(Image courtesy of Straits Times 21 Feb 2015)
Finally got time to read my Saturday Times (I only buy Saturday Times
because I don’t have time to read newspapers everyday, and because it
is usually the one with interesting things to learn. Sunday Times you
get some knowledge too but I rarely buy it. Cost savings
:) ).
Stumbled upon this article about investing in ETFs and Unit Trusts
instead of picking individual stocks, so I thought I’ll write something
about it.
It’s the same reason why I generally prefer ETFs over buying
individual stocks (I have a different policy for dividend stocks in
Singapore) as the amount of stocks to screen and measure is mind
blogging, not to mention when you expand into US equities.
Sure, those funds wouldn’t beat the next upcoming Google nor Apple
shares, but what’s the chance you could actually pick one? I will agree
that carefully filtering, screening stocks to find the good potentials
for growth will outperform those ETFs (those funds usually yield about
70-80% of a good growth stock) but realise that you consistently have to
filter and manage your portfolio for growth. It is a nice trade-off for
me (filtering dividend stocks is already tiring).
Active vs Passive management is important. ETFs tend to be passively
managed, Unit Trusts/Mutual Funds tend to be actively managed, though
there are some of them that are passively managed. My issue with those
actively managed funds is that the maintenance fees are rather costly
and eat into your profits over time.
As a bonus, ETFs allows some control of trade executions like how you
use TA to get the better price (notice I don’t use best, it is pretty
hard to catch market bottoms, for investing for the long term it usually
doesn’t matter so much).
Also remember that ETFs follow stocks clearance time of T+3 as
compared to unit trusts where the money will take some time to come back
into your hands.
SPDR STI ETF (if you want Singapore only ETFs) and Vanguard S&P500 ETF seems good options to me.
What do you folks think?
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