What do you guys think of robo advisor? I know they invests in etfs, but are they "trying to beat the market"?
As someone else said, the ones in SG right now are bad in various ways in terms of high fees and the use of US ETFs (with higher withholding taxes for US equity holdings).
I'm actually interested in creating a SG-relevant roboadvisor of some sort, but I'd have to find time to read up on how to build a site to host it (have to pick up PHP and SQL), and then program the underlying algo.
Mattzakh: roboadvisors are usually explicitly
not trying to beat the market. They’re usually pretty open in acknowledging that they won’t beat the market, because they just track indexes minus fees; what they do try to do is provide a cheap, easy way to invest and avoid some of the most obvious investing pitfalls (overtrading, high fees, selling the lows).
Maeda: trust me, for something like this it’s not going to be a DIY thing. The amount of regulatory and infosec legwork you’d have to put in around something like a roboadvisor is not something one person can crank out in their garage (though you
could do an MVP and use that to get some engineering legwork and funding to build the real thing).
Other thing to keep in mind: there are MAS requirements around registered reps (I think you have to have two) and regulatory capital (you have to have $250k for a basic license that only lets you serve accredited investors, or a cool million for a full license that lets you serve retail).
Separately I probably wouldn’t use PHP? That thing is an absolute security basket-case.
DM me if you want to have a chat.
Incidentally, I also found out that low cost index funds are hardly found in Japan with insane levels of household wealth sitting in cash deposits. Vanguard has an office in JP but they barely sell directly to Japanese investors. IMO, there is an opportunity there, especially with the Japanese millennials who are less traditionally minded than previous generations.
TIL! I genuinely don’t know why this is, though.
He is not American, he is Australian.
Living in the USA, though.
1) i have an old social security number that I have never used. it was given to me when I studied as exchange student in north carolina. no idea if it would be useful
2) me thinking of opening an interest bearing account with an USA bank, so that i can do wire transfer more conveniently in the future. thinking of citibank since they are more global.
3) any other advice you would give me?
appreciate the help since you are the most logical and informed american i happened to know.
Mmm… I’d defer to BBCW on the tax stuff. I personally would pop open an account (though with Chase, because I like them better than Citibank; they didn’t flinch when I opened an account with them even before I moved from Singapore).
Other thing: is there a chance you can cram in a few years’ work in the States before you pull the ripcord? Might be worth it to make yourself eligible for part social security.
Hi guys. Can I understand what is the reason why do you guys don't usually recommend overseas bonds typically?
I see in most portfolio recommendations that bonds should be in SG, but I can't figure out why.
It seems that for one, overseas bonds tend to pay out higher, am I right or am I mistaken?
Not always. European, Japanese, and Australian bonds pay less; US and EM bonds pay more.
The only downsides seems to be currency risks.
That’s a pretty big downside though! The double-digit yields on Turkish bonds look pretty good, for example, until you realize that the currency’s dropped 50% in less than a year.
My second question is whether Singapore Govt are they likely to raise interest rates and follow US?
The MAS doesn’t target interest rates as their tool of monetary policy. Singapore targets the currency, and lets rates bounce around as they like.
This is genius. Thanks for doin’ me an edumacashuns. I’ve never traded forwards before, and seeing how I actually do have some spare USD sitting around IBKR (from all that option selling), i think i could do this.
You're welcome. If you make a few basis points off this, you can repay me with a beer next time I'm in town.
Few more follow-on qns if you dont mind
1. This arb only works during the last few months of the year and into the new year? It wouldn’t work say Mar-Jun? I’m thinking quarter-end results reporting which the banks might wanna hold some spare Benjamins?
2. This opportunity I assume is unique in a sense that you’d need to long a high i/r fx against a negative yielding fx? Or is this strictly USD/-ve ylding FX since it’s king dollar?
1) Good question. The basis (see #2) has been a little twitchy around quarter-end this year, but it's really blowing out over the turn, which is why I strapped some on myself and flagged it up.
2) It's not about the relative interest rates—those would normally get arbed away by the FX forwards. It's about the cross-currency basis: effectively the demand to borrow dollars through FX forwards means that the FX forwards are mispriced compared to the interest rates in the individual currencies. So this is a nearly-pure arbitrage (give or take, y'know, stuff like counterparty defaults and cashflow mismatches between the futures and the FX, but there's not a lot you can do about that).
If you ever got taught about covered interest parity in Finance 101: the reason this trade works is that CIP does not actually hold, and hasn't since 2008.
Hi Shiny,
Just started my investment journey after reading a few books, including yours. Opened an IB account and have bought some IWDA.
A question about the fx routing though. Is using TWS just to use FXCONV necessary? The desktop app runs a bit slow on my computer.
Yeah, this is a weirdness of Interactive. You do have to use TWS to use FXCONV.
- How is Singapore dollars constructed differently from other currency? Is there some in depth history behind or book that we can read further?
- How can Singaporean investors have a significant advantage in global investing? I do know from that Singaporean have capital tax gain advantage compare to U.S. from reading this thread.
I wish I had a reference to hand on this, because it’s kind of fascinating. The MAS and the HKMA have both taken a wildly different approach to central banking from their G10 counterparts. Since the 1980s, the traditional approach to the central banking trilemma (
https://en.wikipedia.org/wiki/Impossible_trinity) has been to let the exchange rate float in return for free capital movement and independent monetary policy, but Singapore and Hong Kong have chosen to peg their exchange rates and give up control over monetary policy.
This occasionally leads to some wildly inappropriate monetary policy settings in Singapore; anyone else remember in the late 2000s/early 2010s when house prices were rocketing higher? A big part of that was because interest rates in Singapore were far too low (a function of the Fed and ECB slashing interest rates, and those low interest rates got passed on to Singapore through the currency peg), but the MAS can’t do anything about that because currency peg.
Yes I am a nerd.
- Does this mean that if one day, the world stop "believing" in MAS. Singapore dollar will have a drop in value?
This "believe in MAS" seem to me that the world is building castle in the air by believing MAS without any foundation.
So I don’t generally have a lot of time for the MAS, as I’ve made clear on this thread ; their regulatory regime and their monpol regime are both too light-touch for my tastes. But they do generally know what they’re doing. They’re not going to cock it up.
IIs there a minimum limit on how much USD that is sitting on our Interactive Broker account, then there will be an advantage to do either invest in BIL or the one above Shiny Things have recommend?
- For “park it in a short-term bond ETF”, I mean, the thing to ask yourself is “why are you parking cash in USD in the first place instead of just buying it when you need it?”.
- For “strap it on let’s trade the xccy basis through the swaps yeehaw”, it only really works in lots of 12.5mio JPY equivalent because that’s the futures notional.
I remember reading somewhere in this thread that Interactive Brokers is not the best to buy BIL as the order might not get fulfilled. (Correct me if I am wrong)
Errrm, I’m a bit confused here. That’s an issue no matter which broker you use; if you say “I want to buy BIL for $90 a share”, you’re not going to get any no matter which broker you use, because nobody wants to sell BIL any lower than $91.50ish.
Update: oh wait, I know what you're on about. You've confused BIL (which is an ETF that holds US treasury bills) with the actual T-bills themselves. BIL is an ETF, it trades like a stock.
Any view on Ray Dalio’s view ?
Do we continue our iwda as businesss as usual and then buy more and heavily once the downturn happens?
I mean, couple of things here:
- He’s talking about the USA. The USA is not Singapore, it’s not the world. If you’re a Singaporean investor changing your allocations based on the US stock market, you’re doing something really wrong.
- He’s not wrong about the “wealth gap” thing. The US totally has a wealth gap problem, and frankly they’re not doing anything about it.
Is there a study done on allocation based on the length of bull-run or the growth in index points since the last bear market? Our risky-to-safe allocation can do inversely to it, if we time for a 12 year period, 3 US presidential terms. 90/10 in first 4 years, then slowly reduced at annual rate of 5% for the next 6 years. At the 10th year, you are 60/40. Year 11, you reduce by 10% and Year 12, by 20%. You end with 30/70 allocation, keeping your assets liquid, ready for the next cycle!
Those 2 late years reduction rate dependent on the outlook then, so like next year, which is 11th year of GFC, the US economy seems strong but too much global headwinds, i will reduce by 10%! This my theory only lah!
JFC, dude, switch to decaf.
Are you just going to keep posting in here like a crazy person and wasting everyone’s time?
If I have approx $1.5-1.7k/mth to invest, will you advise that i:
– open a IBKR account to invest $1k/mth in IWDA (hitting the bare min i know), then the rest in ES3 + a portion of it in my employer's stock plan (they are offering discounts but i'm a bit concerned about the 30% dividends withholding tax)
or
– stick to SCB for both IWDA and ES3 for the time being and only make the switch to IBKR when i build up my portfolio ≥$100k in a few years' time?
Mmm - I’d probably go straight to IBKR for global + Stanchart for local.
Also, you should definitely take advantage of the employer stock purchase plan; you’re effectively getting free money! (Don’t forget to sell the stock as soon as you can, though.)
If I buy ETFs listed on SGX (say ES3) using Vickers, that would be (similar to individual shares like Singtel) be held with CDP?
Another query: for ETFs, what are the concerns with low AUM ? Let’s say the AUM is a paltry 20MM - I know one of the risks is that the ETF may close down as it is not economical to run the ETF. But how about the liquidity (ease of sell) and bid ask spread ? That should not be an issue as the designated market makers are obliged to come in and match buy/sell orders at NAV?
- Yes.
- Errm, I mean, it might be a bit of an issue (smaller, more esoteric ETFs will have fewer market makers and wider spreads), but it’s not the primary issue.
