Looking for passive income? Here’s how I’m investing in Singapore with ETFs

This post was created in partnership with Nikko Asset Management. All views and opinions expressed in this article are Beansprout's objective and professional opinions.

What happened?

With the cost of living climbing year after year, relying only on a single income source through our day jobs may not be enough to achieve our financial goals.

Knowing this, like many investors, I began exploring ways to build a stable passive income stream. 

The idea is simple: complement my salary, grow my wealth steadily, and eventually create a reliable income source for retirement.

Passive income can take many forms, such as dividends from stocks, coupons from bonds, or distribution yields from ETFs and funds.

Recently, I’ve been exploring more Singapore dollar (SGD)-denominated investments to avoid currency risk and eliminate one layer of uncertainty from my financial planning.

Singapore-focused investments not only align with my spending and liabilities, but they also offer practical, sustainable opportunities for passive income generation.

Why Singapore For Passive Income?

Singapore is known globally for its political and economic stability. 

With a AAA sovereign credit rating as of 31 July 2025 (Bloomberg), strong reserves, and a well-managed monetary policy, it offers a conducive environment for income-focused investors like me.

Because I live and spend in Singapore, investing part of my portfolio in SGD helps avoid exchange rate volatility. 

The SGD is managed against a basket of currencies from Singapore’s major trading partners, which helps keep it relatively stable, even in times of global market turbulence.

And while Singapore's market may not be as large as the US or China, in my view, it still provides a wide range of viable investment options from government bonds to blue-chip stocks with consistent dividend yields.

Why I Chose ETFs to Build My Passive Income Portfolio

It’s definitely possible to build a portfolio by picking individual stocks and bonds. But this approach can also be fairly time-consuming. 

Tracking earnings reports, bond maturities, new IPOs, and managing diversification manually can quickly become a second job.

One option I’ve turned to is ETFs (exchange-traded funds). 

They offer a cost-effective, low-hassle way to gain exposure to a diversified portfolio of assets. 

Additionally, they trade like stocks, meaning I can buy and sell them easily to rebalance or free up cash.

I found three SGD-denominated ETFs that allow me to gain exposure to Singapore while building my passive income. 

Let me break down each one.

#1 – ABF Singapore Bond Index Fund

The Nikko AM ABF Singapore Bond Index Fund tracks the iBoxx ABF Singapore Index, which consists primarily of SGD-denominated Singapore government and quasi-government bonds, including those issued by HDB and LTA as of 31 July 2025. 

While it allows for regional government bonds, including those from China, Hong Kong, Indonesia, and Malaysia, the current portfolio is 100% Singapore-based as of 30 June 2025.

The ETF has an average credit rating of AAA, the highest possible rating, thanks to the nature of the issuers, which are the Singapore government and government-related entities. 

As of 30 June 2025, the ETF has a weighted average duration of 8.41 years (Source: Nikko AM). Duration measures a bond portfolio’s sensitivity to interest rate changes, where the higher the duration, the more sensitive the portfolio. 

Its weighted average yield to maturity (the yield for holding all the bonds to maturity) is 2.28%, a reflection of the global shift toward lower interest rates.

The total expense ratio (TER) is 0.25% p.a. (audited as of financial period ended 30 June 2024), and it pays semi-annual distributions (January and July).

Celebrating its 20th anniversary this year, it’s one of the longest-standing SGD bond ETFs, having launched in 2005, and has S$1.12 billion in AUM as of 17 July 2025. 

As of 30 June 2025, the ETF delivered an average return of 2.40% p.a. since inception.

Learn more about the ABF Singapore Bond Index Fund here. 

 #2 – Nikko AM SGD Investment Grade Corporate Bond ETF

This SGX-listed ETF provides exposure to SGD-denominated corporate bonds and tracks the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index. 

This index aims to track the performance of the iBoxx SGD non-sovereigns large cap investment grade index. The minimum inclusion size of each corp bond is S$300 million. (Source: Nikko AM). 

The bonds in the index itself can come from both local and global issuers, as well as sub-sovereign bonds, including entities like Temasek and major banks. 

The Nikko AM SGD Investment Grade Corporate Bond ETF has the flexibility to invest up to 20% in SGD-denominated investment-grade bonds that are not in the index, or Singapore Government Securities (SGS).

Currently, the ETF has about 28% in government agencies, with the remaining diversified across sectors, primarily the financial sector.

Top holdings include reputable local names and established global banks.

As of 30 June 2025, the ETF has an average credit rating of A, which is higher than many typical global investment-grade corporate bond funds or ETFs with BBB ratings.

In addition, the ETF has a weighted average duration of 5.89 years and a weighted average yield to maturity of 2.86%. 

It has S$826 million in AUM as of 17 July 2025, and pays semi-annual distributions.

The ETF has delivered an annualised return of 2.9% since its inception, and a 3-year annualised return of 5.34%, as of 30 June 2025. 

At the same time, its exposure to investment grade bonds presents relative stability compared to equity funds. 

Learn more about the Nikko AM SGD Investment Grade Corporate Bond ETF here. 

#3 – Nikko AM Singapore STI ETF

The Nikko AM Singapore STI ETF is the classic Singapore equity ETF, tracking the Straits Times Index (STI), a market-cap-weighted index of the top 30 companies listed on SGX, including the three local banks and major Singapore corporates.

Due to the size of the Singapore banks, the Nikko AM Singapore STI ETF has a heavy tilt toward financials (over 50%). 

It’s SGD-denominated, launched in 2009, and on 21 July 2025, the Nikko AM Singapore STI ETF crossed a historic milestone of S$1billion AUM.                     

The Nikko AM Singapore STI ETF pays semi-annual distributions in January and July. 

The STI historically has a higher dividend yield than global equity markets (Source: Nikko Asset Management, as of 30 September 2024), as many of the 30 companies in the index tend to declare relatively higher dividend yields. 

Dividends aside, the Singapore stock market has performed well in recent years. The STI has a 1-year return of 31.05%, outperforming the S&P 500, which has a 1-year return of 21.73% and the MSCI All World index, which has a 1-year return of 22.6% as of 8 August 2025 (Source: S&P, MSCI, SGX).       

Chart: 10-Year Historical Dividend Yields (1 October 2014 - 30 September 2024)

The ETF delivered 13.57%  p.a. on a 3-year basis and 13.31% p.a. on a 5-year basis. 

Since its inception in 2009, the ETF delivered a respectable 9.03% p.a. as of 30 June 2025. 

In summary, the Nikko AM Singapore STI ETF is a way to tap into Singapore’s most prominent companies without having to buy the individual stocks. 

Learn more about the Nikko AM Singapore STI ETF here. 

Comparing the three Singapore-related ETFs

I’ve summarised the three Singapore-related ETFs from Nikko AM below: 

As of 30 June 2025, the ABF Singapore Bond Index Fund offers a 1-year total return of 10.61%*, which is quite impressive. This is largely supported by the bond market rally amid easing interest rate expectations. However, its longer-term performance has been more modest, reflecting a typically more stable performance of government bonds. 

*Note: The past performance is due to circumstances which may not be sustainable.

The Nikko AM SGD Investment Grade Corporate Bond ETF provides a balance of yield and stability.  As of June 2025, the ETF has an annualised return of 8.27%, 5.34% and 2.40% over a 1-year, 3-year and 5-year period respectively. While it carries slightly more credit risk than a government bond fund, its investment-grade focus keeps default risk relatively low.

The Nikko AM Singapore STI ETF tracks the top 30 stocks by market cap listed on the SGX.  As of 30 June 2025, it has delivered a 1-year return of 24.92%. The ETF delivered the highest 1-year, 3-year, and 5-year returns among the three listed above.       

These ETFs are managed by Nikko Asset Management, which has a history of managing Singapore-related funds since the 1980s.

From 1 September 2025, Nikko Asset Management will be rebranded as Amova Asset Management, short for “Asset Management for an Optimistic Vision in Asia.” Learn more about Amova Asset Management here.

While the ABF Singapore Bond Index Fund will retain its name, the other two ETFs will be renamed to:

• Amova SGD Investment Grade Corporate Bond Index ETF
• Amova Singapore STI ETF

Find out more about their name change here.

What Would Beansprout Do?

Building passive income is a journey, and it’s never too early or too late to start. 

For Singapore-based investors like myself, SGD-denominated ETFs offer a practical, low-maintenance way to begin that journey with confidence.

The three ETFs I’ve highlighted in this article can be considered by investors looking to build a passive income portfolio.

The ABF Singapore Bond Index Fund offers stability through its exposure to Singapore government bonds, especially for those who want a dependable foundation without taking on much risk. Learn more about the ABF Singapore Bond Index Fund here. 

The Nikko AM SGD Investment Grade Corporate Bond ETF offers a potential income from investing in investment-grade bonds. Learn more about the Nikko AM SGD Investment Grade Corporate Bond ETF here. 

Meanwhile, the Nikko AM Singapore STI ETF offers exposure to top Singapore-listed companies for investors looking to tap into Singapore’s long-term growth potential while enjoying regular dividend payouts. Learn more about the Nikko AM Singapore STI ETF here. 

Of course, no investment is risk-free. Singapore’s markets, while stable, can still be affected by global economic conditions, interest rate changes, and shifts in investor sentiment in the short term.

Bond funds may face price declines when interest rates rise, while equity funds are subject to market volatility and fluctuations in dividend payouts. 

Even high-quality, SGD-denominated instruments can experience periods of lower returns. 

That’s why it’s important to consider your time horizon, risk appetite, and the role each investment plays in your overall portfolio.

Click here to learn more about these funds. 

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