*Official* Shiny Things club

[Shiny Things]

Given that the likely return of STI ETF is approx. 2.5%, why the recommendation to go for STI ETF, than simply parking it in CPF SA @ 4% risk-free rate?

Because 2.5% is what the STI ETF's done in the past, not what it's going to do in the future. From 2002-2007 it did a hell of a lot better than 2.5%; same between 2009 and 2011. It ground higher from 2012 to 2014, and had a rough year last year, but on average, you should expect stocks to do a lot better than the 4% CPF-SA rate.

Also, as people have pointed out, the CPF interest requires you to lock your money up until you turn 65. This isn't necessarily a bad thing, but it's a thing to keep in mind.

Hi Shiny,

Is it wise to use SCB over IB? The exchange rates is it very big difference for USD stocks.

The exchange rate makes Stanchart expensive, yeah, but if you don't trade frequently and your portfolio's less than $100k USD, IB's $10/month activity fee makes it a bit more expensive.

Thanks a lot for your advice. Now things cleared up a lot more for me.

Will be using POSB for my A35 and StandChart for the rest of the ETF including IWDA.

You'll want to use POSB for ES3 as well - it's cheaper to buy ES3 through POSB until you get to about $1k a month.

Am I doing it incorrectly in dcaing es3 via stanchart? I have been dca with a monthly amount of $300 on es3, and since the minimum size to buy is 100 shares each time, i have been buying in fixed amount, waiting for the remaining cash to pile up and buy 200 share at a certain month.

Although I am switching to posb investsaver soon, i would still like to ask about this to see if I had been misunderstanding the concept of DCA.

Nope, you've got it exactly right. In a perfect world we'd be able to buy integer amounts of shares instead of having to round to the nearest 100, but you've got the right idea.

On a related note:

thanks for the lengthy reply ST.

I was referring to a rounded to nearest 100 shares strategy as compared to a odd shares strategy for using fixed amount. using Invest saver will result in odd shares, whereas using SCB will require us to buy in 100 units.

eg invest 1000 a month via SCB
at $3, I will buy 300 shares
at $2.5, I will buy 400 shares.

As compared to investsaver
at $3, buy 333 shares
at $2.5 buy 400.

i am going to run some tests on it though.

I'm pretty sure I can already tell you what you're going to find. The way you've described the problem, using Stanchart means you have a perpetual slight "cash drag" in your portfolio. As long as the thing you're buying is going up, then cash drag means that you're going to have slightly lower performance.

On my ES3 simulation that I shared above, I had some outcomes that resulted in a negative loss at current date, but a positive growth rate?
What could be the reason? like year 2010, 2012. positive growth rate buy negative returns. could it be due to the high spread between high and low price?

How did you get negative returns in 2010?

Also, you should probably quit using highs and lows - it's making your calculations pretty funky. Just use the close data; you should be able to get this pretty easily.

I think its a really bad idea to buy bonds. The interest rates is so low now! we need higher interest rates to make them worthwhile

agree or disagree?

Mostly disagree. Bond yields aren't great at the moment, but (in Singapore at least) they're not ridiculously low. Corporate bonds still look OK; high-yield bonds have rocketed back from their panic lows of last February; munis are a bit expensive and I switched out of them a few months ago, but they're not bad.

You wouldn't want to go buying negative-yield govvies from Germany or Switzerland (how about those negative-yielding 50-year Swiss govvies?!), or Japan. The only reason to buy negative-yielding bonds is either:

1. Because you're required to by law (maybe you're a pension fund, or you're a bank that has to hold government bonds as capital buffers); or,
2. Because you think some idiot will buy them from you even higher (this is the trade in Japan at the moment: buy them at -0.2% yield, sell them to the BoJ at -0.25%, lather, rinse, repeat).

But that said, bonds aren't inherently bad. Some bonds are too expensive, and you wouldn't want to own them; but some bonds are OK, and you always need at least some bonds in your portfolio.

On my IB trading platform, the name is IWDA LSEETF.

On my IB PortfolioAnalyst report, the same counter is SWDA with description as "ISHARES CORE MSCI WORLD UCIT"

The currency is USD in both case.

Why there is a difference?

I'm honestly not sure. Maybe ping IB and ask them?

 

[chuanz]

You'll want to use POSB for ES3 as well - it's cheaper to buy ES3 through POSB until you get to about $1k a month.

Shiny Things, you're gonna have to rewire your brain a bit for POSB => G3B. We've all been too accustomed to ES3 as THE "STI ETF", yours sincerely included

 

[bladez87]

I calculated my compounded annual returns using this process.

I divide the total networth into the unit networth. total NW/ total units = average net worth price

using ANWP I calculate current month/prior month - 1 to get the change in the ANWP.

Then using the (average of the total net change+ 1)^12 to calculate the compounded growth rate for the year. the average total net change is calculated as average growth rate from 2010 to 2016.


Yes. I have a cash drag situation, unfortunately cannot be avoided by using SCB or any other broker that does not allow for odd units purchase.

 

[doody_]

Cash drag shouldn't be too bad, a 100 shares is about $300 only... If it was the old 1000 lot size then it would be more substantial.

 

[Shiny Things]

Shiny Things, you're gonna have to rewire your brain a bit for POSB => G3B. We've all been too accustomed to ES3 as THE "STI ETF", yours sincerely included

D'oh! Yeah, I'm gonna need to fix that... I've already done it in the book, but my brain is still wired to type ES3 all the time.

 

[Cyborg1719]

Hi Shiny Things,

Saw an article on corporate bonds and would like to ask for your opinion on it. What is the difference between buying many good corporate bonds vs A35?

 

[hygge island]

Hi Shiny, is it illegal (insider trading) if I buy shares of company that I work for.

Scenario 1: Mr A is top 800 manager (out of 25k headcount) with insights into sales and profit margins of a segment (35%) of overall business. Big company. Listed on main board.

Scenario 2: Mr A reaponsible for 50% turnover of business and is senior management (not executive board though). Small listed company but not on main stock exchange.

Scenario 3: company janitor

 

[wahkao3]

Mostly disagree. Bond yields aren't great at the moment, but (in Singapore at least) they're not ridiculously low. Corporate bonds still look OK; high-yield bonds have rocketed back from their panic lows of last February; munis are a bit expensive and I switched out of them a few months ago, but they're not bad.

You wouldn't want to go buying negative-yield govvies from Germany or Switzerland (how about those negative-yielding 50-year Swiss govvies?!), or Japan. The only reason to buy negative-yielding bonds is either:
Because you're required to by law (maybe you're a pension fund, or you're a bank that has to hold government bonds as capital buffers); or,
Because you think some idiot will buy them from you even higher (this is the trade in Japan at the moment: buy them at -0.2% yield, sell them to the BoJ at -0.25%, lather, rinse, repeat).
But that said, bonds aren't inherently bad. Some bonds are too expensive, and you wouldn't want to own them; but some bonds are OK, and you always need at least some bonds in your portfolio.

because of the super low interest rate environment
i only want low risk high return. low interest rate = low return. Doesnt fit into the theme

 

[knightcover]

One more nuisance comment from you, you will be put on 3days temp ban. You are warned.

because of the super low interest rate environment
i only want low risk high return. low interest rate = low return. Doesnt fit into the theme

Posted with HardwareZone Forums app

 

[wahkao3]

One more nuisance comment from you, you will be put on 3days temp ban. You are warned.

Posted with HardwareZone Forums app

if you think what i posted is wrong, please share your counter arguments. Or better yet, present a better investment philosophy

we can have a good discussion

 

[knightcover]

Sorry bro i login to the wrong account.

if you think what i posted is wrong, please share your counter arguments. Or better yet, present a better investment philosophy

we can have a good discussion

Posted with HardwareZone Forums app

 

[Shiny Things]

Hi Shiny, is it illegal (insider trading) if I buy shares of company that I work for.

Scenario 1: Mr A is top 800 manager (out of 25k headcount) with insights into sales and profit margins of a segment (35%) of overall business. Big company. Listed on main board.

Scenario 2: Mr A reaponsible for 50% turnover of business and is senior management (not executive board though). Small listed company but not on main stock exchange.

Scenario 3: company janitor

Oooh man, I'm not touching this one with a ten-foot pole. You really need a lawyer to answer this.

For scenario 1 and 2, this is the reason why executives tend to purchase their stock using pre-defined, pre-declared plans. I don't know about Singapore, but US law has a specific safe harbour for executives to purchase stock in their own companies, but they have to preannounce when they're going to buy it (for example "I'm going to buy 100,000 shares every three months for the next five years at whatever the price is on the day"), and they're generally not allowed to make any transactions while the company's preparing its quarterly or annual results.

Scenario 3 could still be illegal insider trading, too. If the janitor's trading because he overheard a conversation in the elevators, or he found unpublished financial reports in the CEO's trash basket, that could potentially be illegal.

Basically, you should follow Matt Levine's Laws Of Insider Trading:

Law 1: Don't insider trade. You'll get caught, and you'll go to PMITA prison.
Law 2: If you must ignore law 1 - I dunno, maybe you're into the idea of PMITA prison? - don't buy short-dated out-of-the-money call options on the acquisition target. That is the most obvious trade in the book. When the regulators look at trading in the acquired company, the first person they're going to collar and haul in is the guy who, having never traded options before, suddenly buys 100 times the average daily volume of the front-month 5-delta call options in the acquisition target.

 

[Shiny Things]

because of the super low interest rate environment
i only want low risk high return. low interest rate = low return. Doesnt fit into the theme

So Wahkao's inadvertently derped into an interesting point here: what does "low return" or "high return" mean any more?

Imagine you are a Swiss bond fund manager with cash to invest (and presumably a nice house overlooking Lake Zurich, so if you invite me to come visit I promise to bring a really good bottle of wine).

You have three options.

Option 1: you can leave your cash in the bank - but if you do that, your bank will probably charge you interest, because the CHF cash rate is -0.75% and banks are having to pass those negative interest rates on to their customers.

Option 2: you can buy 50-year Swiss bonds, which yield... zero. That is a hilariously low return, if you look at it in absolute terms. But if the alternative is leaving cash in the bank and getting charged 0.75% per annum, you might well decide to buy the 50-year at zero, because that means you're not getting charged 0.75% any more.

Option 3: you can buy bonds in other currencies. For example, you might buy the 2yr SGS, which yielded about 1.17% at the most recent auction. That's a very low yield, but it's still a lot better than the -1% or so you'd get from 2-year Swiss bonds. (Yes, there's exchange rate risk; presumably part of your job as a bond fund manager would be to decide whether and how to hedge that.)

So, even though yields are low in absolute terms, there might still be people who want to invest at those low yields. And people in general, and wahkao in particular, might need to recalibrate their expectations for what sort of returns count as "high return" and "low return".

 

[OngHuatHuat]

Actually sti etf may not be a good low risk instrument anymore.

Perhaps high yield corporate bond is a better choice.

So Wahkao's inadvertently derped into an interesting point here: what does "low return" or "high return" mean any more?

Imagine you are a Swiss bond fund manager with cash to invest (and presumably a nice house overlooking Lake Zurich, so if you invite me to come visit I promise to bring a really good bottle of wine).

You have three options.

Option 1: you can leave your cash in the bank - but if you do that, your bank will probably charge you interest, because the CHF cash rate is -0.75% and banks are having to pass those negative interest rates on to their customers.

Option 2: you can buy 50-year Swiss bonds, which yield... zero. That is a hilariously low return, if you look at it in absolute terms. But if the alternative is leaving cash in the bank and getting charged 0.75% per annum, you might well decide to buy the 50-year at zero, because that means you're not getting charged 0.75% any more.

Option 3: you can buy bonds in other currencies. For example, you might buy the 2yr SGS, which yielded about 1.17% at the most recent auction. That's a very low yield, but it's still a lot better than the -1% or so you'd get from 2-year Swiss bonds. (Yes, there's exchange rate risk; presumably part of your job as a bond fund manager would be to decide whether and how to hedge that.)

So, even though yields are low in absolute terms, there might still be people who want to invest at those low yields. And people in general, and wahkao in particular, might need to recalibrate their expectations for what sort of returns count as "high return" and "low return".

 

[yiron]

Actually sti etf may not be a good low risk instrument anymore.

Perhaps high yield corporate bond is a better choice.

Can elaborate a bit more on why you feel so?

 

[OngHuatHuat]

Singapore economy is at peak or close to peak with low inflation rate.
Reverse QE.

Can elaborate a bit more on why you feel so?

 

[Izumi8]

Because 2.5% is what the STI ETF's done in the past, not what it's going to do in the future. From 2002-2007 it did a hell of a lot better than 2.5%; same between 2009 and 2011. It ground higher from 2012 to 2014, and had a rough year last year, but on average, you should expect stocks to do a lot better than the 4% CPF-SA rate.

I think the readers here are generally being mislead. Please make your own research and do not follow blindly to the so called "Experts" here.
Some Experts think that:
1) STI are going to perform better than 4% CPF-SA rate in the next 10, 20, 30 years....
2) Young people should allocate majority of their investment money in SG stocks or STI ETF every month .

Japan is a good case study. Someone who keep buying Nikkei 225 Index for the past 30 years ago could still be in negative returns now, as current Nikkei index still below the 30 years average.

 

[boe7874]

For those who own a property (private/HDB), any thoughts about the following:
1) Use CPF only to pay for the mortgage, vs
2) Use Cash to pay for mortgage, vs
3) Use Cash for partial lump-sum repayment, vs
4) Use Cash to topup SA to get more interest.

And currently I'm into my 5th year of owning my HDB. Started and still on HDB housing loan (due to lack of diligence in considering bank loans, threat of increasing interest rates in the past), but now I'm thinking whether it's worthwhile to take a look at bank loans in view of the low possibility of interest rates increasing in the near future considering the state of the wold economy.

Open for discussion. Thanks guys!

 

[newjersey]

I think the readers here are generally being mislead. Please make your own research and do not follow blindly to the so called "Experts" here.
Some Experts think that:
1) STI are going to perform better than 4% CPF-SA rate in the next 10, 20, 30 years....
2) Young people should allocate majority of their investment money in SG stocks or STI ETF every month .

Japan is a good case study. Someone who keep buying Nikkei 225 Index for the past 30 years ago could still be in negative returns now, as current Nikkei index still below the 30 years average.

they are mislead, as u assume, because they didn't read in full.

the author takes the blame?

really?

 

[boe7874]

A question regarding rebalancing.

For example, after investing for a year, the current portfolio value is as follows:
STI ETF: S$15,000.
IWDA: USD$10,000.
A35: S$7,500.

Assuming a person is supposed to have 80% equity, 20% bonds, how do we calculate how much money to put into IWDA to rebalance it to the optimal 40% of portfolio?

Do we use USD$10,000 x current forex rate to get about S$13,500, then buy another $1,500 worth of IWDA?
Or do we use USD10,000 x (average forex rate which we bought IWDA for over the past year)?

Or what method should we be using for rebalancing? I'm quite confused about this...

Thx in advance!