• Encompassing significant market swings since 2019, the STI has generated a 38% total return, outpacing the FTSE APAC Index 31% total return and FTSE APAC Ex-Japan Index 28% total return. The Index also maintains a 5.0% trailing dividend yield, doubling the 2.4% for the FTSE APAC Index and 2.5% for the FTSE APAC Ex-Japan Index. 
   
• Popular with young investors, Dollar Cost Averaging (DCA) is an alternative method to lump-sum investing, providing a means to build gradual ETF and stock exposure in stocks and securities. From  the end of 2019, the indicative CAGR of month-end dollar cost averaging on an STI ETF amounted to 5.7%.  
   
• The most utilised Singapore-listed ETFs by DCA investors this year included the Nikko AM STI ETF, ABF Singapore Bond Index ETF, Nikko AM Straits Trading Asia ex Japan REIT ETF, Nikko AM SGD Investment Grade Corporate Bond ETF and Lion-Phillip S-REIT ETF.
   

The STI chalked up 6% total return in 1H24, and extended this gain by another 10pp in 3Q24, bringing the YTD total return to 16%. 

The two periods saw contrasting investor flows, with institutions net sellers in 1H24, then net buyers in 3Q24, while retail investors were conversely net buyers in 1H24 and net sellers in 3Q24. As detailed here, the 10 Singapore-listed stocks that saw the most net retail selling in 3Q24 averaged 17% total returns, while the 10 stocks with the most net retail buying averaged just 2% total returns. 

The broad regional gains in 2024 bring the STI total return since end of 2019 to 38% or 6.9% on an annualised basis. This brought the average annualised returns for the STI ETFs over the 57 months to 6.4%.

The composition of benchmark Indices such as the STI change over time to reflect the largest and most actively traded stocks of the exchange. This in itself provides a form of a passive, market following investment strategy subject to the usual market risks. For instance, at the end of 2019, the trio of DBS Group Holdings, Oversea-Chinese Banking Corporation and United Overseas Bank have seen their STI weighting expand from 39.7% to 50.2%. Over this period of time, the trio averaged 80% total returns. Other STI stocks that have also performed strongly since 2019 include Sembcorp Industries (+445%), Yangzijiang Shipbuilding (+420%) and Keppel (+91%). Beyond the STI, Samudera Shipping Line (+965%), iFAST Corporation (+641%), PropNex Holdings (+327%), Dyna-Mac Holdings (+287%) and Geo Energy Resources (+250%) led the FTSE ST All-Share Index from end of 2019 through to 3Q24. 

STI total return indices calculated by Bloomberg and Refinitiv have continued to book all-time highs in 3Q24. Since April 2002, the STI has been investable in the form of an Exchange Traded Fund (ETF) which from inception through to 30 September 2024 generated an annualised total return of 6.6%. This total return assumes the ETF dividends (which are currently paid semi-annually) are reinvested into units. 

Lump-sum investing into the STI ETFs at the end of 2019, with dividend re-invested into the ETF units, averaged 6.4% annualised total returns, not including transaction fees, through to 30 September. At the same time, Dollar-Cost Averaging (DCA) into the SPDR STI ETF from the end of 2019 through to the end of 30 September generated an indicative 5.7% compound annual growth rate, also excluding transaction fees. 

Due to the lower base for initial dividend distributions that comes with DCA, in addition to the DCA attempting to mitigate some of the timing risks that come with lump-sum investing, DCA would not generally expected to outperform lump-sum investing. However over the full 57 month tenure spanning 31 December 2019 to 30 September 2024, DCA investing kept near pace with the returns of a lump-sum investment in a STI ETF. As illustrated below, this was mostly attributed to the volatility that took hold of global stocks in 2020.

This example illustrates the underlying concept of DCA, where investing a fixed sum regularly allows one to purchase more shares when prices are low and fewer when prices are high. Using the SPDR STI ETF (ticker: ES3) as an example, a S$1000 investment bought 407 units in October 2020 at S$2.456 per unit, but only 282 units in July 2024 at S$3.535 per unit, demonstrating a 30% decrease in the number of units acquired as the unit price increased.

The DCA total return also assumes dividend distributions were reinvested into units. As illustrated above, since 2019 semi-annual dividend distributions in February and August have increasingly impacted the number of units acquired in March and September. For example, if the DCA began on 31 December 2019, the first distribution would have gone ex-div in February 2020, with S$0.056 paid per unit. At that time 305 units had been purchased at the end of December 2019 and 312 units had been acquired at the end of January 2020. The combined 617 units went ex-dividend in February 2020 at S$0.056 per unit, equated to near S$35. If reinvested at the end of March, this would mean S$1,035 was available to acquire a total of 416 units at S$2.485 per unit on 31 March 2020. 

More recently, in August 2024, the ETF went ex-dividend with a S$0.086 per unit distribution, which on 19,964 units acquired since the end of 2019, translated to S$1,717, or 471 units to be purchased at the end of September at S$3.642 per unit, in addition to the 275 units acquired on the monthly S$1000 installments. Note the dividend distribution may have been available for reinvestment at the end of August, however, given potential time lags in adjusting the set DCA amount for the month, this educative example assumes the seven distributions over the period were invested the following month.

Assuming S$1,000 was invested at the closing price of the SPDR STI ETF at the end of each month starting from December 2019 to the end of September 2024, the theoretical outlay would have totalled S$57,999, with the tenure of the investing 4 years and 9 months, or 57 months. Based on the 30 September 2024 unit price of S$3.642, the 20,710 units bought since the end of 2019 would have been valued at S$75,426, for a basic Return on Investment (ROI) of 30.0%. Note this does include trans action costs and as discussed above this generated a CAGR of 5.7%.  

The comparative CAGR of the DCA on a STI ETF since 31 December 2019 could also have been further boosted by investing unutilised funds in SGS Bonds, T-bills and Savings Bonds. 

The most utilised Singapore-listed ETFs by DCA investors as of April 2024 included the Nikko AM STI ETF, ABF Singapore Bond Index ETF, Nikko AM Straits Trading Asia ex Japan REIT ETF, Nikko AM SGD Investment Grade Corporate Bond ETF and Lion-Phillip S-REIT ETF.

Note: 

• DCA and ETF investing is also subject to market risk. For instance, using this DCA educative example, had the STI ETFs returned to back below S$3.00 per unit at say S$2.90 per unit on 30 September 2024, the basic ROI would have been 3.6%, and CAGR would be 0.7%. At S$2.50 per unit the basic ROI would have been -10.7%, and CAGR would be -2.4%.
   
• The SGX Academy website includes more information on DCA via Regular Shares Savings Plans such as the DBS Invest Saver, FSMOne Regular Savings Plan, OCBC Blue Chip Investment Plan and Phillip Capital Share Builders Plan.
   

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