*Official* Shiny Things club - Part 2

[Dragonhorror]

Hi guys, anyone knows how to see if the etfs offered by ishares(blackrock) on their hk website reinvests or distributes dividends? Tried to find but don't seem to find it anywhere, unlike the ones on their uk site. Thanks!

 

[jacky817]

I think you have to think about it from this angle:

If not a stock/bond portfolio, what else are you going to 'store' this money? Remember that you are thinking of 'investing' because now you have no need to use these funds.

Remembering what is out there:
Put under bed : no interest earned, notes may be eaten by rats
Put in deposit account in bank : v v low interest, but very safe, no drop in value
Fixed deposit : slightly higher interest but only if you totally can't use it in the meantime
Gold :hard to buy/sell, probably no growth
Property: ???
Buy collector's items like art,wine : ???

So yeah a stock/bond portfolio is probably the best choice.

Just to add on to your reply for soulblader_89.

I agree with your logic and your examples except property. (Also, with all these DBS multiplier, OCBC 360, UOB One, parking a few dozen Ks in the bank is not too bad an idea also, for the extremely risk-averse and ignorant. It's a half-decent way to counteract inflation without much hassle and worry.)

In order to fully know what investment options are out there, we can look at the concept of Assert Classes. From what I know, they are broadly defined as 5 types:
- Bond
- Stocks
- Real Estate
- Commodities
- Currency

I view that the first 2 has the ability to generate interest/profit because it grows in its intrinsic value over time. Whereas the last 3 only generates profit because of the fluctuating demand and supply. Their intrinsic value remains the same over time.

Bond
If you were to lend your money to the government or big corporations, they most likely will take this money to put into doing actual stuff. Like govt will build roads, reclaim land, pay NSFs. Google might invest in autonomous vehicle research. All legit stuff creating actual value that the world needs. Then they pay you back your money with interest.

Your interest didn't directly come from the added value that they have created from road-building and R&D, but at least they're doing legitimate stuff. Which means that in the long run, they don't randomly go bankrupt. Which means that at any one period of time that you bond your money with them, you're safe in that sense.

But of course, if you're talking about the CDO nonsense that caused the 2008 sub-prime, then well, that's just an outright organised fraud. I'm impatiently waiting for the next one to come so that I get to buy all my ETFs on discount

Stocks
When you buy a company's share, you own a proportion of that company. Every company seeks to maximize revenue and profit, but very few has that idea written in their Mission and Vision statement. Which means that their existence and goal, ideally, is to achieve what they set out to do, and create value in this world (not profit maximization per se). The more value that they create and own, the more valuable they are, the more valuable your shares are. You own a portion of the company that is intrinsically more valuable now. They could be more valuable in their patents, technical know-how or machinery assets.

In other words, all their staffs, CEOs and machines are running like siao for themselves to grow. But you get to reap part of that growth, without doing anything.

Of course, when you invest in companies that doesn't actually do that, all your money are gone. Coz you own a portion of a company that doesn't create value, which eventually doesn't have a value in themselves.

Real Estate
It is similar to commodity, since you own something physical. Its intrinsic value stays the same.

But this physical thing is about the land and space that is rightfully yours, rather than the furniture and whatnot. Most often, this space and land don't degrade or disappear over time. Which means that you get to lend this out indefinitely. (for the sake of the argument, ignore lease )

Moreover, the world population doesn't seem to be going down anytime soon, except Japan. Yet the supply for living spaces is heavily affected by technology, political/social reasons. Meaning that it is ultimately, finite. This means that demand seems to be endlessly going up but supply may or may not be able to keep up. In the long run, it's price (not its value though) will go up.

Commodity
Owning something physical/unique.

Its intrinsic value doesn't change. The gold bar that you own won't work hard for you to give birth to cute little mini gold bars. It will forever just be that. It is the demand and supply that affect its price. And you'd have no ***** clue when either of that will change. Suddenly there's a new mining technology to mine deeper, increasing supply. Then another research breakthrough in computer hardware demands for gold as its material.

The worst part is that, unlike real estate, you probably can't find people who'd want to borrow your gold bar.

Other things like art collection etc. are highly subjected to people's perceived value of it as well. The supply remains the same but the growth in demand is questionable. Again, its intrinsic value won't change. A good painting is a good painting. It won't give birth to another good painting after 20 years.

Currency
Honestly no idea wtf this is . It's like commodity but it represents the value of every other commodity. It works as long as everybody agree that it works. Once the economy goes out of whack like hyper-inflation or deflation, it's another worthless piece of paper. Its intrinsic value is.....none? But it has an innate function which is to serve as the common medium, to represent the perceived value of everything (without having people to physically trade 20 tables for an iPhone X).

In fact, its perceived value goes down steadily every year, thanks to economics 101. So for whichever idiot who hides millions and millions of cash under their pillow or in the bank, is subjected to losing at least 2% of its value every year. Which is exactly why I don't see any point for people to keep any more cash past their pre-decided emergency fund amount. Usually they have never decided on that amount in the first place, just assuming more is always better. While not knowing that the more they save, the more opportunity cost they incur for not shifting into a more legit asset class. Even a lame Singapore savings bond at 1.5% + 2.5% inflation rate will incur a cost of 4% to him.

Sidetrack a bit: The way I see it, cryptocurrencies are commodities being marketed as currencies. They don't serve the function of currency at all since you have no idea how much one whatever-coin will be worth - the time it takes for your parcel to arrive changes how much it costs. But they are something "physical" in the sense that they are finite, and each blockchain is unique.

ETFs
So back to the topic, bonds and stocks are the only two asset classes that leads to more value in this world, over time. So in the long run (imo, >20years), they are the most legit.

But you're still prone to company bankruptcy and bond defaults. Which is where ETFs come in. It helps to diversify the risk of your money from being placed on one single company to a few thousand companies. There is no way a few thousand companies all go down together. When that happens, you have a world war/meteorite/alien invasion/AI domination to worry about, not your money.

And according to Modern portfolio theory, you should decide on an asset allocation of these 2 types and re-balance at a fixed interval. The math shows that if you do it "blindly", meaning buying and re-balancing at a fixed interval regardless what happens, you'll eventually get the best average return for that period.

Real estate is a separate league of its own. If you own actual houses, you don't get to re-balance its value so easily. You can't sell half of your toilet coz the rising property price has brought your asset allocation for real estate too high. Neither can you buy a few more centimeter square of area every month so that you can Dollar cost average

But as mentioned above, you get to pretty much always rent out your space and its perceived value will most likely go up. This is especially the case for Singapore, with VERY finite land compared to other places like Russia.

So this leads to the conclusion that "ETFs in real estate", also known as REIT (real estate investment trust) should be considered as part of your asset allocation.

Only problem is that most of us have our parents' house loan or BTO to worry, to the point that the real estate portion can be excluded from our "portfolio". In the sense that your investment in one single real estate with borrowed money (aka leverage), is already dam huge! Still include in your portfolio for what sia.


Anw, just sharing my opinion and current understanding on finances. Feel free to correct me =)

 

[5408854088]

part two

 

[Shiny Things]

WE DID IT

WE BROKE HWZ

Somewhere, an HWZ DBA is watching smoke spew from their servers as the old 10,000-post thread grinds to a halt.

Catching up on a few responses from the old thread, so the formatting's going to be a bit broken at first, but bear with me:

Hi Shiny,

With China's one belt one road initiative, all that crazy infrastructure growth, the fact that Chinese tend to save more (giving china banks more cash), their billion dollar investments in green energy, and Xi's presidency-for-life, should I consider investing/tilting towards China? Oh and the enormous Tencent and Alibaba which seems to be heavily affected by government.
[…]
And don't get me started on how downhill America seems to be heading haha. Of course, there is Google, Facebook, Apple, Amazon holding the fort, but I'm beginning to get more and more worried about my vanguard ETFs invested in the US market. Is this fear justified?

I don’t think so.

China, if anything, is in a bit of a rough spot at the moment. Its banks—which make up a big chunk of the market—are larded up with loans that are only dubiously performing, and the Chinese tech sector is already trading at some fairly enthusiastic multiples, so there’s a lot of growth already priced in there. Owning Chinese stocks is effectively a bet that either Chinese tech is expensive and it’ll get more expensive; or that the banks are actually totally fine, and both of those seem a bit iffy to me.

I’ll grant that the US tech sector is trading at some similarly enthusiastic prices, and having Donny Two Scoops’ tiny hands on the levers of power over here isn’t exactly good for sentiment (though, funnily enough, US stocks rocketed nearly 25% last year! My personal favorite theory is that Everything Trump Touches Dies; so stocks kept going up as long as he kept his tiny hands off the levers of economic policy; at the beginning of this year, his attention shifted to economic policy, and pop goes the market). But on the whole, I think the US economy is in OK shape (that’s why the Fed is tightening); valuations are looking reasonable after the selloff earlier this year; and Im pretty comfortable with where the US economy is right now.

Related:

Hi Shiny, you have mentioned a few times already that India is expensive and Singapore is cheap. With all due respect, I think there are very good reasons why something is cheap and expensive and that too over a long term.

I’ll absolutely agree with you here. Part of the reason Singapore’s stock market trades at a low PE (similar to China) is the big presence of bank stocks in the index, which have traded at lower PEs than the rest of the market over the last decade. That can change, though.

Short term there can be aberrations. But India has always been expensive and it remains expensive.

This, though, is wrong. India’s stock market traded in a low-teens PE ratio in the mid-2000s; it bottomed out around 11x in 2003-04. It’s now trading at 26x earnings.

India was cheap in 2004; it’s now eye-wateringly expensive.

Hello.
Not sure if this question has been asked before but...

When it comes to setting up portfolio allocations, I know it is usually stocks X% and bonds Y%.
In this case, does the bonds portion also include cash-on-hand (e.g. savings account, emergency fund)?

I don’t think so; I think cash should be an entirely separate pot, and your investment pot should be fully invested into stocks-and-bonds, because cash is the worst-performing asset of all over the long term. Related to which:

I find it quite interesting when people like to become such perfectionists with exact asset allocation, emergency cash balance etc, when the future is so unknown.

The scariest statement I find is when people say cash is a drag on their portfolio. I really hope, we don't see a day when they will regret making that statement.

“Cash drag” is a technical term, mate; it refers to the reduction in returns that a portfolio suffers because it holds cash.

If you’re investing for the long term—and in here, we are investing for the long term—the idea is that you won’t need cash as a buffer, because you’ll be able to sit through the ups and downs of stock and bond markets without panicking and having to withdraw from your account. If you keep cash around “just in case”, it just ends up hurting your returns.

Hi Shiny,

Thanks for the insightful reply.

Actually, both question is what i would like to ask.
1)How to get better prices on your execution?
2) How do I reduce the chance that I get assigned when I sell an option?

Do you know of any good websites written by people who actually trade these stuff something like a blog and not those generic ones like investopedia?

1: Execution strategy is a big ol’ rabbit-hole to dive down. One thing you might find useful, in the US options markets at least, is that options MMs will generally trade at or close to the middle of their posted quotes; instead of just hitting the bid or paying the offer, try working an order a bit through the midpoint, and see if someone bites.

2: Sell lower-delta options. The tradeoff, because there is always a tradeoff, is that lower-delta options mean you get less premium.

Hi all pros, anyone invest in Vanguard FTSE Global All Cap Index Fund? This is a accumulating fund that includes EM. This would be like VWRD but reinvested. Would this be better than IWDA? The only thing is higher TER.

Also it’s only got about GBP 4 mio in assets. That’s not enough to keep the lights on, even though the fund itself is quite nice.

Also is VEU or VEA be a good holding instead of global ETFs if I already have 10% in Berkshire B stock and another 10% in US-related sectorial ETF? The TER on those are extremely low as well.

No. You’re going to get slugged with excessive dividend tax on those (and your sector ETFs, too). I bang on about this a lot, but Singaporean investors should always try to avoid US-listed stocks and ETFs, just because of the unfavorable dividend tax.

Somewhat related:

Hi guys, may i know if we can buy index like FTSE ST Index for various sectors?

Not really, unfortunately. Sector ETFs exist in the USA (see above), but the Singaporean market just isn’t big enough to support them; there’s no need for a “Singaporean financial-sector ETF” when that only covers three stocks.

so it is recommended that before I start my first investment, it is advise that I prepare 6 month of my monthly salary as saving first right?

My take home pay is only $2800, what is the amount u recommend I do investment every month? assuming I only use POSB investsaver


What is the minimum amount u recommend for doing investment using POSB investsaver? I understand that you mention $100 is a bit too low, and the there will be a fee of $10 per month

1: yep.
2: Whatever’s left over once you’ve paid for all your expenses. I’m not a fan of “always save 20%!” or hard-and-fast rules like that, because people’s saving capacity varies depending on their personal situation.
3: For POSB InvestSaver, you can absolutely do $100 a month, because their fees are 0.5-1% of whatever you put in, with no minimum. $100 is a bit too low for Standard Chartered; they’re the guys who charge a $10 minimum.

In order to fully know what investment options are out there, we can look at the concept of Assert Classes. From what I know, they are broadly defined as 5 types:
- Bond
- Stocks
- Real Estate
- Commodities
- Currency

There are plenty more, and I think your autocorrect failed you on “assert”? But let’s go through these… also, I’d really debate whether currency is an asset class. I don’t think it is.

I view that the first 2 has the ability to generate interest/profit because it grows in its intrinsic value over time. Whereas the last 3 only generates profit because of the fluctuating demand and supply. Their intrinsic value remains the same over time.

Not quite true. Real estate does tend to grow in value over time (though generally slower than stocks, and it’s more volatile); and bonds don’t grow over time. Currencies tend to be mean-reverting in relation to each other (not always, obvs). And I think your writeup of currencies as an asset class sort of conflated “trading currencies” with “parking cash in a particular currency”.

I liked this on commodities, though:

Its intrinsic value doesn't change. The gold bar that you own won't work hard for you to give birth to cute little mini gold bars. It will forever just be that. It is the demand and supply that affect its price. And you'd have no ***** clue when either of that will change.

In the immortal words of Uncle Wozza: “you can fondle the cube, but it will not respond”.

Some days iwda & eimi prices shot up on the open, and then fall down.

Is the sudden rise due to daily revaluation and dividend reinvestment?

No. It’s because the ETFs track the price of the underlying stocks, and those stocks trade while IWDA and EIMI are closed. So when IWDA opens for trading, its price gaps higher to reflect the moves in the underlying stocks.

How many percent of return will I be expecting each year?

Will I at least guarantee 8% each year of return?

No. There’s no such thing as a “guaranteed return” anywhere outside of Singapore government bonds. And anything that guarantees you 8% return is a guaranteed fraud.

So all that's done, I also opened a SCB account and purchased ES3 as well. On the day of opening my account, the lady advised me to open US and SG markets only, so I took her advice. She said when I'm more used to the system then come and open more (ok no issue).

However, now I want to get some overseas ETF (Vanguard or IWDA). Am still reading up, but I can only find IWDA:LSE on SCB... can't seem to find Vanguard Total World Stock ETF (VT).

May I know which exchange is VT on? I only see it on ASE which I assume is wrong

Nice - you’re on the right track!

Anyway: you probably don’t want VT, because (as mentioned above) it’s listed on a US exchange, which means the US tax office takes a chunk out of your dividends. IWDA is the right pick; they’re baaaasically the same thing as VT, but without the US government hovering up their tax bill.

(ASE, incidentally, is the code Stanchart uses for “American Stock Exchange”. Nobody else calls it that; everyone calls it the Amex.)

Would it be better if I:

1. Start trading in SCB until I have 10K USD worth of IWDA shares and transfer them to IB?

2. Or save up 10K USD equivalent of SGD in cash and put them into IB to save on the FX spread entirely.

Thanks!

So people have discussed this upthread. Personally I’d just use SCB, until you get to the $1000-a-month mark (where IB’s tighter FX spreads become worth it), or to $100k of assets (where IB starts waiving its monthly minimums).

Thoughts about this article? https://www.betterment.com/resources/safety-net-funds-why-traditional-advice-is-wrong/

It states that one should jack up his emergency fund by 30% and then invest it into a 40/60 stocks bonds mix.

So I really like Betterment, and I respect Dan Egan a lot (he’s an excellent Twitter follow!), but I think he’s absolutely wrong on this. The entire point of keeping an emergency fund in cash is that there’s no market risk! Ask anyone who got fired in the depths of 2008; when you need to tap your emergency fund, you don’t want to find out that it’s down by a quarter or a third because you put it in the market. That’s two or three months of runway that you’ve lost, and that’s a really bad outcome.

Better to keep it in cash. Yes it won’t keep up with inflation, but that’s not the point; the point is that you can rely on the emergency fund to get you through life’s little headaches without having to crack your retirement fund piggy-bank, and without having to worry about where you’re going to find the money for this week’s shopping.

 

[sgdividends]

Thank you Shiny for your insights .

Interestingly, IB FYI did also sent me a message telling me to place order between the bid and ask spread as it may earn me rebates for adding liquidity and yield significant price improvement ... Never seen a broker helping me to save some money!

 

[BBCWatcher]

You’re going to get slugged with excessive dividend tax on those (and your sector ETFs, too). I bang on about this a lot, but Singaporean investors should always try to avoid US-listed stocks and ETFs, just because of the unfavorable dividend tax.

I disagree with this reply as a generalization.

First of all, if you're dabbling (or more than that) in individual stocks, shutting out U.S. listed stocks is going to really limit your choices. It is the world's largest economy, after all, and so many U.S. stocks are global leaders. That includes the world's most valuable publicly traded companies, from Apple on down. Second, there are quite a few stocks that don't pay any dividends, that are (at least for the foreseeable future) pure capital appreciation plays. There is no dividend withholding tax if there are no dividends. Both 15% and 30% of zero are zero. Third, for some non-U.S. persons, the U.S. estate tax is actually more "interesting" from a tax point of view than the dividend withholding tax. However, you can very effectively compensate for the estate tax (if you're concerned about it) with life insurance. Fourth, the difference between 15% and 30% dividend tax withholding doesn't really matter if you live in a country where your marginal income tax rate on that dividend income is ~30% or higher. At that point the only question is who gets paid the tax, and that's not such an interesting question for these purposes. (The estate tax operates the same way. Many countries have estate or inheritance taxes, so your country of residence matters...and might make U.S. tax rules effectively moot.) Plenty of Singaporeans live in/retire in countries that do have ~30% or higher marginal income tax rates on (global) dividend income.

Anyway, there's no need to be completely allergic to taxes. Just factor them into your decision as a cost of doing business, that's all. (And some "tax diversification" is helpful. Governments can change their tax rates and tax rules, and some of them -- Singapore, for example! -- can do so literally overnight.) If you're a non-U.S. person trying to choose between a global stock index fund and VWRL (Vanguard's global stock ETF domiciled in Ireland and traded in London), you'll probably want to go with VWRL for dividend and estate tax reasons. But other comparisons might be different.

There’s no such thing as a “guaranteed return” anywhere outside of Singapore government bonds.

Technically, Singapore government bonds are the safest Singapore dollar denominated investment instruments. Hypothetically that particular government could default on its obligations, or merely start taxing bond interest, or generate more inflation to reduce real yields. Consequently those returns are not guaranteed either.

In other words, nothing in life is guaranteed, except death I suppose. However, there is nearly always some investment that we can point to as the safest, as the benchmark, with everything else having more risk...slightly more, a lot more, or practically infinitely more risk. In Singapore, in Singapore dollars, SGSes and SSBs are those benchmark safest assets.

(ASE, incidentally, is the code Stanchart uses for “American Stock Exchange”. Nobody else calls it that; everyone calls it the Amex.)

The American Stock Exchange really doesn't exist any more. The New York Stock Exchange -- actually NYSE Euronext -- acquired it. The legacy names occasionally live on in spirit.

"ASE" is pretty confusing since it seems like it might be the Australian Stock Exchange. Or Austrian Stock Exchange?

 

[keelezibel]

Hi all, i am interested starting investment. I have opened an SCB account and IB account namely to put money into ES3 and IWDA respectively. However, i am only planning to put in around 1200 each month (600 each). I tried depositing money into IB and realised there is a wire fee. Hence, i am wondering if i should do both in SCB instead?

Will this way work or would it better if i invest bi-monthly instead?

Thanks guys!

 

[BBCWatcher]

I tried depositing money into IB and realised there is a wire fee.

There's no wire fee when you're depositing Singapore dollars into IB's custodial account at Citibank N.A. in Singapore.

Chances are you selected the wrong currency when you provided IB with your deposit instructions online. Please try again, and make sure you're selecting the correct currency (Singapore dollars in this case).

 

[ehsevol]

Shiny, nice to meet you. I just bought your ebook and it was a pleasure reading it.

I've been investing in G3B via POSB regularly for the past year or so, but I knew there had to be more to it and wanted to know the 'next' steps. I'm really glad I found your book and gained new knowledge.

Since I've only been investing in G3B this whole time, I have 100% of my portfolio in it and I need to do a rebalance with the things I've learned.

I need 40/40/20.

With these numbers as of today,

Would you agree with my next steps?
1) Redeem half of G3B to get it down to 40%
2) Put the cash from redemption of G3B towards IWDA (all at once?)
3) Add A35 to POSB Invest Saver to gradually reach the 20% target

I know your book recommends IWDA. But I've also seen many mention EIMI here. Is IWDA still more recommended than EIMI? There's no mention of EIMI in the book.

Will of course appreciate opinions from anyone else as well.

Thanks in advance

 

[Maeda_Toshiie]

Hi all, i am interested starting investment. I have opened an SCB account and IB account namely to put money into ES3 and IWDA respectively. However, i am only planning to put in around 1200 each month (600 each). I tried depositing money into IB and realised there is a wire fee. Hence, i am wondering if i should do both in SCB instead?

Will this way work or would it better if i invest bi-monthly instead?

Thanks guys!

Bimonthly is fine; you need to remember which month is to buy which

Shiny, nice to meet you. I just bought your ebook and it was a pleasure reading it.

I've been investing in G3B via POSB regularly for the past year or so, but I knew there had to be more to it and wanted to know the 'next' steps. I'm really glad I found your book and gained new knowledge.

Since I've only been investing in G3B this whole time, I have 100% of my portfolio in it and I need to do a rebalance with the things I've learned.

I need 40/40/20.

With these numbers as of today,

Would you agree with my next steps?
1) Redeem half of G3B to get it down to 40%
2) Put the cash from redemption of G3B towards IWDA (all at once?)
3) Add A35 to POSB Invest Saver to gradually reach the 20% target

Are you regularly putting money into investments right now? If yes, you can stop contributing to G3B and contribute towards the other components of your portfolio towards the target allocation.

I know your book recommends IWDA. But I've also seen many mention EIMI here. Is IWDA still more recommended than EIMI? There's no mention of EIMI in the book.

Will of course appreciate opinions from anyone else as well.

Thanks in advance

IWDA covers the developed markets. EIMI covers the emerging markets. Their coverage is quite different; the recommendation is to cover the developed market for the "world" part of your portfolio. You can hold a small portion of your portfolio in EIMI if you wish. You can also use VWRL instead of IWDA which covers both markets, of which you will see the emerging markets occupy a small portion of VWRL due to cap weights). Generally, the emerging markets is not recommended to be a big portion of any portfolio.

 

[ehsevol]

Are you regularly putting money into investments right now? If yes, you can stop contributing to G3B and contribute towards the other components of your portfolio towards the target allocation.

IWDA covers the developed markets. EIMI covers the emerging markets. Their coverage is quite different; the recommendation is to cover the developed market for the "world" part of your portfolio. You can hold a small portion of your portfolio in EIMI if you wish. You can also use VWRL instead of IWDA which covers both markets, of which you will see the emerging markets occupy a small portion of VWRL due to cap weights). Generally, the emerging markets is not recommended to be a big portion of any portfolio.

Yes I still intend to continue putting a fixed amount monthly into investments. Is there any difference between stopping with G3B and putting all the cash into IWDA until it's balanced, compared to redeeming G3B partially and shifting it to IWDA? Then henceforth my investment amount will be split into 40/40/20.

Thanks for the tip re. EIMI and VWRL!

 

[salmonella]

Fourth, the difference between 15% and 30% dividend tax withholding doesn't really matter if you live in a country where your marginal income tax rate on that dividend income is ~30% or higher.

Uhh, does anyone know if Singaporeans residing in Singapore need to declare dividends on ETFs purchased via IB, such as VWRL? How about accumulating ETFs like IWDA?

 

[BBCWatcher]

Uhh, does anyone know if Singaporeans residing in Singapore need to declare dividends on ETFs purchased via IB, such as VWRL? How about accumulating ETFs like IWDA?

No, and no, with the possible exception of professional traders. Ordinary, individual, long-term investors, no.

 

[aerodude]

I have a question regarding singaporeans who have CPF and are investing in the manner suggested here.

So let's say I am 31, and I want to allocate Bond:Singapore Stocks: World Stocks in the proportion 20:40:40..

If i were to use my CPF to substitute bond component (ABF), does it just mean that from time to time I top-up money into my SA account such that CPF-SA: ES3: IWDA is 20:40:40?


Thanks all for clarification.

Right now, i thought it makes more sense for me to use my CPF as bond component as the returns always is higher than ABF.

Please correct me or share!

 

[我的超酷故事]

Does anyone have experience trading in TSE? I wish to know if Singaporeans investing in stocks listed in TSE would be subjected to tax. And if so, which kind? Thanks!

 

[shun07]

if i would like to invest $1000 on monthly basis. can i know what's the option i can go with?

 

[wealth_farmer]

I have a question regarding singaporeans who have CPF and are investing in the manner suggested here.

So let's say I am 31, and I want to allocate Bond:Singapore Stocks: World Stocks in the proportion 20:40:40..

If i were to use my CPF to substitute bond component (ABF), does it just mean that from time to time I top-up money into my SA account such that CPF-SA: ES3: IWDA is 20:40:40?


Thanks all for clarification.

Right now, i thought it makes more sense for me to use my CPF as bond component as the returns always is higher than ABF.

Please correct me or share!

The issue is that rebalancing would be tricky for you as you obviously cannot cash out the SA to buy equities in the event of a market crash. This would still be ok when your total portfolio amount is small relative to your monthly investment amount, because you can just buy the equities you're short of. However, once your portfolio amount is of a sufficient size, you will find that even dumping your entire month's worth of investment funds into the lagging equities is not enough to close the gap; at that point, you will have to sell your bonds to buy more equities to restore the target allocation ratio. You will not be able to do this with CPF funds.

You are also assuming that SA would always give a better return than government bonds. Bond funds such as A35 gives off coupons, but can also potentially appreciate in times of market stress when there is a flight to safety from the more volatile stock market. In this way, it can act as a more effective stabiliser on your portfolio value. Of course, this is not always guaranteed as it can drop in value as well during certain periods.

I'm hazy on the CPF scheme, but if I'm not wrong RSTU is capped at 7k annually into CPF-SA? And VC, you cannot really specify which account you want your voluntary contributions to go to; but I suppose you could always do an OA to SA transfer after. Is there also a limit to the size of SA where once it hits a certain amount, it will overflow into OA? I really need to go refresh on CPF

All said, I feel if you're confident of your future earnings capability, you should have a separate bond component outside. You should value flexibility over returns in this case. I personally view my CPF as my worst-case backstop and don't really factor it into my market portfolio.

 

[jacky817]

I'm hazy on the CPF scheme, but if I'm not wrong RSTU is capped at 7k annually into CPF-SA? And VC, you cannot really specify which account you want your voluntary contributions to go to; but I suppose you could always do an OA to SA transfer after. Is there also a limit to the size of SA where once it hits a certain amount, it will overflow into OA? I really need to go refresh on CPF

Iirc, you can top up 7k to your own SA, and your siblings etc. can top up another 7k. Meaning that you can increase a max of 14k per year to your SA. There's a limit on your OA and once that is full, all the would-be amount going to OA will be funneled to SA (if you have a salary). I don't think there's a limit on SA, you just get to take the excess amount back after you've chosen your basic/atas/most atas retirement sum.

Thanks all for clarification.

Right now, i thought it makes more sense for me to use my CPF as bond component as the returns always is higher than ABF.

Please correct me or share!

Yep, I agree with wealthfarmer, it is not feasible to rebalance your CPF. Also, because CPF isn't being traded on the market , it doesn't behave like Bond ETFs either. (correct me if i'm wrong here)

I personally view CPF as a bonus, and a very good one imo. For virtually zero risk, the interest rate is pretty ridiculously high. At 2.5-3.5% for OA and 4-6% for SA.

You could consider having a slightly riskier portfolio after excluding your CPFs. Meaning 10:45:45, while knowing that you and your company is paying for your CPF

I don’t think so.

China, if anything, is in a bit of a rough spot at the moment. Its banks—which make up a big chunk of the market—are larded up with loans that are only dubiously performing, and the Chinese tech sector is already trading at some fairly enthusiastic multiples, so there’s a lot of growth already priced in there. Owning Chinese stocks is effectively a bet that either Chinese tech is expensive and it’ll get more expensive; or that the banks are actually totally fine, and both of those seem a bit iffy to me.

I’ll grant that the US tech sector is trading at some similarly enthusiastic prices, and having Donny Two Scoops’ tiny hands on the levers of power over here isn’t exactly good for sentiment (though, funnily enough, US stocks rocketed nearly 25% last year! My personal favorite theory is that Everything Trump Touches Dies; so stocks kept going up as long as he kept his tiny hands off the levers of economic policy; at the beginning of this year, his attention shifted to economic policy, and pop goes the market). But on the whole, I think the US economy is in OK shape (that’s why the Fed is tightening); valuations are looking reasonable after the selloff earlier this year; and Im pretty comfortable with where the US economy is right now.

Thanks for your detailed reply shiny. The name you gave Donny cracked me up

It seems that you're describing the current status of the two countries and maybe the near future, like 2-5 years. But what about a very long term commitment like 20 years?

Even if what you suspect turns out to be true and the china market goes downhill, a consistent investment into china during the downturn would reap even bigger rewards if the assumption that "china will grow and rise to No.1" is true. Meaning that after they've gone down, in another decade they might recover and bounce back even more?

I believe in investing in the intrinsic value that companies are creating, and it seems that china govt and companies are in a much better position to do that in the long term compared to US. Does this statement make sense, or does it even matter?

 

[soulblader_89]

if i would like to invest $1000 on monthly basis. can i know what's the option i can go with?

I think ETF is the best option for now

hmmm POSB investsaver

btw, anyone heard of POSB SAYE Account? what is the opinion of the POSB SAYE Account? is it a good saving tools?

https://www.posb.com.sg/personal/deposits/savings-accounts/saye

 

[Maeda_Toshiie]

Thanks for your detailed reply shiny. The name you gave Donny cracked me up

It seems that you're describing the current status of the two countries and maybe the near future, like 2-5 years. But what about a very long term commitment like 20 years?

Even if what you suspect turns out to be true and the china market goes downhill, a consistent investment into china during the downturn would reap even bigger rewards if the assumption that "china will grow and rise to No.1" is true. Meaning that after they've gone down, in another decade they might recover and bounce back even more?

I believe in investing in the intrinsic value that companies are creating, and it seems that china govt and companies are in a much better position to do that in the long term compared to US. Does this statement make sense, or does it even matter?

Market indices are not static; they are revised on a regular basis by the people who create them. Therefore, passive market index tracking funds will likewise change their invested stocks to match the revised indices.

If Choyna becomes classified as a developed economy*, its domestically listed stocks will invariably enter IWDA. This will be done without any effort on the part of the investor. On the other hand, if you look at VWRL, it contains stocks from both developed and emerging markets:

https://americas.vanguard.com/insti...w?portId=9505&assetCode=EQUITY##portfoliodata

See China? You'd even see Singapore in that ETF too!

Currently, the main reason why the US takes up >50% of any world stock market index (eg. the one tracked by VWRL), is simply due to the massive cap of the US stock market compared to other countries, and that most market indices are weighted on the market basis. As and when the Chinese stock market cap rises, it's percentage will rise in the world market stock index and hence VWRL as well.


*Point to note: there is no clear definition on how you define economies that developed or emerging. Hence you will see some countries like South Korea or Taiwan that gets defined differently by different people. It depends on the index involved and who runs it.