👋 Hey expats, this is Dexter. Welcome to a new edition of Money Abroad, my weekly newsletter where I bring you fresh tips on building wealth while living abroad.
Today in 10 minutes or less, you’ll learn:
- 🇸🇬 How to invest in Singapore as an expat
- 💎 Tips & hacks on stocks, bonds, and real estate
- 🧠 Best (and worst) performing assets in the last 10 years
🇸🇬 How to invest in Singapore as an expat
First post of a two-part series
Here’s how 75 Singapore expats reported allocating their assets:
- Company equity & real estate holdings were prized by high earners. ~20-100% higher for expats earning >$15k / month vs expats earning less
- Crypto is skewed towards the extremes. ~15-20% of assets for expats earning >$30k and <$10k / month vs <10% of assets for those earning between $10k-$30k / month
- Cash is king for expats earning <$10k / month (30%) vs higher income expats (20%)
- Alternatives had limited adoption (5%) across income levels
I apply these core ideas to my expat investing approach:
- Understand your goals & risk tolerance. Be 100% honest with yourself. (Do you really mean it when you say you can stomach 50% drawdowns?)
- Asset allocation is key. Design your portfolio based on your goals and risk tolerance.
- Invest for the long-term, ie 5-10+ year time horizons.
- Minimize fees. Watch out for hidden commissions and expenses.
- Factor in taxes & compliance costs when you run the numbers.
We’ll cover asset allocation further down the road.
For now, let’s deep dive into how to invest, plus tactical tips & hacks, for each asset class as a Singapore expat:
💎 How to invest, plus tips & tricks, by asset class
Stocks are shares of ownership in a publicly-traded company. Let’s include ETFs/index funds.
How to invest
- Invest directly. Interactive Brokers is an online brokerage for expats who plan to move around countries, but want to consolidate to a single brokerage account.
- Invest via Supplemental Retirement Scheme (SRS). Most foreigners are unaware they can save taxes by investing up to $35,700 annually into the government-supported SRS:
- Benefits include deducting from taxable income, investments compounding tax-free, and 50% withdrawals upon retirement tax-free.
- To open an account, apply via local banks like DBS, OCBC, or UOB (or choose funds under Endowus or Stashaway).
- Invest via robo advisor (Endowus, Stashaway, Syfe). Good for beginner investors who want to get started easily, save time using automation, and pay low fees (0.2-0.8%). Many expats use robos although with varying results:
Tips & hacks
- Prepare to swap currency if purchasing overseas stocks. “You might have to convert the currency within the platform to USD if you're buying US equities and you topped up in SGD.” - Romanian expat in Singapore
- Americans should use their US brokerage to avoid higher fund fees & tax issues. Eg buying foreign mutual funds may be more expensive than US funds & trigger PFIC tax/compliance costs. (I do this.)
- Take advantage of employer matching & SRS budgets (aka free money). “Some companies/MNC's do provide a separate budget for employees to save via SRS and will even provide annual contributions on top of their base compensation.” - Former Stashaway employee
- Eg Meta will match retirement contributions & allow withdraws when expats leave Singapore (if not PR/citizen).
Bonds are loans given to a company or government by an investor. We’ll focus on SG government bonds.
How to invest:
- Buy SG bonds directly through your local bank. You will also need to open a SGX CDP account.
- Three options: 6 or 12-month Singapore Treasury Bills, 2 to 50 year Securities Bonds, and 10 year Savings Bonds (I buy the first option: 6-month T-Bills)
Tips & hacks
- Invest part of your emergency cash in short-term T-Bills to earn interest. Assuming the latest 6-month T-Bill median yield of ~3.9%, you would earn ~$393 on $10k principal over the course of a year. (I hold ~60% of my emergency cash in 3-6 month US & SG T-Bills.)
🏡 Real Estate
Real Estate is property including land and structures on top of the land. Includes residential, commercial, industrial, land, and special use.
⚠️ Caution: Private real estate & funds are highly illiquid and high-risk. You have the chance of losing all your invested capital. Don’t invest more than you can afford to lose.
How to invest:
- Buy individual property. While Singapore locals can buy all kinds of property, non-PR foreigners are allowed to buy private condos, privatized executive condos, and landed properties (~20% of housing).
- Invest in public Real Estate Investment Trusts (REITs). REITs are companies that own real estate and trade like stocks. You can buy REITs through your brokerage or fintech. Two popular options that track a S$100B+ Singapore real estate index (~3-5% yield): Syfe REIT+, CSOP iEdge S-REIT Leaders Index ETF
- Invest in private REITs/funds. Pros: possibly higher returns, less volatile, more consistent yields than public REITs. Cons: more illiquid, less accessible, less info disclosed than public REITs.
- One option: Realvantage, an MAS-licensed firm that enables qualified expats to fractionally invest in residential and commercial assets across Australia, US, HK, and SG.
- Benefits (from their Investor Relations): 1/ lower min. check size of $25k 2/ locations expats might be familiar with 3/ tax-optimized, eg avoid stamp duty tax for overseas assets 4/ handles overseas property management
Tips & hacks
- Take advantage of no Additional Buyer Stamp Duty (ABSD) for certain countries. Foreigners buying their first property will typically have to pay a 30% ABSD. Luckily US, Switzerland, Norway, Liechtenstein, Iceland all have trade treaties with Singapore that eliminated ABSD.
- Be prepared for different mortgage terms in Singapore than back home. “Mortgages are not like US where you can get a 30 year fixed rate” - American expat. Instead, your option is to lock-in a fixed rate for 2-3 years duration.
Stay tuned for part 2, where we’ll cover company equity, alternative assets, crypto, and a special bonus 🙌
🧠 Insightful Bites
Asset allocation quilt chart from the past 10 years. Insight: it’s common for best-performing assets one year to be worst-performing the next year (eg emerging markets in 2017 and 2018). and vica versa.
U.S. stock market has grown ~10% per year from 15% of world equity markets in 1899 to 60% in 2022. TBD if this growth rate can be sustained for future.
Cautionary tale: 25-year-old trader amassed $1.5M during the pandemic, lost it all, & now works at Las Vegas deli. Yikes.
Financial statements made simple. Entertaining illustrations & storytelling from the Swedish Investor. Best intro to income statements, cash flow statements, and balance sheets I’ve seen.
Heard any juicy expat money tips recently? Reply or DM me links.