Anyone who is remotely financially savvy, if asked the questions, “ETF or mutual fund?” would without hesitation vote in favor of ETF. There are strong reasons for leaning towards an ETF’s – they are marketed as low cost instruments that can improve your returns over time. Even 1% saving every year compounded over a 5 year period could add up to 7-10% extra returns.
However, one should not forget the ultimate goal of total returns and in case of Vietnam, which has been my preferred market since my first visit to the country, the lion global mutual fund beats the ETF’s by a wide margin.
How does the Lion Global Vietnam Fund Stack up against the ETF’s?
The fund has beaten VNM, which is US listed ETF and XT Vietnam ETF listed on SGX by 76% and 39% respectively over past 5 years.
The chart from Bloomberg above summarizes the performance nicely. If I were to add in the currency rate variance the performance margin will improve even further. Singapore dollar has strengthened around 5% over USD in past 5 years and factoring for that the Singapore dollar denominated Lion Global fund would have beaten VNM by 81% and DB managed XT Vietnam etf by 44%.
The fund has even outperformed the Vietnam index over the past 5 years barring 2018 which was the Vietnam market peak and the fund lagged behind slightly. As of today it has beaten the index by 6%.
What is my strategy for 2021?
I believe in the Vietnam story in the long run. Its a country of grit and has young population. It is one of the few countries to have managed COVID waves effectively. I would rank it number one in managing the pandemic given its lack of resources as compared to a South Korea or a Taiwan.
The Vietnam market has delivered 15% YOY return in the last 5 years and I will continue to invest in Vietnam through this fund. Yes, the fund has a annual expense ratio of 1.78% and management charge of 1.5% but I am happy to pay that amount till the point in time my total returns are superior. Moreover this fund is SRS eligible which makes it perfect to be included in the retirement portfolio. For those of you not in Singapore SRS stands for Supplementary Retirement Scheme, equivalent of ISA in UK, 401K in US and ELSS in India
I think that the Vietnam market should go up by another 15% in 2021 and I would continue to invest through this fund.
So remember, don’t just buy an ETF because it has low cost, focus on superior returns for long term wealth accumulation.
3 thoughts on “Low Cost etf’s don’t always mean superior returns!!”
With the fourth wave of Covid in Vietnam I have exited the market. It’s still a good long term bet but if I can buy again 15% lesser then why not 🙂
One can reduce position in stocks with the news of new strain of the covid virus. The markets could sell off in an environment of thin liquidity during end of the year