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Balanced stock, bond & gold ETF portfolio generated 5% return in 2014 YTD

As discussed in this feature at the end of June, portfolio diversification is typically achieved by spreading investments across a broad range of asset types. An important feature of Exchange Traded Funds (ETFs) is that they track a wide range of indices based on the performances of local stocks, international stocks, bonds, commodities.

For this reason, ETFs can also be referred to as portfolio products. Moreover, despite representing the performance of an index, an ETF is traded like a stock – allowing an investor to open or close an ETF position at market prices during market trading hours.

The most active of the Singapore Exchange (SGX) listed ETFs across the realm of local stocks, international stocks, bonds, commodities in the year thus far include the SPDR® Straits Times Index ETF (SGX: ES3), iShares MSCI India Index ETF (SGX:I98), iShares Barclays Capital USD Asia High Yield Bond Index ETF (SGX:O9P) and SPDR® Gold Shares (SGX:O87). Of these four ETFs, the iShares MSCI India Index ETF has performed the strongest in the year thus far, with a 24.9% total return in Singapore dollar terms. While the MSCI India ETF is the most active of all ETFs listed on SGX, the internationality is confined to one country. The remaining three of the four ETFs, which span local stocks, regional bonds and gold, have also generated positive total returns in the year thus far which are illustrated below.

my gateway graph 1

Source: Bloomberg (Data as of 10 October 2014)

Please note the performance of the two US Dollar denominated ETFs – iShares Barclays Capital USD Asia High Yield Bond Index ETF and SPDR® Gold Shares have been converted into Singapore Dollars. Together, the three ETFs in the chart above have generated an average total return of 4.9% in the year to date on the assumption a portfolio was equally balanced among the three ETFs.

If the SPDR® Gold Shares was 10%, rather than one third of the portfolio, the combined portfolio total return would have been 5.7%. The World Gold Council has published research on the past performance of a 10% portfolio weighting to Gold in previous global downturns.

Name SGX Code Currency Px Chg Pct YTD (SGD) % Total Return YTD (SGD) % Dividend distributed in 2014 YTD
SPDR® GOLD SHARES O87 USD 2.6 2.6 N.A.
SPDR® STRAITS TIMES INDEX ETF ES3 SGD 1.2 4.1 S$0.088
ISHARES BARCLAYS CAPITAL USD ASIA HIGH YIELD BOND INDEX ETF O9P USD 3.1 8.0 US$0.50

Source: SGX and Bloomberg (Data as of 10 October 2014)

SPDR® GOLD SHARES

The SPDR® GOLD SHARES ETF has an investment objective to track the performance of the price of gold bullion. This ETF maintained 2014 year-to-date total return of 2.6% in the year thus far on a Singapore Dollar basis. Longer term a decline of 30.5% occurred over the period from 30 December 2011 to 10 October 2014. As detailed in the table above, SPDR® GOLD SHARES does not distribute dividends. Please also note that the SPDR® Gold Shares ETF is categorised as a Specified Investment Product (SIP).

  SPDR® Straits Times Index ETF

The investment objective of SPDR® Straits Times Index ETF is to replicate as closely as possible, before expenses, the performance of the STI. The SPDR® Straits Times Index ETF generated 2014 year-to-date total return of 4.1%. While the price of SPDR® GOLD SHARES declined 30.5% period from 30 December 2011 to 10 October 2014, the SPDR® Straits Times Index ETF generated a total return of 29.9%. Alternatively, another choice of investing in the STI is through Nikko AM STI ETF (SGX:G3B) which also replicates the performance of the STI.

iShares Barclays Capital USD Asia High Yield Bond Index ETF

The iShares Barclays Capital USD Asia High Yield Bond Index ETF has an investment objective to provide investment results, before fees and expenses, closely corresponding to the performance of the Barclays Capital Asia USD High Yield Diversified Credit Index in US dollar terms. This index tracks the performance of fixed-rate US dollar-denominated government-related and corporate high yield debt of the Asia ex-Japan region. The iShares Barclays Capital USD Asia High Yield Bond Index ETF generated an 8.0% return in the 2014 year to date on a Singapore Dollar basis. Longer term, the ETF generated a total return of 30.1% from 30 December 2011 to 10 October 2014.

A portfolio balanced across the three ETFs from the end of December 2011 to 10 October 2014 would have generated a return of 9.8% on a Singapore dollar basis. Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David KuoTake Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

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