Wednesday, 21 May 2014


It's been awhile since I did my last post. Woohoo, exams are finally over. Yay, FREEDOM :)

I will be doing a summary on the difference between Nikko AM STI ETF and SPDR STI ETF. Some people are still confused over these two ETF. I hope my post can bring some enlightenment.

Basically, these two different ETF are managed by two separate fund companies. The inception dates for SPDR and Nikko AM are 17th April 2002 and 24 January 2009 respectively. Both track the STI ETF as close as possible by replicating the same 30 components. Both are Cash ETF whereby they are bought with underlying cash and not with derivatives.

Difference Between SPDR VS Nikko AM

It works a little similar like a mutual fund but their expense ratio (commission fee) are much lower. Nikko AM STI ETF has a higher expense of 0.39% as compared to SPDR STI ETF of 0.30%. This may seems a little negligible in terms of numerical value, but the power of compounding really can do wonders. Usually the larger the fund size, the lower the expense ratio due to economies of scale. In this case, in terms of lower expense ratio, SPDR is preferred. Moreover, dividend yield for SPDR offers 2.66%.

Both SPDR and Nikko Am works in a way where there is a buy/sell price. SPDR usually trades one cent wide while Nikko AM usually trades a few cents wide in spread. SPDR has a board size lot of 1000 while Nikko AM is 100. This means that small time investors are able to afford Nikko AM.

Tracking error is the discrepancy between ETF performance and Index performance. It measures the annualized standard deviation of daily return differences or to simply put the volatility in difference of performanceFor this case it means comparing NIKKO AM STI ETF and SPDR STI ETF against STI ETF. It is quite impossible to perfectly mimic the index and thus tracking error arises. So, we can roughly say that tracking error is a measure of the effectiveness of a manager to replicate the performance of an index.

Below is the breakdown of the sector allocation of the two different asset management company.

 Sector Allocation of SPDR STI ETF

Sector Allocation of Nikko AM STI ETF

Why invest in ETF? 

1. A diversified fund.
2. Lower transaction cost as compared to buying 30 components by yourself
3. Investors who are lazy or don't have time to research
4. Investors who don't have time to monitor
5. Investors need not cherry pick stocks
6. It tracks the performance of the ETF and generally it is an uptrend. 
(Note: Point 3-6, it is still best to do your own due diligence) 



Little Boy


  1. Very clear comparison table. thanks for the work.

    1. Hi Cory,

      Thank you for appreciating my work :)


  2. Little Boy (what a name ;-)),

    Thanks for this easy to read comparison and what is ETF all about. By the way, for the expense, any idea how is it charged? Is it a month deduction from our invested fund like Unit Link?

    From a ETF newbie uncle ;-)

    1. Hi Richard,

      Thank you, glad that you find it easy to read. This means that my effort have paid off.

      The dividends you receive from the ETF have already been deducted by the total expense ratio (TER). The dividends received by the funds come from investing in the 30 components. So after, deducting management fee, trust fee, etc. they are redistributed to ETF shareholders.

      In times where dividends received by the fund are not able to cover the cost, they will dispose part of the fund's portfolio of index shares and/or by short term borrowing.


    2. Thanks for the clarification. It seems like transparent to the investors then...

  3. Little Boy,

    Good job!

    Now to have some fun.

    In an alternative universe, can you see points 3 to 6 you have given for investing in a ETF are also the very same reasons why a person who thinks like that SHOULD NOT be "investing"?

    1. Hi SMOL,

      Thank you very much.

      I love how you always make me think. It's really a good thing.

      Yes, true. These are the same reason why a person should not be investing. I may have phrase it incorrectly. It's always good to do your own due diligence before committing your money into anything. You are right on this :)


    2. Little Boy,

      No, thank your open mind ;)

      Compliments? That's easy. Openness to constructive feedback?

      You will adapt well in the corporate world.

      Look out for your cohorts that can't take feedback from anyone. Soon, they will become "transparent". I think you can guess what happens to "invisible" co-workers in an organisation ;)

      Jia you!

      I'll give my every cent to start all over again at 18! Youth!

    3. I really hope I do adapt well in the corporate world.

      Thank you so much all this time :) I am so appreciative.

  4. Appreciable post. Making great comparison between the two firms on the basis of ETF performance and index performance,both.But I need some Best SGX stock picks for trading or investing in singapore market.

    1. Hi Sofiya,

      Thank you!

      I'm happy that people appreciate my post :)


  5. Very nice blog post. Indicating the comparative study among two firms of stock market. Can you'll post something related to the Best MCX Trading Advisor of the stock market, dealing in commodities.

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