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BBCWatcher

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What will really happen? Probably something less spectacular... but far from the fiction spewed in that video! Some of the statements in there are just laughable.
We actually know more or less what happens when oil prices fall and stay low because it happened circa 1986.

Hey BBC, do you have any idea how ETN work?
ETNs are Exchange-Traded Notes. I'd just refer you to Investopedia's article on ETNs.

For eg TVIX
Basically is it like a pump and dump kind of play i.e.by traders? Or does the issuer actually pump in the cash to support the prices?
TVIX is a very short-term instrument for professional traders. Investopedia's article on TVIX explains it pretty well.

I suggest you stay far away from ETNs such as TVIX.
 

auvignon

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Yes, Great Eastern seems to offer the best T&Cs, but all of the DII policies are better than none.

Noted. Will take a look at the GE Pay Assure T&Cs and get that rolling. If I recall correctly, you also recommended to stretch out the pre-benefit period for as long as it is allowed so as to keep the premiums low (which I guess should not be an issue given the planned liquidity/reserves going forward).

Actually, it's best to base your emergency reserve on your monthly household spending. So if you're figuring you need S$8K/month to keep your household of one afloat, then S$96K would be equivalent to 12 months. That's usually a very good buffer, and most people aren't that well buffered. Also, conceivably you could reduce monthly household expenses below S$8K in an emergency, but let's use S$96K as a target.

Some of that S$96K would be held in an ordinary bank account, and if you can eke out a bit of extra interest for behaviors you would have anyway (such as a salary deposit), great, no problem. So maybe S$50K in SSBs?

Ah, using household spending makes more sense. Got it, will plough about half into SSBs (which I understand may be great at this time given falling interest rates conditions). Will also work on boosting my IWDA and ES3 (as well as the full OA to SA transfers (up to FRS) and S$7k RSTU SA top-up (also up to FRS)) first before purchasing MBH.

Are you? If your variable pay is under $30,000, you should have some room below the CPF Annual Limit.

No, your compulsory contributions are always made. You're not going to lose anything that way. However, if, for example, you exceed the CPF Annual Limit by making a too large voluntary contribution into your MediSave Account, the overage will be returned to you without interest.

That's not the only play. You can also deposit $7,000 directly into your Special Account for tax relief. Yes, these are irreversible, but you're very well compensated with 4% interest and, if you keep this up for just a few years, with a Full Retirement Sum-funded Retirement Account at age 55 plus lots of dollars available for withdrawal at age 55+ plus lots of tax relief along the way, which you can also save and invest. As long as you're maintaining adequate or better liquidity throughout -- and goodness knows you've got that already since you're in absolutely no danger of missing a $3K/month mortgage payment -- it's all good.

Unfortunately (or rather, fortunately), yes. I have hit the CPF Annual Limit only just last year and am on course again this year (*crossing fingers*). Did not learn about the possibility of making voluntary contributions earlier in my career, so have lost out on quite a few years.

I think I understand now (but do let me know if I am misreading): if I make voluntary contributions early on in the year, and mandatory contributions (which will have to be made by both my employer and by myself) pushes me across the CPF Annual Limit near the later part of the year, my employer's portion of the mandatory contributions (for those few months in the later part of the year) will still have to be made into the various CPF accounts regardless, but the excess amounts above the CPF Annual Limit will then be returned to me without interest.

Just one question that I'd like to clarify: will I still get tax benefits from the early-in-the-year voluntary contributions for MA (up to BHS) then (even if I do not get interest and will be refunded later on in the year)?

In any case, thanks so very much for taking the time to run me through these - it has been really helpful. You're awesome!

Thats really high income for this age. Care to share what occupation this is.

Am just lucky to be in a protected profession in Singapore.
 
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BBCWatcher

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If I recall correctly, you also recommended to stretch out the pre-benefit period for as long as it is allowed so as to keep the premiums low (which I guess should not be an issue given the planned liquidity/reserves going forward).
Yes, absolutely. If you cannot handle at least a 6 month loss of income, somehow (could even be the "Bank of Mom and/or Dad" if it's a reliable bank), then that's a separate problem to fix reasonably quickly. You don't have that problem. You would have a catastrophic problem if you lost all S$16K/month (2020 dollars) starting (for example) at age 35, for life. Although even then you'd muddle through (not recommended) through some combination of liquidating your property equity, funding your future CPF Retirement Account up to the Full Retirement Sum (and maybe even more than that at age 55), reducing your other overheads to the extent you can, and conserving the rest of your resources until you reach age 65 when CPF LIFE can take over. So my suggestion to slam pretty hard into your SA and MA is consistent with the idea of nailing down the age 65+ basic/foundational part of the equation -- with some surplus also available at age 55+ if need be. Having an adequate level of DII then takes care of the portion up to age 65 if you suffer a disability and associated complete or near-complete loss of income. (And yeah, I would go term to age 65 there, although you can play around with the premium and monthly benefit numbers if you wish.)

Ah, using household spending makes more sense. Got it, will plough about half into SSBs (which I understand may be great at this time given falling interest rates conditions).
That's my view, yes. I think this month's SSB is going to be the best for a while. I could be wrong, and if I'm wrong then, no problem, you can sell this SSB and buy another, better one in the future. SSBs can be oversubscribed on occasion, please note.

I also think ICBC's 12 month "Step Up" fixed deposit is a pretty reasonable offer since it'll pay 1.7% interest if held for the full 12 months, but it also allows premature withdrawals while still paying reasonable interest. But it's only a 12 month offer, whereas the SSB is a 10 year offer. If we're living in a ~0.8% SSB/fixed deposit interest rate world 12+ months from now, you'll wish you had bought the SSB. Of course you can buy some of both if you wish.

Will also work on boosting my IWDA and ES3 (as well as the full (not just S$7k) OA to SA transfers (up to FRS)) first before purchasing MBH.
OK, to be clear you get tax relief for SA top ups if they're cash top ups, up to $7,000 per year. OA to SA transfers don't attract additional tax relief. But I'm suggesting you do both. Neither SA cash top ups nor OA to SA transfers need to fit within the CPF Annual Limit. They only have to fit within the Full Retirement Sum and are available only strictly before your 55th birthday.

I think I understand now (but do let me know if I am misreading): if I make voluntary contributions early on in the year, and mandatory contributions (which will have to be made by both my employer and by myself) pushes me across the CPF Annual Limit near the later part of the year, my employer's portion of the mandatory contributions (for those few months in the later part of the year) will still have to be made into the various CPF accounts regardless, but the excess amounts above the CPF Annual Limit will then be returned to me without interest.
That's right.

Just one question that I'd like to clarify: will I still get tax benefits from the early-in-the-year voluntary contributions for MA (up to BHS) then (even if I do not get interest and will be refunded later on in the year)?
No, sorry, that would be cheating. ;)
 

auvignon

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OK, to be clear you get tax relief for SA top ups if they're cash top ups, up to $7,000 per year. OA to SA transfers don't attract additional tax relief. But I'm suggesting you do both. Neither SA cash top ups nor OA to SA transfers need to fit within the CPF Annual Limit. They only have to fit within the Full Retirement Sum and are available only strictly before your 55th birthday.

Yes, I realised that I conflated the two concepts after re-reading your comment and also edited my original response (i.e. full OA to SA transfers every month and also S$7k SA RSTU top up every year for the full tax benefit, both up to FRS).

Very clear, as always. Thank you!
 

BBCWatcher

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No, I bought IWDA, which, is traded in USD.
Exactly the same fund with exactly the same fund manager and exactly the same stock holdings is listed/quoted in British pounds as well, symbol SWDA.

Should we be worried that USD may potentially be devalued to an irreversible state like what the video has illustrated?
Should you likewise be worried about the British pound?

What did you buy when you traded U.S. dollars for a stock fund? Did you buy U.S. dollars? Are you holding U.S. dollars, or U.S. Treasuries, or U.S. dollar denominated bonds? No! You're holding shares of a fund that owns the shares of real businesses that are publicly traded in all of the world's "developed economy" stock markets. Once you've parted with your U.S. dollars, and you have if you bought IWDA, you're no longer holding U.S. dollars. You are a part owner of real businesses that do business around the world -- that's what you're holding.

As it happens, this particular fund is listed/quoted in U.S. dollars (IWDA on the London Stock Exchange, SWDA on the Swiss Exchange), British pounds (SWDA on the London Stock Exchange), euro (listings in Italy, Germany, and the Netherlands), and (would you believe) Mexican pesos (Mexican exchange). Are you worried about Mexican peso exposure now? :D
 
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MrHighlander

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Hi BBCW, I have a question to consult you.

I am looking to buy a property in SG during this coronavirus-hit times. I have however been putting money into the stock markets as equities been falling.

My concern is end of the day I don’t have sufficient cash to buy a property, if my cash are stuck in equities at a lower price than my entry price.

Do you have any thoughts on how the SG property index tracks the SG and US stock markets ? In other words, does normally/historically the stock market rise first (giving opportunity to cash out at profit) prior to the housing market rising back, so there’s cash to buy housing ?

As always thank you for your views

 

BBCWatcher

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I am looking to buy a property in SG during this coronavirus-hit times. I have however been putting money into the stock markets as equities been falling.

My concern is end of the day I don’t have sufficient cash to buy a property, if my cash are stuck in equities at a lower price than my entry price.

Do you have any thoughts on how the SG property index tracks the SG and US stock markets ? In other words, does normally/historically the stock market rise first (giving opportunity to cash out at profit) prior to the housing market rising back, so there’s cash to buy housing ?
No idea, but I doubt there's a strong correlation. For example, property valuations in Singapore crashed during the Asian Financial Crisis, but stock markets outside the region, particularly in the U.S., had a strong bull run.

Quite simply, you don't park your down payment for a near-term home purchase in stocks. That doesn't make sense.
 

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Where Are U.S. Markets Right Now?

Yesterday (March 11, 2020), the U.S. S&P 500 Index closed at 2,741.38. That means U.S. markets have met the official definition (such as it is) of a bear market. [On edit, correction: Only the Dow Jones Index meets that official definition, and nobody seriously cares about the Dow Jones Index any more except the popular press.] That's good news if you're buying stocks since you can get more shares for fewer U.S. dollars (and fewer Singapore dollars too).

Here's an interesting question: when was the last time U.S. stocks were this affordable? And the answer is...not too long ago! As recently as June 3, 2019, the S&P 500 Index closed at 2,744.45 and hit an intraday low of 2,728.81. That was just over 9 months ago.
 
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celtosaxon

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Looking back at early 2009 and what a great opportunity that was... makes me think of the Warren Buffett quote, when others are fearful, be greedy.

Yesterday (March 11, 2020), the U.S. S&P 500 Index closed at 2,741.38. That means U.S. markets have met the official definition (such as it is) of a bear market. [On edit, correction: Only the Dow Jones Index meets that official definition, and nobody seriously cares about the Dow Jones Index any more except the popular press.] That's good news if you're buying stocks since you can get more shares for fewer U.S. dollars (and fewer Singapore dollars too).

Here's an interesting question: when was the last time U.S. stocks were this affordable? And the answer is...not too long ago! As recently as June 3, 2019, the S&P 500 Index closed at 2,744.45 and hit an intraday low of 2,728.81. That was just over 9 months ago.
 

BBCWatcher

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Looking back at early 2009 and what a great opportunity that was... makes me think of the Warren Buffett quote, when others are fearful, be greedy.
I expect the global COVID-19 pandemic to get much worse, unfortunately. I'm not going to be trying to time markets, though.
 

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Thanks BBCW

Btw is there any good Europe etf which you would recommend? I checked out CEU but the volume seems dismal despite the fund size.

No idea, but I doubt there's a strong correlation. For example, property valuations in Singapore crashed during the Asian Financial Crisis, but stock markets outside the region, particularly in the U.S., had a strong bull run.

Quite simply, you don't park your down payment for a near-term home purchase in stocks. That doesn't make sense.
 

BBCWatcher

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Btw is there any good Europe etf which you would recommend? I checked out CEU but the volume seems dismal despite the fund size.
I don't like overweighting any geography's stock market(s) with the possible exception of one's likely retirement country, but have you looked at ISEU and VEUR, both on the London Stock Exchange?
 

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Thanks. Both ISEU and VEIR are distributing though - I am looking for a accumulating ETF. Looking at CSX5 (euro stoxx 50) but it has only 50 companies ...

Any suggestion ?

I don't like overweighting any geography's stock market(s) with the possible exception of one's likely retirement country, but have you looked at ISEU and VEUR, both on the London Stock Exchange?

 
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celtosaxon

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I expect the global COVID-19 pandemic to get much worse, unfortunately. I'm not going to be trying to time markets, though.

Yes, it probably will. But how much of that “much worse” is already baked in versus how bad it will really be? Perception matters, that is why markets tend to overshoot, both on the up and downside.

Agree with you though, trying to time markets is generally not advisable... but for anyone who has been procrastinating, this could be an opportunity to make up for lost time. I have a few family members in this situation.
 

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Thanks. Both ISEU and VEIR are distributing though - I am looking for a accumulating ETF. Looking at CSX5 (euro stoxx 50) but it has only 50 companies ...
Any suggestion ?
I think VEUR and ISEU are the least worst.

But how much of that “much worse” is already baked in versus how bad it will really be? Perception matters, that is why markets tend to overshoot, both on the up and downside.
We’d just be guessing, but as far as COVID-19 goes this’ll be bad in many countries.
 

lingalong

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Hi BBC,

Don’t mind if I ask you since the other threads are being swarmed..

I just tried converting $200 SGD to USD via the Phone App

It says order was executed at 1.4075, with 140 units bought under trade history. But when I go back to my portfolio, it shows me having 137USD + 2 SGD. If I reverse calculate, this only results in 194.82 SGD. Am I missing something? :s22:
 

BBCWatcher

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I just tried converting $200 SGD to USD via the Phone App

It says order was executed at 1.4075, with 140 units bought under trade history. But when I go back to my portfolio, it shows me having 137USD + 2 SGD. If I reverse calculate, this only results in 194.82 SGD. Am I missing something? :s22:
Try pulling up your statement across the past several days to see if there’s anything weird there.

My guess is that your portfolio readout is caught between your previous 200 SGD balance and settlement of your currency trade, and it’s only able to make a rough estimate based on some different exchange rate. So when the currency trade settles in a day or two you should see 140 USD.
 

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BBC,

I’m starting to question the value of bond funds given how much they have dropped in recent days. The lowering of interest rates is supposed to increase bond prices, since new bonds will have lower yield than existing ones. The only excuse that fund companies seem to have is that too many redemptions is causing this wedge between their bond fund price and reality. The whole purpose of holding bonds is for safety, but it seems they are not as safe in fund form.

I’ve only just started investing in bond funds for the first time in my life and I have no idea whether to just sit it out, or buy more given this apparent wedge. They claim this wedge issue will eventually be resolved in the coming weeks or months, so should I load up on more? I honestly don’t know if this is an opportunity or a threat!
 

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I’m starting to question the value of bond funds given how much they have dropped in recent days. The lowering of interest rates is supposed to increase bond prices, since new bonds will have lower yield than existing ones. The only excuse that fund companies seem to have is that too many redemptions is causing this wedge between their bond fund price and reality. The whole purpose of holding bonds is for safety, but it seems they are not as safe in fund form.

I’ve only just started investing in bond funds for the first time in my life and I have no idea whether to just sit it out, or buy more given this apparent wedge. They claim this wedge issue will eventually be resolved in the coming weeks or months, so should I load up on more? I honestly don’t know if this is an opportunity or a threat!
Lower prices should mean you find them more attractive.

I think if we’re honest with ourselves we knew there was a decent or better chance Herbert Hoover the Sequel would “nuke Denmark” metaphorically. (OK, so he nuked the U.S. Oooops.) Except for The Godfather and maybe The Terminator, the sequel is always worse. So we’ve just got to muddle through it until President Biden and Vice President (fairly soon to be President) Harris hire lots of competent public servants, with the help of Majority Leader Schumer and (please!) a no filibuster Senate. I think you just keep plugging away with monthly buys per normal, and we’ll emerge in 2021, most of us anyway. The first half of 2020 at least is just a write-off, really.
 
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