Singaporean Variations of The Core 4 Portfolio

In my previous post, I explored several variations of the Bogleheads three fund portfolio for Singaporeans.

To recap, the ingredients of a three fund portfolio are:

  • A domestic stock index fund
  • An international stock index fund
  • A bond index fund

Another popular portfolio is Rick Ferri’s core 4 portfolio which consists of four funds. This is basically an extension to the three fund portfolio. The additional fourth fund allows you to add different tilts to customize the portfolio to your preference.

Classic Core-4 Portfolio

The classic core 4 portfolio introduces a REIT index fund as the fourth to the three fund portfolio. Here is the basic structure of the portfolio:

  • Domestic stock index fund
  • International stock index fund
  • Bond index fund
  • REIT index fund
ETFAllocation
Vanguard Total Market ETF (VTI)36%
Vanguard Total International Stock ETF (VXUS)18%
Vanguard Real Estate ETF (VNQ)6%
Vanguard Total Bond Market ETF (BND)40%
US Classic Core 4 Moderate growth 60% Equity 40% Bonds (Vanguard ETF version)

The most straightforward Singapore version is to substitute the US total market index with the SPDR STI ETF (ES3), substitute the total international stocks ETF with the equivalent Vanguard All World UCITS ETF (VWRA) for tax efficiency, substitute the US Real Estate ETF with the Lion Phillip S-REIT ETF (CLR) and substitute the US Bond Market ETF with the ABF Singapore Bond Index ETF (A35).

For the REIT ETF, either Lion Phillip S-REIT ETF (CLR) or NikkoAm Straits Trading Asia ex-Japan REIT ETF (CFA) is fine. If you want more Asia exposure, CFA has more regional diversification compared to CLR. CFA has a slighly higher TER of 0.60%

Vanguard all world UCITS ETF (VWRA) is in USD and is listed in the London Stock Exchange. So you might need a broker that has access to that market. Alternatively, you can choose the Infinity Global Stock Index Fund SGD Class which you can access via FSMOne. That fund has an annual expense ratio of 0.75%

ETFAllocationTER
SPDR STI ETF (ES3)36%0.30%
Vanguard FTSE All-World UCITS ETF (VWRA)18%0.22%
Lion Phillip S-REIT ETF (CLR)6%~0.58%
ABF Singapore Bond Index ETF (A35)40%~0.19%
Singapore Version 1 Classic Core 4 Moderate growth 60% Equity 40% Bonds

As I had previously mentioned in my three fund portfolio article, I do not really like the STI ETF. Hence, instead of using a global world ETF and a STI ETF, I would prefer to use the combo of iShares Core World MSCI World UCITS ETF (IWDA) and iShares Core EM MSCI IMI UCITS ETF (EIMI) instead.

ETFAllocationTER
iShares Core MSCI World UCITS ETF (IWDA)36%0.20%
iShares Core EM MSCI IMI UCITS ETF (EIMI)18%0.18%
Lion Phillip S-REIT ETF (CLR)6%~0.54%
ABF Singapore Bond Index ETF (A35)40%~0.19%
Singapore Version 2 Classic Core 4 Moderate growth 60% Equity 40% Bonds

You may look up the core 4 website to see the allocations for the different risk profile portfolios: low-risk (80/20), conservative (60/40), moderate growth (40/60), and aggressive (20/80)

There are also several other core 4 portfolios proposed by Rick Ferri.

Total Economy Core-4 portfolio

The first variation is the total economy core 4 portfolio which introduces small cap stocks with real estates to track the overall economy. The portfolio consists of:

  • Global stock index fund
  • Small cap index fund
  • REIT index fund
  • Bond index fund
ETFAllocation
iShares MSCI ACWI ETF (ACWI)42%
iShares S&P 600 Small Cap Value ETF (IJS)12%
iShares Core US REIT ETF (USRT)6%
iShares Core US Aggregate Bond ETF (AGG)40%
Total Economy Core 4 Moderate growth 60% Equity 40% Bonds (iShares ETF version)

For the Singapore version, the most tax efficient equivalent world small cap ETF is the iShare MSCI World Small Cap UCITS ETF (WSML). So we just have to substitute that in for the Singapore version. The rest of the ETFs are same as the ones used in the classic core-4 portfolio.

ETFAllocationTER
Vanguard FTSE All-World UCITS ETF (VWRA)42%0.20%
iShares MSCI World Small Cap UCITS ETF (WSML)12%0.35%
Lion Phillip S-REIT ETF (CLR)6%0.58%
ABF Singapore Bond Index ETF (A35)40%0.19%
Singapore Version Total Economy moderate growth 60% Equity 40% Bonds

Global Market Core-4 Portfolio

The next variation is the global market core 4 portfolio which adds a global bond index fund. The portfolio consists of:

  • US stock index fund
  • International stock index fund
  • US bond index fund
  • International bond index fund
ETFAllocation
Vanguard Total Market ETF (VTI)42%
Vanguard Total International Stock ETF (VXUS)18%
Vanguard Total Bond Market ETF (BND)30%
Vanguard Total International Bond Market ETF hedged (BNDX)10%
US Global Market Core 4 Moderate growth 60% Equity 40% Bonds (Vanguard ETF version)

The international bond ETFs that I had found are usually denominated in USD or EUR. You can opt for the hedged or unhedged fund. For me, I will choose the USD denominated and it does not matter if it is hedged or unhedged because my main currency is still SGD – holding in USD already exposes me to currency risk. So AGGU is the hedged ETF and AGGG is the unhedged ETF.

If you would like to look for international bond funds hedged in SGD, there are no ETF options available. You could search for fixed income funds denominated in SGD in FSMOne.

ETFAllocationTER
iShares Core World MSCI World UCITS ETF (IWDA)42%0.20%
iShares Core EM MSCI IMI UCITS ETF (EIMI)18%0.18%
ABF Singapore Bond Index ETF (A35)30%~0.19%
iShares Core Global Aggregate Bond ETF hedged (AGGU)10%0.10%
Singapore Version Global Market Moderate growth 60% Equity 40% Bonds

Inflation Fighter Core 4 Portfolio

As the name suggests, this portfolio aims to offset the impact of any unexpected inflation. This is achieved with addition of a treasury inflation protected security. The portfolio consists of:

  • Global stock index fund
  • REIT index fund
  • Treasury Inflation Protected Securities 
  • Interest Rate Hedged Securities
ETFAllocation
Vanguard Total World Stock ETF (VT)54%
Vanguard Real Estate ETF (VNQ)6%
iShares TIPs Bond ETF (TIP)20%
iShares Inflation Hedge Corporate Bond ETF (LQDI)20%
US Inflation Fighter Core 4 Moderate growth 60% Equity 40% Bonds

This is a tricky one as we do not have any inflation protected securities or interest rate hedged securities. So I am going to cheat a bit and replace it with gold – a common hedge against inflation.

ETFAllocationTER
Vanguard All World UCITS ETF (VWRA)54%0.22%
Lion Phillip S-REIT ETF (CLR)6%~0.58%
ABF Singapore Bond Index ETF (A35)20%~0.19%
SPDR Gold Shares (O87)20%0.40%
Singapore Version inflation fighter Moderate growth 60% Equity 40% Bonds

Income Seeker Core 4 Portfolio

The second last core 4 portfolio variation is the income seeker portfolio. As the name suggests, this portfolio aims to generate income. The portfolio consists of:

  • High Dividend Yield US Stocks
  • High Dividend Yield Total International Stocks 
  • US Investment-grade Corporate Bonds
  • US Preferred Stocks
ETFAllocation
iShares Select Dividend ETF (DVY)42%
iShares International Select Dividend ETF (IDV)18%
iShares iBoxx Investment Grade Corporate Bond ETF (LQD)30%
iShares US Preferred Stock ETF (PFF)10%
US Income Seeker Core 4 Moderate growth 60% Equity 40% Bonds (iShares ETF version)

SGX contains many high dividend companies and REITs. So naturally, my first choice is the SPDR STI ETF (ES3) which has a yield of 4.82% (due to current drop in price). I would keep the Lion Phillip S-REIT ETF (CLR) and add Nikko AM SGD Investment Grade Corporate Bond ETF (MBH)

ETFAllocationTER
SPDR STI ETF (ES3)42%0.30%
Lion Phillip S-REIT ETF (CLR)18%~0.58%
Nikko AM SGD Investment Grade Corporate Bond ETF (MBH)30%~0.17%
ABF Singapore Bond Index ETF (A35)10%~0.19%
Singapore Version Income Seeker Moderate growth 60% Equity 40% Bonds

However, this portfolio has too much home country bias. You may use Vanguard All World High Dividend Yield UCITS ETF (VHYL) with a TER of 0.29% as a substitute for CLR.

Conclusion

The core-4 portfolios are a extension to the Boglehead three fund portfolios. The addition of a fourth fund enables us to tilt the portfolio in various flavours.

I hope you found my adaptation of the US centric core-4 portfolios to a Singapore investor (or non US investor) helpful.

These are merely my suggestions and please do your due diligence before investing yourself.

Like this article? Follow Fatty’s Finance social media for more quality content!

Author: Fatty's Finance

Finance is like health. It becomes an issue if it is not well maintained. I want to help you get back in shape!

Leave a Reply