things I learnt from Shiny Things & money mind

newjersey

Senior Member
Joined
Apr 21, 2014
Messages
857
Reaction score
118
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
 
Last edited:

newjersey

Senior Member
Joined
Apr 21, 2014
Messages
857
Reaction score
118
3 Brokers : Interactive Brokers / TD Ameritrade / Stanchart

1. Interactive Brokers

Pros :
1.1.1. cheapest trading fees,
1.1.2. instant FX exchange with the lowest spread
1.1.3. access to many stock markets

Cons :
1.2.1. needs to trade a min number per month
OR
be charged US$10 a month
BUT
waived if u place US$100k value of monies / stocks
1.2.2. no physical office in sg for telephone enquiries.
1.2.3. initial US$10k deposit


2. TD Ameritrade

Pros :
2.1.1. have a physical office in sg, you can call them, etc.
2.1.2. significantly cheaper than local brokers.
2.1.3. no monthly fees.

Cons :
2.2.1. need to fund the acc, by local bank transfers only.
( I change the $$$ in POEMS for better FX rates )
2.2.2. limited to US stock market only.


3. Stanchart

Use this, if you like to invest in SG stocks / bonds.


4. All other local brokers.

They are expensive ( about 4% of your trade ) & charge imaginary fees, i.e. custodian fees.

That's what happens when the gov protects the big boys, where they become dull, entitled babies.
 
Last edited:

newjersey

Senior Member
Joined
Apr 21, 2014
Messages
857
Reaction score
118
Interactive Brokers Need-To-Knows'

- Trading Fees : US$1 for every 200 shares.

- Minimum Activity Fees : US$10 / month.

- 1 Free Withdrawal / Month.

- No fees for T.T. ( local bank transfer to IB's sg bank account ).

* Monthly Activity Fees Waiver : Minimum US$100k cash / equities.

- Select FAST Tract Application for Individual Traders.

- COST Plus OR FLAT Plus ?
Stick to Flat Plus, for retail investors.

- Spread for USD / SGD : 1.5 pip & 0.2 pip commission or minimum US$2.50 for each FX transaction.
(This beats all the money changers' rates in SG!!!)

- PRO Tip on FX conversion for USD / SGD.
Buy USD during the daytime in SGP.
Spread on USD / SGD tighter during SGP hours than NY trading hours.

- Use Portfolio Margin : for lower margins.
or Reg. T margin. ( Portfolio Margin is better than Reg. T Margin )
I am not keen on this aspect though.

- STOCK LENDING PROGRAM.
Stock Yield Enhancement Program available.
In short, the stocks you purchased is loan to short-sellers and IB shares the profits with you. Sounds awesome for the long-only investor.

- 30% US Estate Tax, in event of death.
Use a term insurance to defray : 30% x [ US portfolio value - USD65k ]

- Use SMART when trading US Stocks on IB.
NEVER USE "MARKET" ORDERS!!!

- CONVERTING SGD TO USD ON IB.
1. Add a new "USD.SGD" on TWS.
2. Click on [ ASK SIDE ] of USD.SGD Quote, to buy USD.
3. Select the Amount to Buy.
4. Set Routing to FX.CONV, NOT IDEAL.PRO.
FX.CONV : Just converts the cash.
IDEAL.PRO : Creates an actual FX position & the appropriate P&L takings.
5. Hit BUY.
6. You are done.

- DIFFERENT TYPES OF MARKET ORDERS.

1. MKT : Market Order. AVOID @ ALL COSTS.
- eg. buy me 100 shares of Apple @ any price.

2. LMT : Limit Order.
- eg. buy me 100 shares of Apple @ no more than US$123/px or less.
+
I can wait, indefinitely.

3. IOC : Instant or Cancel.
- eg. buy me 100 shares of Apple @ no more than US$123/px or less
+
Buy what you can & Cancel the Rest.

4. STP : AVOID @ ALL COSTS.
- eg. Apple is @ US$123/px & if it trades @ US$122/px, I want to sell 100 shares immediately @ ANY PRICE.

5. STP LMT :
- eg. Apple is @ US$123/px.
If it trades @ US$122, I want to place a limit order to sell 100 shares @ no worse than US$121.50/px.

STP vs STP LMT

STP : ensures that the stock is sold NO MATTER WHAT, but exposes you to selling @ any price.

STP LMT : ensures that the stock is sold @ the price you want, but it does not ensure that you sell the entire inventory.

6. Trailing Stop Limit Order [ THE MOST USEFUL ONE ]

A trailing stop limit order is designed to allow an investor to specify a limit on the maximum possible loss, without setting a limit on the maximum possible gain.
 
Last edited:

Shiny Things

Supremacy Member
Joined
Dec 13, 2009
Messages
9,415
Reaction score
607
Great stuff mate, this is tremendously useful. There's a lot of good info floating around on these threads, but it takes a lot of time to consolidate it into one place - appreciate the effort.
 

Sai777

Arch-Supremacy Member
Joined
Apr 3, 2011
Messages
17,060
Reaction score
2
wow....very good summary. I read the original threads and I cannot do a better job summarising than ts. Thank you.
 

newjersey

Senior Member
Joined
Apr 21, 2014
Messages
857
Reaction score
118
Advantages of AVIVA SAF Term Life

1.1. Cheapest premium for SG$1m Sum Assured, Coverage is up to Age 65.
* Insured members can extend coverage till age 70.
* From age 65 to 70, Sum Assured options @ SG$50k / SG$100k only.

1.2. Level Premium throughout based on desired Sum Assured.
* The purchase must be before age 55.

1.3. Can extend to Spouse & Children.
* Coverage cease for Female Child @ Age 25 / upon Marriage, whichever earlier.
* Coverage cease for Male Child @ Age 20.

1.4. Enables you to buy the Cheapest Personal Accident Rider.
- Sum Assured of SG$100k : Monthly Premium SG$04.17 + GST
- Sum Assured of SG$200k : Monthly Premium SG$08.33 + GST
- Sum Assured of SG$300k : Monthly Premium SG$12.50 + GST
- Maxxed Out @ SG$300k


Disadvantage of AVIVA SAF Term Life.

2.1. Premiums are subjected to CHANGES, as negotiated by SAF / MINDEF periodically.


Advantages of AXA Term Lite
- ( Accurate as of Dec 2015 ) Through the DPI, direct purchase insurance program, it is the 2nd cheapest term life insurance, as it eliminates the insurance agent from the equation.

3.1. Insurance Premium locked in by Age, not subjected to further changes. Very Important Feature, unlike Aviva SAF.


Disadvantage of AXA Term Lite

4.1. Maximum Sum Assured of SG$400k only.


My Recommendation.

- buy the Aviva SAF term insurance first, if you have very little disposable cash.

- switch to AXA Term Lite, when you become more financially stable / Buy this first, if you have the disposable income.
( because the premiums are locked-in by age )

- buy more / maxxed out Aviva SAF term insurance @ SG$1m, when your networth / debt-liabilities increases to SG$1m. ( Example, bank loan from pty purchase ).

- go to pub. ;)
 
Last edited:

newjersey

Senior Member
Joined
Apr 21, 2014
Messages
857
Reaction score
118
Great stuff mate, this is tremendously useful. There's a lot of good info floating around on these threads, but it takes a lot of time to consolidate it into one place - appreciate the effort.
hi Shiny Things,

I am only a parrot, the content-provider for most of the info is from you.

Thanks for sharing generously throughout all these years, it's really amazing for us to have you on an embarrassingly, mostly singlish forum.
 

Broadwalk

Great Supremacy Member
Joined
Apr 14, 2015
Messages
59,451
Reaction score
4,394
Book mark, I need it.

Can TS meet up or someone coach me on IB setup? I am still confuse though the information is there.
 

Shion

Senior Mentor
Joined
Oct 24, 2008
Messages
320,167
Reaction score
80,643
Maybe you can add on for Aviva SAF term is that you can also buy CI portion and disability income portion, though the premiums will be higher
 

Lewis.T

Senior Member
Joined
Apr 17, 2014
Messages
1,143
Reaction score
0
Aviva SAF term may not be the cheapest, depending on your age of entry.

Generally the older you are the more it favours SAF term, if you're younger than try personal term plans.
 

newjersey

Senior Member
Joined
Apr 21, 2014
Messages
857
Reaction score
118
Flaws on "The Permanent Portfolio" ( PP ) Idea.

The Skinny :

The Permanent Portfolio [ PP ] proposes 25% in Long Bonds, Cash, Gold, Stocks.

1.1. If economy is bullish, Bonds & Stocks will do well.

1.2. If economy is bearish, Cash & Gold will do well.

1.3. If Deflation occurs, Cash & Bonds will do well.


THE PROBLEM with the PP Theory.

2.1. They are positioning for apocalypse, which will happen with rampant climate change, due to inaction of gov and peoples' habits.

BUT

Stocks do the best out of all asset classes over the very long term, so you want your portfolio, mostly in stocks.

Stick to the boring [ 110 - your age ] Stocks : Bonds ETF ratio, if you are a boring, long-only, unsophisticated retail investor, like me.

2.2. The long version, as explained by Shiny Things...

" These guys are one-quarter in stocks; I reckon if you looked at this portfolio since 1980 it would have been incinerated by a boring 60-40 stocks-bonds portfolio. Those allocations to cash and gold are absolutely huge, so when stocks and bonds outperform cash and gold (which is what happens the most often) you're going to have a huge drag on your portfolio from all the cash and gold you're sitting on.

Secondly, their 25-25-25-25 allocation doesn't reflect how the real world works. They've got 50% of their portfolio in stuff that works well during deflation, but (outside of Japan) deflation just doesn't happen that often.

Same for economic shrinkage - they've got 50% of their portfolio in stuff that works when the economy's shrinking, but economies just don't shrink that often.

If you wanted to weight this portfolio toward the actual probabilities of this stuff happening, you'd have maybe 5% of your portfolio in deflation hedges, and 10% in economic-shrinkage hedges... and that still leaves 85% to put in stocks and bonds, like a normal person. "

In short, the permanent portfolio is pretty much one step above allocating your portfolio to guns and canned goods.


2.3. Achievement Unlocked : Bonus Words of Wisdom...

1. Don't Follow Based on Historical Results.
- Don't buy "the thing that performed best in the past". That will kill you faster than anything else; just because something performed well in the past doesn't mean it will perform well in the future, and just because something performed badly in the past doesn't mean it will perform well in the future.

If anything, the opposite is true. Indexes tend to mean-revert as their sectors move in and out of fashion; emerging markets and small-caps were hugely popular just after the 2008 crisis, because everyone was all "oh decoupling", but now emerging markets are absolutely radioactive, which is why Singapore-based stocks are so cheap.
[ Dated as of Dec 2015 ]


2. Keen to Invest in Oil?
- Oil is best traded with futures. But for those who are noob in futures, and/or for those who wish to long oil, ETFs provided the next viable option.

Try BNO @ 5% of your Commodity Asset Class of your portfolio.


3. Do most people lose money over stocks as a global average?
- Nope, the average investor in stocks is profitable, but they make a lot less than the index return.
- S&P 500 index made 8.x % per year, since inception from 1920s.
- Buy & Hold + Be Methodical.

If you're methodical about how you invest, you'll save yourself from making a lot of mistakes and those mistakes cost a lot of money.


4. Growth Stocks / Dividend Stocks?

Over the long term, boring value stocks do significantly better than hot, trendy "growth" stocks.

This seems to be because those growth stocks are the ones that are already popular. You're paying high multiples of earnings for them, and that means they have to deliver a lot of growth to pay off. But value stocks - ones trading at lower multiples - tend to become high-multiple stocks in time, and deliver more value for money in the process.

The problem is, actually exploiting this is tough. "Growth" stocks can outperform "value" stocks for years at a stretch, like the late nineties. The swings can be really painful from year to year. And some value stocks are cheap for a reason - they're the so-called "value traps".

So most investors don't need to worry about the "value effect". Just buy a broad-based index fund and you'll get all of those great value stocks as part of it.


5. What do you think about investing in commodities or property as opposed to bonds?

Commodities: no. I think commodities are pretty unappealing anyway (remember gold went nowhere for two decades in the 80s and 90s), and they tend to be a very "trendy" asset class - they were trendy in the 2000s and tons of money flooded into commodities; now they're not trendy and tons of money is flooding out.

I might look to buy some gold around the US$500 mark - like 3-5% of my portfolio - but I'm sure as hell not buying it here.

Property - this one's debatable! I'm not a fan of property, mostly because all the property I'd like to own (basically SF, Sydney and Maui) is horrifically expensive in price-to-rent-ratio terms. But it's not the worst idea in the world; some REITs can be a sensible investment. Just make sure you diversify across residential, commercial and industrial properties, as any good SimCity player knows.

I don't bother with them because they basically sit in the middle between stocks and bonds in terms of risk; they don't add anything particularly special. But I won't look at you funny if you buy 5% or so.


6. Insight on REITs by "The Accountant".

REITs offer cashflow returns back to the investor. They are fundamentally different from normal business which returns capital growth back to the investor. REITs are unique because they pass through rental without being taxed back to shareholders. They do not invest in technology and innovation to leverage on growth, instead they leverage on land and buildings to collect rental. However when it comes to a REIT fund, the tax advantage diminishes because of foreign withholding tax. if you wanna escape the foreign tax on dividends by taking up a local REIT fund in Singapore, the only REIT fund is Phillip real estate income fund which is actively managed, but for some reason the fund itself is being taxed by IRAS before they pass the dividends back to investor (talk about tax efficiency!) .

Conclusion : If you really wanna take up the alternative asset class, i think a 10% allocation (although some argue that REITs are already found in the world index fund, owning a separate REIT fund is just overlapping your cap weighted world index fund) is fine as long as you are not disturbed when this assets class underperforms over a long period of time.


7. Bond, James Bond by "Bedokian".

Theoretically and traditionally, bonds serve as a good counterbalance to the volatility of shares, so it is common for investors, newbie and seasoned, to use the equity-bond combo. As one's portfolio gets larger, you can afford to add in other asset classes such as commodities and property (either as in condos/houses).

IMO commodities should only be around 5%-10% of the portfolio, and should be limited to gold/silver/crude oil.


8. Is 110 - Your Age Stocks : Bonds ETF Ratio an unbreakable rule?

The assets allocation of 100 minus your age is a general rule of a thumb for those who just started out. Once you start to understand more about the financial market, you will also learn better to understand your risk tolerance and personal liability matching so you will need to adjust this allocation base on your unique situation.


9. I like boring... by Shiny Things.

I like the regular, boring, market-cap-weighted ETFs because they're there, they're big, and they're well understood, and you can't go too far wrong with them. If you go for an equal-weighted or a smart-beta ETF, you're still effectively betting that you can beat the index, and that's not my thing. The small-cap effect and the value effect are totally real things, but you wouldn't go plowing all your money into a smallcap-value ETF; that'd be nuts.


10. Withholding Tax & Capital Gain Tax by "The Accountant".

as far as withholding tax on dividend and interests are concern, the rule is: withholding taxes are never, never, never, never, never, never base on the country they are listed in. They are always base on the country that they are incorporated in.

Capital gain arises when you sell those stock so its depending on your tax resident status. There's no capital gain tax in SG. Unless IRAS view your transaction as a revenue gain, which makes it taxable.


11. "The Accountant" shares his/her thoughts on 30-40s in SG.

( The 70s - 80s babies )
Our generations in the age of 30 - 40 is unique in a sense that we have never been through any serious crisis period. The last two round of financial crisis that occur in the dot com and GFC did not hit Singapore as hard as the 97's Asia financial crisis. Our generations spent money like drinking water and emergency funds are only at bear min.

My point is, our CPF system no doubt is a good system that provides you the best risk free rate of return so that you don't have to worry about retirement. However the con is that this system used to be highly inflexible. They recently made it slightly better by introducing CPF life but you still get the same problem when you are in accumulation phase and that is: should you run out of emergency funds, your CPF is untouchable.

So i would think when you are young, you don't need to top up your CPF since even a balance allocation of 60 equity 40 bond over a long term, (think ten years) should give a return somewhat similar with SA account and if not, higher. If things really goes wrong, you still have you bonds to tap on. When you reach close to retirement and do not have much dependents, then you can sell most of your index fund and top up you CPF in order to get the highest level of annuities payout.


12. Less is More, by Shiny Things.

"110 minus your age" is a simple investing concept that works.

The key is simplicity. You want to give people a strategy that they can easily understand, easily follow (invest every paycheck, rebalance once a year), and easily stick to through the ups and downs of the market - because a plan that people can't stick to is worse than no plan at all.

That's what I went for here - you can always optimise it for more performance or more aggressiveness or customise it for a given person's risk appetite (and that's what I do if people come to me asking for one-on-one investment consulting), but that gets a hell of a lot more complicated than "110 minus your age in stocks, rebalance once a year, go to the pub", and the simple rule works really well for most people.


13. If you fail to plan, you plan to fail.

You cash out once you've retired. Once you're not working any more, and therefore not getting a paycheck, you can slowly sell down your holdings to pay for your expenses.

In Singapore, there's no capital gains tax. You can just sell shares (or don't reinvest your dividends) to take out 3-4% per year, and that's your retirement money.


14. We may be Bogleheads... unknowingly.
by "The Accountant"

Bogleheads are folks from different background who invest using a simple and easy to adept philosophy. I believe many here are actually following this philosophy and therefore are Bogleheads without knowing.

When it comes to strategies, everyone's strategy is different. e.g we have folks who slice and dice to get a lower cost of investing, some tilt to REITs, others tilt to small caps. So don't worry too much about what other says regarding strategy.

You will do great as long as you follow the philosophy.

Everyone will have a chance at being right, for their strategy. It's just a question of time.


15. To Be OR Not To Be : Value-Averaging.
by "Shiny Things".

The idea behind value-averaging is that instead of "invest a fixed amount every month" (which is dollar-cost averaging), you "invest a variable amount each month so the value goes up by a fixed amount".

It's the difference between "invest $1,000 every month" and "invest enough money so that your portfolio value goes up by $1,000 every month".

There's two reasons why that's dopey. Firstly, if your stocks get crunched like they have in the last month, you need to find a huge pile of cash to continue value-averaging properly. Let's say you have $10,000 in stocks; you're investing $1,000 a month, and they fall by 20% in a month: value-averaging says you should invest $3,000 to bring your portfolio up to its value-averaging target.

On the one hand, that's sort of a great idea, because you're buying armfuls of stocks when they go down. On the other hand, though, it's completely impractical: where are you supposed to find $3,000 at a moment's notice when you're only investing $1k a month?

And the second reason is that it just completely falls over once your account gets bigger. Let's say you're close to retirement and your account is a million dollars strong: if that goes down even 10%, you're supposed to find $100,000 to bring it up to its value-averaging benchmark. That's just silly. It's not going to happen.


16. Expense Ratio & Tracking Error.
by "The Accountant".

there are two things that you need to consider when you pick an index tracker fund.
1) expense ratio
2) tracking error

The expense ratio is the ongoing expenses that are incurred in operating the fund. in simple logic, an investor's return = market return less expense.

Tracking error is more complex to explain but i will give it a try. Tracking error arises when the fund deviate out from the indices its trying to track. For instant, if STI index gives a 7% return for one year, if the etf gives a 4% return the tracking error will be 3%. But don't worry, this is just an illustration. The two tracker fund does not deviates that much.

17. Lump Sum Investment or Dollar Cost Averaging?
by "The Accountant".

There are a few things to consider whether should you implement a lump sum investment or DCA. The things to consider are :

1) The size of your lump sum as compared to your entire savings. If the size is relatively small, then you should consider lump sum investment. The rule of a thumb is if the investment is less than 20% of your entire saving, you should consider lump sum investment as it will not cause a huge style drift on your portfolio. If your size is more than 20%, the following consideration arises.

2) Was this money from your investment portfolio before it went into your SRS account? If yes, you should do a lump sum investment with the same allocation as your portfolio before the transfer into SRS.

3) Was this money from a sales of business or property? if yes, then there was a business risk attached to the money. At such, consider investing a portion of the money into stocks and DCA the remaining over a period of say two years. This will spread out the entry point risk of entering the market. However if your timeframe and risk tolerant are at such that you won't panic through the volatile market, then you can put all of your money to work as soon as possible. There should be a check and balance to this part because you don't wanna pour in all the sales proceed into SRS as you will under utilise the tax saving. At such a portion are invest into SRS while the balance into the market with your normal brokerage account.

4) Was this money inherent, or won from another source where you do not have any ownership? if yes, this is where DCA will work very well for most investor. I take it for this to work perfectly, you actually DCA your inflow into SRS account to fully utilise the tax saving. The money outside SRS should be in a saving account.

5) Was this money from your pay cheque? If yes, you should consider a lump sum investment because you would be continuously receiving your future pay cheque and invest them. It eventually is DCA by itself.


18. Cancellation of Dividends
by "Shiny Things"

Companies can cancel the dividend on their stock, or on their preference shares, with no legal repercussions. But they can't cancel the interest payment on their bonds - missing an interest payment is a default, and it means the creditors can rock on in and take your stuff.


19. Finding the Bottom?
by "IronMac"

There's always a recovery. ALWAYS.

The biggest problem is determining the BOTTOM. Then, you have to see how badly scarred you are. The more scarred you are, the more reluctant you are to re-enter the market. The more reluctant you are, the more likely you will miss out on the recovery.


20. Take a Dump...
by "Shiny Things"

Markets, on average, go up over time.

Therefore, on average, more time in the market is better than less time in the market.

Therefore, leaving the money sitting mostly in cash while you DCA it in is worse than just dumping it all in in one lump.


21. CDP, a Uniquely Singapore feature.
by "Perisher"

CDP is just a place to hold your shares.
CDP is linked to most brokerages in SG(except SCB) and purely SG only.
SCB acts as a custodian to hold your shares so it's not linked to CDP.
Every brokerage uses a custodian to hold your overseas shares.
SCB uses a custodian to do both local and overseas shares.

Custodian Fees is a fictitious fee.


22. This is where SG > US.
by "Shiny Things".

In the US, the rule of thumb is that you want to put bond funds, REITs, and high-turnover stock funds in your tax-free accounts, because those three things get unfavourable tax treatment. In Singapore it doesn't matter as much, because you get generous tax treatment no matter where you park the things.


23. The reality of SMEs...
by "newjersey".

"you're not a success story if you have to depend on the gov't".

Alot of SMEs are dependent on scamming the gov on PIC and grants for their cashflow.

In fact, I have a couple of SMEs who think of getting a loan from the banks as early payouts for them... to spurge on ktv / flower-joints / lap-dance bar ( for the western context ).

It's also a sad culture that alot of SMEs are driven in sales by cashbacks... it's distinctly backwards.


24. AMERIKA
by "IronMac".

Q : Can you explain why do the general american population save so little?

is it because of an existance of a social welfare system that allows them not to save for a rainy day?

is it because they don't save, they invest and so they channel their funds to stocks, futures, fx, property, etc?

A : It's not a matter of economics as to the rationale why Americans (as a whole) do not save for a rainy day or retirement. It's psychology. It's in their historic psyche that they - the individual - can make it on their own and become a success story. And you're not a success story if you have to depend on the gov't.

This plays into why the American consumer is such a powerful force in the global economy. They can literally pull the world out of a recession. Give them 2-3 years of high employment, decent wage growth and watch out.

Savings rates won't budge much but you will see housing starts pick up, auto sales go up, imports increase, etc.

Right now, so long as the Chinese economy doesn't implode into recession, the Europeans muddle along with minor economic improvements (hola Espana!), then, the world economy should be in fine shape over the next 2-3 years.

from "Shiny Things".

Usually in Western economies, people say that 15-20% of your income should go to investment, and in America you're lucky to convince people to save 5%.


25. Financial Measurement
by "SpeedingBullet".

Capital growth is the stock price increasing, NOT the revenue.

A company's revenue can go up 60% but the stock can still drop 10%, it has little to no correlation. I can see that if your understanding of dividends is like that, it's no wonder you fear that dividend thread haha.

I'll try to explain it in layman terms:

Revenue is simply the total sales a company brings in.
Profit/earnings is basically revenue-expenses.
Dividends are paid out of earnings/profits.

If a company pays out dividends at say a 50% payout ratio, it simply means half of the company's profits they return to shareholders. The other half they keep it as cash or they reinvest it in the business. This can be a catalyst for growth as a company uses the cash to reinvest in properties, research, products, services, etc.

If you wanna use growth, check out the company's dividend history.

Has the company been increasing dividends every year?
Has the company's earnings been increasing every year?
How stable is the company's payout ratio?
What is their dividend policy?

Use basic metrics like ROE (Return on Equity, which is simply earnings/shareholder equity), which measures how much a company returns on its equity annually. You can also simply plug in numbers into excel to see whether its earnings are increasing, and at what percentage. Then use the PE multiple to gauge how cheap or expensive the stock is.

When reinvesting dividends, please note the transaction costs (brokerage fees, etc.) when doing so. A traditional broker here in SG charges roughly S$25 per trade, so you'll have to subtract that from your dividends when reinvesting. And when you reinvest, are you confident enough that you can time your reinvestments?

26. Are you keen on JP pty?
by "Shiny Things"

Japanese bonds & stocks have been going up in price, nearly as fast as yen's been going down.

Don't buy Japanese real estate. Rental Yields : pretty phat, about 5%. But house prices dropping by 5% every year as well.

Japan's demographics : it's population is decreasing, as the population is rapidly aging... world's fasting, low birth-rate. Plus the country's xenophobic fear of immigrants.

* If you are buying JP apartments, buy the ones from 1984 onwards, this is the year that all buildings must be earthquake-resistant.

1981: The “shin-taishin”, or New Earthquake Resistant Building Standard Amendment.
Damage from the 1978 Miyagi Earthquake with a magnitude of 7.4 led to this new revision. The earthquake resistance definition is as follows:

For the often occurring mid-size earthquakes (magnitude 5~7), the building should suffer no more than a slight amount of cracks and should continue to function as normal. For the rare and large earthquakes with a magnitude 7 or higher and a Shindo scale of upper 6 or higher, the building should not collapse.

** unlike SG pte apartments which go on en-bloc, JP apartments go on to full depreciation after 25-30 years.
 
Last edited:

NewInvestor

Supremacy Member
Joined
Dec 17, 2014
Messages
7,343
Reaction score
3
A fantastic summary by newjersey. This and Shiny Thing's thread ought to be a sticky.
 

Broadwalk

Great Supremacy Member
Joined
Apr 14, 2015
Messages
59,451
Reaction score
4,394
Can someone meet up with me and help and guide me on interactive broker?:o
 

newjersey

Senior Member
Joined
Apr 21, 2014
Messages
857
Reaction score
118
hello to you

hi all,

if this attempt at consolidation of information is useful to u & you like to show your appreciation, just press the LIKE icon.

DO NOT REPLY & MAKE THIS A 200-PAGE THREAD.

thanks.
 
Last edited:
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ. Forum members and moderators are responsible for their own posts.

Please refer to our Community Guidelines and Standards, Terms of Service and Member T&Cs for more information.
Top