For many Singapore investors, the past 15 years have made it almost a no-brainer to park most of our money in US stocks. And when we say “US stocks,” we’re usually talking about the heavyweight champion —the S&P 500 Index.
It’s the world’s most-watched stock market benchmark, home to corporate giants like Apple, Microsoft and Amazon. Thanks to these tech behemoths, the S&P 500 has delivered some truly impressive returns over the past decade or so.
But as global markets shift, and as President Trump’s policies reshape trade relationships and geopolitical dynamics, it’s fair to ask: Is betting everything on the S&P 500 still the smartest move?
Because while the US market has had a dream run, no trend lasts forever, and the next decade could look very different from the last.
That’s why it might make sense to start looking closer to home, for example, Singapore’s very own Straits Times Index (STI), as part of a more balanced, diversified portfolio.
Read Also: How To Invest In STI ETFs In Singapore
Dominant Appeal Of The S&P 500 Index
There’s no escaping the fact that when it comes to stock markets, the S&P 500 is the heavyweight champion. It’s the “800-pound gorilla” of global equities, and for good reason.
The index tracks 500 of America’s biggest listed companies and has become the shorthand for “the stock market.” Over the past decade, it’s delivered strong double-digit annual returns, leaving most other indices struggling to keep up.
The secret sauce? Big Tech.
The so-called “Magnificent 7” — Apple, Microsoft, Nvidia, Amazon, Meta, Tesla, and Alphabet — now make up over 30% of the S&P 500’s weight. That’s a lot of influence in just seven names, but these companies dominate globally and have seen explosive growth in profits and share prices.
For investors, buying the S&P 500 through an ETF has basically meant owning a slice of the world’s most powerful and profitable businesses. It’s been a winning strategy, at least so far.
A Different Mix At Home: The Straits Times Index
Back in Singapore, the Straits Times Index (STI) paints a very different picture.
Instead of tech giants, the STI is driven by financials, property developers, and real estate investment trusts (REITs). In fact, the three local banks — DBS, OCBC, and UOB — alone make up about half the index, with DBS taking up roughly a quarter on its own.
That might sound overly concentrated, but here’s the upside: if you already hold US or global ETFs that are tech-heavy, adding the STI actually helps diversify your portfolio. Since financials only make up around 14% of the S&P 500 and 18% of the MSCI All-Country World Index (ACWI), Singapore’s banking tilt provides exposure to very different growth drivers.
Our banks benefit from higher interest margins, regional trade, rising wealth management activity, and generally strong household balance sheets. Meanwhile, REITs give investors access to tangible, income-producing assets, from shopping malls to industrial spaces, that continue to appeal to those looking for a stable yield.
Why Diversification Matters More Than Ever
In 2025, the case for not putting all your eggs in the S&P 500 basket has grown stronger. A few key forces are at play, and they directly affect what lands in your pocket.
Let’s start with the US dollar.
So far this year, it’s been having a rough ride. Thanks to ongoing tariff disputes and confusion over how quickly the US Federal Reserve might cut rates, the greenback has suffered its worst first half in nearly 50 years, falling about 10% in just six months.
That matters because when you invest heavily in US assets, your returns are exposed to currency swings.
For example, while the S&P 500 rose 5.7% in US dollar terms in the first half of 2025, the weaker currency meant that Singapore investors actually saw a negative return of around –4.3% after converting back to Singapore dollars.
In short, strong US stocks don’t always translate into strong SGD returns.
Valuations & Concentration Risks
Beyond currency, the US market itself looks stretched. Years of massive gains from tech giants have pushed valuations to lofty levels, great for those who got in early, but it means future returns may be more modest.
Singapore’s market, on the other hand, trades at far more reasonable earnings multiples. It’s supported by steady dividends, a resilient banking system, and growing interest in small- and mid-cap companies that could offer better value.
Another red flag: sector concentration. The top 10 stocks now account for more than 35% of the S&P 500, a higher concentration than during the dot-com boom. These are world-class businesses, no doubt, but history reminds us that no sector stays on top forever.
Dividends: The STI’s Quiet Strength
Here’s where the STI shines — steady income.
Singapore-listed companies tend to pay higher dividends than their US counterparts, thanks to their mature business profiles. The STI’s average dividend yield hovers above 4%, compared with just about 1.3% for the S&P 500.
And remember, Singapore dividends are tax-free, while US dividends are subject to a 30% withholding tax for foreign investors. That’s a meaningful difference when you’re investing for the long run.
Dividends might not make headlines like stock price rallies, but over time, they do the heavy lifting. In fact, even in the US, dividends have historically contributed roughly a third of total market returns. In Singapore’s case, that share is likely even higher.
The Practical Side: Simplicity, Access & Tax Efficiency
There’s also a practical angle to diversifying into the STI. You can invest through local exchange-traded funds (ETFs) such as the SPDR STI ETF (SGX: ES3) or the Nikko AM STI ETF (SGX: G3B), both of which track the index and distribute dividends.
These ETFs are easy to buy through SGX, and you can even invest small amounts regularly using savings plans offered by local brokers and banks. With many new digital brokerages now offering low or even zero-commission SGX trades, it’s a cost-efficient way to invest.
Plus, unlike US-listed ETFs, Singapore ETFs don’t carry estate tax exposure—an often-overlooked risk that could expose non-US investors to taxes of up to 60% on holdings above US$60,000.
To be clear, this isn’t about dumping your S&P 500 holdings. US stocks still make up roughly two-thirds of global equity markets and, naturally, remain a key driver of long-term growth.
The smarter move is balance. By blending S&P 500 exposure with STI holdings, you can reduce your portfolio’s concentration risk, gain access to tax-free dividend income, and cushion your returns against currency swings.
In investing, diversification isn’t about choosing sides; it’s about building resilience. And for Singapore investors, that might mean giving your home market a little more room to shine.
Read Also: MAS Appoints 3 Asset Managers To Invest In Singapore Stocks. What This Means For Local Investors
Photo Credit: Moo Kar Ming/DollarsAndSense
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