*Official* Shiny Things club - Part 2

[limster]

Thanks. So if I were to buy IWDA, it will then depend if I want the exposure to GBP or EUR? Any thoughts on this? GBP seems to have continued headwinds with Brexit negotiation going nowhere, EUR slow recovery and hike in i/r in the long term?

imagine that you are buying clothes and the price tag has multiple currencies. Whatever currency you pay in is not that important, you pay whatever is most convenient for you. The value of the clothes you bought is not determined by the currency you paid in.

 

[Shiny Things]

Thanks. So if I were to buy IWDA, it will then depend if I want the exposure to GBP or EUR? Any thoughts on this? GBP seems to have continued headwinds with Brexit negotiation going nowhere, EUR slow recovery and hike in i/r in the long term?

If you're doing your accounting in SGD, it doesn't matter whether you buy the GBP-denominated or the EUR-denominated listing; the listing currency of the ETF doesn't matter.

Think about what happens to your SGD PnL if GBP suddenly doubles against every other currency in the world. The price of the ETF would halve (because the holdings of the ETF are worth half as much in sterling terms), but the value of each share in SGD terms would double (because one sterling now buys twice as many Singapore dollars). Net result: zero.

The only thing that matters is which listing is most liquid and has the tightest spreads, and I think that's the USD-denominated London listing (haven't checked, TBQH, so correct me if I'm wrong).

Edit: actually just look at Limster's post, they explained it better than I possibly could, and with more lace bustiers.

 

[af7680]

I was looking for 'like' button

imagine that you are buying clothes and the price tag has multiple currencies. Whatever currency you pay in is not that important, you pay whatever is most convenient for you. The value of the clothes you bought is not determined by the currency you paid in.

 

[collision]

Hi Josh! Just finished your book today. Thanks for the great insights and making it easy for a newbie to read and digest (as compared to those who used super chim words).

Was wondering if you could help me with these enquiries:

I’m 24 and am planning to invest $500 each month. Have started G3B since Nov 2015 so currently invested about $3.1k. According to your 110 minus my age rule, I should be investing 43% G3B, 43% IWDA and 14% ABF as of today.

1) For the IWDA ETF, it is recommended to open an account with SC. Do you have the detailed steps on how can I open the account? Tried searching online for answer but to no avail. Does it have min investment amount to start with? Also, seems like the shares were not hit by recession before. Do you think it’s a risky time for me to enter right now?
2) For the A35, do you recommend using POSB too? Was reading through the terms and seems like it has some other fees written on it.

Appreciate your replies so I can start investing in the other two ETFs! Thanks!

 

[EagleToThesSky]

If this is savings for your retirement, you *may* want to consider opening an IBKR account (if you don't already have it) and moving everything there and putting into just IWDA + EIMI, since you have the $140k (US$100k + a bit of buffer) to avoid the monthly commission. You can then let that sit while you reaccumulate your G3B/ES3 to catch up. Instead of holding A35 for retirement, I would recommend looking at your CPF SA instead and counting that as your bond allotment.

Hi Tangent314, you seem to like IB a lot, which I start to (Wish I could have started earlier)..

Just curious, how would you recommend executing above transaction of all to IB and putting into IWDA+EIMI. This would at least involve selling the G3B/ES3/A35 which will have quite a bit of transaction fee given the amount? Or there are some other ways to do it?

And also, can we transfer G3B/ES3/A35 to IB? seems that Singapore residence cannot buy SGX stocks using IB? If we can transfer, means we can also sell using IB, which could make sense, since IB has only 0.08% fee on that.

 

[BBCWatcher]

I would…
Step 1: Sell the VOO (rather than transferring it out, because you might want to use the funds to buy local stocks).

I disagree with this bit. Even if you want to cash out into Singapore dollars for something else (in Singapore), it's still going to be less expensive to move VOO in-kind to IB then cash it out. At SCB the currency conversion alone is worth about $60 of extra expense versus IB in this case. If it costs only $13 to transfer VOO to IB, I'd favor that approach.

 

[Purplestars]

I'm going to throw in an opinion on fund allocation between sti and vwrd.

As a late 20s investor, I am putting all my monthly contributions into vwrd and none into sti.I don't hold any opinions of any country outperforming another.

The rationale of investing in sti lies only in it being domestically weighted; allowing for a much smoother drawdown during retirement. And that only happens about 40 years later. There is no need to rush into sti at the moment.

Also, the contributions to vwrd will mean that I will attain 100k worth sooner thereby reducing the monthly 10usd commission. The plan is to hit 100k vwrd before I consider investing into sti. Brokerages will be minimised.

This is similar to my take on bonds. Just do away with it until maybe 20 years later. Take on as much risk as you can while you are young. Have some balls of steel.

There will also be no need to consider sc and trouble myself of transferring from sc to ibkr in the future. The larger contribution will make ibkr much more superior. And frankly speaking, anybody going for the long haul will use ibkr eventually. Sc is just a temporary holding account before you build up funds.

I feel like I have a pretty neat idea going on. Feel free to criticise


Sent from Ilovennp using GAGT

Good job, I have roughly the same game going for me. 0% STI, as none of the 30 companies in the STI appeals to me and I don't see why I want to overweight them in my portfolio. Not to mention the commission on these things are exorbitant on SCB.

70% IWDA, 10% EIMI, and 20% on punts. The 20% risky punts are the ones that bring in the greatest returns.

The difference with you is that I hoard a lot of cash. I am very much a contrarian. In a Bull market that is near the ATH, my balls shrink. In a Bear market near the ATL, my balls become much brassier and I will go all in.

I don't mind losing out on gains holding on to cash, I am pretty happy with the 3%+ pa my banks accounts give anyway. The one thing you should stay away though is the A35 bond fund. It is amazing that the bond fund is the only one that is showing negative returns when it is supposed to be the most stable. Don't gamble with price changing bond funds, stick it into your bank accounts until they are maxed out then go into SSBs.

 

[Xanthyon]

1) For the IWDA ETF, it is recommended to open an account with SC. Do you have the detailed steps on how can I open the account? Tried searching online for answer but to no avail. Does it have min investment amount to start with? Also, seems like the shares were not hit by recession before. Do you think it’s a risky time for me to enter right now?

Go down to any of their branch and apply to open these accounts
- SGD eSaver account - to transfer SGD from your other bank accounts
- SGD settlement account - to settle any SGD-denominated stocks you buy on SGX (optional)
- USD settlement account - to settle any USD-denominated stocks you buy (for your IWDA)

You need to fill up a few forms (e.g. W-8BEN) which the bank staff will help you out with. Just need to bring your NRIC (if SG citizen/PR) along.

for the SGD eSaver account, there is a minimum $1000 balance required, otherwise u will kena some fees for falling below the amount. the other 2 settlement accounts don't have any minimum amount.

in general, timing the market is a bad idea cuz your assumption is recession will hit soon. but if it doesn't, then you're missing out on growth which could be even costlier.

2) For the A35, do you recommend using POSB too? Was reading through the terms and seems like it has some other fees written on it.

For your $500 monthly investment amount, it makes more sense to get A35 through POSB RSP, since the only cost is the 0.5% sales charge with no minimum. Assuming you allocate $100 monthly for A35, you only pay $0.50 sales charge each month via POSB RSP.

If you buy A35 thru SCB, it has a lower 0.25% sales charge but with a S$10 minimum, which will not make sense unless u drop $5000 each time u buy A35.

No other fees associated with buying G3B/A35 via POSB RSP, cuz I personally also subscribe to these 2. Also, there is an ongoing promotion - if you set up an RSP from now until end Sep, POSB will refund u all sales charges (incurred between Jul-Sep) into your PayLah! account by end Dec 2018.

Hope this helps.

 

[Maeda_Toshiie]

Yeah, that’s a problem for the SGX. Liquidity begets liquidity, and why on earth would companies list on the SGX instead of the HKSE (if you want Asian investors) or the US markets (if you want global coverage)?

Funny thing: the SGX has tried this in the past. They lobbed in a fairly substantial bid for the ASX back in 2011… and got abruptly and spectacularly shot down by Australia’s government. And I am fairly reliably informed that the reason the takeover got shot down was because of the disastrous state of the SGX’s equity market and its lax enforcement of listing rules: in short, the Aussie government didn’t want the SGX’s enforcement division anywhere near the Australian markets.

Don’t forget, this was 2011, in the middle of the S-chip implosion—the dodgy Chinese midcaps (no, autocarrot, not “madcaps”, although you’re not exactly wrong) that filled the SGX’s coffers with listing fees in 2006-2008 and then ran off with investors’ money a few years later.

Just quietly, I think it’s going to be at least a few years more before the SGX gets any traction on any merger attempts outside of the EMs.

And it can turn into a vicious downward spiral for SGX. Companies in ASEAN countries do not need to list at SGX because their domestic exchanges are doing just fine. IOW, we aren't going to participate very much in growth within ASEAN via SGX, except through indirect exposure via the banks lending out (and how much of the growth does that capture?).

The Chinese don't need to list here; Shanghai + HK is enough for the biggies (or New York for access to US monies). What instead comes over and list are the dodgy ones like the S-chips that do a David Copperfield on investors' monies. Tighten the rules to filter out the dodgy ones but that leaves few if any to list. Losen the rules and you get junk that implode to screw over investors (and driving them away in the process), leaving a bad name for SGX in the business.

If we look at local companies getting listed on SGX in recent times, what we get are a bunch of nano caps companies doing local business with little growth prospects (listing look more like exit strategies for them than to raise funds). Or REITs. This place is turning into a rentier economy!

If SGX doesn't attract promising IPOs, investors aren't going to come. If investors aren't coming, SGX isn't going to attract promising IPOs. Instead, what SGX gets are kindergarden franchises and coffeshops chains.

For indexers, the STI is frankly ill diversified with just 30 stocks and the terrible balance exacerbated by the 3 banks and SingTel. The rest of it is stuffed with that few big names that have existed forever or government linked corporations (which also have existed forever).

Brokers have been moaning about the low trade volumes in the local market since the 2009; that has not changed. Younger investors (millennials) are more interested in the US and Choyna markets.


tl;dr: investing in the SGX is fine for getting a decent dividend but forget about growth.

 

[MrHighlander]

That strikes a chord especially with the contrarian and cash overweighting bits. Having said that, which bank accounts give 3% pa? Think that’s non existent - unless you are talking about DBS multiplier hitting the highest interest tier

Good job, I have roughly the same game going for me. 0% STI, as none of the 30 companies in the STI appeals to me and I don't see why I want to overweight them in my portfolio. Not to mention the commission on these things are exorbitant on SCB.

70% IWDA, 10% EIMI, and 20% on punts. The 20% risky punts are the ones that bring in the greatest returns.

The difference with you is that I hoard a lot of cash. I am very much a contrarian. In a Bull market that is near the ATH, my balls shrink. In a Bear market near the ATL, my balls become much brassier and I will go all in.

I don't mind losing out on gains holding on to cash, I am pretty happy with the 3%+ pa my banks accounts give anyway. The one thing you should stay away though is the A35 bond fund. It is amazing that the bond fund is the only one that is showing negative returns when it is supposed to be the most stable. Don't gamble with price changing bond funds, stick it into your bank accounts until they are maxed out then go into SSBs.

 

[EagleToThesSky]

Sure, odd lots are fine. That currency pair is highly liquid, so you should still get your orders filled.

Hi BBC, are you suggesting IB treats the exchange from SGD to USD and vise versa like a trade of stock? When you are buying, someone else (an individual) is selling. That is why the rate is very close to market rate? Instead, banks will just trade the currency btw you and the banks themselves and they take their share?

You may have to wait for settlement of your U.S. dollar purchase, which takes a couple days. (If you have a margin account, maybe not.) Then, with U.S. dollars available, you just place an order for IWDA.

What is a margin account?

One thing to be aware of, if you're a non-U.S. person, is that there is a U.S. estate tax that applies to all U.S. broker held cash, in any/all currencies. There is a single US$60,000 estate tax exemption that applies to all your U.S. estate taxable assets.

So, here's how this works. Let's suppose you were to die on June 29, 2018. (Hopefully not! It's just an example.) Let's also suppose you own 100 shares of General Electric (a U.S. listed/traded stock) held in a custodial account that your employer (GE) set up for you, and you have US$50,000 and S$35,000 of cash held at Interactive Brokers. You also have US$40,000 worth of U.S. Treasury Bills, purchased through Interactive Brokers. And you have US$20,000 worth of IWDA, again at IB. Plus some assets in Singapore, such as some equity in a HDB unit and CPF savings.

OK, got all that? So (oversimplifying only slightly), the way the U.S. estate tax works for non-U.S. persons is that all your assets are tallied up, at fair market value, on the date of your death. Some assets are U.S. estate taxable, and some are not. In this particular list, the following assets are U.S. estate taxable:

* 100 shares of GE (worth about US$1,320 right now)
* US$50,000 cash at IB
* S$35,000 cash at IB (worth about US$29,915 right now)

Total = US$81,235

and that's it. To this list of U.S. estate taxable assets a single US$60,000 exemption is applied. The value of your U.S. estate taxable assets above the single exemption (about US$21,235) are then assessed a 40% estate tax, and the executor of your estate (the person responsible for settling your financial affairs after you die, whoever that is) then is required to pay, under U.S. law, that estate tax (with accompanying estate tax form) within 9 months of your death. U.S. estate tax owed in this example would be about US$8,494.

Provided you keep your U.S. estate taxable assets at or under the US$60,000 single exemption, no U.S. estate tax will be owed in the event of your demise.

as long as we stay away from US counters and do not keep too much cash in IB accounts, we are fine, which is the case for most people here since we are buying IWDA/EIMI.

 

[EagleToThesSky]

Having said all these, there is currently an ongoing promotion for both SCB and POSB-IS until end of June 2018, basically they will refund all brokerage fees for buy trades, subject to certain T&Cs. Check their website to see if you qualify. If yes, it might be a good time to do lump-sum investing since brokerage fees will be refunded

I would not factor this in the investment decision as this is probably small things compared to the sum you are going to put in

 

[tangent314]

I’m 24 and am planning to invest $500 each month. Have started G3B since Nov 2015 so currently invested about $3.1k. According to your 110 minus my age rule, I should be investing 43% G3B, 43% IWDA and 14% ABF as of today.

1) For the IWDA ETF, it is recommended to open an account with SC. Do you have the detailed steps on how can I open the account? Tried searching online for answer but to no avail. Does it have min investment amount to start with? Also, seems like the shares were not hit by recession before. Do you think it’s a risky time for me to enter right now?
2) For the A35, do you recommend using POSB too? Was reading through the terms and seems like it has some other fees written on it.

I wouldn't worry too much about the equities:bonds ratio. Once you start counting your CPF holdings as part of your bonds portfolio you will realize that you don't ever have to bother about buying any bonds outside of CPF. If you really want to, A35 isn't the best vehicle for that, you should probably look into SSBs instead.

With $500 per month, either way you go (IB or SCB) is going to be expensive. IB is 'all-inclusive' at US$10/month, while with SCB you need to put in US$4000 (~S$5500) each purchase to reach the US$10 minimum commission before paying another ~US$22 for forex, meaning saving up for 11 months before making a purchase. There's a bit of opportunity cost doing this, and this also assumes you are putting everything into IWDA and none into others.

Sadly our options, even the best ones, just aren't very good. IMO the best way to do this is to make a big commitment to reach US$100k in IBKR as quickly as possible. I'm almost there, sharing an account with my wife. Unfortunately, not many people can do this.

Hi Tangent314, you seem to like IB a lot, which I start to (Wish I could have started earlier)..

Just curious, how would you recommend executing above transaction of all to IB and putting into IWDA+EIMI. This would at least involve selling the G3B/ES3/A35 which will have quite a bit of transaction fee given the amount? Or there are some other ways to do it?

And also, can we transfer G3B/ES3/A35 to IB? seems that Singapore residence cannot buy SGX stocks using IB? If we can transfer, means we can also sell using IB, which could make sense, since IB has only 0.08% fee on that.

I wouldn't touch the G3B/ES3/A35 that you already have, unless there is free redemption (e.g. POSB Invest Saver). I'm guessing you will probably not be able to transfer SGX counters to IB, and I don't think it's really necessary to try.

 

[EagleToThesSky]

Using your IWDA example:

* Cost of 100 units : 100 x $55 = $5500
* Commission : $5500 x 0.25% = $13.75 (this is what you will pay because it's higher than min of $10)
* Fees : $5500 x 0.5% = $27.50 on order, but $0 on settlement (this one will be confusing because SCB calculates this when you are placing your order, but it does not actually get charged)
* GST : ($13.75 + $27.50) x 7% = $2.89 on order, but $13.75 x 7% = $0.96 on settlement since $0 fees (because SG Govt must get its cut)

You will need 5500 + 13.75 + 27.50 + 2.89 = $5544.14 in your USD settlement account to pay for the transaction, although only 5500 + 13.75 + 0.96 = $5514.71 will be deducted on settlement

[all amounts are indicative only and my calculation may be off by a few cents due to rounding errors]

0.5% is the ex-rate loss for the conversion, right? So it is not shown on the settlement but incurred when you do the conversion from SGD to USD and from USD to SGD?

 

[kehyi4]

0.5% is the ex-rate loss for the conversion, right? So it is not shown on the settlement but incurred when you do the conversion from SGD to USD and from USD to SGD?

Nope. 0.5% is UK stamp duty that is calculated when you buy stuff on LSE. It's not actually charged because ETFs are exempt from it

Nothing to do with fx fees

Sent from null using GAGT

 

[BBCWatcher]

Hi BBC, are you suggesting IB treats the exchange from SGD to USD and vise versa like a trade of stock? When you are buying, someone else (an individual) is selling. That is why the rate is very close to market rate?

That's basically correct, but it is a market rate because it's a market. You can read about IB's IdealPro foreign exchange market here.

as long as we stay away from US counters and do not keep too much cash in IB accounts, we are fine, which is the case for most people here since we are buying IWDA/EIMI.

That's correct, but some U.S. domiciled assets are U.S. estate tax exempt for non-U.S. persons. As a notable example, directly held U.S. Treasuries (bills, notes, bonds, etc.) are U.S. tax exempt (estate and income) for non-U.S. persons.

One of these rainy days I ought to take a look to see if there's an Irish domiciled U.S. dollar money market fund that'd be appropriate for parking U.S. dollar cash.

 

[311290]

Thanks all for the advise.

For now will invest $200/monthly in ES3 (POSB Invest Saver)
For SSB should i apply directly or theres a ETF for it?

If yes, which method if highly recommend?

IWDA will invest on SCB as its hard to reach the $100kUSD on IB.

In future is it recommend to transfer IWDA to IB once i reach 100kUSD in stocks?

 

[Purplestars]

That strikes a chord especially with the contrarian and cash overweighting bits. Having said that, which bank accounts give 3% pa? Think that’s non existent - unless you are talking about DBS multiplier hitting the highest interest tier

You can start by checking out BOC and Maybank.

You are pretty behind in the Bank accounts game, no thanks in part to Shiny refusing to acknowledge them as superior. There is some learning curve for you understand how to get the maximum returns from the banks.

 

[revhappy]

Anton Kreil from the BBC show; Million Dollars traders fame.

Sent from Xiaomi REDMI NOTE 4 using GAGT

 

[BBCWatcher]

For now will invest $200/monthly in ES3 (POSB Invest Saver)

POSB Invest-Saver offers G3B, which is basically the same as ES3 except it has a higher management fee.

For SSB should i apply directly or theres a ETF for it?

You can only buy Singapore Savings Bonds directly, using ordinary Singapore dollar funds at one of the three primary dealer banks (DBS/POSB, UOB, or OCBC). The minimum purchase increment is $500, plus there's a fixed $2 fee.

IWDA will invest on SCB as its hard to reach the $100kUSD on IB.

The US$100,000 figure doesn't actually matter with IB in this comparison. Standard Chartered can easily be more expensive than IB even if you don't qualify for IB's minimum activity fee waiver. It depends on how frequently and how much of IWDA you buy, and whether there are any other counters (such as EIMI) that you're also buying. Standard Chartered's foreign currency exchange cost is much higher than IB's.

It's rather rare that Standard Chartered wins the cost comparison, actually. If, for example, you receive a modest (less than S$5500, it looks like) bonus once per quarter, and you plow that bonus into IWDA (once per quarter), and only into that one counter, then Standard Chartered could be less expensive than IB. Otherwise, IB probably pulls ahead.

The US$100K threshold offers some additional savings at IB, but you cannot assume that below that amount somebody else wins. You have to sit down and do the commission and forex cost math, that's all.