*Official* Shiny Things club - Part 2

[Shiny Things]

Say i spend SGD5000 to get USD3596 (1.390SGD for 1USD) to get 72 shares of IWDA bought at price of $50 and it goes to $53 and i sell all of it giving a 6% return (53* 72 = USD3816)

I then convert USD3816 back to SGD5257 (1.377SGD for 1USD) and my return becomes 5%.

Because this is what i'm experiencing now except that i didn't sell. But the FX eat 1% of the return??

The SGD strengthened by 1% between the buy and the sell, so yes, that looks exactly right.

So if IWDA long term avg return is 5-7%, after FX our return potentially will becomes 4-6%?? or worse if the FX spread gets wider in the future..

The assumption you seem to be making is that the SGD will only ever strengthen. But FX is a two-way market - it can go up or down.

Since 2012, USDSGD has gone from 1.25 to 1.40-ish. If you’d bought IWDA in 2012, the weakening SGD would have added about 10% to your returns over that time.

 

[hwckhs]

Where does it show/indicate that SWRD is a distributing ETF?

It's accumulating, like IWDA.

https://uk.spdrs.com/etf/spdr-msci-world-ucits-etf-SPPW-GY

Income Treatment: Accumulation

 

[linuskltan]

Where does it show/indicate that SWRD is a distributing ETF?

Those who considering SWRD as an alternative to IWDA cuz of lower expense ratio should consider LCWD. Although same 0.12% expense ratio and similar AUM, somehow actual trading bid-ask spread for SWRD ~0.19%, which is more than 2 times as much as LCWD's 0.08% and IWDA's 0.07%.

 

[ftpofmpo]

ICBC is desperate for long-term USD deposits for whatever reason; that's why they're paying up. And the fact that a Singaporean bank is thirsty for USD cash - when Singaporean banks are usually bursting at the gills with deposits and desperate to lend them out - is a bit of a worry.

this is an interesting point, what could be possible reasons behind this;

singapore, second to hongkong is a friendly regulatory environment for them to raise usd in times of need?

according to scmp "Foreign financial institutions increasingly reluctant to lend US dollars to Chinese banks given worries about financial risks amid the trade war"

china has also stepped up capital controls on foreign currency

Domestic demand for US dollars is rising sharply because of exporters’ reluctance to repatriate dollars earned abroad amid fears over yuan depreciation and escalating trade tensions

it would be a huge signal to the rest of the world if an outpost of icbc loses deposits

esssentially foreigncy currency deposits at banks are unsecured bonds it can be assumed

 

[ftpofmpo]

it's questionable how u manage to get 3%.

"An apparent reflection of the tighter supply of US dollars and their rising costs, China’s US dollar interest rate for one-year deposits implied by the yuan exchange rate has risen steadily to around 3.4 per cent from 2.4 per cent last August"

This interest rate seems to be across the board in china, so nothing unusual

 

[Shiny Things]

Can even get interest as high as 6% in one of the ASEAN countries for USD FD. No deposit insurance and subject to 6 or 14% tax on interest earned. Current promotion rate is 6%.

Ahhh, but what you’re getting there is a huge lump of credit risk.

Ever heard of Icesave? That was a savings account that Landsbanki—an Icelandic bank—offered to UK depositors, back in the mid-2000s. It was a GBP account, so it made sense for UK depositors, but it paid as much as 6% when other sterling accounts were paying 2-3% interest.

It was INCREDIBLY popular... until October 2008, when the entire Icelandic banking system (which, to be fair, was only three banks) collapsed in the space of about 48 hours. (That was... interesting. I was in the UK when it happened, and boy oh boy do I have some stories.)

High returns always come with some risk somewhere, whether you can see it or not.

hi Shiny, i came across this ETF SWRD. very similar to IWDA but with lower expense ratio. what do you think of this ETF?

Yeah, but it’s less liquid - you’ll pay a wider spread to buy/sell it. Don’t bother.

Hi ShinyThings!
I am into the second month of buying IWDA, G3B and MBH. I do have a very silly question (and I am not sure if I can even phrase it correctly).
what are we buying for? I need to apologise because i think i sound really dumb here. I am wondering if we are buying all these to beat the ever-increasing inflation? or to be super rich by the time we retire?

Not at all. This is a good question, though it’s one where the answer will vary a bit depending on who’s asking it. Some people are saving to buy a house, some are saving for retirement (that’s why I called the book “Rich By Retirement”), some for their kids’ education...

The same strategy works pretty well in most cases, and it’s simple to follow.

(As a side note: I wouldn’t say inflation in Singapore is “ever-increasing”. Inflation in Singapore is pretty low, all things considered, and it’s actually been negative pretty recently!)

what about global short term etfs based on Bloomberg Barclays Global Aggregate Corporate USD 1-3 index, such as the Vanguard USD Corporate 1-3 Bond UCITS ETF listed on lse?

Ftpofmpo (gesundheit), you’ve completely missed the point of the bond component of a balanced portfolio.

The point of the bond component is that it’s something that has a relatively stable value. You’re a SGD investor; if you buy USD bonds (and this specifically applies to bonds, not to equities), you suddenly have a huge lump of USDSGD currency risk. If USDSGD were to go back to 1.25, where it spent quite a long time in the early-mid 2010s, you’d lose 10% of your portfolio on something that’s supposed to be pretty stable.

I’ve noticed you’ve asked a lot of questions in a lot of different threads, trying to find alternatives, and a lot of times it seems like you haven’t actually understood what you’ve been suggesting. I’d suggest that you actually start investing, and spend a few months getting comfortable with the process.

Hi Shiny Things,

I was going to start the POSB plan when I read about IB Lite. Would your current recommendation to use POSB/SCB still stay for amounts under $1k/mth? Thank you.

IB Lite is not available to Singaporean residents, unfortunately.

Hi Shiny Things,

I have less then 500 every month to invest, do you think
i should go for POSB Invest Saver ?

Yep!

What are the risks of investing in ETFs? Like for eg, if we plan to buy G3B for 20 years, if the fund company cease to exist after 10, is there any protection or guarantee for us?

Even if the fund manager ceases to exist, the ETF is a separate entity. Your money is still there; they just appoint a new fund manager and the ETF keeps on trucking.

Hi Shiny, you mentioned there is a better way than Infinity Global funds to get US exposure in SRS? Could you kindly share that? Based on what I know we cannot buy IWDA in SRS.

Yes, there is: don’t.

You don’t want specific US equity exposure: you want global equity exposure. You can get that through IWDA.

If you have access to an SRS account, buy ES3/G3B in the SRS account. Buy IWDA in your regular brokerage account.

Thanks for the info.

from SWDA on ishare.com, what does this EUR and GBP "hedged" means?

It means that the fund takes out currency hedges to convert the returns back into EUR or GBP or whatever. This is almost always a waste of money.

 

[BBCWatcher]

Other banks USD FD interest rates:
RHB 4.25%
CIMB 4%
Maybank 3.75%

Where are you seeing those rates? For example, RHB Singapore is only paying 2.0% on a super jumbo 24 month U.S. dollar fixed deposit.

 

[Shiny Things]

I heard about Landsbanki and the shareholders of the bank also owned West Ham Football Club at that time.

Interest rate in this country is trending downward.

During the 2007/8 global financial crisis, no bank in this country collapse. I can understand the risk but what can someone do if their businesses or income are from this country?

Firstly, for anyone who's wondering, "this country" is probably Cambodia, where the banks all pay weirdly high interest rates because they're desperate for hard currency (and I don't think there's any deposit insurance).

So, Tiger: you're telling me you heard about Landsbanki, and presumably you heard about all the headaches that caused for Landsbanki / Icesave depositors. That should make you run a mile from whichever bank this is.

If you have businesses or income in Cambodia, honestly, the best thing you could do is convert your profits to a hard currency and move them back to Singapore or another more stable country as fast as you possibly can. The reason these banks pay such high interest rates is because leaving your money there is risky.

 

[Converged]

So I've followed ur RBR book - bought nikko, iwda, and a bond. Will keep buying them and rebalance the portfolio religiously too. Thank you very much for the great guidance and advice.

I've completed the passive investing sector of the portfolio. Now... what's next? What'd u recommend?

Posted from PCWX using kkj

 

[SuperFund88]

yea i keep track of the FX rate i trade at as well

 

[SuperFund88]

The SGD strengthened by 1% between the buy and the sell, so yes, that looks exactly right.



The assumption you seem to be making is that the SGD will only ever strengthen. But FX is a two-way market - it can go up or down.

Since 2012, USDSGD has gone from 1.25 to 1.40-ish. If you’d bought IWDA in 2012, the weakening SGD would have added about 10% to your returns over that time.

got it, thanks! i doubt its of MAS's interest to keep a strong SGD against USD, so i guess a stronger USD is higher probability scenario decades from now..

 

[SuperFund88]

yep. that's the fx risk u hv to take that's why I usually record the rates I am getting fr each trade to know the ytd returns I am getting

yea i keep a record of the rate i trade at as well, so far its high 1.3x ish on average

 

[spadestick]

Shiny Things

New development - Charles Schwab recently announced $0 trade commissions, and its impact effectively cancelled Robinhood Investing, M1 Finance, and so many other brokerages

how does this affect / benefit us in sg? More importantly, would it be easy to sign up for Charles Schwab and beneficial?

Thanks!

 

[BBCWatcher]

You are right, it is Cambodia.
I do move some USD back to Singapore, once or twice a year into Standard Chartered USD$aver account.

And then what?

I am not really worried about the banks in Cambodia as they can loan out the money at 12 to 18% pa.

Have you thought about the creditworthiness of those borrowers?

 

[Shiny Things]

You are right, it is Cambodia.

I thought it rang a bell. I looked at the weirdly high USD interest rates in Cambodia a couple years back, and realized it was basically all down to credit risk.

To be totally blunt, if these banks were creditworthy they wouldn’t need to pay 6% in the first place; they’d be able to borrow USD on international markets at much lower rates.

I am not really worried about the banks in Cambodia as they can loan out the money at 12 to 18% pa.

2. Most borrowers have to pledge their properties.

This sounds a lot like the view people had of American banks back in the mid-2000s. They could borrow cheaply and lend at high rates, secured by people’s houses... and that turned out very badly.

On top of everything, a USD loan secured by a house in Cambodia has currency risk. If the bank has to repossess and sell the house, they’ll get KHR for it, which won’t help them if they need to pay back a depositor who gave them USD.

The real risk is a devaluation of the KHR: if the KHR gets devalued at the same time people start defaulting on their loans (say, because the economy slows down), the banks are going to be in a world of trouble, because they won’t be able to repay those USD term deposits with KHR assets.

This is pretty much word-for-word the same loan-currency mismatch that blew up a bunch of the Indonesian and Thai financial sectors in 1998.

Anyway, long and short of it: the high yields on USD in Cambodian banks aren’t free money. They’re really risky money, and I think you’re doing the right thing by moving USD out to Singapore on a regular basis.

 

[Wonderer haha]

Shiny Things

New development - Charles Schwab recently announced $0 trade commissions, and its impact effectively cancelled Robinhood Investing, M1 Finance, and so many other brokerages

how does this affect / benefit us in sg? More importantly, would it be easy to sign up for Charles Schwab and beneficial?

Thanks!

Charles Schwab to close Singapore office.

https://www.reuters.com/article/us-...e-office-two-years-after-launch-idUSKCN1VQ0AL

 

[FrostWurm]

There are only 5 companies listed in Cambodia Securities Exchange. 3 of them are state owned.

Erm...how is this related to credit worthiness?

 

[Rui Qi]

Hello,

I am a complete beginner and am looking to start investing 2k every month into ETFs. I already have all the pre investment fundamentals covered i.e. 6 months emergency fund, debts and insurance. I saw that the recommended choice is between the POSB Invest Saver and the Standard Chartered Brokerage. Would the advise be for me to use SCB due to the lower fees of $10 compared to POSB's $20?

My account however, is tied to POSB and so was wondering if it would be better to simply use POSB for the convenience.

I still need to do more reading and so might have missed out subtle details.

 

[FrostWurm]

Did I say anything to do with credit worthiness?

No, but how does the fact that 3 of the 5 listed companies in Cambodia being state-owned make any difference to your argument?

Does it mean the economy is good? The economy is bad? What point are you trying to make here?

 

[Shiny Things]

What I am trying say is that hardly anyone in Cambodia invest or speculate in stocks, so when stock markets around the world crashed, how many Cambodian will be affected?

Cambodia economy growth 7% in 2017 and 7.5% in 2018.

You said you're not trying to get people to invest in Cambodia, but it sure as hell sounds like you're saying "yeah, Cambodia is great, it's totally safe!".

There's a very big disconnect between that and what you said upthread about having been aware of the Icesave saga, which is literally exactly the same thing as the Cambodian banks are doing right now. Everyone thought the Icelandic banks were rock solid as well, until they weren't.

Let me be blunt. You came in here saying "I've found really great USD interest rates in this country, but I won't tell you what the country is! I'm totally not trying to get people to invest here, I swear!". Then when we figured out which country it was, you switched to "oh yes, Cambodian banks are very solid, there's not a housing bubble, nobody in Cambodia owns stocks so the banks are totally fine".

You sound like you're trying to sell something and I don't know what it is. But you're making these tortured arguments that the Cambodian banking sector is rock solid, despite having pretty substantial cross-currency borrowings, an asset base amounting to a nosebleed-level 140% of GDP, and being fragmented and under-resourced to a degree that would make the long-tail US banking sector proud.

Either you work for one of the Cambodian banks and you're trying to plug them, or you want us to tell you that yes, the Cambodian banking sector is totally fine and it's OK to chase those suspiciously high yields. Neither of those are going to happen.