Passive Investment Options in Singapore

The accessibility of ETFs is a major draw, as they provide investors with broad market exposure. For instance, the SPDR STI ETF and NikkoAM-StraitsTimesIndex ETF allow investors to track the performance of the Straits Times Index (STI), the benchmark index for Singapore’s stock market. In addition to local ETFs, international ETFs give Singaporean investors exposure to global markets, such as the iShares Core S&P 500 ETF, which tracks the performance of the U.S. stock market.

ETFs are ideal for investors seeking diversification without having to pick individual stocks, and they are particularly well-suited for those who want a "set it and forget it" approach. While they offer lower fees and greater liquidity, ETFs are also subject to market volatility, so investors need to be prepared for potential short-term fluctuations in their portfolios.

Mutual funds can be actively or passively managed. In Singapore, investors often choose passively managed mutual funds that track specific indexes, similar to ETFs. These funds provide the advantage of professional management, with fund managers selecting and managing the underlying investments. For instance, local providers such as DBS Asset Management, OCBC Asset Management, and UOB Asset Management offer a wide range of mutual funds that cater to different risk profiles and investment objectives.

Despite being an attractive option for those seeking professional fund management, mutual funds often come with higher management fees compared to ETFs. However, for investors who prefer to leave the decision-making to fund managers, mutual funds provide a level of expertise that ETFs do not. Mutual funds also allow for automatic reinvestment of dividends, which can be beneficial for long-term growth.

The appeal of robo-advisors lies in their low fees, ease of use, and accessibility. Many robo-advisors in Singapore require relatively low minimum investments, with some platforms allowing investors to start with as little as S$100. Robo-advisors typically invest in low-cost ETFs, which allows investors to enjoy the benefits of diversification and low expense ratios. The convenience factor is another draw—investors can set up their portfolios online in just a few minutes, and the robo-advisor automatically rebalances the portfolio as market conditions change.

While robo-advisors are excellent for investors who prefer automation and are looking for a low-maintenance investment solution, they may not offer the same degree of customization as other investment vehicles. Robo-advisors generally follow a passive investment strategy, which may not appeal to investors who prefer active management or who have more complex financial goals. However, for those who simply wish to grow their wealth in the long term without having to make decisions or monitor the market closely, robo-advisors are an excellent choice.

In Singapore, REITs are well-regulated and offer relatively high dividend yields compared to other asset classes. This makes them particularly appealing to income-focused investors. Well-known REITs in Singapore include CapitaLand Integrated Commercial Trust (CICT), Mapletree Commercial Trust, and Ascendas REIT. These REITs typically invest in commercial, retail, and industrial properties, providing diversification within the real estate market.

REITs are a good option for investors looking for consistent income streams, as they pay out regular dividends. However, they are also subject to market and property-specific risks. Changes in interest rates, the property market, or even economic conditions can impact the performance of REITs. Additionally, REITs may not provide the same level of growth potential as other asset classes, as their primary appeal is the steady income they generate.

In Singapore, government bonds such as Singapore Savings Bonds (SSBs) are especially popular, as they are considered a safe and low-risk investment. SSBs offer a reliable return and are backed by the Singapore government, making them a preferred choice for conservative investors. Corporate bonds, which tend to offer higher returns, are also available but carry greater risk.

Bonds are a passive investment option that provides predictable income through interest payments. However, they may not offer the same level of growth potential as equities or other investment vehicles. For investors with a low risk tolerance or those nearing retirement, bonds provide a stable and reliable option. The downside, however, is that bonds are generally less liquid compared to ETFs or mutual funds, and their performance can be affected by interest rates and inflation.

​Ultimately, the best passive investment option depends on an individual’s risk tolerance, investment horizon, and financial goals. Diversifying across multiple investment vehicles may be the most effective way to build a well-rounded portfolio that balances growth and risk.