*Official* Shiny Things club - Part 2

[Shiny Things]

http://richbyretirementbook.com
Not sure if the link still works
Maybe wait for his reply

Yep, that's the best link to use.

And I think you’ve missed IB’s greater opportunities for security lending, if you’re interested in doing that.

One parenthetical note on that: IB’s sec-lending programs only work for US-listed stocks, so people buying IWDA or other UK-listed ETFs won’t see any difference there.

Hi guys, just did a DCA calculations for STI over a period of 9 years, realize that the total percentage year on year increment was only around 2.5%. I am not sure if my calculations are correct. Anybody can advise?

I think you’ve left out dividends, which run about 3% per year. But yes, the STI hasn’t performed as well as, say, the S&P 500 over the last few years. Doesn’t mean that will continue, though.

1. Saxo Capital Market (less fee per trade, custody fee, can get referral promo to offset the fees)

2. Standard Chartered (no custody fee, higher fee per trade)

1. Use Stanchart. You’re investing for decades; promotions will run out after a few months.
2. You shouldn’t be buying US-listed stocks; the dividends get taxed at a relatively high rate. Buying ETFs listed in the UK lets you minimize the tax hit.

A few questions regarding purchase of overseas stocks (namely US stocks) and could also be applied to SG stocks:

1. How do i identify which are growth or dividend stocks?

2. Other than purchasing Ireland domiciled ETF (e.g IWDA), how else can one avoid the withholding tax?

1. Why are you picking stocks in the first place; do you think you have some sort of advantage over professional traders? Anyway, the idea is that growth stocks are stocks that are growing quickly, whatever your definition of “growing quickly” might be; and dividend stocks are stocks that pay a high dividend, whatever your definition of “high dividend” might be. These are not firm definitions.
2. That’s it, basically. There are no secret ways to dodge dividend withholding tax; the relevant authorities tend to clamp down on that sort of tax dodging pretty quickly.

So .. a bit early to jump the gun. What do you guys think for all the IWDA CSPX or whatever ETFs. Sell before the crash? Then again who knows when is the crash starting. LOL

Thing one: a recession doesn’t imply a crash. It doesn’t even imply that stocks will go down.
Thing two: this article talks about the USA. IWDA owns stocks from a bunch of other countries. This is why you buy IWDA instead of going all-in on the USA!
Thing three: you and I and everybody else on here have no idea when the US economy will slow, but from where I sit it doesn’t seem to be slowing right now.

Don’t try to time the market. You’ll get it wrong, you’ll kick yourself, and you’ll end up buying back above where you sold.

For equities etf should buy iwda through LSE? Thanks

For global equities, yes.

Thanks BBCW! So in other words I can buy US govt bonds from US exchanges without worry of any taxes other than estate taxes?

Yes, though you’re probably better off buying UK-listed bond ETFs like CORP or LQDA, not least because you can do all that through Stanchart or Interactive.

Sorry for asking so many questions.

1. For SCB investing IDWA there's 0.25% comm 10USD min.
If i'm investing SGD$500/month, to pay less for the comm i need to invest ~5000usd
each time.
Will it be best that i invest every quarter (SGD1.5k) and pay the min comm?

2. In the future if i can invest 1000SGD/month which ST suggest to use IBKR.
How should i make the transition to IBKR?
Sell off my shares in SCB or i'm i able to transfer?

1. Yes. You shouldn’t be buying all three listings every month; each month, just buy one ETF (whichever one you’re short of.
2. You can transfer your holdings from Stanchart to IWDA. It’s easier to do that than to be out of the market for a couple weeks while the money moves from point A to point B.

Thanks for the explanation. Oh, im jus wondering if etf is able to withstand the test of time, given that many etfs are created after GFC. Like e extreme cases of ppl rushing to exit in smaller size fund of etf (e.g. like reits etf listed on sgx compared to those giant ishares/vanguard etfs)

Yeah, this is not a thing you need to worry about. ETFs have been around since 1993. And a “rush for the exits” in a smaller ETF would have less impact—because the ETF is smaller!

The below are the allocation of my portfolio.

I am intending to achieve 80-20 rule. However, due to the fact that i have purchase ssb first, the allocation is far from attaining the rule.

I am trying to add more stocks as investment instead of ssb

Stocks (56%)

Should i have stocks of other currency or should i hold more of any of the 2 above?

I’m not sure what you mean by “holding stocks of a particular currency”. Do you mean “overseas stocks”? If so, yes, you should sell some of your Singapore-listed stocks and buy global stocks (just buy the IWDA ETF).

Kindly advise if i should hold on to the cash or convert them to stocks or ssb?

Depends - is that cash for your emergency fund or your investment fund for retirement? You shouldn’t mix the two.

If it’s for your emergency fund, leave it in a high-interest savings account. If it’s for your retirement, buy MBH and count that as part of your bond allocation.

I am not too sure isit still cheaper or do you think I should start off with other brokerage firm which will be at a lower cost?

Use Stanchart. The FX costs will be a bit higher (about an extra $200 in FX conversion costs), but it’ll end up cheaper because you won’t be paying the minimum monthly brokerage.

1. Should I do it in 1 shot? (500,000 worth of IWDA instantly?)
2. Should I split it up into X no of tranches of equal size over Y no of years?
3. Should I split my tranches based on the market price right now? (If high buy less, if low buy more?)

4. If I were to split up into tranches (dollar cost averaging), what should I do with the idle cash meanwhile to keep the cash working for me?
5. Should I hold my cash in USD or SGD?

My $500,000 investment horizon is for life. Should be able to ride out most volatility. But I expect a good buy-in price too, as a hedge against shock.

Option 2. Split it into a few tranches over a few months (not a few years; that’s too long).

Option 1 is technically the best option (because markets tend to go up over the long term, so you’d rather be invested than have any cash sitting around). But if you drop the whole lump in, and the markets go down the next day, you’re going to feel pretty bad! Not unjustifiably, either; but the absolute worst thing you could do is invest, see the market go down a bit or up a bit, and then pull all your money out because you’re terrified of being invested.

Investing over a few months lets you get used to having money in the market, and you win both ways, psychologically. If the market goes up, you can say “great, I bought some and it went up! Time to buy some more!”; if the market goes down, you can say “great, now I can buy some at a lower price, I get more stars for my money!”. Both of those are totally fine, and they’re much better than saying “oh no I want to sell everything and hide under the bed”.

To your other points:
Point 4: leave it in the bank. Don’t try to be a clever-clogs with your cash management; that’s my job
Point 5: Whatever currency it’s in right now, just leave it there and convert it when you need it.

 

[MrHighlander]

Return is on a ‘total return’ basis - you should count in the dividend yield too. With that it’s higher than 2.5%

Hi guys, just did a DCA calculations for STI over a period of 9 years, realize that the total percentage year on year increment was only around 2.5%. I am not sure if my calculations are correct. Anybody can advise? If my calculations are right, then STI's ROI is actually quite pathetic...

Date Close Volume of stock purchased using $1500 (close)
31/1/2009 1.62 1,052
28/2/2009 1.71 997
31/3/2009 1.9 897
30/4/2009 2.35 725
31/5/2009 2.34 728
30/6/2009 2.67 638
31/7/2009 2.66 641
31/8/2009 2.67 638
30/9/2009 2.68 636
31/10/2009 2.77 615
30/11/2009 2.91 586
31/12/2009 2.77 615
.
.
.
.
.
31/5/2017 3.34 467
30/6/2017 3.42 456
31/7/2017 3.41 454
31/8/2017 3.35 462
30/9/2017 3.51 441
31/10/2017 3.56 435
30/11/2017 3.54 437
31/12/2017 3.61 429
31/1/2018 3.6 423
28/2/2018 3.51 434
31/3/2018 3.74 407
30/4/2018 3.58 425
31/5/2018 3.4 448
30/6/2018 3.42 445
31/7/2018 3.33 450
31/8/2018 3.38 444
30/9/2018 3.38 444
Total volume of stock purchased over 9 year period: 63,372
Total payout: $214,199
Invested amount: $175,500
% year on year: 2.5%

 

[chainer22]

Shiny Things' does not advocate stock picking. Instead you should stick to diversified ETFs and not worry about a stock is growth or dividend.

i understand this point. however, is it correct to say there's "growth" and "dividend" ETFs?

with regards to the information shared by BBCWatcher bro above, other than IWDA, what other overseas ETFs are there suitable for Singaporean investors?

You don't avoid U.S. tax on the dividends that U.S. stocks distribute when you buy an Irish domiciled fund that holds U.S. stocks. You don't avoid other countries' dividend taxes either. Blackrock, IWDA's fund manager, pays those countries their dividend taxes. The U.S. dividend tax rate is 15% for Irish funds, and that tax is paid. Then the fund manager either distributes dividends (VWRD for example) or reinvests them (IWDA). But there is still dividend tax, at a lower rate thanks to the U.S.-Ireland tax treaty.

As it happens, there's no additional dividend tax owed if you're a resident of Singapore and hold investments in your personal capacity, and as long as your country of citizenship or permanent residence doesn't tax you.

OK, now, answering your question, you can avoid all U.S. dividend taxes under these circumstances (examples):

* You invest in a U.S. domiciled stock fund (which will probably be lower cost than IWDA) via a qualified contribution to a Roth 401(k), and you make only qualified withdrawals from that U.S. tax advantaged account;

* You invest in a U.S. domiciled stock fund via a qualified contribution to a Roth IRA, and you make only qualified withdrawals from that U.S. tax advantaged account;

* You invest in a U.S. domiciled stock fund via a 529 education savings plan, and your 529 beneficiary makes only qualified withdrawals from that U.S. tax advantaged account;

* You invest in a U.S. domiciled stock fund in an ordinary account, and you have an unspent foreign tax credit for passive category income that you can apply to offset the tax on the dividends;

* Your total taxable income is low enough such that your dividend income falls within the 0% tax bracket.

All of the above examples apply to U.S. persons and only rarely and exceptionally apply to non-U.S. persons. "Become an American" in some fashion, basically.

Of course, it's possible to avoid dividend tax if you're never paid dividends. One way to do that is via the stock futures and options markets. Those markets allow you to bet in various ways on the movement(s) of popular stocks. But you're not holding the stocks themselves, so you're not receiving any dividends. Another way is to invest in zero dividend stocks, a.k.a. "growth stocks." Some companies issue preferred voting shares that pay no dividends, so that's another way. And there are some individual stocks that obviously could pay dividends but don't. Berkshire Hathaway is perhaps the most famous example, although last year Warren Buffett suggested he might reconsider his multi-decade avoidance of dividends.

Thanks BBCWatcher bro! very informative. gonna bookmark this.

Seems like the best option for most of us is to go for Irish domiciled funds or "growth" stocks.

Regarding the investment in "growth" stocks, how do i identify them? am i right to say that it depends on the company from year to year?

 

[Shiny Things]

i understand this point. however, is it correct to say there's "growth" and "dividend" ETFs?

There are, but I really don't think you understand what you're trying to do.

A growth tilt is inherently an aggressive strategy; you think that things that have gone up will continue to go up.

A dividend tilt is inherently a defensive strategy; you care about cash more than growth.

Putting both of those in your portfolio is counterproductive. You might as well just buy one whole-market ETF like IWDA and go to the pub.

 

[chainer22]

1. Why are you picking stocks in the first place; do you think you have some sort of advantage over professional traders? Anyway, the idea is that growth stocks are stocks that are growing quickly, whatever your definition of “growing quickly” might be; and dividend stocks are stocks that pay a high dividend, whatever your definition of “high dividend” might be. These are not firm definitions.
2. That’s it, basically. There are no secret ways to dodge dividend withholding tax; the relevant authorities tend to clamp down on that sort of tax dodging pretty quickly.

Thanks for the info Shiny Things bro.

The reason i am asking is, i read a few other investment blogs (financialhorse, investmentmoat) and noticed that their portfolios are pretty diverse in terms of overseas ETFs and individual stocks (e.g VGSIX:US, VOO, VGK:US, VPL:US + FB, GOOG, AAPL, AMZN, BABA etc).

One of the reasons stated was to invest in "dividend" stocks locally and to invest in overseas "growth" stocks.

is there any significant benefit for such a portfolio?

 

[makav31i]

Off-topic, but does anyone actually get the rebates into their Paylah account? If yes, can GPGT?

I've been buying G3B/A35 since May and still have yet to get a single cent into my Paylah account.

Last I called POSB, they said the rebates will be credited into my Paylah account by end Sep, but until now still nothing.

I received on Aug 24 around 5am with the description, "PayLah Cashback for Online RSP 2017"...I can GPGT if you want, but not now as it is almost 1am and I need to blank out the amount and transaction reference number...If I'm getting my 2017 rebates now, what do you think about my purchase this year...

 

[Johnlinn]

Withholding Tax

DOes anyone has a firm answer on do we still incur the 15% withholding tax on the auto-reinvest dividends for IWDA?

 

[Shiny Things]

DOes anyone has a firm answer on do we still incur the 15% withholding tax on the auto-reinvest dividends for IWDA?

Yes. The dividends get paid to the fund, with tax already taken out; then, the fund reinvests them.

 

[Shiny Things]

Thanks for the info Shiny Things bro.

One of the reasons stated was to invest in "dividend" stocks locally and to invest in overseas "growth" stocks.

is there any significant benefit for such a portfolio?

No, that's nonsensical. There's no reason to do that.

Also, you should be a little bit suspicious of anyone who recommends US-listed ETFs to Singaporean investors. As a Singaporean investor, if you buy a dividend-paying US stock or US-listed ETF, you'll get 30% of those dividends taken away in withholding tax. In nearly every case, there's a UK-listed equivalent that gives you the same exposure, but takes advantage of a loophole that reduces the tax (spoiler: if the ETF is domiciled in Ireland, it pays 15% tax on dividends instead of 30%).

Edit: On reflection, I think I sort of get the idea. The idea is that if you're going to own dividend stocks, you should buy local dividend stocks; and if you're going to buy growth stocks, you can buy those anywhere. That's really badly phrased, though, and it still doesn't make sense. Dividend stocks anywhere outside the US still get reasonably favourable treatment. And dividend-vs-growth is not a meaningful bifurcation; the usual bifurcation is value stocks vs growth stocks. Value stocks aren't necessarily dividend stocks, and stocks that pay a big div aren't necessarily good value.

 

[vince123123]

Has anyone analysed the upcoming Philip-Sing Income ETF (OVQ) and compared to ES3 to see if it could also be a contender?

https://nextinsight.net/story-archi...llip-sing-income-etf-side-steps-dividend-trap

https://www.fool.sg/2018/10/02/the-...f-a-new-option-for-income-hungry-singapore-in

 

[Hellos!]

I’m not sure what you mean by “holding stocks of a particular currency”. Do you mean “overseas stocks”? If so, yes, you should sell some of your Singapore-listed stocks and buy global stocks (just buy the IWDA ETF).


Depends - is that cash for your emergency fund or your investment fund for retirement? You shouldn’t mix the two.

If it’s for your emergency fund, leave it in a high-interest savings account. If it’s for your retirement, buy MBH and count that as part of your bond allocation.

Firstly, thank you for your reply.

Secondly, i would like to apologies if the following question has already been asked or mentioned in the earlier page.

1) You have advised me to sell some of my SG stock and buy global stock.

May I know what is the "ideal" allocation for the stocks?

2) I am confuse between the 2.

Right now, I have been trying to set aside a portion of my salary for savings and another portion for investment.

I have read it somewhere that one should have an estimated 6month equivalent of expense as emergency fund.

If that is the case, does anything above 6 month count as emergency or can they be used as retirement fund?

I was planning to use it as a retirement fund.

Does it seem too little for an emergency fund or is my concept not advisable and ideal?

3) What is MBH?

 

[BBCWatcher]

Has anyone analysed the upcoming Philip-Sing Income ETF (OVQ) and compared to ES3 to see if it could also be a contender?

Yes, we’ve already had a discussion about this ETF in another thread. You can safely ignore it. OVQ holds a slightly different collection of 30 SGX listed stocks, there’s no particular reason to forecast why that 30 is any better or worse than ES3/G3B’s 30, and OVQ charges a materially higher management fee for the privilege. Pass!

 

[chainer22]

No, that's nonsensical. There's no reason to do that.

Also, you should be a little bit suspicious of anyone who recommends US-listed ETFs to Singaporean investors. As a Singaporean investor, if you buy a dividend-paying US stock or US-listed ETF, you'll get 30% of those dividends taken away in withholding tax. In nearly every case, there's a UK-listed equivalent that gives you the same exposure, but takes advantage of a loophole that reduces the tax (spoiler: if the ETF is domiciled in Ireland, it pays 15% tax on dividends instead of 30%).

Edit: On reflection, I think I sort of get the idea. The idea is that if you're going to own dividend stocks, you should buy local dividend stocks; and if you're going to buy growth stocks, you can buy those anywhere. That's really badly phrased, though, and it still doesn't make sense. Dividend stocks anywhere outside the US still get reasonably favourable treatment. And dividend-vs-growth is not a meaningful bifurcation; the usual bifurcation is value stocks vs growth stocks. Value stocks aren't necessarily dividend stocks, and stocks that pay a big div aren't necessarily good value.

Thanks again for the clarification

it puzzles me as to why Singaporeans invest in those overseas/US-listed ETFs with that 30% withholding tax.

is there any recommended source for identifying the UK-listed equivalent of US-listed ETFs?

also, what's your thoughts on robo-advisors?

 

[kingboonz]

Hi Shiny Things, thanks for the reply. Was looking forward to that reply.

Is it a good idea in general to lend securities? Say on interactive brokers, lending my IWDA. What are the risks involved for that extra interest (which is quite very tasty btw)

 

[BBCWatcher]

Is it a good idea in general to lend securities? Say on interactive brokers, lending my IWDA. What are the risks involved for that extra interest (which is quite very tasty btw)

As Shiny Things mentioned, IB's securities lending program is only for U.S. listed/traded securities. It does not include IWDA or any other non-U.S. securities.

 

[kingboonz]

As Shiny Things mentioned, IB's securities lending program is only for U.S. listed/traded securities. It does not include IWDA or any other non-U.S. securities.

Understood!

Will buying US ETFs and then going stock yield enhancement earn me more than buying an equivalent overseas ETF with 15% DWT?

 

[YouHeypiCanLiao]

What do you think of this strategy?

Say i have 30k USD. Split 90% 10% IWDA and EIMI purchase through LSE.
First I will do a lumpsome of 10k
Then I will DCA 2k every month, buying IWDA and EIMI alternately( to balance the ratio ) to save on the transaction fees.

 

[revhappy]

What do you think of this strategy?

Say i have 30k USD. Split 90% 10% IWDA and EIMI purchase through LSE.
First I will do a lumpsome of 10k
Then I will DCA 2k every month, buying IWDA and EIMI alternately( to balance the ratio ) to save on the transaction fees.

Good strategy!

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

 

[BBCWatcher]

Say i have 30k USD. Split 90% 10% IWDA and EIMI purchase through LSE.

OK, so that would mean you should end up with $27K of IWDA purchases and $3K of EIMI purchases....

First I will do a lumpsome of 10k

OK, into IWDA I assume. Running total: $10K IWDA, $0K EIMI.

Then I will DCA 2k every month, buying IWDA and EIMI alternately( to balance the ratio ) to save on the transaction fees.

So that'd be 10 more purchases, with 5 of those purchases of IWDA ($10K) and 5 of those purchases EIMI ($10K). Thus you'd end up with $20K of IWDA and $10K of EIMI. Which is different than $27K/$3K, much different.

Good strategy!

Whether it's good or not is a separate question. The math isn't consistent.

If you want to end up with US$27K of IWDA purchases and US$3K of IWDA purchases, and you're starting with a US$30K lump sum, then you could just carve it up into 10 installments of $3K each. Find a pseudo random number generator that'll select any number from 1 to 10 inclusive, and that'll be the installment that you use to buy EIMI. Let's suppose that's 3, so on the third month you'd buy EIMI. For the other 9 purchases you'd buy IWDA. Done.

 

[YouHeypiCanLiao]

OK, so that would mean you should end up with $27K of IWDA purchases and $3K of EIMI purchases....


OK, into IWDA I assume. Running total: $10K IWDA, $0K EIMI.


So that'd be 10 more purchases, with 5 of those purchases of IWDA ($10K) and 5 of those purchases EIMI ($10K). Thus you'd end up with $20K of IWDA and $10K of EIMI. Which is different than $27K/$3K, much different.


Whether it's good or not is a separate question. The math isn't consistent.

If you want to end up with US$27K of IWDA purchases and US$3K of IWDA purchases, and you're starting with a US$30K lump sum, then you could just carve it up into 10 installments of $3K each. Find a pseudo random number generator that'll select any number from 1 to 10 inclusive, and that'll be the installment that you use to buy EIMI. Let's suppose that's 3, so on the third month you'd buy EIMI. For the other 9 purchases you'd buy IWDA. Done.

Thanks for the thorough explanation... I think something like this

and I will repeat Month 2 to Month 6 cycle.