destroying the world). On their app, they have a LiveBetter icon that you can press to read the stories of how they are using banking to build more sustainable communities.

It offers you stories of the social enterprises they have funded, and also the option to invest in funds that build a more sustainable world.

In sum

Invest if you’re starting out.

It offers a good way into markets. And if you see it as a defensive play to protect against the downsides, this can be a good play.

But beyond that, if you are looking for more aggressive returns, this may not be the best investment to make, in the long run.

The performance of the REIT ETF, which is frankly, dismal
The performance of the REIT ETF, which is frankly, dismal

Compare this to your CPF rates of 2.5 to 5% per year, and you can easily see why this is not the best option.

Whilst it does offer liquidity, that liquidity does come at a substantial cost. You need to be clear about that.


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