STI Index is a ‘Super Terrible Index’?

Hey fellow FIRE-wannabes! I am back with a new post after some time (been busy with other hobbies like leathercrafting, and trying to keep fit with a slowing metabolism). Today’s post is about the STI index, or the Straits Times Index. The STI has a pretty bad reputation in general. In fact, some even call it the ‘Super Terrible Index’. However, being part of my own Bogleheads portfolio, it’s a moral responsibility to myself to take a deeper look at the STI.

Why Do People Dislike the STI Index?

To be honest, one doesn’t need to look hard to understand why the STI index isn’t very popular amongst millennial investors. There are just so many shiny and sexy ETFs these days. For example, the popular ARKK Innovation ETF, or the ARKG Genomic Revolution ETF by ARK Invest (to name a few). Above all, there’s the more traditional S&P 500 (tracked by VOO etc). Being a benchmark for many fund managers, there are also many advocates for dumbing down your investment strategy to just buying the S&P 500.

But back to the STI. Why do so many people have so little faith in it? Popular sentiments are that:

  1. STI is for ‘boomers’. C’mon, buying Singapore bank stocks?
  2. Also, STI seems to be in a boring range between S$2.00 – $3.50 forever.
  3. There is ‘no more growth potential’ for Singapore companies because there is ‘no innovation’.

A further look at the price chart of the STI index between 2010 and 2021 ‘confirms’ people’s disdain for it. Price has been trudging between S$2.50 – S$3.50 for a decade! As a result, this puts a dampener in one’s spirits when they see how people have been making bank in other equities.

STI index

STI Index Pays Dividends

However, we must not forget that STI is a distributing ETF that gives about 3.5% dividends a year (broken into 2 payments typically in Jan and Jul). Hence, we need to factor this (effects of dividends), when calculating whether investing into STI is worth it.

Investing S$1,000/Month Between 2017 – 2021 (With Dividends)

Let’s see what happens if you invested S$1,000/month from Jan 2017 to Apr 2021. During this time, you re-invest the dividends immediately upon getting them. Consequently, by Apr 2021, you would have injected a total of S$52,000, and the NAV would have been S$57,405 (an internal rate of return of 4.68%). Alternatively, you could have also ploughed in the entire S$52,000 right in the beginning (Jan 2017) and re-invested dividends. If so, the NAV in Apr 2021 would have been S$64,677 (IRR of 5.27%). Lump sum investing is better most of the time.

Note: If you do not know what IRR is, this is the best explanation on IRR I could find on YouTube!

Investing S$1,000/Month Between 2017 – 2021 (No Dividends)

Now, imagine a hypothetical world where STI index does not pay dividends. As a result, you would have no dividends to re-invest to get new units. If you invested S$1,000/month from 1 Jul 2017, you would have injected S$52,000 by Apr 2021. At the end, the NAV would have been a miserly S$53,011 (IRR of 0.91%)! Even if you had ploughed in the entire S$52,000 right in the beginning (Jan 2017), the NAV in Apr 2021 would have been only S$55,362 (a better, but still inferior IRR of 1.91%). Therefore, STI is definitely not a good investment if it doesn’t give dividends.

Dividends Versus no Dividends

DCA or Lump Sum?End Amount (Dividends)End Amount (No Dividends)
S$1,000/month from Jan 2017 – Apr 2021S$57,405S$53,011
S$52,000 lump sum in Jan 2017S$64,677S$55,362

Disclaimer on above simulations: STI index actually ended at a ‘decent’ price of S$3.24 on Apr 2021. Therefore, the gains were positive. Nevertheless, the above shows the stark difference between STI giving dividends, versus one in a parallel universe where it doesn’t. In any case, a short-term investment of 4 years is not a good test. The rest of the simulations below try to predict what happens if someone invests in the STI for the next 40 years at current market conditions.

Main Simulations

As with all simulations/projections of anything, lots of assumptions have to be made. For the sake of STI, we make the following general assumptions:

  • Firstly, a ‘worst-case scenario’ where STI ranges perpetually between S$2.00 – S$3.80 for the next 40 years, from May 2021 onward (self-fulfilling prophecy of Singapore ‘not having growth’).
  • Secondly, we assume dividends/unit is S$0.05/unit forever.
  • Thirdly, broker fees are not factored.

Scenario 1 – STI Index as Part of Bogleheads Portfolio

STI index
Note: X-axis is years elapsed (not age).

Imagine STI as part of a Bogleheads portfolio (comprising STI, IWDA and A35), where the ideal holdings of equities (like STI index) decrease with age. Assume Tom started investing in 2009 at age 25, with a Bogleheads goal of S$1,500,000 (ideal STI NAV would form a fraction of this goal). He buys S$1,000 of STI/month with the goal of hitting his ideal NAV (blue line), while re-investing dividends. He withdraws every time he exceeds ideal NAV. Between ages 50 – 80, he would have withdrawn about S$25,000/year, with a cumulative gain of about S$725,000. Ultimately, his total out-of-pocket cost would have been around S$260,000 (achieved at age 47), with an IRR of 4.76% at age 80. He would also still have an NAV of about S$215,000 left over!

Outlay to hit NAV target (for STI only)S$263,000 (achieved at 47)
Passive Income from 50 – 80S$25,011/year
NAV at 80S$216,103
Cumulative gain at 80S$750,336
IRR at 804.76%

Note: In a Bogleheads setting, Tom would have bought more when STI index is down (maybe selling bonds if he becomes very bond-overweight) to acquire more units at cheap prices. Note that the income of S$25,000 would only form a portion of passive income from his Bogleheads portfolio (which would also have IWDA and A35). Also, the interplay with IWDA and A35 would have also affected the pattern of accumulating STI units.

Scenario 2 – STI Fanatic Who Dedicates His Whole Portfolio to STI Index

STI index
Note: X-axis is years elapsed (not age).

Next, let’s take a look at someone who decides to make STI index his only investment strategy for life. He buys S$2,500/month worth of STI from 2009 (age 25) onward, with a portfolio target of S$1,500,000. Yes, S$2,500/month is insane for someone at age 25! But let’s just imagine for simulation purposes. At age 51, he would have hit this target, with an outlay of S$757,500. Between ages 51 – 80, he would be able to withdraw about S$65,000/year as retirement income (topping up the NAV to S$1,500,000 periodically, as needed). At age 80, he would still have S$1,386,416 left over!

Outlay to hit S$1,500,000 NAVS$757,500 (achieved at 51)
Passive Income from 50 – 80S$64,591/year
NAV at 80S$1,386,416
Cumulative gain at 80S$2,564,880
IRR at 804.63%
Portfolio target S$1,500,000 at S$2,500/month

Wanna retire earlier with a more modest lifestyle? A portfolio target of S$800,000 yields the following outcome:

Outlay to hit S$800,000 NAVS$552,500 (achieved at 44)
Passive Income from 44 – 80S$42,841/year
NAV at 80S$741,723
Cumulative gain at 80S$1,712,981
IRR at 804.93%
Portfolio target S$800,000 at S$2,500/month

Here’s another example with a portfolio target of S$700,000, contributing S$1,500/month.

Outlay to hit S$700,000 NAVS$552,500 (achieved at 44)
Passive Income from 44 – 80S$42,841/year
NAV at 80S$741,723
Cumulative gain at 80S$1,712,981
IRR at 804.93%
Portfolio target S$700,000 at S$1,500/month

Scenario 3 – Buying STI Monthly and Panicking During Crashes

Note: X-axis is years elapsed (not age).

The third and fourth scenarios are not of ‘proper’ portfolios. Neither are they about whether STI is profitable, per-se. Rather, they are a glimpse at what happens if you are too reactive during market downturns. In this case, STI is merely used as a vehicle for this demonstration.

For scenario 3, Tom buys S$1,000 of STI every month from 1 Jan 2017. IRR was decent at 4.2% as of 1 Jan 2020. Then, price crashed in Mar 2020 due to COVID-19. Seeing that price has dropped below S$3.00 and stayed low throughout the rest of the year, he decides to stop buying. Price recovers in Apr 2021, and he ends up with a gain of S$2,708 (IRR 2.54%). Better than leaving money in the bank, but definitely not an impressive return over a 4-year period.

Scenario 4 – Buying STI Monthly No Matter the Price

Note: X-axis is years elapsed (not age).

In contrast with scenario 3, let’s see what happens if someone just buys S$1,000 of STI/month continuously like a robot, without caring about price fluctuations. When price crashes in Mar 2020, he keeps buying throughout the crisis. By Apr 2021, he ends up with a gain of S$5,405 (IRR 4.68%), which is twice that of scenario 3! This happened because throughout 2020, he has been acquiring units for cheap. By Apr 2021, his average price/unit is S$2.93. For scenario 3, the average price/unit is S$3.02. The difference does not seem much at the level of a single security, but the effects are compounded with larger holdings.

Importance of Staying the Course During Market Downturns

In reality, scenarios 3 and 4 are very similar to me and my brother’s own experiences. He actually has the same portfolio makeup as me (STI, A35 and IWDA). Around Mar 2020 (in the thick of the COVID-19 crisis), equities worldwide started to tank sharply. The STI and IWDA were no exception. However, there was a difference between the two. STI stayed down from Mar – Nov 2020 before any signs of recovery. In contrast, while IWDA also saw a steep drop in Mar, it started climbing again quickly from Apr 2020. Therefore, my brother, disappointed at the dismal STI prices for the next few months, decided to reduce his STI allocation (in favour of IWDA). Consequently, this was straying away from the Bogleheads strategy of having a 50/50 split between local and foreign equity ETFs.

During this time, I continued to plough more funds into STI according to my desired allocations (basically, I continued averaging down to get more units for cheap). Because I was underweight in STI, I kept accumulating more of it. Come the turn of 2Q2021, the internal rate of return for my STI holdings ended higher than IWDA and A35! To my brother’s surprise, his STI holdings were barely breaking even in Mar 2021 (and only going slightly into profit in Apr 2021). All these while, he thought he did the ‘correct thing’ by stopping acquisition of STI to ‘protect’ his portfolio. However, this actually defeats the fundamental logic of Bogleheads investing (which is not to attempt to time the market)! Remember, it is much easier to accumulate when things are cheap, than chase an expensive stock!

Closing Thoughts on STI

Once again, scenarios 1 and 2 are based on a ‘pessimistic’ projection of STI being stuck in a range between S$2.00 – $3.80 (hence fulfilling the common objections against STI by most people). Even so, a median IRR of around 4.5% for both scenarios over a period of decades is good enough for me. This is achievable because STI gives dividends of about 3.5% a year. In the event STI breaks out of it’s preconceived mold of having ‘no growth’, we can look forward to even better gains.

If you play around with the simulations (links to Google Sheets below), you might also agree that a cyclical ranging market is not necessarily a bad thing, when there are dividends twice a year. Because of this, coupled with a Bogleheads strategy that forces you to buy low and sell high with zero emotion, I will continue investing into the STI systematically. In terms of actual statistics in my broker account, it is a fact that returns for STI currently outperforms IWDA (outlay is 50/50 for each). Importantly, be level-headed, and stick to pre-determined portfolio allocations if you are a long-term investor.


Finally, these posts are not financial advice. Simulations are based on a barrage of assumptions which could end up to be wrong. Hence, these are for educational and infotainment purposes only (please do your own diligence). At the same time, I would be delighted to hear your thoughts in the comments section below for further discussion. Also, do feel free to point out any stark mistakes in the calculations and/or assumptions used in these simulations for learning purposes. I hope you enjoyed this post!


  1. Simulations Google Sheet (static) <– Faster
  2. Simulations Google Sheet (dynamic) <– Slower (if you want to play with the values)

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