*Official* Shiny Things club - Part 2

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yukari_san3

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*Official* Shiny Things club

Shiny Things

Ex Options Trader from Investment bank!

I r the...
...#1 fan!!!


Yukari
 

xyziop

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Emergency fund is separate from the portfolio. Do NOT mix.

The portfolio will only contain equities, fixed income securities, and any cash you intend to invest. If you can get an cash account that pays >2% interest rate for SGD, you can count that as part of your bond component. HOWEVER, the sum inside that you count as your bond component must NOT be anything other than investible cash. Otherwise, the investible cash in your portfolio is a bit of a drag on returns and should be a small percentage in the first place.

Thoughts about this article? https://www.betterment.com/resources/safety-net-funds-why-traditional-advice-is-wrong/

It states that one should jack up his emergency fund by 30% and then invest it into a 40/60 stocks bonds mix.
 

limster

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Thoughts about this article? https://www.betterment.com/resources/safety-net-funds-why-traditional-advice-is-wrong/

It states that one should jack up his emergency fund by 30% and then invest it into a 40/60 stocks bonds mix.

Conflict of interest?

He is an employee of betterment.

Betterment doesn't earn money from investors if they leave the money in cash savings.

Furthermore, the bond returns, after deducting expenses and fees, might not be so different from returns in savings account, SSB, or fixed deposit.
 

Maeda_Toshiie

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Thoughts about this article? https://www.betterment.com/resources/safety-net-funds-why-traditional-advice-is-wrong/

It states that one should jack up his emergency fund by 30% and then invest it into a 40/60 stocks bonds mix.

Potential conflict of interest aside.



The point of the emergency fund is that you know you have x amount of money available for use when you need it. Consider that the scenario that the economy tanks, which also sees the market tank, and you just got retrenched. Then what? It may not be so painful if your emergency fund has been growing for the past 10 years and its value is still greater than the initial amount even if the market halved. On the hand, what if you only had dumped your emergency money into the market 6 months ago only to see it tank 25% and you need to access it?


Now, I'm not against putting a portion of your emergency stash in something like SSB. That's fine, except that you have to account for the time required before you can receive the money after redemption.
 

wealth_farmer

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Thoughts about this article? https://www.betterment.com/resources/safety-net-funds-why-traditional-advice-is-wrong/

It states that one should jack up his emergency fund by 30% and then invest it into a 40/60 stocks bonds mix.

I don't like the idea of:
1.) chasing returns for my safety net funds. I just need to know 18k will be 18k when I need it. Inflation may or may not be a concern (depending on what kind of savings accounts interest you can get), but I feel the right way to grow my safety net funds, if required, is to set money aside for it as necessary and not betting on Mr Market to go my way.

2.) I don't like to pump up my safety net funds requirement by 30% just to pad it for a statistical 23% decline. It seems self-defeating. I don't need $23,377; 18k means 18k.

To me, a safety net fund is my insurance against a rainy day. It is also a deadweight on my portfolio returns by design (not that I count my safety net funds in my portfolio; my point is the theoretical extra returns I could get if I pumped the amount of my safety net funds into my market portfolio). I don't need it to be bigger than what my needs are, for that reason.
 
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Maeda_Toshiie

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Another point to add to what I wrote above: the emergency fund is more than just to meet expenses in the event of retrenchment; it is also to meet emergency expenses such as medical bills, car repairs, or air con repairs. It is there to meet sudden short term needs. Whille you can put some of those on a credit card, card interest rates are heavy enough to make it a dicey move.
 

w1rbelw1nd

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xyziop wrote:
Thoughts about this article? https://www.betterment.com/resources...vice-is-wrong/

It states that one should jack up his emergency fund by 30% and then invest it into a 40/60 stocks bonds mix.

I agree with the concept of having funds available for emergency, but the means of having it in a liquid savings accounts dont appeal to me personally.

For one, I have credit card balance transfer that is fairly cheap (<6% interest), which is less than the expected returns of my ETF portfolio. I also have a stable job, and am a young age with better health than my peers, with hospitalisation insurance coverage. If really need be, I can approach my parents for any "bridging loan“ kind of arrangement, or liquidate my 200k ETF portfolio and get the money in 7 working day tops.

Again, I understand why people have "emergency funds", but I am comfortable with my stance on this matter. Back to the article, I dont know if that line of thought is what I would subscribe to, since I rather not touch my investment portfolio.
 

revhappy

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I find it quite interesting when people like to become such perfectionists with exact asset allocation, emergency cash balance etc, when the future is so unknown.

The scariest statement I find is when people say cash is a drag on their portfolio. I really hope, we don't see a day when they will regret making that statement.

Sent from Xiaomi REDMI NOTE 4 using GAGT
 

redtees

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Question

Hi Shiny,

Been lurking in your thread and I have a question.

I'm currently looking at trading with either SCB/IB, however, I do not have 10K USD worth of cash to get started, but I'm looking to put 2K SGD cash into buying IWDA every month.

Would it be better if I:

1. Start trading in SCB until I have 10K USD worth of IWDA shares and transfer them to IB?

2. Or save up 10K USD equivalent of SGD in cash and put them into IB to save on the FX spread entirely.

Thanks!
 

wealth_farmer

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Hi Shiny,

Been lurking in your thread and I have a question.

I'm currently looking at trading with either SCB/IB, however, I do not have 10K USD worth of cash to get started, but I'm looking to put 2K SGD cash into buying IWDA every month.

Would it be better if I:

1. Start trading in SCB until I have 10K USD worth of IWDA shares and transfer them to IB?

2. Or save up 10K USD equivalent of SGD in cash and put them into IB to save on the FX spread entirely.

Thanks!

Are you 25 or younger? If so, you only need USD 3k equivalent to activate your IBKR account. Speaking from personal experience (and I was over 25 when I opened my account), I was able to activate my account with SGD 6k and start investing with IBKR. It's just that I didn't have the option to withdraw any cash from my account until I had in excess of USD 10k equivalent in assets with them.

If you can commit to buying IWDA every month, then you should just start off with IBKR because the monthly cost is the same to you whether IBKR or SCB: USD 10 each month. Unless you have other assets with SCB that can push you into priority banking, that is; at 0.18% with no minimum commission, your SGD 2k investment, or about USD 1,526 will generate commissions of USD 2.74 a month per transaction with SCB. This is before factoring in the USDSGD spread, which based on what forummers who use SCB here have said in the past, runs at about 0.5%.
 
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