Invest in Straits Times Index

I believe buying STI ETF will beat the market in the long run.  Currently there are 2 ETFs that track the Straits Times Index, Nikko AM STI and SPDR STI.  There have been many blogs or websites listing the the pro of buying the ETFs.  In my view

1. Low cost, management fee < 1%
2. STI represents the top 30 companies in Singapore.  There is a periodic review of the stocks, if it under performs it will be replaced.  The most recent case was NOL was taken out.  So it is the survive of the strongest.
3. Good diversification, buying a STI ETF is the same as buying 30 strongest companies in Singapore including Singtel, OCBC, DBS and UOB.
4. With dollar cost averaging in the long run, it can beat the market.

But which to buy Nikko AM STI or SPDR STI?
Nikko AM has higher expense ratio of 0.48% vs 0.3% for SPDR STI.  As compared Nikko AM has a larger tracking error as compared to SPDR STI.  Another key is SPDR gives higher dividend.  Taking data from 2008 to 2013, I make a comparison between Nikko AM STI and SPDR STI.  

Assuming an investor has a budget of $300 per month, I want to evaluate buying which ETF gives better outcome.  However SPDR STI trades at 1000 shares per lot and Nikko AM STI trades at 100 shares per lot.  So it is a little tedious to compare because Nikko AM can be purchased monthly, therefore I compare with the following 4 methods with purchase done of first day of the month starting from Nov 2008.  Nov 2008 is the start of the dip.

#1 with $300 per month
With $300 per month either accumulate the money enough to buy 1 lot of SPDR or buy 1 or 2 lots of Nikko and save the remaining for next month.  As SPDR is trading at 1000 shares per lot and Nikko at 100 shares per lot, so it is more difficult to buy SPDR. So it does not give good dollar cost averaging, if investor has only $300 per mth, he has to wait for months before he can buy a lot of SPDR therefore Nikko is better for dollar cost averaging despite the fact that it has lower dividend.  Result: Nikko wins

#2 buy ~$10,000 when hit the low and continue to practice DCA
Buy about $10,000 of SPDR or Nikko when it STI dip.  Then continue to use $300 per month of buy like #1.  Result: Nikko wins

#3 if SPDR trades at 100 shares per lot 
SGX has the intention to reduce stocks to from 1000 shares to 100 shares per lot, that may take place next year.  If that happen it will be a better comparison between the 2.  Same as # 1. Result: SPDR wins

#4 if SPDR trades at 100 shares per lot and 

Assume SPDR is trading 100 share per lot, then buy about ~ $10,000 of etf, then continue to use $300 per month.  This is the same as #2.  Result: SPDR wins

Conclusion from my own analysis on this, dollar cost averaging will beat market but it works better if we can pick a large sum when it dip.  As seen from the above, #4 will give the best yield with a combination of buying the bulk when market is low and continue DCA.  Can take MA 50 cut MA 200 as the point to buy the large quantity, then continue the dollar cost averaging.  Hope what I mentioned is clear for you.

Why do I invest?

The main reason that I invest is to reach financial freedom in 20 years time.

Investing for an ordinary salary worker like me is the only true way I can reach financial freedom.  I prefer stock investing.  It is by far the one that requires the smallest capital as compared to investing in property. You can buy 1 lot or 2 lot of the stock to start investing.  Although you will not make you rich overnight with 1 lot but you definitely have to start somewhere.  

I started buying stock in Aug 2011.  The first stock I bought was Genting.  At that point of time I have no idea how does the stock market work, and buy based on what others recommended.  Although I didn't make a lost after a year of foolish following others or make much money from stocks but I was not sure I am not going anywhere.  I was simply chasing when price was going up and didn't buy anywhere when price was at bargain.  Basically I was following the herd.  It was only until early 2012 that I realised  something had to change.  I started to read financial books and attend seminar to learn.  

I truly believe with this current basic knowledge of stock picking I can reach my goal of reaching financial freedom when I reach 55.  The first step to reaching my goal is to truly believe.  The next step is to work hard to my goal.

Along this financial journey I will pick up a lot of useful tricks, I wish I can pass everything I know through this blog to my children.  I shall call this "A gift to my children".