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deadravel

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hi,

need some help understanding the benefits of etf that re-invests dividends.

if the global etf accumulates the dividend, what is the yield benefit to us? our investment doesn't increase by the same %

will the purpose then to expect the price to increase overtime? does it mean it's better to do lump-sum investment now rather than dollar averaging since the price will only go up?

u dont have to deal with the dividends payout manually. means the dividends are compounded automatically.
u save the hassle to accumulate the dividend, buy urself and pay brokers fee

yes. lump sum is better compare to DCA,
but problem with lump sum is sometime after ppl lump sum the short term price went down, ppl regret n panic. :s13:
so i rmb shiny suggested u can separate into 2 lump sum.
 

totallycrushed

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Thanks for the quick reply deadravel
u dont have to deal with the dividends payout manually. means the dividends are compounded automatically.
u save the hassle to accumulate the dividend, buy urself and pay brokers fee
does the number of units we hold increase or just the total value of the fund?

i have the impression that we're still highly dependent on the market price of the ETF, so it's more like value investing that we foresee growth of this fund due to yearly yields.

i'm kinda confused here, appreciate if you could help me see the compounding effect.
 

Maeda_Toshiie

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Thanks for the quick reply deadravel

does the number of units we hold increase or just the total value of the fund?

i have the impression that we're still highly dependent on the market price of the ETF, so it's more like value investing that we foresee growth of this fund due to yearly yields.

i'm kinda confused here, appreciate if you could help me see the compounding effect.

The dividend is reinvested to give shares. It's a bit like the scrip scheme offered by local banks.

Correct, the value is in the market price of the ETF, which in this case is an index tracking ETF. When you buy a growth stock, you are seeking growth of its share values (which you then cash out). When you buy an index tracking ETF, you are seeking growth in the basket of companies that make up the index.
 
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wealth_farmer

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Thanks for the quick reply deadravel

does the number of units we hold increase or just the total value of the fund?

i have the impression that we're still highly dependent on the market price of the ETF, so it's more like value investing that we foresee growth of this fund due to yearly yields.

i'm kinda confused here, appreciate if you could help me see the compounding effect.
In addition to maeda-san's reply earlier, I can provide a numerical example.

Let's say ETF A is a Distributing fund, while ETF B is an Accumulating fund (all dividends reinvested).

Beginning of year:
ETF A: $1.80 per share
ETF B: $1.80 per share.

You buy four shares each of A and B, and you pay $7.20 for each.

End of year:
ETF A: $2.00
ETF B: $2.00

Both funds end up trading at the same price. In addition, both declare dividends of $0.50 per share. As you have bought four shares each of A and B, your situation is as below:

ETF A: Trades at $2.00 per share, and you get $2.00 in dividends ($0.50 multiply by four shares. This lets you buy another share of ETF A, so you end up with 5 shares of ETF A. Of course, this is not accurate as you have to pay brokerage to get that extra share. But theoretically, you have $10 worth of ETF A shares now.

ETF B: Will trade at $2.50 per share as the dividend is reinvested by accumulating all the extra dividends and buying into more shares of the underlying index components in proportion. You will still only have four shares. However, they are also worth a total of $10.

In both cases, you end up with the same value of shares, just in different forms.

Thus, the advantages of holding Accumulating fund is that you don't have to worry about reinvesting your dividends and you will incur less brokerage. In this context, and for the world ETF, ST recommends the IWDA listed on LSE.

But personally, I feel it's more shiok to get dividends, that's why I went with VWRD which is also listed on LSE.

Hope this helps!
 
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amognoix

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To all knowledgeable folks out here:

I will be relocating to Australia for the next 10 years.

Should i continue to invest in
1. SG stocks ES3
2. SG Bonds A35
3. Global stocks IWDA on London Stock Exchange

Or should i invest in the ETF equivalent for OZ stocks, OZ bonds and Global stocks?

Hope that someone will be able to provide an answer xD
 

Maeda_Toshiie

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A bit of a tough question. You envision yourself retiring in SG or in Straya?

Personally I'd invest my Straya dollars in the ETFs listed on the ASX, especially the ETFs that track companies listed on the ASX. Shiny will know the ETFs there better.

The rational being that you don't know what the exchange rate is going to be like 10 years down the road. Besides, you might want to stay there after all...
 

amognoix

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Thank you for replying.

I hope to achieve both financial independence & geographical independence for retirement.

As an Australian resident, i will be taxed on my worldwide income - a big no-no for me. To reduce my tax burden and stretch my dollar, i will rather retire in Malaysia (Singaporean here btw).

I am still wondering if i should continue investing through IBKR / StandChart for:

1. SG stocks ES3
2. SG Bonds A35
3. Global stocks IWDA on London Stock Exchange

Or should i invest in the ETF equivalent for OZ stocks, OZ bonds and Global stocks?

Any effect on taxes? Thank you.

Edit: Just realised IBKR cannot buy Australian Government Bonds.
 
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NoobMi

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Been using posb invest saver since 2 yrs ago dunno whether i made or lost money

:(

yeah... me too...
does anyone has any sort of spreadsheet or willing to share how to calculate the actual rate of returns i am getting?
letting me know the technical term for it will do also. then i can goggle myself :)
 

totallycrushed

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The dividend is reinvested to give shares. It's a bit like the scrip scheme offered by local banks.

Correct, the value is in the market price of the ETF, which in this case is an index tracking ETF. When you buy a growth stock, you are seeking growth of its share values (which you then cash out). When you buy an index tracking ETF, you are seeking growth in the basket of companies that make up the index.

Hi Maeda, that's the biggest confusion for me right now. Will the dividends be reinvested like scrip and we increase the number of shares or the money is invested into the fund. I would prefer of it's the former but I think it's the latter
 

kehyi4

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Hi Maeda, that's the biggest confusion for me right now. Will the dividends be reinvested like scrip and we increase the number of shares or the money is invested into the fund. I would prefer of it's the former but I think it's the latter
There shouldn't be any confusion - accumulating funds reinvest their profits into their NAV instead of paying it out as dividends. They don't issue new units as 'scrip dividend' lah :s8:

The number of units stays the same, but the value of each unit rises to reflect the increase in NAV
 
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wealth_farmer

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What do you guys think of Maybank Kim Eng Prefunded as opposed to SCB?
Hi zissou

Technically with SCB, you also have to trade on a prefunded basis. They call it Purchasing Power. I've not checked MBKE pricing, what's the minimum comm per trade for them on a prefunded basis? I'm guessing it's still more than SCB, but perhaps their trading platform is better. SCB's is *really* basic.
 
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wealth_farmer

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yeah... me too...
does anyone has any sort of spreadsheet or willing to share how to calculate the actual rate of returns i am getting?
letting me know the technical term for it will do also. then i can goggle myself :)
You could either ask POSB for your previous statements (I get a consolidated monthly statement just relating to investments, separate from the banking statements).

Or you could try using the Bogleheads investment returns spreadsheet. If you're aware of at least your monthly contribution amounts (for e.g. if you've kept them at a constant amount for the last two years), then you could at least get a rough returns percentage if you just key in the latest portfolio value. That could work, give it a try. Link below:

https://www.bogleheads.org/wiki/Calculating_personal_returns
 

crystalnox

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What do you guys think of Maybank Kim Eng Prefunded as opposed to SCB?
Local trading it's pretty much the same as scb now, but foreign sucks. They charge you dividend fees, cash offer fees, rights offer fees and custody fees.
 

zissou

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Hi zissou

Technically with SCB, you also have to trade on a prefunded basis. They call it Purchasing Power. I've not checked MBKE pricing, what's the minimum comm per trade for them on a prefunded basis? I'm guessing it's still more than SCB, but perhaps their trading platform is better. SCB's is *really* basic.

For local trades, 0.18% with minimum of $10. Rates lowered since Aug 2016, IIRC.

Just wondering if I'm missing out on anything, since SCB seems to be the favoured one here.
 
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zissou

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Local trading it's pretty much the same as scb now, but foreign sucks. They charge you dividend fees, cash offer fees, rights offer fees and custody fees.

Thanks for pointing that out. I'm going with IB for my foreign, so MBKE seems reasonable for my local.

For SC foreign trades, none of those apply?
 

mocharust

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Yeah, that's the right link. I suspect it just might not be possible to buy Kindle books if your Amazon account is marked as "Singapore"; it's easy to switch your account to the US and then switch it back after you've bought the book, though. Boo Amazon.

Got a copy! New York, New York, 10001 if anyone has trouble
 
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