Wednesday, January 23, 2008

Availability of Low Cost Funds

Dear Mr. Tan,

I was reading a commentary somewhere that the state of fund investing in Singapore was reminiscent of a decade ago in the US, with consumers exposed to upfront loads of more than 3% and expense rations of more than 1%.

Why are no load or low expense ratio Index Funds have not gained popularity here? Is it a question of banks/companies not earning enough from such products? ( i.e. Fundsupermart does not sell Index Funds, DollarDex only sells the Lion Capital Infinity US500 Stock Index SGD (feeder fund in the Vanguard® U.S. 500 Stock Index Fund) with 1% commission.

I, for one, would be interested in low cost Index Funds (such as those from Vanguard) pegged to the STI. For some reason, the STI-ETF does not trade at NAV most times, possibly because of high demand?. Can I check if you have made progress towards arranging for such offerings in Singapore?

REPLY

We need to educate the public about low cost Indexed funds, and be comfortable with investing in them. I will try my best to provide this educational service through my blog and website. If there is stronger demand, the banks and Internet portals will be willing to sell these products.

2 comments:

Anonymous said...

This is a commission driven industry. No carrot dangled infront the agents won't move. The bigger the front end charge the faster the insurance agents go. Commission is the only means they know.
They have no other skill except selling skill at the best.

NS said...

I personally feel that SGX has not done sufficient public education on ETFs. Hence, there is not sufficient demand for ETFs amongst retail investors right now.

ETFs are absolutely the way to go for retail investors. I pity those people who spend enormous amount of time/energy running after individual stocks / mutual funds - there has got to be a better way and index investing through ETFs are the way to go.

If one compares breadth of ETF offerings available in US and the depth of information in US market (just check ETF information in E*Trade), Singapore is still taking baby steps in the world of ETFs.

If SGX doesn't offer the ETF that Singapore investors are looking for, should they go and buy them in US market?

Mr. Tan, it would be great if you can educate folks about the tax implications (if any) of Singapore tax residents investing in US instruments (stock, ETF, bond etc.).

Thanks!

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