newjersey
Senior Member
- Joined
- Apr 21, 2014
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SIMPLE USEFUL INVESTMENT CONCEPTS
- if it's not simple enough for me to understand, it won't be listed here.
- if it's not useful for long term financial protection & growth, it won't be listed here.
- I have 0 financial performance / measurement background & I wish to tabulate the collection of wise investment concepts, so that we can use this as a reference for our financial education journey.
1. Long-Only Investing for Retail Investors
- Invest in Stock & Bond ETFs.
- For Sg Stock & Bond ETFs, that's ES3 & A35.
- Use [ 110 - your age ] for the Stocks : Bond ETF ratio.
- Rebalance once every year. Buy & Sell to bring your stocks & bonds to that [ 110 - your age ] ratio.
- Consider exposure in other markets, eg. S&P500, China Large-Cap ETFs, etc, for diversification & growth.
- US-listed ADRs aren't subject to US div withholding tax, 30%.
- NASDAQ is sort of a growth stock market while S&P is more of a fundamental value stock market. NASDAQ has outperformed S&P / Dow over the years.
- If an ETF shuts down, its assets get handed back to the shareholders.
- A 100%-equities portfolio is also a bad idea.
- STI's more tightly linked with economies like China and Malaysia and Indonesia than it is with the US and EU.
- In the long run, an investor's return is measured as earnings per share growth + dividends + changes in valuation(PE ratio).
2. Lump-Sum Investing / Dollar-Cost-Average?
- Consider dumping it all at once / in 3 portions.
- To minimise buying high, split into 03 parts.
Invest 1 part each month, until you are fully invested.
That way, if the stock goes up, at least, you bought some.
If the stock goes down, you have cash to buy more at discounted prices.
- Avoid making many trading transactions per month, as that amounts to a high trading fee.
3. Why is investing in Gold silly?
- Gold is an unproductive asset, it does not provide dividends yield.
- It relies solely on capital gains.
- Physical Gold storage requires security expenditure & Paper Gold account requires a monthly expenditure.
- Investing in Gold = Shorting Interest Rates.
Gold / Cash / Long Bonds are direct / indirect bets that interest rates are going down. ( interest rates set by FED )
- Over the long term, Stocks provide better returns than Bonds & Gold.
- 2-5% of your portfolio in Gold is acceptable.
4. Investment Horizon.
- if you need the money within 2 years or so, it should be in cash.
- if you need the money within 5 years, it should be in cash / bonds.
- if you don't need the money within 5 years, it can go into stocks, or ( even better ) the 110-minus-your-age stock / bonds mix.
5. About ETF Types.
- Invest in ETFs that actually holds the stocks / bonds that they claim, so that in events of distress, say, Great Financial Crisis, etc, the ETF would not vanish into thin air.
- there's many types of ETFs...
Leveraged ETFs, Inverse ETFs ( Short ETFs ), Futures-Based ETFs... all have their own problems.
- Stick to Vanguard & iShares. Ignore everything else.
Because they are ETFs that really hold the stocks that they target to be vested in.
6. Suggested Portfolio Mix.
"110 minus your age in stocks; the rest in bonds; and 50-50 split between local and global stocks"
- Allocation to Singapore equities (including your ETFs, stocks, and REITs).
- Allocation to international equities (including DM and EM).
- Allocation to Singapore bonds.
- You can keep a 5% fun-money account around for that sort of punting.
7. When to rebalance your ETF?
- Doing it at the end of December is a bit silly, because that's when liquidity is at it's absolute worst.
- "Markets are seasonal" sounds like witchcraft, but there does appear to be a bit of seasonality in the US markets.
- The old "Sell in May & Go Away" doesn't have much validity, but re-balancing in November, after the end of the May-October seasonal weak pretty, is a pretty good idea if you want to have a slightly better chance of capturing the turning points in the markets.
- If you are re-balancing once a year, I would pick November.
- If you are doing it twice a year, May & November ( 6 months apart ) is a good idea.
- Rebalancing is done periodically regardless of economic situations and market conditions.
8. Which broker to use?
- for SG stocks, use Stanchart.
- for US & other markets, use Interactive Brokers (IB).
- for US only, with Sg office, use TD Ameritrade (TD).
* Interactive Brokers is the absolute best.
9. BOOBY TRAP / made-in-USA IED.
- Using IB or TD, it is subjected to 30% US estate tax for accounts > US$65k.
- Buy a Term Insurance of 30% X [ US Portfolio Value - US$65k ], so that in the event you die... the term insurance offsets the 30% estate tax.
- If you are a Singaporean, consider taking up Aviva SAF term life, to defray the 30% US estate tax.
10. On Insurance
- Buy Term Insurance + Personal Accident Insurance.
- Buy Hospitalisation Insurance.
- Buy Mortgage Insurance, if you have any outstanding mortgage loans.
- Invest the rest.
- Do not buy Life Insurance.
- Do not buy ILP, Investment-Linked Products.
Mixing Protection ( essentially, Insurance ) & Investment in a product, eg. ILP, Life Insurance, Endowment Plan, is a terrible idea, because these events are mutually exclusive & it should not cause liquidation.
- Cheapest Term Insurance in SG : Aviva SAF
This is the first insurance you should get, if you don't have any for Death & TPD. ( Total Permanent Disability )
- Limited to SG$1m Sum Assured.
- 2nd Cheapest Term Insurance in SG : go to CompareFirst.sg
Select from the DPI scheme : Direct Purchase Insurance.
It cuts away the insurance agents to give the consumers a lower premium.
- Limited to SG$400k Sum Assured.
- Currently, it's AXA Term Lite, that's the 2nd cheapest ( as of Dec 2015 ).
- TPD Vs Personal Accident, PA.
TPD : You need to lose 2 limbs to make a claim.
PA : You can make a claim, if you lose 1 limb
* must be permanent loss, unless you are wolverine.
- Limited Life Insurance.
I would buy a limited life insurance / term insurance for a baby.
Because of the cheap premiums, due to the age.
In the future, they would see the value of a cheap premium insurance.
11. Growth-Centric / Dividends-Centric?
- If you are near retirement age, opt for dividends-centric stocks / Bonds ETF.
- Generally, you buy stocks for growth gains, not dividends.
One of the most dangerous things an investor can do to a portfolio is to seek bond-like returns from the stock market, while taking de facto equity risk on the fixed income side. In English - to turn their bonds into stocks & their stocks into bonds.
Buy high-yielding dividend stocks for their current income and pretending they are "bond-like" is a recipe for nasty surprises at some point down the line. But this is precisely what many in the industry have been doing - Financial advisors, ETF providers, money managers - everyone's playing.
From "Downtown Josh Brown"
12. Diversify.
Hold a diversified assets in different countries.
13. ETF
ETF : Exchange traded fund, basically tracks / holds a bunch of something.
ES3 is an ETF the tracks 30 sg-based companies, i.e. DBS, OCBC, SingTel, Keppel, etc.
It's safer than buying 1 company and rises with the economy.
During a crisis, you can be sure this ETF won't disappear, can't say the same about any single company.
A35 is a bond ETF, it holds many bonds to maturity. One can treat it like a bond. It's stable and yields about 2%.
ES3 and A35 are stock code.
Their name is STI ETF and ABF SG BOND ETF.
You can buy / sell them on the stock market.
The Top 7 of STI are heavy weighted in Banks and a smaller spread on Telcos, Real Estate, Oil & Gas where they made up of 60% of STI.
14. on SG Reits ( Aug 2015 )
If you buy a bunch of REITs, you're explicitly making a bet on real estate prices - they're nothing to do with the STI really.
The STI is mostly banks, real estate companies (not REITs, the companies like Capland that run the REITs) and Singtel.
REITs are a tiny tiny slice of the index, like 3.5% of it.
15. Avoid punting on FX if you are an unsophisticated Long-Only blue chips / ETFs investor.
- Compared to investing in equities, when the price goes below your FX position, you have to fund it. Meaning you have to pay to maintain the position OR cut loss and sell the position.
- Going Long-Only on blue chips, ETFs, Reits, won't make you rich, but it won't make you poor either.
- From 1928 through 2014, the S&P 500's compound rate of return was 9.8%, enough to transform a $100 investment at the start of 1928 into $346,261 over 87 years.
16. Pro Tips About Trading.
Don't trade after-hours OR in the pre-open.
Spreads are WIDE & you don't know what the "real" price is.
17. SeekingAlpha.com for US-centric stocks / investment-related news.
18. the most basic books about investing.
- millionaire teacher
- the coffeehouse investor
- if it's not simple enough for me to understand, it won't be listed here.
- if it's not useful for long term financial protection & growth, it won't be listed here.
- I have 0 financial performance / measurement background & I wish to tabulate the collection of wise investment concepts, so that we can use this as a reference for our financial education journey.
1. Long-Only Investing for Retail Investors
- Invest in Stock & Bond ETFs.
- For Sg Stock & Bond ETFs, that's ES3 & A35.
- Use [ 110 - your age ] for the Stocks : Bond ETF ratio.
- Rebalance once every year. Buy & Sell to bring your stocks & bonds to that [ 110 - your age ] ratio.
- Consider exposure in other markets, eg. S&P500, China Large-Cap ETFs, etc, for diversification & growth.
- US-listed ADRs aren't subject to US div withholding tax, 30%.
- NASDAQ is sort of a growth stock market while S&P is more of a fundamental value stock market. NASDAQ has outperformed S&P / Dow over the years.
- If an ETF shuts down, its assets get handed back to the shareholders.
- A 100%-equities portfolio is also a bad idea.
- STI's more tightly linked with economies like China and Malaysia and Indonesia than it is with the US and EU.
- In the long run, an investor's return is measured as earnings per share growth + dividends + changes in valuation(PE ratio).
2. Lump-Sum Investing / Dollar-Cost-Average?
- Consider dumping it all at once / in 3 portions.
- To minimise buying high, split into 03 parts.
Invest 1 part each month, until you are fully invested.
That way, if the stock goes up, at least, you bought some.
If the stock goes down, you have cash to buy more at discounted prices.
- Avoid making many trading transactions per month, as that amounts to a high trading fee.
3. Why is investing in Gold silly?
- Gold is an unproductive asset, it does not provide dividends yield.
- It relies solely on capital gains.
- Physical Gold storage requires security expenditure & Paper Gold account requires a monthly expenditure.
- Investing in Gold = Shorting Interest Rates.
Gold / Cash / Long Bonds are direct / indirect bets that interest rates are going down. ( interest rates set by FED )
- Over the long term, Stocks provide better returns than Bonds & Gold.
- 2-5% of your portfolio in Gold is acceptable.
4. Investment Horizon.
- if you need the money within 2 years or so, it should be in cash.
- if you need the money within 5 years, it should be in cash / bonds.
- if you don't need the money within 5 years, it can go into stocks, or ( even better ) the 110-minus-your-age stock / bonds mix.
5. About ETF Types.
- Invest in ETFs that actually holds the stocks / bonds that they claim, so that in events of distress, say, Great Financial Crisis, etc, the ETF would not vanish into thin air.
- there's many types of ETFs...
Leveraged ETFs, Inverse ETFs ( Short ETFs ), Futures-Based ETFs... all have their own problems.
- Stick to Vanguard & iShares. Ignore everything else.
Because they are ETFs that really hold the stocks that they target to be vested in.
6. Suggested Portfolio Mix.
"110 minus your age in stocks; the rest in bonds; and 50-50 split between local and global stocks"
- Allocation to Singapore equities (including your ETFs, stocks, and REITs).
- Allocation to international equities (including DM and EM).
- Allocation to Singapore bonds.
- You can keep a 5% fun-money account around for that sort of punting.
7. When to rebalance your ETF?
- Doing it at the end of December is a bit silly, because that's when liquidity is at it's absolute worst.
- "Markets are seasonal" sounds like witchcraft, but there does appear to be a bit of seasonality in the US markets.
- The old "Sell in May & Go Away" doesn't have much validity, but re-balancing in November, after the end of the May-October seasonal weak pretty, is a pretty good idea if you want to have a slightly better chance of capturing the turning points in the markets.
- If you are re-balancing once a year, I would pick November.
- If you are doing it twice a year, May & November ( 6 months apart ) is a good idea.
- Rebalancing is done periodically regardless of economic situations and market conditions.
8. Which broker to use?
- for SG stocks, use Stanchart.
- for US & other markets, use Interactive Brokers (IB).
- for US only, with Sg office, use TD Ameritrade (TD).
* Interactive Brokers is the absolute best.
9. BOOBY TRAP / made-in-USA IED.
- Using IB or TD, it is subjected to 30% US estate tax for accounts > US$65k.
- Buy a Term Insurance of 30% X [ US Portfolio Value - US$65k ], so that in the event you die... the term insurance offsets the 30% estate tax.
- If you are a Singaporean, consider taking up Aviva SAF term life, to defray the 30% US estate tax.
10. On Insurance
- Buy Term Insurance + Personal Accident Insurance.
- Buy Hospitalisation Insurance.
- Buy Mortgage Insurance, if you have any outstanding mortgage loans.
- Invest the rest.
- Do not buy Life Insurance.
- Do not buy ILP, Investment-Linked Products.
Mixing Protection ( essentially, Insurance ) & Investment in a product, eg. ILP, Life Insurance, Endowment Plan, is a terrible idea, because these events are mutually exclusive & it should not cause liquidation.
- Cheapest Term Insurance in SG : Aviva SAF
This is the first insurance you should get, if you don't have any for Death & TPD. ( Total Permanent Disability )
- Limited to SG$1m Sum Assured.
- 2nd Cheapest Term Insurance in SG : go to CompareFirst.sg
Select from the DPI scheme : Direct Purchase Insurance.
It cuts away the insurance agents to give the consumers a lower premium.
- Limited to SG$400k Sum Assured.
- Currently, it's AXA Term Lite, that's the 2nd cheapest ( as of Dec 2015 ).
- TPD Vs Personal Accident, PA.
TPD : You need to lose 2 limbs to make a claim.
PA : You can make a claim, if you lose 1 limb
* must be permanent loss, unless you are wolverine.
- Limited Life Insurance.
I would buy a limited life insurance / term insurance for a baby.
Because of the cheap premiums, due to the age.
In the future, they would see the value of a cheap premium insurance.
11. Growth-Centric / Dividends-Centric?
- If you are near retirement age, opt for dividends-centric stocks / Bonds ETF.
- Generally, you buy stocks for growth gains, not dividends.
One of the most dangerous things an investor can do to a portfolio is to seek bond-like returns from the stock market, while taking de facto equity risk on the fixed income side. In English - to turn their bonds into stocks & their stocks into bonds.
Buy high-yielding dividend stocks for their current income and pretending they are "bond-like" is a recipe for nasty surprises at some point down the line. But this is precisely what many in the industry have been doing - Financial advisors, ETF providers, money managers - everyone's playing.
From "Downtown Josh Brown"
12. Diversify.
Hold a diversified assets in different countries.
13. ETF
ETF : Exchange traded fund, basically tracks / holds a bunch of something.
ES3 is an ETF the tracks 30 sg-based companies, i.e. DBS, OCBC, SingTel, Keppel, etc.
It's safer than buying 1 company and rises with the economy.
During a crisis, you can be sure this ETF won't disappear, can't say the same about any single company.
A35 is a bond ETF, it holds many bonds to maturity. One can treat it like a bond. It's stable and yields about 2%.
ES3 and A35 are stock code.
Their name is STI ETF and ABF SG BOND ETF.
You can buy / sell them on the stock market.
The Top 7 of STI are heavy weighted in Banks and a smaller spread on Telcos, Real Estate, Oil & Gas where they made up of 60% of STI.
14. on SG Reits ( Aug 2015 )
If you buy a bunch of REITs, you're explicitly making a bet on real estate prices - they're nothing to do with the STI really.
The STI is mostly banks, real estate companies (not REITs, the companies like Capland that run the REITs) and Singtel.
REITs are a tiny tiny slice of the index, like 3.5% of it.
15. Avoid punting on FX if you are an unsophisticated Long-Only blue chips / ETFs investor.
- Compared to investing in equities, when the price goes below your FX position, you have to fund it. Meaning you have to pay to maintain the position OR cut loss and sell the position.
- Going Long-Only on blue chips, ETFs, Reits, won't make you rich, but it won't make you poor either.
- From 1928 through 2014, the S&P 500's compound rate of return was 9.8%, enough to transform a $100 investment at the start of 1928 into $346,261 over 87 years.
16. Pro Tips About Trading.
Don't trade after-hours OR in the pre-open.
Spreads are WIDE & you don't know what the "real" price is.
17. SeekingAlpha.com for US-centric stocks / investment-related news.
18. the most basic books about investing.
- millionaire teacher
- the coffeehouse investor
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