5 Fascinating Things for Investors to Know About the Straits Times Index

Blue chips, or stocks which make up the Straits Times Index (SGX: ^STI), tend to be a favourite among Singapore investors.

The SPDR STI ETF (SGX: ES3), an exchange traded fund which mimics the fundamentals of the STI, represents one way for investors to invest in the some of the biggest companies in Singapore’s market.

A recent report from the ETF shed some light on the inner workings of the Straits Times Index. Here’re five things investors may want to know:

1. The SPDR STI ETF’s annualised performance (including dividends) between 11 April 2002 (the fund’s inception) and 31 December 2016 is 6.58%. Without dividends, the SPDR STI ETF’s annualised performance would be 3.46%. This comparison shows how important dividends are in the equation when it comes to long-term investing returns.

2. The annualised performance of the Straits Times Index over the same timeframe above is 3.48%. The 0.2% difference between the returns of the SPDR STI ETF and the Straits Times Index comes mainly from the expense ratio of the ETF. The expense ratio for 2016 was 0.3%, unchanged from 2015. For investors, the smaller the expense ratio, the better the returns.

3. The General Industrials sector made a comeback in 2016, occupying 6.42% of the Straits Times Index. This was prompted by the return of Jardine Matheson Holdings Limited (SGX: J36) to the stock market benchmark; the company replaced Sembcorp Marine Ltd (SGX: S51) in 2016. General Industrials accounted for only 0.75% of the Straits Times Index in 2015.

4. The return of the General Industrials sector came at the expense of other sectors. The most affected were the Bank and Financial services sector and the Oil Equipment Services and Distribution sector. The latter sector is represented by Keppel Corporation Limited (SGX: BN4) and Sembcorp Industries Limited (SGX: U96). As mentioned earlier, Sembcorp Marine had dropped out.

5. The smallest contributor to the Straits Times Index is SIA Engineering Company Ltd (SGX: S59). The aircraft maintenance services provider makes up only 0.33% of the index. On the other end of the spectrum, DBS Group Holdings Ltd (SGX: D05) accounted for 12.16% of the Straits Times Index. This is a stark example of the differing impact of the component companies.

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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 contributor Chin Hui Leong doesn’t own shares in any companies mentioned.