Build and run an ETF portfolio

Set your asset allocation, choose and compare ETFs, rebalance by a fixed rule and run your portfolio from a written plan.

This course is for people who have bought their first ETF and want to know what to do next. Most people stop there, add a second fund on a friend's tip, and end up with several holdings and no plan for a crash. Here you build a portfolio you can run for decades. You set the split between shares and bonds first. Then you pick indexes and funds to fill it, compare ETFs on cost, tax and domicile, and decide how SRS and CPF fit in. You finish with a written investment policy statement, so you know what you will do the next time markets fall.

What you'll be able to do

• Set a target asset allocation based on your time horizon, the growth you need and how much loss you can tolerate
• Choose the indexes that fill your allocation and check your combined exposure to each country
• Compare ETFs on TER, tracking difference, domicile, withholding tax, fund size and spread
• Choose between accumulating and distributing share classes, and set a currency hedging policy, with your reasons written down
• Write a rebalancing rule and test it against a made-up crash
• Place your holdings across cash, SRS and CPF accounts and manage them as one portfolio
• Write a one-page investment policy statement and keep it up to date with a yearly review

Syllabus

Module 1: Make asset allocation the first decision

Choose how to split your money between shares, bonds and cash. That split drives most of your portfolio's ups and downs, and you set it from your time horizon, the growth you need and how you behave when markets fall.

• 1.1 Your allocation does more work than your fund choice
• 1.2 What shares, bonds and cash each do in a portfolio
• 1.3 Set your split from horizon, need and nerve
• 1.4 Draft your target allocation

Module 2: Choose the index before the fund

Learn how indexes are built and weighted, compare world, US, emerging market and Singapore indexes, and pick the ones that fill the share part of your allocation.

• 2.1 What an index is and how it decides weights
• 2.2 World, US, emerging or Singapore: what each index gives you
• 2.3 One world fund or a set of building blocks
• 2.4 Map indexes onto your allocation

Module 3: Compare ETFs that track the same index

Compare ETFs on what they actually cost you: expense ratio, tracking difference, domicile and withholding tax, fund size and trading costs. Then pick a fund for each part of your plan.

• 3.1 Expense ratio and the costs it leaves out
• 3.2 Tracking difference is what you actually lost to the index
• 3.3 Domicile and withholding tax on dividends
• 3.4 Fund size, trading volume and the bid-ask spread
• 3.5 Build an ETF comparison sheet

Module 4: Decide between accumulating and distributing funds

You will learn how each share class handles dividends, compare the two on tax, admin and behaviour, and pick one for each holding in your plan.

• 4.1 Two ways a fund can handle its dividends
• 4.2 Tax, costs and the behaviour each one encourages
• 4.3 Choose the share class for each holding

Module 5: Settle home bias and currency exposure

Decide how much of your money to keep in Singapore and how much in the rest of the world, see what currency moves do to returns for an SGD investor, and choose whether to hedge.

• 5.1 Home bias: holding too much of what you know
• 5.2 What currency moves do to your returns in SGD
• 5.3 Hedged share classes: when they help
• 5.4 Set your home and currency limits

Module 6: Rebalance by rule, not by mood

You will choose between calendar and threshold rebalancing, use new contributions to rebalance cheaply, and write a rule you will stick to in both a crash and a boom.

• 6.1 Why your allocation drifts
• 6.2 Calendar or threshold rebalancing
• 6.3 Rebalance cheaply with new contributions
• 6.4 Test your rule on a made-up crash

Module 7: Invest through SRS and CPF with care

How SRS and CPFIS work for ETF investors, what each one costs you in lost interest or flexibility, and which parts of your plan to hold in which account.

• 7.1 How SRS works for an ETF investor
• 7.2 CPFIS: what you can buy and what it costs you
• 7.3 Which money goes in which account
• 7.4 Draw your account map

Module 8: Write your investment policy and review it every year

You will write an investment policy statement that puts your allocation, funds and rules on one page. You will also set up a yearly review that changes the plan only when there is a real reason.

• 8.1 What goes in an investment policy statement
• 8.2 Rules for when markets fall and when they boom
• 8.3 The yearly review: what to check and what to leave alone
• 8.4 Write your investment policy statement

Frequently asked questions

How long does the course take?

About nine hours across eight modules, including the exercises and the final project. Most people finish in four weeks, spending two to three hours a week.

Will you tell me which ETFs to buy?

No. The course is education and does not replace financial advice. Examples refer to types of fund, such as a world equity ETF, and you choose your own funds using the comparison method taught here. For advice on your own situation, speak to a licensed financial adviser.

How is this different from Investing 101 and Investing in US and global markets from Singapore?

Investing 101 takes you as far as opening your first account and buying your first ETF. This course covers building the full portfolio and the rules for running it. Brokers, custody and US estate tax are covered in detail in Investing in US and global markets from Singapore.

Do I need a large sum to start?

No. The method works for a monthly savings plan as well as a lump sum. Lesson 3.1 shows you how to check that fixed fees do not take too large a share of a small regular investment.

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