*Official* Shiny Things club - Part 2

[wannabelazy]

1. Sell down some of that stock, I’m guessing you’ve got a lot of weird single names in your portfolio; flog those off and move it into ES3 or IWDA.
2. Once you’ve got an initial lump sum that you’re ready to invest, buy ES3 and IWDA over the course of a few months. Since you already own some STI, you’ll want to purchase more IWDA than ES3, so that your portfolio ends up balanced.
3. You might or might not want to tilt your monthly purchases toward IWDA, as well. Basically set your target percentages of IWDA and ES3 first, and then aim for those.

Thank you so much for your response. Will see about letting go of some of those individual counters. It's going to be painful but will try to be an emotionless robot about it so I can get to IWDA sooner! Appreciate the effort you put into replying people on here, Shiny Things!

 

[BBCWatcher]

Hi BBC, how is this implemented? Do we not only have one account with IB? For example, for singapore investors, the account is in USA. How do you open an account in Australia?

Interactive Brokers has custodial bank accounts in a variety of currency zones. For example, they have a bank account somewhere in Australia, in Australian dollars, where you can send Australian dollars (wire or domestic transfer). IB then credits Australian dollars, as Australian dollars, to your one and only IB account. If you want to send euro, you can send euro...to IB’s custodial account somewhere in Europe. British pounds? No problem, IB has a custodial account at a bank in London.

This is rather common among brokers operating internationally. Charles Schwab can also receive a variety of currencies into their custodial accounts in various currency zones, although in Schwab’s case they’ll always automatically convert those funds into U.S. dollars since Schwab really only focuses on U.S. listed/traded securities.

Want to understand what you mean by cheap baht.

I simply mean 2.9% interest, fixed for 40 years, means you have low priced baht. Enjoy it! Invest your savings elsewhere, prudently and reliably earning >2.9% over the medium to long term, and you come out ahead. And that should be easy to do, because 2.9% fixed for 40 years on Thai baht is a wonderful deal. A loan is terrific if it’s cheap, and that one is.

I believe I explained how this works, but I’ll try again. If somebody will rent you a plow for 500 baht, and you can fairly reliably use the plow to generate 1,000 baht worth of crops, do it! Same thing here. You have two basic choices for your surplus (excess income that you don’t need for day to day consumption). One choice is to pay down a mortgage (on property you don’t own!) faster than the 40 year loan term, and the other choice is to invest that surplus in something that will prudently, safely, reliably generate >2.9% returns. And choice #2 should be easy, and you should do it!

Now, that basic financial reality — that, if you’re going to pay any of this mortgage, you should pay it at normal scheduled pace — is in your interest, and in the interest of your dependents. It’s how you build greater wealth faster, to let cheap money run as long as you’re allowed, and to make your savings work harder for you. If there’s somebody pushing you to do otherwise, that’s how the owner of the property (not you) builds greater wealth (equity in the property) faster. And that much faster until you’re not needed any more. I hate to be cynical, but I must point out this possibility. There are unfortunately some people in this world looking to abuse others. I hope that’s not happening, but a plea to “Pay down my (low interest, long term) mortgage, NOW!” is consistent with an abuse pattern.

I should also point out that it’s highly irregular for a parent, who is presumably 40+ years of age, to have a 40 year mortgage. Banks are not generally in the habit of lending money with payments expected at age 80+, at least not to someone who genuinely needed the money. (Maybe Thai lenders are different? But I don’t think so.) So that part is...well, let’s just say it’s odd. That too gives me concern.

Maybe I’m worrying too much, but maybe I’m not.

 

[Shiny Things]

What do you guys think of this article?
https://www.forbes.com/sites/greats...e-we-headed-for-a-passive-index-meltdown/amp/
Basically saying passive index being a bubble

People have been screaming that "index investing is going to cause a bubble!" for years. Usually these people are active managers who are rapidly losing assets to lower-cost, better-performing index funds.

Anyway, the assertions in that article are just wrong.

"You get what you pay for": weirdly, when it comes to funds, you get what you don't pay for. Funds with lower fees systematically outperform funds with higher fees.

"Stocks in fewer indices have outperformed stocks in more indices in the last twelve months": the guy is confusing "small-caps have outperformed" with "under-followed stocks have outperformed". And that's over the last twelve months; I suspect he'd find that the opposite has held true over longer timeframes.

"Rebalancing risk": yeah uh what? We've been through zillions of rebalancing cycles over the last few years and it hasn't stopped US equities. People have been rebalancing into EM equities, but the weight of selling has kept those down.

Guy doesn't know what he's on about.

 

[EagleToThesSky]

Interactive Brokers has custodial bank accounts in a variety of currency zones. For example, they have a bank account somewhere in Australia, in Australian dollars, where you can send Australian dollars (wire or domestic transfer). IB then credits Australian dollars, as Australian dollars, to your one and only IB account. If you want to send euro, you can send euro...to IB’s custodial account somewhere in Europe. British pounds? No problem, IB has a custodial account at a bank in London.

This is rather common among brokers operating internationally. Charles Schwab can also receive a variety of currencies into their custodial accounts in various currency zones, although in Schwab’s case they’ll always automatically convert those funds into U.S. dollars since Schwab really only focuses on U.S. listed/traded securities.

Thank you BBC! I mixed up IB's custodial account with our own accounts. Clear now. Thank you.

 

[Listopad]

4. Later, after your SAs are full (Full Retirement Sum), and when you reach the point where you still have "too much" OA accumulating, then you could take a look at the CPF Investment Scheme (OA) to see if there's something reasonable and low enough cost that could reliably beat 2.5% over at least a medium term time horizon.

any suggestions on what could reliably beat the 2.5% ?

 

[BBCWatcher]

any suggestions on what could reliably beat the 2.5% ?

It's reasonable to forecast that ES3, the STI fund, would beat 2.5% over the medium to long term. ES3 is available through the CPF Investment Scheme (OA).

 

[Listopad]

It's reasonable to forecast that ES3, the STI fund, would beat 2.5% over the medium to long term. ES3 is available through the CPF Investment Scheme (OA).

Medium to long term , would you consider 10 -15year perspective appropriate? I’ve been thinking about my OA currently untouched and it be a good 15 years before withdrawal if I decide to .

 

[revhappy]

My portfolio is back to its previous high. Amazing rollercoaster this is. I didn't expect markets to come back this fast. The cash that I set aside for deploying waiting for a crash, will have to wait longer I guess. But I don't think I will increase my allocation to equities at these valuations.

Sent from Dont Take Any Of My Statment As Investment Advice. Do Your Own Due Diligence. using GAGT

 

[hengah_ongah]

My portfolio is back to its previous high. Amazing rollercoaster this is. I didn't expect markets to come back this fast. The cash that I set aside for deploying waiting for a crash, will have to wait longer I guess. But I don't think I will increase my allocation to equities at these valuations.

Sent from Dont Take Any Of My Statment As Investment Advice. Do Your Own Due Diligence. using GAGT

Just checking for such a case, would you use some $ to top up ur cpf sa account?

 

[goldnut]

People have been screaming that "index investing is going to cause a bubble!" for years. Usually these people are active managers who are rapidly losing assets to lower-cost, better-performing index funds.

Anyway, the assertions in that article are just wrong.

"You get what you pay for": weirdly, when it comes to funds, you get what you don't pay for. Funds with lower fees systematically outperform funds with higher fees.

"Stocks in fewer indices have outperformed stocks in more indices in the last twelve months": the guy is confusing "small-caps have outperformed" with "under-followed stocks have outperformed". And that's over the last twelve months; I suspect he'd find that the opposite has held true over longer timeframes.

"Rebalancing risk": yeah uh what? We've been through zillions of rebalancing cycles over the last few years and it hasn't stopped US equities. People have been rebalancing into EM equities, but the weight of selling has kept those down.

Guy doesn't know what he's on about.

I like how he cherry picks from the whole John Bogle quote.

 

[BBCWatcher]

Medium to long term , would you consider 10 -15year perspective appropriate? I’ve been thinking about my OA currently untouched and it be a good 15 years before withdrawal if I decide to .

Yes, I think so.

I'm not really a fan of the CPF Investment Scheme before your SA has reached the Full Retirement Sum. OA to SA transfers rank as more attractive from my point of view. However, if you still have OA dollars piling up -- a possible happy problem at mid-career and later, typically -- then yes, there are a few CPF Investment Scheme (OA) choices that are attractive enough for that sort of time horizon.

Last I checked, UOB offers the best deal in the required CPF Investment Account (if you're going to participate in the CPF Investment Scheme-OA), and then just keep a close eye on fees and expenses since they can be pretty awful in Singapore. Also be careful that the choices you make fit within your overall portfolio targets, including stocks/stock-likes versus bonds/bond-likes, and global versus local splits.

 

[revhappy]

Just checking for such a case, would you use some $ to top up ur cpf sa account?

Sorry bro, I have no idea how cpf works. I am currently keeping the cash in my DBS multiplier account. It is still less than 50k.

Sent from Dont Take Any Of My Statment As Investment Advice. Do Your Own Due Diligence. using GAGT

 

[peipei1]

IWDA has gone past the Jan levels, wow but does it mean we should expect a slight correction soon, be it from China retaliation? I hope this time i can reduce some EIMI positions for a profit at 28.38 next week. I do get a feeling, it will drop back to 26-27 after this run up cools down.

I discovered two things while gambling on this run-up, the new exchange IEX provides realtime prices and realtime trades for free on the website!

IB Smart routing helps to sell obscure stocks, without selecting it, i cannot seems to sell for a few days. Sadly smart routing cannot do GTC, and need to set every new day.

 

[Shiny Things]

Q: TD ameritrade charges USD25 for each withdrawal, should I just make a clean withdrawal, or leave some money there as I have some free trades pending, and if so, which US etf is recommended?
Q: Does SCB charge for incoming TT?
Q: I have SGD300k FD maturing, and I plan to use 100k for CPF OA/SA, I am in my early 50s. Not sure what to do with rest of my cash. I have about SGD45k in SSB, and will top up more.

Thanks!

1) Just make a clean withdrawal. Free trades vs $1 per trade at IBKR... it's not much of a difference.
2) Not sure.
3) If you're in your early 50s, you should be 40-ish percent in bonds - so once you finish topping up your SSBs, it might be worth investing in some local bond ETFs (e.g. MBH)

I discovered two things while gambling on this run-up, the new exchange IEX provides realtime prices and realtime trades for free on the website!

I've said it before, this is not a thread for your posts on "gambling". If you're posting about your short-term trades, take it to another thread. Do you understand?

Also IEX is an exchange, they're not a broker. They post their market data for free, but they don't offer trading, free or otherwise; are you sure you're looking at the right website? The IEX website is www.iextrading.com.

Sadly smart routing cannot do GTC, and need to set every new day.

This is just completely wrong. I just fired up TWS and was able to place a smart-routed GTC order.

 

[gantan88]

Hi ST,

Thanks for your response. I guess I will split my investment to posb-is and scb then. I also have plan to put some of my investment on IWDR. I actually already have my scb account ready for iwdr. Besides etf, I also contemplating to get some individual bank shares and hold for longer term but their price are running very high.

I still go for the ol' 50-50 local-global. Within your stock allocation, which should be balanced out by a bond allocation: 50% STI ETF; 50% IWDA.

Once you get above about six figures, so you're purchasing a meaningful amount of emerging-market stocks: 50% STI ETF, 45% IWDA, 5% EIMI.

If you've only got a $10k portfolio (for example), you're going to have five hundred bucks' worth of EIMI. It's really not worth the effort and the transaction costs. So: once you get up to a bigger portfolio, then you can put 10% of your "global stocks" allocation toward EIMI.



Glad you enjoyed the book! A’s to your Q’s:

1. The most recent one is on slide 60 of JPMAM’s Guide to the Markets
2. Sure! You can play with the numbers yourself on https://www.portfoliovisualizer.com/ ; note that I don’t argue that a balanced portfolio would have better absolute returns than an all-equity portfolio. The balanced portfolio gives you most of the returns with a lot less volatility.
3. Not off the top of my head. Interactive Brokers does this in its reports, but I don’t know what the state of other brokers’ performance reporting is like.
4. I’ll defer to BBCWatcher on 4, 5, and 6, though I will say direct-purchase term life is the way to go. Get a quote from www.comparefirst.sg, and then buy from there.
5. (actually #7): Oooh, where to start. My usual recommendation for investing is A Random Walk Down Wall Street, by Burton Malkiel. If you like scandal-literature, or the “how not to do it” genre, go for “When Genius Failed”; the implosion of LTCM was twenty years ago now, but it’s still as relevant as ever.

Normally the answer is “USD”, but because you’ve already got the pounds in your account, there’s no sense paying an additional FX spread to convert to USD. Just buy the GBP-listed counters.



Six of one, half a dozen of the other, really. Buying VWRD means you only pay one set of brokerage fees instead of two; but IWDA and EIMI reinvest their dividends, which means you don’t have little bits of cash floating around whenever you have a dividend payment.



Depends on whether you have a lump sum to invest. If you have a lump sum to invest, then buying a lump sum is what you should do. If you’re investing from a paycheck that comes in every two weeks or every month, then dollar-cost-averaging is what you’ll do.



Sure! I personally think for emergency funds (which are separate from your regular investment funds), the best place to put them is in a high-interest bank account. Put the money in there and don’t crack it unless you need it.



Hey, no worries. If I’ve saved a few people a few thousand or tens of thousands of dollars over their investing lifetime, I’ve done my job.



You’ll want both. Stanchart for buying Singaporean stocks (because IBKR won’t let you buy Singaporean stocks if you’re a Singaporean resident), and IBKR for everything else.



Nah. Don’t set your percentages based on whether you think the market is cheap or expensive, because most likely, you’ll be wrong. It’s best to set your percentages based on your time to retirement, and the allocation you’ll need when you retire.

I personally think you’ve got the right idea. Just set your percentages based on the rules you already understand, and make sure you rebalance once a year, because you’re on the glide path toward retirement; so your percentage of bonds should be increasing every year.



Yep, but if you’re investing $100,000 in one hit, you should be buying via Standard Chartered instead. You’ll pay a lot less than 1%.



The fact sheet should say “before fees” or “after fees”. That 10.81% number is after fees.

That said, don’t bank on getting 10.81% per year every year. That 9-year window includes some great years (like 2009 and 2010). A more realistic expectation for equities is 5-7% per year, and for bonds it’s 2-3% per year.




You miiiiigggghhhhttttt be making this just a bit too complicated?



Nah, the easiest thing to do is just to:

1. Sell down some of that stock, I’m guessing you’ve got a lot of weird single names in your portfolio; flog those off and move it into ES3 or IWDA.
2. Once you’ve got an initial lump sum that you’re ready to invest, buy ES3 and IWDA over the course of a few months. Since you already own some STI, you’ll want to purchase more IWDA than ES3, so that your portfolio ends up balanced.
3. You might or might not want to tilt your monthly purchases toward IWDA, as well. Basically set your target percentages of IWDA and ES3 first, and then aim for those.

Oh yeah, totally. If you’re absolutely loaded, to the point where you can live off the bond coupons, then you absolutely would have a higher bond allocation; no sense taking risk if you don’t have to. (Alternatively, if you want to pass your money on or set up a permanent endowment, then you might have a higher equity allocation, because you have a longer investment horizon and can afford to take more risk. It’s all about what your goal are, at that level.)

 

[peipei1]

Hi Shiny, oh sorry i did not meant to write realtime trading but trades executed being displayed realtime on IEX website.
It is engaging to see 100 lots of Apple stocks traded through the night. There is a bet the new iPhone sales will be reported as good, and Apple stock to jump on this.
https://iextrading.com/apps/stocks/AAPL
Nasdaq free realtime website is frankly an embarrassment for such an established exchange by comparison.

Oh i think i have got mixed up with IB terms, i was using IB mobile to enter my order through the wheel, and adaptive (smart) is available through this order wheel, this adaptive order cannot do GTC. I think adaptive order uses smart routing to get our orders through the most iliquid places, even off exchange ATS i hear. IB mobile have been upgraded over the months, last year we could not even do adaptive order with it! We still cannot do FX Conv, i had to use TWS to sell my SGD for USD.

 

[Johnlinn]

Query for Early Retirement

Hi Shiny!

thanks for being so generous for your tremendous contributions to everyone!Really appreciates your kind sharing and assistance!

After settling all insurance and emergency funds, I intend to have a start-up investment of sgd$70,000.

-My investment objective is to reap at least 8% returns and to reach a portfolio of $1,000,000 woth of sgd.
-Current age: 27, Singaporean
-Holding period: about 28 years or till I reach $1,000,000.
-Retire: hopefully 57
-Intend to rebalance once it exceed a general threshold of 5% (overall) or 25% (of its own weightage).
-intend to inject sgd $10,000 per year to rebalance or expand my portfolio.
-intend to increase my bond % in portfolio gradually as I grow older.

Some of my questions:

1) Although VWRD and IWDA are world etf, more than half of it invest in the USA market (1 single market), wouldn't it be high on geographical risk?

2) IWDA vs VWRD: IWDA is accummulating and has a lower expense ratio (0.2%), VWRD has emerging market exposure, 3000+holdings (much more holdings than IWDA), and a lower exposure on USA market. Which one do you think is better and why?

3)Which brokerage firm would be best to invest in given my situation in terms of costs and other factors?

4) Currently the price of both VWRD and IWDA is very high, is it a good time to buy it (although I know that we should not time the market)? should I split up into 2 portions to invest in with a few weeks gap?

5) Would the rebalance objective be effective or any recommendation?

6)Would it be overall more cost effective if we go to money changer to change sgd to usd and then deposit it into our bank account than suffering the poor exchange rate of bank?

portfolio 1:

-20% ABF Pan Asia Bond Index (stock code: 2821)
-25% STI ETF
-10% MSCI World Smallcap UCIT ETF (accummulating)
-10% NikkoAM-StraitsTrading Asia ex Japan REIT ET
-35% VWRD

I think ABF SIngapore ETF is AAA rated which is very secured but nevertheless it is only on Singapore which incur high geographical risk, and it also has very low returns.The purpose of using ABF Pan Asia Bond Index (stock code: 2821) is to diversify geographically as it invests into more than 8 countries (with 380 holdings)and its rating is AA-/A+ which I feel its acceptable with its 4.1% return since inception and 15% this etf are on Singapore. I read up that if I am living in Singapore I should have some holdings in it, just thinking will 40% too high?
I included the iShares MSCI World Small Cap UCITS ETF USD as i thought it would be attractive and relatively safe with over 3000 holdings and with a long horizon of more than 20 over years to hold my portfolio if I were to start, but I don like the fact that it is geographically centric with 57% USA and small companies may tend to go bankrupt much easily when the economy of the particular country is not doing well. I added the Nikkoam Reits etf component as I think it is a separate asset class to mitigate risk ,where I choose the Nikkoam Reits etf in particular instead of world reits etf as I read up and stimulate my thinking that with scarcity of land in Singapore and Hong Kong (highest weightage), it would be doing well but I want to diversify it thus did not choose lion reits etf.

With this portfolio, overall weightage:

Geograhpically:
-34% on Singapore, 26% on US, the rest on other parts of the world.

Sector:
-VWDR+Small Cap+STI ETF: 22.5% on financial sector, 10% on tech (i include telecom in), 10% industrial, 9% on consumer, and the rest% on other sectors,
-20% Bond ETF,
-10% Reit ETF
<7) Am I wrong with my calculation?>

8) portfolio 1: Will this be good? Kindly share with me as I am still a newbie.

9) Portfolio 2: 40% VWRD/IWDA, 40% STI ETF, 20% ABF Pan Asia Bond Index
Or I should go with the Portfolio 2, will it be a better management of risk and return and why? I am just uncomfortable with it heavily weighted in USA and Singapore, also sector wise it is heavily weighted on financial and technology.

10)I have an objective to acquire $1,000,000 or $6000 monthly dividend for early retirement. This strategy above I beleive is capital gain strategy. If you were me when you are 27 years old, what would you do to reach this target in the shortest possible time with a good management of risk and return?

Apologise for asking so many questions Shiny as I really wish to learn and apply when I am young from experienced people like yourself!
I personally have read up many books but still it is only 1-way communication haha I can never clarify my doubts.
Thank you a million and I sincerely hope to hear from you!


Best regards,
John Lim

 

[swordsly]

-VWDR+Small Cap+STI ETF: 22.5% on financial sector, 10% on tech (i include telecom in), 10% industrial, 9% on consumer, and the rest% on other sectors, 20% Bond, 10% Reit <7) Am I wrong with my calculation?)

Why do you use light coloured font on top of light coloured background?
Don't you find it hard to read?

 

[gr8fool]

I understand from reading ST's book that POSB-IS is the most cost-effective way to DCA into G3B but what's the most cost-effective way to put a lump sum into ES3?

 

[BBCWatcher]

....what's the most cost-effective way to put a lump sum into ES3?

At the moment (through end of September, 2018), Standard Chartered since they have a new account promotion. You're charged the standard commission, but then you get a rebate early next year that'll reduce the commission down to 0.05%.

If you prefer a non-custodial broker that'll get your ES3 holding recorded at CDP, then DBS Vickers Cash Upfront looks like the best deal right now at 0.12%. They may have an asymmetric price, though, i.e. higher charge to sell.

Both of these brokers have $10 minimum commissions. Taxes and exchange fees are not included in these base numbers.