Sunday, November 1, 2020

Is The Straits Times Index That Bad In Performance?

I have been hearing comments and opinions about how not-so-good the Straits Times Index (STI) is doing for a long time. In this post, we shall find out quantitatively if this is true.

But first, a little caveat…


Introducing The iShares MSCI Singapore ETF


Since it was the weekend and I did not want to burn my brains calculating past returns from the two available local ETFs that tracked the STI, I had gone the easier way of using a proxy: the iShares MSCI Singapore ETF (EWS). The EWS ETF was launched in the US markets on 12 Mar 1996, which by the way was “older” than our very own SPDR STI ETF (ES3, listed on 17 Apr 2002) and the Nikko AM STI ETF (G3B, listed on 24 Feb 2009), so at least we could gather data a bit further back.


EWS tracked the MSCI Singapore 25/50 Index (Note: prior to 1 Dec 2016 it was tracking the MSCI Singapore Index), and the constituents and their respective weightages are comparable to the STI’s (see Figures 1 and 2 below):


Fig.1: Constituents of EWS (did not include cash component of the fund)1. 


Fig.2: Constituents of the STI2.


To top it off, here is a screenshot from Yahoo Finance, showing the close correlation between EWS, ES3 and G3B:


Fig.3: Chart of EWS, ES3 and G3B3.

Comparison With S&P500


I will use the SPDR S&P 500 ETF (SPY) for our analysis, since a number of people were using it for comparison. SPY has an even older history (incepted on 22 Jan 1993), so it is quite fitting to “track” their journeys together. I used Portfolio Visualizer ( to generate the numbers and here it is:


Fig.4: Performance Summary between EWS and SPY, with an initial USD 10,000 investment from Apr 1996 to Oct 2020. Final Balance and CAGR numbers are shown before inflation.


The statistics in Figure 4 did not paint a very good picture for EWS on all fronts, including returns and risk factors. Making it worse, after factoring in inflation, we get negative returns (CAGR -0.38%) instead.


So, is EWS (or STI) really that “bad”?


We return to the same figures came out by Portfolio Visualizer, and look at the annualized rolling returns:


Fig.5: Annualized rolling returns of EWS and SPY, based on full calendar year periods.


Assuming that EWS and SPY were bought on 1 Jan and sold on 31 Dec (hence the stated full calendar year) and going by my philosophy of holding your investments for at least 10 years, EWS actually performed better, with an average of 7.89% as compared to SPY’s 6.20%. Going down further, for the 15-year annualized rolling return, EWS returned an average of 7.54% over SPY’s 6.28%.


Judging from the results in Figures 4 and 5, it seems that the performance is neither good nor bad, because whatever the views on the outcome and answer, it boils down to the two famous words that I always use in replying to questions: it depends. We shall not touch on why SPY’s performance is better than EWS’/STI’s, but rather we would tackle it from a portfolio management perspective.


It Depends #1: The Holding Period


If you noticed in Figure 5, EWS’ 10-year annualized rolling period ranged between 1.89% and 16.57%, which meant that certain 10-year periods gave better results than others. Delving deeper, this is akin to a gamble; a lucky investor would get 16.57% per year after 10 years while another would get back a measly 1.89% annually if he/she picked the wrong 10-year window. 


The problem is we do not really know what would happen to our investments after 10 years, and if we are unlucky to plan the withdrawal on years like 2008, 2009 or even 2020, then it would be better to put it off and maybe wait for another few years to withdraw when things get better.


It Depends #2: Past Performance Is Not Indicative Of Future Results


This is a very common clause (or something similar to it) found in almost all investment literature, like prospectuses, factsheets, etc. I am bringing this up because what we were looking at was past data and we were inferring the results based on them. As reiterated in the previous section, we do not know what is in store for us; who knows, suddenly Singapore may become a hub of sorts and companies flock to set up shop and/or list in our exchange, thus growing our markets comparable to the S&P500’s.


On a macro scale, business and consumer trends, geopolitical issues and economic conditions may change the factors and parameters that produce the results that we obtained from our backtesting. Rather than hoping for things that may or may not happen, it would be prudent to adopt a more diverse and defensive approach to prepare for multiple scenarios, and this goes back to my basic emphasis on diversification, first by asset classes, then by regions/countries, sectors/industries and finally companies.


It Depends #3: Diversification Is Important


The scenario in Figure 4 assumed that an investor only held EWS since its inception and was the only holding in his/her investment portfolio. What if we used the famous 60/40 equity/bond portfolio, with EWS making up the 60% and the remaining 40% with a bond fund (I used a mutual fund, the Vanguard Total Bond Market Index Fund Investor Shares, or VBMFX, as it is currently one of the oldest bond funds around to match with EWS’ history)? Using the same timeline (Apr 1996 to Oct 2020), here are the results:


Fig.6: Performance Summary of portfolio with EWS (60%) and VBMFX (40%), Apr 1996 to Oct 2020, with an initial investment of USD 10,000. Rebalancing is done annually. Final Balance and CAGR numbers are shown before inflation.


Fig.7: Annualized rolling returns of the same portfolio, based on full calendar year periods.


With diversification, the results are more positive as compared to the ones in Figures 4 and 5. The returns are better, the volatility is lesser (based on standard deviation, worst year and max drawdown) and you still get almost the same average 10-year and 15-year annualised rolling returns, albeit with better “Low” scores (which mitigates the issue faced in ‘It Depends #1’). 




It is natural to view individual counters and assess its past performances and analyse its fundamentals as stock picking is a common trait among most investors (myself included). However, it is advisable to see things on a higher level, which is why I kept on harping about looking at our investments on a macro, portfolio level and the importance of diversification.


The STI ETFs (ES3 and G3B) are just a type of equities, which in turn is a component of a larger investment portfolio, akin to a piece of furniture (ETF) within a room (asset class) in a house (portfolio). While it is a good practice to look and inspect the furniture individually, we must not forget its place and role in the room and finally, in the house. 


1 – Detailed Holdings and Analytics. iShares MSCI Singapore ETF. iShares. 29 Oct 2020. (accessed 30 Oct 2020).


2 – STI Constituents. FTSE ST Index Series. FTSE Russell. 19 Aug 2020. (accessed 30 Oct 2020).


3 – Yahoo Finance as at 30 Oct 2020.


Further Note


There are a few assumptions on the statistics generated by Portfolio Visualizer, some of which includes (from the Portfolio Visualizer website):

  • All portfolio returns presented are hypothetical and backtested. Hypothetical returns do not reflect trading costs, transaction fees, or taxes.
  • The results are based on information from a variety of sources we (as in Portfolio Visualizer) consider reliable, but we (as in Portfolio Visualizer) do not represent that the information is accurate or complete.



  1. Good balanced writeup. A lot of 'hate' in the internet forums for STI. But I am still holding my STI ETF and I believe that it can recover to 3,000 in a few years'. At the same time, I agree one needs to diversify into other markets.

    1. Hello World,

      Thank you for your comment. Like you, I am invested in the STI, both by ETF and some of the individual constituents. Diversification to other markets (regions and countries) is advisable, too, as "good" and "bad" times in different parts of the world do not happen at the same time.