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Despite its small size, Singapore has one of the world’s strongest economies. According to the , our GDP per capita, measured in purchasing power parity (PPP), is approximately US$141,500, ranking it amongst the highest globally and highlighting our robust economic position. Singapore’s stability and renowned connectivity make it an attractive destination for businesses and investors. For those looking to participate in Singapore’s economic growth, one easy way is via investing in its companies. Growing up in Singapore, I’ve always considered the Singapore Exchange (SGX) as the primary platform for investing. As Singapore’s primary exchange, the SGX plays a crucial role in maintaining Singapore’s position as a well-connected global financial hub. On the SGX, we can invest in some of Singapore’s top companies, including the three local banks—DBS, OCBC, and UOB—and other established firms like Singtel, Singapore Airlines and many more. According to the for June 2024, there are 623 listed securities on SGX, with a total market capitalisation of S$792 billion. If you are based in Singapore, the SGX is an ideal platform for starting your investment journey. However, if you are new to investing, the vast number of companies listed on the SGX can be overwhelming, and it can be challenging to decide which ones to invest in. To simplify this, Exchange Traded Funds (ETFs) offer a practical entry point. ETFs are collections of securities traded on an exchange, designed to track the performance of specific indexes. By investing in a single ETF, investors gain exposure to a broad range of assets, reducing the risk associated with individual investments. ETF managers handle the portfolio management, including rebalancing to align with the tracked index, allowing investors to participate in the market without needing to constantly monitor and manage their investments. In this article, we will highlight four ETFs available on the SGX that can provide exposure to various segments of Singapore’s economy, allowing us to benefit from the growth and stability that Singapore’s economy offers. One of the most popular ETFs on the SGX is the (SGX: G3B). This ETF provides investors with exposure to the Straits Times Index (STI), which tracks the performance of the top 30 companies listed on the SGX by market capitalisation. In other words, by investing in the , you will be investing in the top 30 largest companies listed in Singapore by market capitalisation. This ETF provides you with a good representation of major companies in Singapore’s economy. Source: Nikko AM, as of 30 June 2024 Based on their (as of 30 June 2024), the has a significant weighting towards the financial sector, particularly the “Big Three” banks—DBS, UOB, and OCBC—which together make up over 50% of the ETF’s holdings. This is because these banks are among the largest companies in Singapore. The next most significant sectors in the ETF are Real Estate (16.5%) and Industrials (15.5%), providing exposure to stable and mature companies known for consistent dividend payments. Launched in February 2009, the ETF pays distributions semi-annually* and has a Total Expense Ratio (TER) of 0.29% per annum. It has achieved an annualized total return of 8.06%** since its inception, based on the June 2024 Factsheet, making it a popular choice for investors seeking diversified exposure to Singapore’s economy. Real Estate Investment Trusts (REITs) are a popular investment option in Singapore, which has become the largest REIT market in Asia outside of Japan. As an asset class, REITs are required to distribute 90% of their earnings to unitholders, making them attractive to income-seeking investors looking for high yields (source:?). Instead of selecting individual REITs, an easier way to gain diversified exposure to this asset class is through a REIT ETF, such as the (SGX: CFA/COI). This ETF is traded in both Singapore Dollars (SGX: CFA) and US Dollars (SGX: COI) and aims to replicate the performance of the FTSE EPRA Nareit Asia ex Japan REITS 10% Capped Index, which tracks the performance of REITs in both developed and emerging markets in Asia ex Japan. By investing in the , you gain exposure to many of the top REITs in Singapore, including CapitaLand Integrated Commercial Trust and CapitaLand Ascendas REIT. Beyond just Singapore, you also get exposure to other major REIT markets across Asia, including Hong Kong and India, with investments in REITs like Link Real Estate Investment Trust (based in Hong Kong) and Embassy Office Parks REIT (based in India). Source: Nikko AM, as of 30 June 2024 Based on their , we can see that Singapore has the highest weightage within the ETF at about 70%. The ETF also has significant holdings in Hong Kong (12.2%) and India (9.5%). The main sectors covered are Retail REITs (36.5%), Industrial REITs (29.3%), and Office REITs (14.4%). Listed since March 2017, the ETF has earned an annualised total return of 0.58%** since inception. While many investors focus on equities for their potential to generate high returns, it’s crucial to also consider the role of fixed income instruments like bonds in a portfolio. Bonds may provide stable, passive income and often have an inverse correlation with stocks. This means including stocks and bonds in a portfolio may reduce overall risk and limit potential losses. The stability and fixed interest payments of bonds may offer a counterbalance to the volatility and potential high returns of stocks, creating a more resilient and balanced investment strategy. Similar to stocks, we can invest in bonds through ETFs. One such ETF listed on the SGX is the (SGX: A35). This fund provides investors with access to bonds mainly issued by the Singapore government, which holds a AAA credit rating, and quasi-Singapore government entities ensuring these bonds are safe and creditworthy in terms of default risk. By investing in the , you are essentially investing in secure bonds mainly issued by the Singapore government, supported by a stable and strong Singapore Dollar (SGD). Source: Nikko AM, as of 30 June 2024 As we can see from their , the top 10 ETF holdings consist of only high-quality government bonds, which are considered low-risk investments. This makes the an attractive option for investors seeking stability and predictable income in their portfolios. If we want higher returns from our bond investments, we can also consider investing in high quality corporate bonds through the (SGX: MBH). This ETF closely tracks the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index. By investing in the , we would invest in investment grade bonds issued by high quality entities such as Temasek, DBS, HSBC, NTUC Income and UOB. The average credit rating for the fund is A based on their . Source: Nikko AM, as of 30 June 2024 The is attractive to investors looking for stable returns and lower risk, as it focuses on investment-grade bonds from financially strong and stable companies. The semi-annual distributions* provide regular income, appealing to those seeking a steady cash flow. Additionally, the ETF’s diversification across various sectors and issuers may help to mitigate risk, as it is not overly dependent on any single entity or sector. The rise of ETFs as a popular investment tool globally may also be reflected in Singapore. Unlike individual company shares that require buying in lots of 100, SGX-listed ETFs can be purchased with just one share, making them highly accessible. This feature makes ETFs an excellent choice for building diversified portfolios, particularly for new investors. ETFs like the , , , and provide investors with broad-based exposure to Singapore’s economic growth and stability. These ETFs offer a mix of government bonds, corporate bonds, equities, and REITs, enabling investors to benefit from the stability of government bonds, the creditworthiness of high-quality corporate bonds, and the growth potential of leading Singaporean companies and real estate assets. However, investors should be aware of key risks and considerations associated with these ETFs. Market volatility can cause significant price fluctuations in equities and REITs while interest rate changes can lead to capital losses in bond ETFs. Also, while diversification reduces risk, it doesn’t eliminate it; sector-specific or economic downturns can still impact performance. With the diverse offerings of these ETFs, investors can come together as one to participate in the growth story of Singapore’s economy, benefiting from the collective strength of multiple sectors and asset classes.