*Official* Shiny Things club - Part 2

[Wanderer85]

Hi ST, BBCW et al,

First of all, thank you very much for all your invaluable knowledge and for your kindness on sharing it here. Beers on me next time you are in Singapore!

My situation is the following: 35 years old, I’m originally from an undeveloped country that has been doing very bad in terms of economics so I’m not planning on going back or retire there at all. I’ve been in Singapore for a few years but I know I will not retire here either. Problem is that I have no idea where I will retire. I might be going to another country or two before I decide to settle down.

Having in mind the “local shares/local bonds/global shares” recommendation, how should I play the local part? I currently own some Singapore shares and bonds (ES3, MBH, SSB, SGS bonds) so what should I do going forward? Let’s say that I move to Australia in 12 months, am I supposed to sell my SG investments and re-invest in Australia? And if I move somewhere else afterwards I should do the same again? Why is it so important to invest in the country you are planning on retiring? I’m comfortable having a portion of my portfolio in Singapore, even after moving somewhere else.

Thank you in advance for your help!

 

[BBCWatcher]

I would like to maintain both a passive index portfolio and a dividend income investing one.

Any particular reason(s) for the latter? There’s a higher cost involved simply because it costs money to reinvest. Is that because you need some income right now?

Monthly I have 1k sgd allocated for my passive index portfolio. Based on what you pointed out, I would tweak my IWDA + EIMI to (~70%) and 30% to Bonds and ES3.
Would this be a better course of action? Also is there an ideal ratio between IWDA and EIMI?

I prefer staying substantially global until 7 to 10 years before drawdown age, yes.

So here’s the thing about EIMI at a $1,000/month savings rate. If you try to divide everything every month into little buckets then you typically end up incurring a lot of minimum commission charges. That’s just not worth it. So you’ve got really three solutions to the commissions problem:

1. You could buy VWRD, which is effectively IWDA plus EIMI combined. VWRD is not an accumulating dividend fund (it distributes dividends), and the management fee is slightly higher, but it’s one trade simple.

2. You could skip EIMI entirely for the time being.

3. You could pick your favorite month of the year — December? — and buy $1,000 of EIMI only in that month, then use the other months to buy IWDA, ES3, and SSBs. There are 11 other months, January to November, so you could do something like this:

January: $1,000 IWDA
February: $1,000 ES3
March: $1,000 IWDA
April: $1,000 SSB
May: $1,000 IWDA
June: $1,000 ES3
July: $1,000 IWDA
August: $1,000 SSB
September: $1,000 IWDA
October: $1,000 ES3
November: $1,000 IWDA
December: $1,000 EIMI

Total for the Year: $6,000 IWDA (50%), $3,000 ES3 (25%), $2,000 SSB (16.7%), $1,000 EIMI (8.3%) = $12,000 (100%). And those percentages are rather good, actually. That sort of approach (one buy per month) cuts down on the minimum commissions you pay. OK, yes, it’s a little extra work if you’re trying to use a regular savings plan with its automatic monthly purchases — you’d have to flip those automatic purchases on and off — but it can be done. The IWDA part is every odd month, and then the others take turns in the even months, with December being a special month (EIMI). Not too complicated, really, and I think it pretty well matches what you’re trying to achieve.

 

[BBCWatcher]

My situation is the following: 35 years old, I’m originally from an undeveloped country that has been doing very bad in terms of economics so I’m not planning on going back or retire there at all. I’ve been in Singapore for a few years but I know I will not retire here either. Problem is that I have no idea where I will retire. I might be going to another country or two before I decide to settle down.

Financials aside, if you can nail down a firm right of abode somewhere you might like to retire, that’s helpful.

Having in mind the “local shares/local bonds/global shares” recommendation, how should I play the local part? I currently own some Singapore shares and bonds (ES3, MBH, SSB, SGS bonds) so what should I do going forward? Let’s say that I move to Australia in 12 months, am I supposed to sell my SG investments and re-invest in Australia? And if I move somewhere else afterwards I should do the same again? Why is it so important to invest in the country you are planning on retiring? I’m comfortable having a portion of my portfolio in Singapore, even after moving somewhere else.

Retirement savings are going to be spent in retirement, and they’re going to be spent in that retirement country’s currency. So as you approach retirement — about 7 years before retirement, I suggest — that’s when you’d start making portfolio adjustments, slowly and steadily, to converge on a drawdown-oriented portfolio suitable for your retirement country/currency.

In the meantime, since you don’t know where you’re going to retire, all you’d really do is this:

1. For short duration emergencies, maintain emergency reserve funds in your residential country’s currency, assuming it’s a high quality currency. In Singapore SSBs work especially well in that role. So if you don’t have a firm right of abode in Singapore, I would suggest keeping a couple or a few months of emergency reserve in SSBs, plus your ordinary bank account at a reasonable level for day-to-day spending.

2. For near to medium term spending in that country, go ahead and save in sensible ways. Examples would include a security deposit on an apartment (if you move), a big ticket item such as home appliances or a car, maybe an entrance fee for a child to attend school — that sort of thing. For those “lumpy” spending needs you can save in....SSBs. SSBs work well for that, too, in Singapore. Other countries often have comparable choices.

3. For your long-term retirement savings, just stay global — a mix of global stocks (IWDA+EIMI, or VWRD) and a dash of global bonds (e.g. CORP). Yes, OK, if your country of (temporary) residence offers a tax break if you save/invest in a certain way, that can make sense. In Singapore that’s the Supplementary Retirement Scheme (SRS), and sometimes that makes sense — and, with a little creativity (not much), it’s possible to invest SRS funds in a reasonably globally diversified way. There’s no particular need to overweight your country of residence and its stocks.

Sometimes there’s a chance you’ll end up staying. In your Australian example, maybe you fall in love with that country and vice versa (the Australian government doesn’t mind keeping you around for the rest of your life). But you don’t know that for sure; you just know there’s a possibility of that happening, of your immigration status becoming permanent. In that case you can “dabble” in Australian stocks, and probably (in that case) you’d do that through superannuation savings if available to you. You’d still stay very global — this only a possibility, not a probability — but you could be a little overweighted in Australian stocks.

Make sense?

 

[swordsly]

Any particular reason(s) for the latter? There’s a higher cost involved simply because it costs money to reinvest. Is that because you need some income right now?

I reckon most people (including myself) prefer
1) to lock-in some profits --> helps ease some mental stress as well?,
2) have more control over what to use it for

 

[BBCWatcher]

I reckon most people (including myself) prefer
1) to lock-in some profits --> helps ease some mental stress as well?,
2) have more control over what to use it for

I suppose there’s that psychology, but please note that dividend distributions are often taxed — at source at 17% for most Singapore stocks — and I’d prefer at least a deferral of tax.

Amazon is a terrific, recent example of the power of retained earnings and investment in the business. For literally decades Wall Street investors (some) have been upset with CEO Jeff Bezos (now the world’s wealthiest individual) because Amazon seemingly never turned a profit and never paid dividends, for a long time anyway. And now we all know how that worked out: REALLY well! Amazon is now the world’s second most valuable publicly traded company, second only to Apple. If you’re paying dividends, especially high dividends, then you’re not investing those dollars in growing the business. And maybe that means there just aren’t any good investments to be made, but that’s a bit sad, isn’t it?

 

[Ch3tah_39]

OK, so for ~30 year money you'd typically invest it in something like an 80:20 stocks:bonds split and with some global stocks. (Let's set aside the question of what that global percentage should be for a moment.) Is that what you're doing?

Hi BBCWatcher, thanks for your reply. Yes,currently is investing in G3B(monthly), A35(monthly) and
IWDA and SSB not on regular basis.

But currently is almost 50:50 stocks:bonds split if considering SSB.

 

[CupcakedCrusader]

Any particular reason(s) for the latter? There’s a higher cost involved simply because it costs money to reinvest. Is that because you need some income right now?


I prefer staying substantially global until 7 to 10 years before drawdown age, yes.

So here’s the thing about EIMI at a $1,000/month savings rate. If you try to divide everything every month into little buckets then you typically end up incurring a lot of minimum commission charges. That’s just not worth it. So you’ve got really three solutions to the commissions problem:

1. You could buy VWRD, which is effectively IWDA plus EIMI combined. VWRD is not an accumulating dividend fund (it distributes dividends), and the management fee is slightly higher, but it’s one trade simple.

2. You could skip EIMI entirely for the time being.

3. You could pick your favorite month of the year — December? — and buy $1,000 of EIMI only in that month, then use the other months to buy IWDA, ES3, and SSBs. There are 11 other months, January to November, so you could do something like this:

January: $1,000 IWDA
February: $1,000 ES3
March: $1,000 IWDA
April: $1,000 SSB
May: $1,000 IWDA
June: $1,000 ES3
July: $1,000 IWDA
August: $1,000 SSB
September: $1,000 IWDA
October: $1,000 ES3
November: $1,000 IWDA
December: $1,000 EIMI

Total for the Year: $6,000 IWDA (50%), $3,000 ES3 (25%), $2,000 SSB (16.7%), $1,000 EIMI (8.3%) = $12,000 (100%). And those percentages are rather good, actually. That sort of approach (one buy per month) cuts down on the minimum commissions you pay. OK, yes, it’s a little extra work if you’re trying to use a regular savings plan with its automatic monthly purchases — you’d have to flip those automatic purchases on and off — but it can be done. The IWDA part is every odd month, and then the others take turns in the even months, with December being a special month (EIMI). Not too complicated, really, and I think it pretty well matches what you’re trying to achieve.

I see the perks of income investing because it gives a steady stream of income and it allows me to FIRE once the income exceeds my expenses. However I am not perfectly in picking individual stocks that why I have a passive portfolio too.

Seems like a good suggestion for me to buy different asset from Jan - Dec. If I were to follow this method, I wouldn't need to care of the portfolio allocation and rebalancing?

 

[Shiny Things]

Hey guys could help me out a little here. 23 YO here, with a portfolio as shown:

[snip]

So for this month I would add to IWDA? Even though IWDA is higher than my average price, I would still buy more IWDA?

Yep, that's how it works. Your average price doesn't matter. (I started buying US equities in mid '08, just before everything really imploded, but after ten years my average price would be something like $170 in SPY terms. If average price mattered, I'd never be allowed to buy anything ever again.)

I see the perks of income investing because it gives a steady stream of income and it allows me to FIRE once the income exceeds my expenses. However I am not perfectly in picking individual stocks that why I have a passive portfolio too.

My problem with a dividend strategy for you is that you're 23! You don't need income until you actually join Team Ripcord, and income-producing investments (like bonds or dividend stocks, as BBCW pointed out) tend to have lower total returns than other investments - so by investing for dividends at your young age, you're actually going to delay your retirement. (Also: having dividends means you have the temptation to spend those dividends. Not great.)

A better way to do it would just be to follow a passive index strategy with your entire portfolio for now. Once you get within about five years of being able to retire, then you can shift into a more bond-heavy, income-focused portfolio.

As a side note, am I the only person who thinks "FORE" would be a better acronym than "FIRE"? "F*ck Off & Retire Early" has a nice ring to it, aside from also being "what you shout when you're on the golf course because you've retired early".

1.In my case which brokerage firm should i use for global and local stocks to be most cost effective?

2.Should i change account after I reach certain amount to further reduce cost?
Thank you so much!

Cheers,
John

You should probably go straight to IBKR for global stocks and Stanchart for local stocks. Your account balance is going to grow fast enough that you'll be above the $100k line in IBKR before too long.

Hi ST, BBCW et al,

First of all, thank you very much for all your invaluable knowledge and for your kindness on sharing it here. Beers on me next time you are in Singapore!

Mine's an Asahi, cheers.

My situation is the following: 35 years old, I’m originally from an undeveloped country that has been doing very bad in terms of economics

That's not a very nice way to describe New Zealand! (I'm joking, I'm joking )

so I’m not planning on going back or retire there at all. I’ve been in Singapore for a few years but I know I will not retire here either. Problem is that I have no idea where I will retire. I might be going to another country or two before I decide to settle down.

Having in mind the “local shares/local bonds/global shares” recommendation, how should I play the local part?

Don't.

If you're a global nomad, and you're not settling anywhere yet: just put the lot in international stocks (IWDA) and international bonds (CORP).

 

[peipei1]

How about posb invest saver for local stocks? Thus far, it has been commission free with the paylah apps rebates. There is no redemption fee too, and you can ask to transfer the units to your cdp account, does scb allows that?

 

[celeron787]

How about posb invest saver for local stocks? Thus far, it has been commission free with the paylah apps rebates. There is no redemption fee too, and you can ask to transfer the units to your cdp account, does scb allows that?

How to get the rebate on paylah if I'm an existing POSB IS and paylah user?

 

[unhinged_loon]

As a side note, am I the only person who thinks "FORE" would be a better acronym than "FIRE"? "F*ck Off & Retire Early" has a nice ring to it, aside from also being "what you shout when you're on the golf course because you've retired early".

Some like to keep it family friendly.

Mine's an Asahi, cheers.

You like dry stuff?

That's not a very nice way to describe New Zealand! (I'm joking, I'm joking )

Look, there are only hobbits and wizards there! Those wizards don't shoot lazers!

 

[Wanderer85]

Retirement savings are going to be spent in retirement, and they’re going to be spent in that retirement country’s currency. So as you approach retirement — about 7 years before retirement, I suggest — that’s when you’d start making portfolio adjustments, slowly and steadily, to converge on a drawdown-oriented portfolio suitable for your retirement country/currency.

In the meantime, since you don’t know where you’re going to retire, all you’d really do is this:

1. For short duration emergencies, maintain emergency reserve funds in your residential country’s currency, assuming it’s a high quality currency. In Singapore SSBs work especially well in that role. So if you don’t have a firm right of abode in Singapore, I would suggest keeping a couple or a few months of emergency reserve in SSBs, plus your ordinary bank account at a reasonable level for day-to-day spending.

2. For near to medium term spending in that country, go ahead and save in sensible ways. Examples would include a security deposit on an apartment (if you move), a big ticket item such as home appliances or a car, maybe an entrance fee for a child to attend school — that sort of thing. For those “lumpy” spending needs you can save in....SSBs. SSBs work well for that, too, in Singapore. Other countries often have comparable choices.

3. For your long-term retirement savings, just stay global — a mix of global stocks (IWDA+EIMI, or VWRD) and a dash of global bonds (e.g. CORP). Yes, OK, if your country of (temporary) residence offers a tax break if you save/invest in a certain way, that can make sense. In Singapore that’s the Supplementary Retirement Scheme (SRS), and sometimes that makes sense — and, with a little creativity (not much), it’s possible to invest SRS funds in a reasonably globally diversified way. There’s no particular need to overweight your country of residence and its stocks.

Sometimes there’s a chance you’ll end up staying. In your Australian example, maybe you fall in love with that country and vice versa (the Australian government doesn’t mind keeping you around for the rest of your life). But you don’t know that for sure; you just know there’s a possibility of that happening, of your immigration status becoming permanent. In that case you can “dabble” in Australian stocks, and probably (in that case) you’d do that through superannuation savings if available to you. You’d still stay very global — this only a possibility, not a probability — but you could be a little overweighted in Australian stocks.

Make sense?

Thanks BBCW, really appreciate your comments. One follow up question: considering that I already own some Singapore shares and bonds (ES3, MBH, SSB, SGS bonds), would you be against the idea of keep building this portfolio until I leave the country and then simply leave it here in Singapore to grow? I honestly like the idea of some direct Singapore exposure and it could be good diversification considering that I will subsequently invest in an index ETF from the next country I move to, but you are the expert....

Mine's an Asahi, cheers.

Invite is still on. A few cold Asahi's are waiting for you....

That's not a very nice way to describe New Zealand! (I'm joking, I'm joking )

Haha, wrong hemisphere my friend

Don't.

If you're a global nomad, and you're not settling anywhere yet: just put the lot in international stocks (IWDA) and international bonds (CORP).

Thanks. What are your views regarding my question above to BBCW? Do you think it is a good idea? I like it...

Also, if I invest only in IWDA and CORP, wouldn't it be too much concentration in only two investments? I do understand that they are well diversified themselves but it'd seem that all my eggs are in only two baskets...

 

[BBCWatcher]

One follow up question: considering that I already own some Singapore shares and bonds (ES3, MBH, SSB, SGS bonds), would you be against the idea of keep building this portfolio until I leave the country and then simply leave it here in Singapore to grow? I honestly like the idea of some direct Singapore exposure and it could be good diversification considering that I will subsequently invest in an index ETF from the next country I move to, but you are the expert....

I don't think it's a great idea unless there's some reasonable prospect you'll retire in Singapore.

Imagine instead of heavily investing for retirement in ES3/MBH/SSB/SGSes you, instead, invested in the equivalent (stocks and bonds) in Slovakia (another country beginning with the letter S, with almost exactly the same population as Singapore), in euro. So you're now holding a large basket of Slovakian stocks and Slovakian bonds, asking whether that was a good idea and whether you should hang onto them until retirement.

But would that make any sense for your retirement savings, to pour so much savings specifically into Slovakian stocks and bonds, to the exclusion of the other ~98% of the investable world? Well, it'd make just as much sense as your concentrated Singapore-based portfolio, possibly even more sense if there's a chance you would retire in the Eurozone, or in a country with a currency that's highly correlated to the euro. But can you now see how silly that is? It's really quite silly. I assume you're not going to retire in Slovakia either, so why are you even bothering with a single non-retirement country's stocks and bonds for your future retirement? It's just not a great idea.

I agree with Shiny Things. If you don't know where you're going to retire -- except that it won't be Singapore -- then just keep your retirement savings/investments neutrally globally diversified, which is quite easy to do. Funds such as IWDA or VWRD, and CORP, get that job done perfectly easily. You simply don't overweight Singapore stocks and Singapore dollar bonds for your retirement savings. (For other, near-term savings purposes, sure, maybe then Singapore dollar-oriented assets make sense, such as SSBs.)

Investing is for the future, your future. It's not like leaving acorns and breadcrumbs in the few countries where you happen to live before retirement.

Now, there is a possible exception that might cause you to bend this retirement diversification "rule" a little: Singapore's Supplementary Retirement Scheme (SRS). SRS is designed for retirement savings, at least primarily. And there can be a decent income tax break if you open and contribute to a SRS account. However, it's somewhat more difficult to invest SRS dollars into globally well diversified assets. I've discussed one new way you can, with reasonably (for Singapore) low costs in some other threads.

This is not advice to go sell all your Singapore-based holdings tomorrow, in one big transaction. No, you'll want to make this adjustment gradually, especially if it's a relatively large (or larger) percentage of your current wealth. It's the same thing you'd do to rebalance when you're overweighted in anything else -- just "gentle nudges" that'll push into a more appropriate portfolio allocation for your future retirement needs over, say, the next 12 months or so.

 

[Wanderer85]

But would that make any sense for your retirement savings, to pour so much savings specifically into Slovakian stocks and bonds, to the exclusion of the other ~98% of the investable world? Well, it'd make just as much sense as your concentrated Singapore-based portfolio, possibly even more sense if there's a chance you would retire in the Eurozone, or in a country with a currency that's highly correlated to the euro. But can you now see how silly that is? It's really quite silly. I assume you're not going to retire in Slovakia either, so why are you even bothering with a single non-retirement country's stocks and bonds for your future retirement? It's just not a great idea.

Thanks BBCW for taking the time to respond to my "silly" idea. I guess my thought process was that Singapore seems to have a stable economy so some direct exposure would be fine but I do see your point. Thanks again.

 

[BBCWatcher]

I guess my thought process was that Singapore seems to have a stable economy so some direct exposure would be fine but I do see your point. Thanks again.

It does, and that's (in part) why you're working in Singapore. That's also why IWDA, VWRD, and CORP all include some measure of Singapore stocks and bonds, based on the financial market value of Singapore's securities. You're not getting zero in those vehicles.

But there's absolutely nothing more or less special than Singapore compared to, say, Slovakia for you, for your retirement.

 

[Shiny Things]

How about posb invest saver for local stocks? Thus far, it has been commission free with the paylah apps rebates. There is no redemption fee too, and you can ask to transfer the units to your cdp account, does scb allows that?

I already recommend POSB Invest Saver for smaller buyers. It's a great way to buy an STI ETF and a nice sensible bond ETF, because there's no minimum transaction fee.

 

[hengah_ongah]

Hi, i would like to understand the etf further and appreciate it if you could advise me further.

ETF XYZ weightage, stock A 90% and stock B 10%. (A price is $5, B price is $2) units are created per $100.

Day 1-
Stock A has $90 (18shares)
Stock B has $10 (5 shares)

Day 10 - stock A price increase to $10 and stock B decrease to $1.

Stock A has $90 (9 shares)
Total $180 (27 shares)

Stock B has $10 (10 shares)
Total $20 (15 shares)

Day 20 - ETF review. stock C replaced stock B with same weightage 10%

Stock A continue with its 90% purchase.

Assuming price for stock B remains $1. And sold off all ( $15 of 15 shares) .. What happen to the $5 loss occured?

 

[Shiny Things]

Hi, i would like to understand the etf further and appreciate it if you could advise me further.

ETF XYZ weightage, stock A 90% and stock B 10%. (A price is $5, B price is $2) units are created per $100.

Day 1-
Stock A has $90 (18shares)
Stock B has $10 (5 shares)

Day 10 - stock A price increase to $10 and stock B decrease to $1.

Stock A has $90 (9 shares)
Total $180 (27 shares)

Stock B has $10 (10 shares)
Total $20 (15 shares)

Day 20 - ETF review. stock C replaced stock B with same weightage 10%

Stock A continue with its 90% purchase.

Assuming price for stock B remains $1. And sold off all ( $15 of 15 shares) .. What happen to the $5 loss occured?

I'm a little confused here. The ETF doesn't buy and sell shares in the middle of its life, except when there's an index rebalancing or a dividend. Let's step through this again.

Day 1:
The ETF owns 18 shares of A @$5, and 5 shares of B @ 2. That's $100 of NAV.

Day 10:
The ETF owns 18 shares of A @ $10, and 5 shares of B @ 1. That's $185 of NAV.

Day 20:
Prices don't change. The ETF replaces B with C. The ETF sells its 5 shares of B @ 1, for a total of $5, and buys $5 worth of C. A's weight in the ETF doesn't change. There's still $185 of NAV.

 

[CupcakedCrusader]

Pardon my noobnest but I still have a few burning questions.
1. Let's say if I retire at 40. How does this passive investing portfolio ensure that I will not run out of money. Assuming my drawdown rate is 4%.

2. I'm turning 24 this year and have an aim to semi retire in my late 30s. With ~15 years to run would it be achievable (current savings rate 55%)

 

[hengah_ongah]

Oh.. I think i got the idea on the NAV but just want to clarify on one part regarding the weightage of the components in the index.

Shares A is 90%, shares B is 10% in the index.

$5 worth of B is no longer day 1 of the 10% weightage of the index. So when the $5 are used to buy C, does it have to use more funds($5 + X amount) to meet the index weightage for C at 10%?