The Dividend Snowball: SPDR STI vs Amova STI ETF: How To Own Singapore's Banks Without The Heartache

🌟🌟🌟There is a quiet, almost invisible magic built into the concrete foundations of Singapore.  It doesn't scream for attention like a volatile tech stock on Wall Street, nor does it keep you awake at 3am in a cold sweat.  It is the steady unyielding power of financial compounding.

Compounding is the financial equivalent of rolling a tiny snowball down Bukit Timah Hill.  At first it looks insignificant.  But as it rolls, the snow picks up more snow.  In the investing world, your money makes babies and then those babies have babies, until you are suddenly sitting on a generational empire.

In Singapore, the kings of this compounding kingdom are our local banking trio: $DBS(D05.SI)$  $OCBC Bank(O39.SI)$  and $UOB(U11.SI)$  .  Together these 3 financial giants command over 50% of the entire Straits Times Index (STI).

Our 3 banking trio aren't just banks.  They are the structural tollbooths of South East Asian wealth.  Every time someone swipes a credit card, takes out a mortgage or parks their wealth in a private banking account, a tiny fraction of a cent drops into their vaults and eventually flows straight into your pockets as a dividend payout.

But if you are a new investor, staring down the recent banking selloff can feel incredibly intimidating.  Trying to pick the exact right time to buy DBS, OCBC or UOB is a fast track to analysis paralysis.

The smartest , stress free strategy? Don't choose.  Buy the top Singapore blue chips in a single click using an STI ETF.

The Great Singapore Showdown: $SS SPDR STI ETF(ES3.SI)$  vs $Amova STI ETF S$D(G3B.SI)$  

When you look at your Tiger Brokers App, you will find 2 ETFs staring back at you : SPDR STI ETF and the Amova Singapore STI ETF (formerly Nikko AM).

They track the exact same 30 blue chip companies.  They hold the same banks.  Yet Singapore finance forums have spilled endless digital ink debating which one reigns supreme.

Let's break down the data to see which ETF earns the crown for your wallet.

Expense Ratio: SPDR STI is 0.28%, dropped from 0.30%.  Amova Singapore STI ETF is capped at 0.25%.

Dividend Yield: SPDR STI is 3.30% while Amova STI is 3.50%.

Fund Size: SPDR STI is SGD 4 billion.  It is the undisputed heavyweight.  Amova STI is SGD 890 million.

Top 3 Holdings: Both ETFs are the same: DBS at 29.7%, OCBC at 19.4% and UOB at 9.7%.

Payout Frequency: Semi annual.  SPDR STI pays in February and August while Amova STI pays in January and July.

The Deep Dive Breakdown

If you read older financial blogs, you will often see a flat fee of 0.30% cited as the standard baseline fee for both funds.  However intense competition in the local ETF space has triggered a structural price war, directly benefiting retail investors.

SPDR STI has optimised its efficiency, causing its expense ratio to drop to 0.28%.

Amova STI responded under its new Amova management, implementating a strict operating cost cap that guarantees its total expense ratio stays at a low 0.24% to 0.25%.

While a 0.03% gap sounds like the price of a single curry puff, over 30 years of uninterrupted compounding, those minor cuts leaves vastly more capital in your portfolio to grow.

Advantage: Amova STI

Dividend Yield and Liquidity 

On paper, Amova STI shows a better dividend yield of 3.5% vs SPDR 3.3%.  However the latter is the ancient Titan of the SGX, boasting a huge SGD 4 billion asset pool.  This colossal size means the SPDR STI trades with incredibly tight bid-ask spreads.

When you buy or sell SPDR STI you get filled almost instantly at the exact market price.  Amova STI can occasionally experience wider spreads, meaning you may pay a small premium just to enter the trade.

Advantage: SPDR STI 

The Verdict: Which Is Better?

If you are a retail investor using a dollar cost averaging plan, SPDR STI is the safer, default gold standard.

However if you are planning to buy a large lump sum to hold for the long  term without touching it, Amova STI's competitive new expense ratio makes it an incredibly compelling alternative to maximise pure compounding efficiency.

Whichever ETF you choose, the secret isn't timing the market.  It is time in the market.

Concluding Thoughts 

When it comes to the unstoppable physics of compounding, Warren Buffett famously summed up his entire multi billion dollar portfolio in a simple elegant metaphor:

"Life is like a snowball.  The important thing is finding wet snow and a really long hill".

By dollar cost averaging SPDR STI or Amova STI ETF over time, you are effectively creating a snowball that will transform into an absolute avalanche of wealth.

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