The most common index investing mistakes are not about choosing the wrong fund. They are holding funds that overlap, chasing whatever did best last year, keeping too much at home, ignoring currency and costs, and selling in a downturn. Each one quietly undoes the reasons people choose index funds in the first place: wide spread, low cost and a simple plan.
Here are seven, with Singapore examples and figures from the index providers’ own factsheets. For the basics, read what index investing is first.
1. Owning the Same Companies Several Times
Buying more funds feels like more diversification. Often it is the opposite.
- US companies were 64.63% of the MSCI ACWI on 30 October 2026, according to MSCI. Add an S&P 500 fund and your US share rises further.
- The top 10 companies were about 37% of the S&P 500 in November 2026, by State Street’s SPY page. Add a US technology fund and the same few names grow again.
Before buying a fund, list its top ten holdings and its country weights next to what you already own. MoneySense notes that one ETF per market exposure is usually enough.
2. Chasing Last Year’s Winner
A sector, country or theme that rose sharply last year is the one everyone notices. Buying it after the rise means paying a higher price for the same companies, with no guarantee the trend continues.
An index fund’s strength is that it does not need you to predict winners. Swapping funds every year to follow performance turns a passive plan into an active one, with trading costs on top. Our guide to sector, thematic and leveraged ETFs explains why narrow funds swing more.
3. Too Much at Home
Singapore investors often hold mostly Singapore assets. The STI is 30 companies, and DBS, OCBC and UOB alone were 57.25% of the SPDR STI ETF on 12 November 2026.
Add a salary paid in Singapore, an HDB flat and CPF savings, and much of your wealth depends on one small economy. Singapore is one of 47 markets in the MSCI ACWI. Our STI ETF guide sets out what the local index holds.
4. Ignoring Currency
A fund holding US or global shares moves with the US dollar against the Singapore dollar, as well as with share prices.
Illustration only. S$100,000 converted at an assumed S$1.30 per US dollar buys US$76,923. If the fund is flat and the rate moves to S$1.20, the holding is worth about S$92,300: a 7.7% loss from currency alone. The reverse can happen too. Our guide to investing in the S&P 500 from Singapore covers currency, withholding tax and US estate tax.
5. Looking Only at the Headline Fee
The expense ratio is one cost among several. MoneySense lists the others to compare: tracking difference, the bid-ask spread, and withholding tax set by where the fund is domiciled. It notes that a US-domiciled ETF held by a Singapore investor has 30% US withholding on dividends.
Small gaps compound. In our pros and cons illustration, the gap between 0.2% and 1.5% a year costs about $56,400 on S$100,000 over 20 years. See expense ratio, tracking error and spreads explained for the full picture.
6. Selling in a Downturn
An index fund takes the market’s full fall. MSCI records a maximum drawdown of 58.38% for the MSCI ACWI, from 31 October 2007 to 9 March 2009. Investors who sold near the bottom locked in that loss; those who held were exposed to whatever came next, good or bad.
MoneySense’s advice is not to take risk you do not have the time to recover from. Decide in advance what you will do in a large fall. Our guide to investing during a recession covers keeping to a plan.
The short version: most index investing mistakes come from doing too much: too many overlapping funds, too much switching and selling at the wrong moment. A simple plan you keep beats a clever one you abandon.
7. Investing Money You Will Need Soon
Index funds suit money you can leave for many years. Money for a flat, a wedding or an emergency within a few years can be caught by a fall at the wrong time. Keep it in lower-risk products; see our comparison of T-bills, Savings Bonds and fixed deposits.
Index Investing Mistakes: A Quick Checklist
| Check | What to look for |
|---|---|
| Overlap | Top 10 holdings and country weights across all your funds |
| Home bias | How much of your total wealth depends on Singapore |
| Currency | Which currency the fund holds, and whether it is hedged |
| Cost | TER, spread, withholding tax and brokerage together |
| Time frame | Whether you can leave the money through a large fall |
| Plan | A fixed mix and a rebalancing rule, written down |
Our guide to building a simple index portfolio shows how a fixed mix and rebalancing work.
What To Do Next
- List every fund you own with its top holdings and country weights, and look for doubling up.
- Read the prospectus and product highlights sheet of any fund before you add it.
- Check that your broker or platform is listed in the MAS Financial Institutions Directory.
- Write down your rules for a fall of 30% or more, before it happens.
- This is general information, not advice on your situation.
