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How to Get Good Investment Returns While Staying Lazy

“It is too hard, it is too risky, and I do not have the time to do it”. These are some of the common reasons I’ve heard from others about why they’re not investing. And when I hear them, I have a penchant for addressing these points. In particular, here’s what I have to share regarding the last one about time.

Thing is, I do agree that investing takes time. It requires an investor to constantly learn, read up about companies, and gain knowledge about different industries. Not only that, investors also have to spend time understanding different investing concepts and then use even more time to apply and review these concepts.

However, I do not think that these are good enough reasons to make a person stay away from investing. This is because there is still a way to get decent returns even if you do not have the time to actively invest yourself. In other words, you can still get satisfying results while being lazy.

The way to do so resides in exchange-traded funds (ETFs) which tracks major market indexes. In fact, even billionaire investor Warren Buffett actually recommends index funds for the average investor. This is how he describes it:

“Among the various propositions offered to you, if you invested in a very low cost index fund – where you don’t put the money in at one time, but average in over 10 years – you’ll do better than 90% of people who start investing at the same time…

…If you like spending 6-8 hours per week working on investments, do it. If you don’t, then dollar-cost average into index funds. This accomplishes diversification across assets and time, two very important things.”

In Singapore, the most widely-followed market index would be the Straits Times Index (SGX: ^STI). In its current incarnation, it consists of 30 of some of Singapore’s largest publicly-listed companies. Through an index tracker, an investor can instantly be invested in those 30 companies. There are currently two ETFs which track the Straits Times Index and they are the SPDR STI ETF (SGX: ES3) and Nikko AM Singapore STI ETF (SGX: G3B).

These ETFs also have low expenses, keeping in mind that high expenses can really destroy an investor’s returns. The SPDR STI ETF has a total expense ratio of 0.30% while the Nikko AM Singapore STI ETF has a total expense ratio of 0.39%. In comparison, the average equity-based unit trust in Singapore had carried an expense ratio of 1.94% in 2013, according to Morningstar.

The SPDR STI ETF was set up in April 2002 and over the past 12-plus years, it has delivered total annualised returns (when gains from reinvested dividends are considered) of 8.5%. That’s not a bad return for doing almost nothing (besides buying and then holding the ETF), right?

Of course, ETFs tracking Singapore’s market benchmark may not be right for everyone. But if you’re a time-starved investor, it’s worth thinking about what these ETFs can do for you.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.