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Old 15-02-2018, 12:43 AM   #9286
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Why does STI track emerging market indices more closely than developed?
Good question. I think there's two factors that drive it:

1) Economic integration. Singapore's economy is linked far more closely with the economies of China, Malaysia and Indonesia than with, say, the economy of Australia or Germany or the USA;
2) Traders' instinct. As a corollary to #1, if people see China's economy sneezing (for example), they're going to assume that all of the south-east Asian economies will take a hit from that - whether it's true or not.


is there any advantage to invest in IGIL (ishares global inflation linked govt bonds) , over A35 ? is the return % any better?
Those are two very different things.

IGIL is an ETF full of inflation-linked bonds from all over the world. It's a bet on inflation kicking off all around the world. A35 is an ETF full of SGD-denominated government bonds; it's a place where Singaporean investors can get a low-risk, low-return place to park their cash.

Frankly, I don't understand why IGIL exists! The reason you buy inflation-linked bonds is because you want insurance against inflation in whatever country you're in. I live in the USA, so it might make sense for me to own some US inflation-linked Treasury bonds, especially if I were retired and I wanted inflation-protected income.

But there'd be no reason for me to own UK inflation-linked bonds (which, incidentally, are HORRIFICALLY expensive because of huge one-way demand from UK life-insurance companies), and definitely no reason for me to own Swedish linkers - what the heck do I know about Swedish inflation? But those are both in IGIL - 30% of the fund is in UK linkers, and 1% is in Swedish linkers.
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Old 15-02-2018, 07:57 AM   #9287
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Good question. I think there's two factors that drive it:

1) Economic integration. Singapore's economy is linked far more closely with the economies of China, Malaysia and Indonesia than with, say, the economy of Australia or Germany or the USA;
2) Traders' instinct. As a corollary to #1, if people see China's economy sneezing (for example), they're going to assume that all of the south-east Asian economies will take a hit from that - whether it's true or not.

EEM= Emerging markets
EWA= Australia
EWS = Singapore
VGK = Europe

Australia and Europe ETF seem to have the same or higher correlation to EEM compared to EWS in US$ terms
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Old 15-02-2018, 08:17 AM   #9288
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EEM= Emerging markets
EWA= Australia
EWS = Singapore
VGK = Europe

Australia and Europe ETF seem to have the same or higher correlation to EEM compared to EWS in US$ terms
That's an interesting table, may I know where it's from? Also, is 6 months too short a time frame to draw a conclusion from this?

Taking a look at STI's top holdings, I see:

DBS - 16.65%
OCBC - 13.31%
UOB - 11.14%
HONGKONG LAND HOLDINGS - 3.5%
THAI BEVERAGE - 2.96%

All of these companies do business in China, Hongkong, Indonesia, India, Thailand. All of these are emerging markets. Can we say that STI should track emerging market indices, based on this?
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Old 15-02-2018, 08:25 AM   #9289
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There are certain characteristics of emerging markets, like high growth, high inflation, high interest rates, volatile etc BRICKS along with few others like Indonesia, Poland, Vietnam etc fit this definition perfectly.

Singapore can be bunched with Thailand, Malaysia, Korea, Australia, UK etc.

If you have to choose one deciding factor , that would be interest rates.


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Last edited by revhappy; 15-02-2018 at 08:46 AM..
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Old 15-02-2018, 10:13 AM   #9290
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I am following msci world allocation%, excluding hk.

I am doing vusd/cspx, veud, 3126, XIU and IOZ. That is a tighter fit than what you mentioned. SJPA has less favourable dwt considerations than 3126, and I couldn't locate a proper cpxj on IB.

Is there anything you are concerned about?
I've been gathering ETF information for portfolio construction. This table is getting a bit ridiculously long even on the equities side.

World:
VXUS Vanguard Total International Stock ETF
VWRD/VWRL Vanguard FTSE All-World UCITS ETF
IWDA/SWDA iShares Core MSCI World UCITS ETF
EIMI/EMIM iShares Core MSCI EM IMI UCITS ETF
WDSC/WOSC/ZPRS SPDR® MSCI World Small Cap UCITS ETF
VFEM Vanguard FTSE Emerging Markets UCITS ETF
VWO Vanguard FTSE Emerging Markets ETF

US S&P500
SPY SPDR S&P 500 ETF Trust
VOO Vanguard S&P 500 ETF
VTI Vanguard Total Stock Market ETF
VUSD/VUSA Vanguard S&P 500 UCITS ETF
CSPX iShares Core S&P 500 UCITS ETF
(US small ETFs not included)

Europe?
ISX5/CS51/CSX5 iShares Core EURO STOXX 50 UCITS ETF
XSX6 db x-trackers Stoxx® Europe 600 UCITS ETF
EXSA iShares STOXX Europe 600 UCITS ETF (DE)
VEUD/VEUR FTSE Developed Europe UCITS ETF (VEUR)
EUN iShares STOXX Europe 50 UCITS ETF
SMEA/IMEA iShares MSCI Europe UCITS ETF EUR (Acc)
CEU/ CEU1/IEMU iShares MSCI EMU UCITS ETF
EMUE SPDR® MSCI EMU UCITS ETF

Canada:
XIU iShares S&P/TSX 60 Index ETF
XIC iShares Core S&P/TSX Capped Composite
ZCN BMO S&P/TSX Capped Composite
VCE Vanguard FTSE Canada Index
VCN Vanguard FTSE Canada All Cap Index

APAC/Australia/ANZAC
CPXJ/CPJ1 iShares Core MSCI Pacific ex-Japan UCITS ETF
IOZ iShares Core S&P/ASX 200 ETF

Japan:
IJPA/SJPA iShares Core MSCI Japan IMI UCITS ETF
3126 Vanguard FTSE Japan Index ETF
VDJP/VJPN Vanguard FTSE Japan UCITS ETF

Choyna (it's not developed, but it has a big internal market)
XCS6/XCX6 db x-trackers MSCI China Index UCITS ETF (DR)
3010/9010/83010 iShares Core MSCI AC Asia ex Japan Index ETF

Remaining information on TER, domicile, currency, dividends not included.
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Old 15-02-2018, 11:19 AM   #9291
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Remaining information on TER, domicile, currency, dividen
One of the most important is actually average daily volume.....
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Old 15-02-2018, 11:43 AM   #9292
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[2/2]

Essentially, I'm looking at portfolio construction based on economic bloc for the developed countries. I assume that developed economies are more mature with significant internal consumption and less volatile than developing ones. Choyna is not classified as developed and is an export led economy, but it is big enough to warrant being an economic bloc on its own. For the developing ones, there seems to be less interest in them by investors and I'm OK with lumping them in EIMI for now.

I'm not sure how much the Canucks correlate with the US, or how NZ correlated with Straya.



I don't feel trading volume is particularly important, as compared to fund size.
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Old 15-02-2018, 01:15 PM   #9293
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Anyway, good job being annoying with the choicd of using terms like choyna and Canucks, it's fairly effective.

I don't get your point of construction based on economic blocs, since a typical broad etf would have factored that in, no? Seems like what you need can be done with a simple iwda/eimi allocation.

Just to reiterate, my purpose is to minimise TER, minimise DWT, and have greater diversification in terms of sheer number of underlying companies I own.

[2/2]

Essentially, I'm looking at portfolio construction based on economic bloc for the developed countries. I assume that developed economies are more mature with significant internal consumption and less volatile than developing ones. Choyna is not classified as developed and is an export led economy, but it is big enough to warrant being an economic bloc on its own. For the developing ones, there seems to be less interest in them by investors and I'm OK with lumping them in EIMI for now.

I'm not sure how much the Canucks correlate with the US, or how NZ correlated with Straya.



I don't feel trading volume is particularly important, as compared to fund size.
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Old 16-02-2018, 08:02 PM   #9294
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Rebalancing in a POSB Invest-Saver account is a little tricky, for obvious reasons (you can't really sell-and-buy without a little bit of work). That said, you don't need to be too picky with your rebalancing: if you're out by a couple hundred dollars, that's totally fine; at that level I'd just say "don't worry about rebalancing this time around".
Hey Shiny, why do you say it's tricky to rebalance using POSB Invest Saver? Sorry if I'm missing something really obvious here, haven't yet gone along my investing journey long enough to need to rebalance haha
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Old 16-02-2018, 10:28 PM   #9295
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Anyway, good job being annoying with the choicd of using terms like choyna and Canucks, it's fairly effective.

I don't get your point of construction based on economic blocs, since a typical broad etf would have factored that in, no? Seems like what you need can be done with a simple iwda/eimi allocation.

Just to reiterate, my purpose is to minimise TER, minimise DWT, and have greater diversification in terms of sheer number of underlying companies I own.
World wide ETFs are cap weighted according to constituent companies. My thinking is to be able to weigh the different regions with my own weightage, eg. equal. I know this goes against the tenant of Bogleheads, but I may, given certain circumstances, may want to reduce exposure to one region.
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Old 16-02-2018, 10:30 PM   #9296
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Hey Shiny, why do you say it's tricky to rebalance using POSB Invest Saver? Sorry if I'm missing something really obvious here, haven't yet gone along my investing journey long enough to need to rebalance haha
Well, such RSP do not trade like normal brokerage. You'd have to adjust the buy amount (or even change to sell) for that particular month for rebalancing, and then change the instructions again to go back to your regular schedule.
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Old 16-02-2018, 11:10 PM   #9297
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Well, such RSP do not trade like normal brokerage. You'd have to adjust the buy amount (or even change to sell) for that particular month for rebalancing, and then change the instructions again to go back to your regular schedule.
Oh I see. Okay I guess I still have a few months before my first rebalancing so I'll find out then thanks!
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Old 16-02-2018, 11:13 PM   #9298
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There used to more than 500 pages for this thread. What happened?
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Old Yesterday, 12:42 AM   #9299
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Thanks ST and all the contributors in the thread! I'll be practising the 110 minus age rule and have set aside 82% for ETFs and 18% for A35. For the ETFs, half of it has gone to VWRD (instead of IWDA) as I prefer the emerging markets bit, and the other half will go into ES3 (haven't bought any yet as the market was closed today).

However, my partner thinks I should still diversify my ETF portfolio even further to reduce the impact from the US market should prices go down. (We just finished watching "Inside Job" and somehow he's got this notion that every 10 years something bad will happen to the stock market, especially since it's been doing well in recent years.) He suggested that I get another that focuses on China/emerging markets. I told him that VWRD tracks emerging markets (about 5%?), and STI too to some extent (can someone enlighten me on how STI does this please?). I understand his point about diversification but I don't want to get another ETF and find out later that it actually doesn't do anything for my portfolio and I end up incurring more fees and hassle.

Last edited by Pherenike; Yesterday at 08:54 AM..
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Old Yesterday, 09:18 AM   #9300
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However, my partner thinks I should still diversify my ETF portfolio even further to reduce the impact from the US market should prices go down. He suggested that I get another that focuses on China/emerging markets. I told him that VWRD tracks emerging markets (about 5%?), and STI too to some extent (can someone enlighten me on how STI does this please?).
You can point out a couple of things:
1) All markets go down at one time or another; that’s why you diversify across countries, and diversify between stocks and bonds. The US is only about 20% of your portfolio, so you’re plenty diversified.
2) Yep, VWRD owns about 10% in emerging markets, so you already have an allocation to them. Emerging markets are riskier and more volatile than developed markets, so you don’t want to be too heavily allocated to them (even if you think, as I do, that EM stocks are generally solid investments).

To your question about the STI: I mentioned this upthread, but the general idea is that investors tend to group Singapore in with China and other emerging markets, so they tend to trade them together. That said, I saw those stats upthread as well showing that I might be wrong about Singapore’s correlations, so I’m going to take a look at that this weekend and see if I need to reevaluate my assumptions there.

I understand his point about diversification but I don't want to get another ETF and find out later that it actually doesn't do anything for my portfolio and I end up incurring more fees and hassle.
Yeah, exactly. If you bought an EM ETF, you’d be adding extra transaction costs, and extra exposure to EM stocks.

(We just finished watching "Inside Job" and somehow he's got this notion that every 10 years something bad will happen to the stock market, especially since it's been doing well in recent years.)
So I see this occasionally and it drives me UP THE FRICKIN’ WALL, because it’s just so wrong.

If people say “oh, the market crashed in 1987, 1997, and 2007!”... remind them that even with the Black Monday crash, the US market finished 1987 up; that the GFC really kicked in in 2008, not 2007; and that 2017 was the best year for stocks since 2013.

If people say “oh, the market crashed in 1998 and 2008!”, then tell them “but it didn’t crash in 1978 or 1988. It’s a coincidence”.

If people say “oh, there was the credit correlation explosion in 2005 when Ford and GM got downgraded, and then there was the emerging-markets selloff in 2015, so we should all panic in 2025!”, then... I mean, that’s a pretty impressive memory, but they’re really making a reach.

And even so: the point of investing is that you’re in it for the long term. While you’re still investing, like you and your partner are, a downturn is a good thing - it’s a buying opportunity! If a downturn does come along, then by getting started now, you’ll be ready to buy when the market is down and take advantage of stocks being on sale. After the lows of the 1998 Asian crisis, the STI tripled in two years; if you’d been avoiding the market, you’d have missed that huge rally.

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