What other ways to earn regular passive income?

w1rbelw1nd

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My target is for my cash portfolio to be split 50/50 foreign/SG. CPFIS and SRS because of restrictions are mainly SG shares.

I wonder how to explain the extreme home country bias in local investment bloggers? Surely they have some investment knowledge (hope they are not throwing smoke in their blogs) so they have heard of the word "diversification". But they have made a conscious decision to avoid foreign stocks.

On SRS and CPFIS, I foresee that will be a struggle for me as well. SRS/CPFIS restrictions effectively forces us to either stockpick Singapore equities/ buy ETFs, or buy unit trusts with foreign equities exposure. So am I right all in, your portfolio is still heavy on SG shares if you take into cash and SRS/CPF? I probably only invest in STI ETF for my SRS/CPF OA, but since I am not a high earner, my projections point out that I will exceed my 15% overall exposure in SG-listed equities if I were to invest in SG sgares through SRS/CPF OA. :(

I dont think very positively on local bloggers, frankly. Yes, most of them may be altruistic and do it out of interest and passion, but also because of doing it for interest they have a tendency to interact with people of the same mindset (a sinkie tendency, no doubt), rather than challenge their own thinking. Just take a look at ASSI facebook page.

Quite recently there was a reader commenting that he should share more on his failures and bad picks. ASSI immediately (IMO) self-victimise himself and say things like "yea maybe i should take a break from blogging, since my sharing has adverse impacts on readers" and lol all the ASSI white knights come in and comfort him. The point is, under an environment where like-minded people seek each other, and just parrot each other, can these bloggers give a truly learned, informed and balanced view?

Anyway the post is on 26 feb

My response to a very long reply from W Y.
It is too long to reproduce here. If you want to read it, go to my blog's comments section:
http://singaporeanstocksinvestor.blogspot.sg/…/hock-lian-se…
Sounds like I have to shoulder more responsibility if I want to continue blogging. Not something I want to do.
I am working on a couple of new blog posts now. It would be a shame to stop halfway. I will complete them and then take another break; this time, it will be a longer one.
 

Darkzi0n

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Just sharing my views, yes, many STI companies have international revenue, but is this overseas revenue even close to reflective of what the global economy requires?

With little FMCG, pharmaceuticals, IT exposure in STI, is STI a truly diversified etf?

Should we really be that concerned about FX risk, when macroeconomics concepts state otherwise? Or for that matter, is that risk really not commensurated with the grossly superior diversification a global index can offer?

i agree with wat u said, but im not arguing about how diversified STI EFT is. In fact, one thing i notice about some forumers here is that the word ETF alone seems to be synonymous with an ideal diversification strategy with no consideration of the underlying basket of stocks.

im jus pointing out that investing in STI ETF dosnt mean u have zero international exposure.
 
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w1rbelw1nd

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I see i see...

For discussion purposes only, would like to point out that aside from the banks, probably the rest of the index has more overseas revenues than SG revenues.

Individuals favouring local equities should probably be aware that they are already compromising on FX risks...

i agree with wat u said, but im not arguing about how diversified STI EFT is.

im jus pointing out that investing in STI ETF dosnt mean u have zero international exposure.
 

w1rbelw1nd

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Very simple: buy what you understand best. On top of that, focus fire on the stocks that you understand best. They don't take the shotgun approach.

That can work. Back to limsters point, sadly looking at investing from an asset class/geographical diversification angle, even though very straightforward, is boring AF, and just don't generate as much attention/ readership.

I used to follow cheerfulegg.com to understand more about passive investing, but frankly after perhaps half a dozen blog post you get 90% of the idea. Now all the stuff written is on random musings, not like the sexciting stuff Singaporean stock pickers can write (" buy Sheng shiong! Recession-proof! CANT LOSE MONEY ONE!!!!" " BUY SMRT! BUY WHAT YOU KNOW AND USE DAILY!!!")

In the end, like in mm/ssi, the index/passive investors just get crowded out by the stockpicking forummers/bloggers. That's just sad...
 

Maeda_Toshiie

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There is nothing to write w.r.t. index investing. It's just robotic application of DCA.
 

BBCWatcher

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With little FMCG, pharmaceuticals, IT exposure in STI, is STI a truly diversified etf?
No.

Are any of these other sectors represented except in trace amounts, at most?

energy (oil, gas, solar, wind, etc.)
electricity generation
electricity distribution
aerospace
defense (e.g. Lockheed)
casino gaming
cultural exports (films, video games, book publishing, etc.)
plastics
chemicals
waste management
nuclear engineering
hospitals
medical equipment
biological sciences (e.g. seed development)
apparel (e.g. Zara)
luxury goods (e.g. Tiffany)
mining
restaurants (e.g. Starbucks)
temporary staffing
tobacco
payment networks (e.g. Visa)
education and training
home appliances (e.g. Whirlpool)
retailing (e.g. Amazon, Tesco)
advertising (e.g. JCDecaux)
railways (e.g. CSX)
sporting goods (e.g. Nike)
trucking (e.g. J.B. Hunt)
vehicle manufactuers (e.g. Bombardier, BMW)

?

I could list some more sectors, but that's already a long list, isn't it?
 

Bedokian

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That can work. Back to limsters point, sadly looking at investing from an asset class/geographical diversification angle, even though very straightforward, is boring AF, and just don't generate as much attention/ readership.

I used to follow cheerfulegg.com to understand more about passive investing, but frankly after perhaps half a dozen blog post you get 90% of the idea. Now all the stuff written is on random musings, not like the sexciting stuff Singaporean stock pickers can write (" buy Sheng shiong! Recession-proof! CANT LOSE MONEY ONE!!!!" " BUY SMRT! BUY WHAT YOU KNOW AND USE DAILY!!!")

In the end, like in mm/ssi, the index/passive investors just get crowded out by the stockpicking forummers/bloggers. That's just sad...

If an investor is set on an investment style and methodology, and if he/she decides to blog about it, there could only be that much to write about. It is like writing a textbook on a subject - if all the points and syllabus are being covered, there is nothing much to write on except for certain special scenarios and applications of it.

For my case, I would espouse my method, but if you meet me long enough you would have noticed that I would be saying the same thing over and over again. =:p
 

Bedokian

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Just sharing my views, yes, many STI companies have international revenue, but is this overseas revenue even close to reflective of what the global economy requires?

With little FMCG, pharmaceuticals, IT exposure in STI, is STI a truly diversified etf?

Should we really be that concerned about FX risk, when macroeconomics concepts state otherwise? Or for that matter, is that risk really not commensurated with the grossly superior diversification a global index can offer?

Diversification as in sector and country, no, but I believe diversification should be done first on the highest degree, that of asset classes.
 

limster

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Diversification as in sector and country, no, but I believe diversification should be done first on the highest degree, that of asset classes.

book1_zpsdg6avtfu.jpg


Definitely agree, yet investors who practice asset allocation seem to be in the minority.
 

BBCWatcher

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Diversification as in sector and country, no, but I believe diversification should be done first on the highest degree, that of asset classes.
I assume by "asset classes" you mean: stocks (equities; example: shares of Singtel traded on the SGX), bonds (examples: the 10 year SGS bond, CPF savings), cash and cash equivalents (examples: Singapore Savings Bonds, a bonus interest savings account), and possibly real estate (examples: a 99 year HDB leasehold, REIT shares) and commodities (examples: a silver coin hidden under the mattress, a contract for a delivery of orange juice in May, 2017).

How about we agree that the commodities asset class is silly for most people, and if you want that sort of exposure just buy shares in the companies involved in such businesses. For example, if you buy XOM shares (Exxon Mobil) you're pretty much buying oil and gas. The STI has a bit of agriculture (Wilmar, as a notable example).

As it happens, if you buy a STI index fund you're quite heavily invested in pure play real estate, especially Asian real estate. In the STI you've got UOL, Keppel, Hongkong Land, Genting Singapore, Capitaland, Global Logistics Properties, City Developments, CapitaCom Trust, CapitaMall Trust, and Ascendas Real Estate Investment Trust. That's 10 out of the 30 listings -- or maybe 9+ (Keppel in particular, and Genting to some degree, are a little more diverse).

See the problem? The STI isn't genuinely a different asset class from real estate.
 

Bedokian

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book1_zpsdg6avtfu.jpg


Definitely agree, yet investors who practice asset allocation seem to be in the minority.

A lot of new investors think investing = stocks and shares only. I would prefer to advise them to start off on a basic equity-bond combination.
 

w1rbelw1nd

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Diversification as in sector and country, no, but I believe diversification should be done first on the highest degree, that of asset classes.

Well depends right? The whole purpose of diversification is to reduce risk. Lets compare this 2 persons

1.Person A deciding to diversify on asset class level, but for stocks, decide to only buy a few blue chips, for bonds, decide to buy some high yield Singapore traded bonds

2. Person B deciding to buy a global equity index ETF

Who is more "diversified" and do a better job with portfolio management? I would say Person B over person A... Person A simply has too big a unsystematic risk.
 

w1rbelw1nd

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How about we agree that the commodities asset class is silly for most people, and if you want that sort of exposure just buy shares in the companies involved in such businesses. For example, if you buy XOM shares (Exxon Mobil) you're pretty much buying oil and gas. The STI has a bit of agriculture (Wilmar, as a notable example).

There are arguments for using gold as a inflation hedge, and its low correlation to other asset class.
 

w1rbelw1nd

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OK, just to be precise to a fault, we do have companies in the STI that has subsidiaries in some of these sectors.

No.

Are any of these other sectors represented except in trace amounts, at most?

energy (oil, gas, solar, wind, etc.)
electricity generation Keppel and Sembcorp generates power (Sembcorp power and Keppel Electric
electricity distribution
aerospace ST has an aerospace arm
defense (e.g. Lockheed)ST Engineering has subsidiaries manufacturing weapons
casino gaming
cultural exports (films, video games, book publishing, etc.)
plastics
chemicals depending on definition, golden agri and wilmar i guess?
waste managementKeppel and Sembcorp has waste to energy plants
nuclear engineering
hospitals
medical equipment
biological sciences (e.g. seed development)
apparel (e.g. Zara)
luxury goods (e.g. Tiffany)
mining
restaurants (e.g. Starbucks)
temporary staffing
tobacco
payment networks (e.g. Visa)
education and training
home appliances (e.g. Whirlpool)
retailing (e.g. Amazon, Tesco)
advertising (e.g. JCDecaux)
railways (e.g. CSX)
sporting goods (e.g. Nike)
trucking (e.g. J.B. Hunt) Keppel has a logistics arm
vehicle manufactuers (e.g. Bombardier, BMW)

?

I could list some more sectors, but that's already a long list, isn't it?
 

BBCWatcher

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There are arguments for using gold as a inflation hedge, and its low correlation to other asset class.
Not very good arguments.

Fidelity looked at this question and backtested several investments to see which of them were the best inflation hedges. They looked at the period 1973 to 2012, a period with a couple oil shocks and some wild inflation swings. Gold ranked dead last among 9 possible inflation hedges they looked at. The very best were TIPS (Treasury Inflation-Protected Securities), which of course makes sense. If you want to hedge against inflation, you can do it directly in most countries, and with associated ETFs (which can also span countries).

Interestingly, traditional CPF comes fairly close to an inflation-protected Singapore dollar bond. Its interest rates are adjusted according to market rates, subject to a floor. But unfortunately the government doesn't issue bonds analogous to TIPS.

Fidelity found that REITs handily outperformed gold as inflation hedges. The S&P 500 did better than gold, too. So if you're buying a STI index fund (chock full of REITs), you're probably already better hedged against Singapore dollar inflation than gold.
 

Bedokian

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I assume by "asset classes" you mean: stocks (equities; example: shares of Singtel traded on the SGX), bonds (examples: the 10 year SGS bond, CPF savings), cash and cash equivalents (examples: Singapore Savings Bonds, a bonus interest savings account), and possibly real estate (examples: a 99 year HDB leasehold, REIT shares) and commodities (examples: a silver coin hidden under the mattress, a contract for a delivery of orange juice in May, 2017).

How about we agree that the commodities asset class is silly for most people, and if you want that sort of exposure just buy shares in the companies involved in such businesses. For example, if you buy XOM shares (Exxon Mobil) you're pretty much buying oil and gas. The STI has a bit of agriculture (Wilmar, as a notable example).

As it happens, if you buy a STI index fund you're quite heavily invested in pure play real estate, especially Asian real estate. In the STI you've got UOL, Keppel, Hongkong Land, Genting Singapore, Capitaland, Global Logistics Properties, City Developments, CapitaCom Trust, CapitaMall Trust, and Ascendas Real Estate Investment Trust. That's 10 out of the 30 listings -- or maybe 9+ (Keppel in particular, and Genting to some degree, are a little more diverse).

See the problem? The STI isn't genuinely a different asset class from real estate.

Yes, by asset classes I meant equities, bonds, etc., and I agree with your examples in the first paragraph. As for commodities, my definition would be on the thing itself, not companies that mine, drill or grow them, for I would classify them as equities instead.

To elaborate further on my idea of commodities, there are just 3 types of it in my definition - gold, silver and oil. And being a dividend investor, it would be strange that I include them in my portfolio, but I believe it plays a role in stabilising and cushioning any volatility that it comes to my overall investment. My commodities holdings is about at most 5% of my portfolio.

To be fair to STI, there are other sub-indices around such as the FTSE ST Mid Cap Index, FTSE ST Catalist Index, etc., that have a more varied sector/industry base, but no investment vehicle to invest in them (http://www.ftse.com/products/downloads/FTSE_ST_Index_Series.pdf?957). Therefore, the SPDR STI ETF and the Nikko AM STI ETF are the only ETFs that allow one to buy into the local equity markets. Also, the main STI is based on the largest 30 companies by full market capitalisation (http://www.ftse.com/products/downloads/Straits_Times_Index_Ground_Rules.pdf?957).

Still, to me the STI main index is equity in nature, as the counters you mentioned is only about 25% max of its entire weightage (http://www.ftse.com/analytics/factsheets/Home/DownloadConstituentsWeights/?indexdetails=STI).
 

Bedokian

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Well depends right? The whole purpose of diversification is to reduce risk. Lets compare this 2 persons

1.Person A deciding to diversify on asset class level, but for stocks, decide to only buy a few blue chips, for bonds, decide to buy some high yield Singapore traded bonds

2. Person B deciding to buy a global equity index ETF

Who is more "diversified" and do a better job with portfolio management? I would say Person B over person A... Person A simply has too big a unsystematic risk.

There are many views on diversification, but true diversification comes in having different asset classes, because different asset classes behave differently with one another.

Some said getting all the major players within an industry is diversification,
such as acquiring the shares of the three major telecommunications companies in
Singapore. The thinking behind this reasoning is since these three are competitors,
and in the world of a zero-sum market share, one’s loss would result in the others’
gain, thus there is a form of hedge created. However, these three belong to the telecommunications sector, and if there is any major impact in the sector it would result
in a massive loss, regardless of which telecommunications company share you
hold.

Some said investing across different sectors is diversification, having shares
across companies in the telecommunications, financial and transportation sectors.
They reckoned that some sectors perform well in different economic conditions,
such as recession, where companies in the basic consumer sectors such as supermarket
chains would thrive. However, company shares belong to an asset class
called equities. In 2008-2009, during the Global Financial Crisis (GFC), most equities
across all sectors suffered a major blow, even those sound ones which thrive
in recession periods.

There is also diversification across countries, as some argued that not the whole
world had suffered from the GFC (Australia is one of the few countries spared).
I espouse diversification between local and foreign financial
markets and economies, provided that these are done under the general umbrella
of asset classes, which brings us to the final point of diversification across different
asset classes.

So why diversification is best done at the asset class level? If you look at the earlier
examples of investing in different companies of the same sector, across different
sectors and across countries, there is always a level higher in which one could
diversify. Upon reaching the asset class level, it is considered the ultimate as there
is no higher degree, thus making it the first consideration in diversification. Asset classes behave differently when under different economic conditions,
which means different asset classes have different correlation with one another.
Different correlation means when the value of an asset class goes up, the other
would come down or remain stable, and vice versa. This lies in the answer of why
we need different asset classes in a portfolio.
 

BBCWatcher

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To elaborate further on my idea of commodities, there are just 3 types of it in my definition - gold, silver and oil.
I guess you can set whatever personal definitions you want, but the fact remains that if Asian (or even Singaporean) real estate tanks then the STI is substantially tanking, too. The risk correlations are the risk correlations.

There are far, far more market traded commodities than those three. It is possible to buy/sell broad index baskets of commodities using ETFs. UC15 on the London Stock Exchange is one such example.
 
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