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Old 07-11-2014, 04:17 PM   #61
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Good advice from shiny. Simple and basic investment strategy is the best for long term. The key ingredient is discipline to excute it.
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Old 07-11-2014, 11:49 PM   #62
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Shiny,

Let me guess you were from CS
I'd rather not turn this into a guessing game, but no, not CS.
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Old 08-11-2014, 12:05 AM   #63
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Is there a reason why a major shareholder keep on transfering his shares to nominee name?

Is it done purposely to hide his percentage holdings of the company and does SGX require them to declare such percentage holdings?

I am just wondering what other reasons there could be ?

One other reason I could think of them doing this is to earn lending fees for people to short their shares and at the same time the major shareholder can buy at lower prices to beef up their stake. ( does it make sense?)
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Old 08-11-2014, 12:35 AM   #64
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Is there a reason why a major shareholder keep on transfering his shares to nominee name?
Edit - wait, I think I get what you're asking.

No, there are plenty of reasons you'd move your shares to nominee name. The most obvious is so that you can borrow against them - the bank needs to be able to see the shares to loan against them, and they can't do that if the shares are sitting in CDP's black hole.
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Last edited by Shiny Things; 08-11-2014 at 12:39 AM..
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Old 08-11-2014, 04:15 AM   #65
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Hi,

I like shiny's posts a lot.

Just like to discuss the portion on bonds.
My opinion differs from shiny's on buying ABF ETF (A35).

I'm guessing the rationale for buying A35 are:
1) Diversification among a lot of quality bond issues with low transaction costs
2) Low price point per lot so more accessible to retail investors

There is an inherent problem with bond funds though... they have no maturity date!

In a rising interest rate environment, you will still buy bonds for part of your portfolio (keeping it within 5 years maturity) for balancing. If rates rise, you can still look forward to the maturity where you get back your principal and can then reinvest for higher rates. For bond funds, there is no maturity date, so you can be stuck with losses for years while waiting for the next interest rate cycle (hoping for interest rates to hit zero again?)

The caveat is, if interest rates rise very very slowly, I guess you will still be alright.

Generally, the longer the bond's maturity, the harder it is going to be hit by rising interest rates. The move by A35 to move to longer dated bonds now is puzzling; when rates do rise it will hit their bond portfolio even harder.

Only problem with trying to buy individual bonds is the fetal status of Singapore's debt market. Any decent offering is done at a quarter million a pop. Things are changing though, with initiatives to slice up bonds into more bite-sized portions.

In the meantime, sometimes reasonably ok corporation do come to market with retail bonds at $1000 per lot (the most recent being Capitamall?)

So, I would urge those with slightly larger portfolios to consider individual bonds instead.

Let's discuss!
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Old 08-11-2014, 08:16 AM   #66
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Hi Coppee, happy that you asked as that did crossed my mind.

If say Iboxx(creator of the index which A35 replicates) sells less than 1 year maturity bonds, they are able to sell it at par or near par as the gov will soon be redeeming it at par.

It then buys new issuance bonds at par. Basically, Iboxx have just exchanged par for par. If interest rates rise, yield on these new issuance bonds will be higher. If interest rates decrease, yield on these new issuance bonds will be lower.


In aggregate, the yield on the A35 index will rise in an increasing interest rate environment and will be lower in a decreasing rate environment.

What about the existing bonds in the index, those with maturity more than 1 year left? Text book answer is when interest rates rise, the mark to market value of these bonds will decrease and when interest rates decrease, the mark to market value will rise.

Sad to say, A35 only started in end 2005 and we all know that rates decreased after the financial crisis. There is not much historical data to test the above hypothesis.




Based on the above, the price chart of A35 supports the textbook theory that interest rate decrease, price will increase BUT the “dividends or yield” does not. Funny thing is, as interest rate decreases, “dividends” increases instead of decrease.

The only thing I can conclude is that, there are many other factors other than interest rate which affects A35. (such as AAA rating, e,t,c) And we have no historical data to back it up. BUT one thing is highly likely and that is“dividends” will FOREVER increase, and I mean forever. (i sound stupid)
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Old 08-11-2014, 08:31 AM   #67
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Hi,

So, I would urge those with slightly larger portfolios to consider individual bonds instead.

Let's discuss!
Agree especially if one can leverage with a private bank to juice the returns ( at the correct point of the interest rate cycle) or when one is like what shiny's suggestion (110 - age) is older.

If not, inflation will eat into the returns unless one buy junk bonds with good returns but then face the risk of bankruptcy.

There really is no free lunch in the bonds area...the maxim high returns high risk is really meant for bonds.
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Old 08-11-2014, 08:59 AM   #68
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Sorry for the incessant posting guys but i really like this thread.

Shiny, your (110-age) rule between Equity component: (suggested: ES3) and Bond component: (suggested:A35, CPF SA) is beautiful as it realises gains to buy unloved stuff and the repeated process should ensure a market beating performance, with low risk due to ETF diversification and also age appropriate with low frictional cost due to fees. And best is, it is really damn simple.

My baby is due soon and am starting a fund for him. Do you have any links on articles that shows the historical performance of such a strategy by any fund manager or anyone who has measured?

And thanks for the info about nominee.

Last edited by sgdividends; 08-11-2014 at 09:12 AM..
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Old 08-11-2014, 09:56 AM   #69
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I do not think bond is suitable for small retail investors, unless you have millions of money. The returns are too low to have any meaningful impact. You see the A35, from 1.00 to 1.20 20% returns for 5 years, pathetic dividends,
A 10k investment on Baidu, Alibaba, Apple or Amazon 5 years ago will likely give you 10 times returns rate, now become 100k! So you just carefully do research and it is not difficult to find stocks that can give you more than 100% returns rate in 5 years.

Last edited by Izumi8; 08-11-2014 at 09:59 AM..
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Old 08-11-2014, 09:57 AM   #70
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There is an inherent problem with bond funds though... they have no maturity date!

In a rising interest rate environment, you will still buy bonds for part of your portfolio (keeping it within 5 years maturity) for balancing. If rates rise, you can still look forward to the maturity where you get back your principal and can then reinvest for higher rates. For bond funds, there is no maturity date, so you can be stuck with losses for years while waiting for the next interest rate cycle (hoping for interest rates to hit zero again?)
So I've read about this, and I used to think this way as well - that somehow bond funds wouldn't get their principal back if rates go up. It turns out it doesn't apply in every case - it depends on the fund. (This Bogleheads wiki page is long and not particularly well written, but it explains the question pretty well. I think the problem is that people mistakenly compare bond funds to a bond that you never roll and never reinvest; but that's not why you buy a bond fund. The right comparison is to buying a ladder of bonds, and then rolling into new bonds when each of the old bonds matures.)

If it's, say, a "long-dated bond" fund that's required to sell bonds once their maturity drops below 15 years or 10 years or whatever, then of course you're going to take losses if you sell bonds that you bought as a 30-year but that are trading below par when they reach the 15-year mark. You'd take those same losses if you did that strategy yourself - it's not a problem that's unique to bond funds as opposed to single bonds.

But the ABF fund isn't constrained like that - I don't think it has to sell bonds once they get below a certain maturity (it owns everything from the 2016s out to the 2042s). So it's effectively the same as owning the bonds yourself and holding them to maturity.

So it's an important thing to understand when you're investing in bond funds - you need to understand that you might take some permanent losses if rates go up, if your fund can't hold bonds to maturity. If it can hold bonds to maturity - and the ABF fund can do that - then this is not a problem.

Generally, the longer the bond's maturity, the harder it is going to be hit by rising interest rates. The move by A35 to move to longer dated bonds now is puzzling; when rates do rise it will hit their bond portfolio even harder.
Has it really moved to longer-dated bonds? This is a serious question - I don't think A35's portfolio composition has changed very much at all.

A35's not an actively managed fund - it's passively managed, tracking the iBoxx ABF Singapore Bond Index (and it tracks it very tightly). So it doesn't have any latitude to take its portfolio up or down in duration.

The index's duration might have drifted longer, just because Singapore is issuing longer-dated debt this year. The average duration of SGS issuance this year has been somewhere around 7 or 8, but that's only slightly longer than the ABF fund's current duration - so this year's issuance won't have changed the portfolio very much.
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Old 08-11-2014, 12:26 PM   #71
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I do not think bond is suitable for small retail investors, unless you have millions of money. The returns are too low to have any meaningful impact. You see the A35, from 1.00 to 1.20 20% returns for 5 years, pathetic dividends,
A 10k investment on Baidu, Alibaba, Apple or Amazon 5 years ago will likely give you 10 times returns rate, now become 100k! So you just carefully do research and it is not difficult to find stocks that can give you more than 100% returns rate in 5 years.
Yes, and a $10k investment in Citigroup or American Airlines would have become $100.

The point of bonds is not to make you rich: it's to provide a counterweight to the stocks in your portfolio. Bonds tend to go up when stocks go down; they make your portfolio a lot less volatile, so it's easier and less scary to ride out the stock market's swings, and they provide a useful warchest to buy stocks when they're cheap. Have a look at the example below.

My baby is due soon and am starting a fund for him. Do you have any links on articles that shows the historical performance of such a strategy by any fund manager or anyone who has measured?
Congrats on your new arrival!

There's plenty of research out there, but you can do even better - you can test it for yourself. Give this site a whirl - it lets you set up a portfolio, switch on annual rebalancing, and see how it would have done over the last forty years. This portfolio compares a 100% US stocks portfolio against a 60-40 stocks-bonds portfolio with annual rebalancing - you'll see that the 60-40 portfolio performs almost as well as the all-stocks portfolio (9.6% p.a. vs 10.3% p.a.), but it has MUCH lower volatility, so the swings and roundabouts are a lot less painful: the biggest drawdown of the all-stocks portfolio (in 2008) was 40% peak-to-trough, but the stocks-and-bonds portfolio never has a drawdown bigger than 22%, even in the depths of the 2001 tech stock crash, the 1987 Black Friday meltdown, or the 2008 GFC blowup.

Basically: for money you need in 20 years, when the kid's headed off to college, a 60-40 portfolio will be great; just don't forget to rebalance it once a year. (A 70-30 might even be a bit better - I'd rather lean toward stocks than bonds at the moment.)
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Old 08-11-2014, 02:21 PM   #72
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BUT QE from central banks has distorted the markets and the traditional rule when stock going DOWN, bond going UP no longer apply. In recent years, bond prices and stock prices both were going up together. So we can predict yield going up and stocks going down in next few years.
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Old 08-11-2014, 07:48 PM   #73
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Few things i am interested in.
Correct me if i get anything below wrong.

How can we be so sure fed is gonna raise interest rates?. They failed to do so after QE1 then QE2. If this time, we get a QE4, how should people prepare for it?

Fed's balance sheet sits at around 4 trillion USD. This amount will increase every year as the bonds the fed has bought also generates interest, which they have clarified, would be used to make further bond purchases. Going by US fractional reserve ratio requirement of 10%. We can easily see this 4 trillion be amplified into more than a quadrillion. A 0.1% increase in interest rates would mean $1 trillion dollars is due to be paid.

With the above scenario, how is the fed going to realistically raise any interest rates without triggering massive defaults everywhere?

If i get anything above wrong. Please correct me.
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Old 08-11-2014, 08:18 PM   #74
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Global qe by US, Europe and Japan means that we are merely transferring pte debt to public debt. I think we have passed the point of no return. The politicians and central bankers cannot afford not to keep the music going. I was a non believer of qe (or rather the efficacy) but I think it doesn't matter how now. US may have stopped for now but we still have Europe and Japan to continue...

I truly think we (and more so our next generation) are truly fxxked
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Old 08-11-2014, 08:40 PM   #75
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Global qe by US, Europe and Japan means that we are merely transferring pte debt to public debt. I think we have passed the point of no return. The politicians and central bankers cannot afford not to keep the music going. I was a non believer of qe (or rather the efficacy) but I think it doesn't matter how now. US may have stopped for now but we still have Europe and Japan to continue...

I truly think we (and more so our next generation) are truly fxxked
just play along and we will be fine
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