*Official* Shiny Things club - Part 2

[unhinged_loon]

The disadvantage is that you're missing out on literally half of the world's stock market capitalisation, and some great diversification opportunities. You don't want to be all-in on the US stock market.

Or buy VWRD which includes some of EM.


Maybe if we can convince enough people to buy VWRD, the TER will drop further... lol

 

[Ilovemathstutor]

hi Shiny Things,

I am totally grateful to you for your participation in the SG ecosystem, where it's full of noise & singlish, haha.

while I totally see myself investing in the passive S&P 500 index fund ETF for retirement, I was wondering are we creating our own bubble / overvaluation when everyone does the same?

that's why leading companies have their mcap pumped as retail investors are getting smarter and realising that S&P500 index investing is the way to go.

ARE WE CREATING OUR OWN BUBBLE ? ( Financial Crisis )


As always, thanks for your thoughts in advance.

 

[tangent314]

My dad has reached BHS but not my mom. Since she hasn't worked since almost 30 years ago.

Yeah you should probably top your mom's MA up to the BHS. This is tax deductible too.

That's good to hear! Will try to convince my dad to do this. I have a question though, back in 2017 when my dad was 55, the EHS is 249k. If we were want to top-up his RA to EHS say in 2022, will the EHS still be at 249k or pegged according to the 2022's rate?

You should be able to top up your ERS as it increases every year if I'm not wrong, but typically if it is already at max the interest earned will increase faster than the rise in the ERS.

 

[BBCWatcher]

Yeah you should probably top your mom's MA up to the BHS. This is tax deductible too.

No, that's not correct. Tax relief is only available for individuals making contributions to their own MediSave Accounts. Since this mother has little or no taxable income and pays no income tax, there's no tax relief opportunity for MediSave in this case.

However, if the father can pay all of the household's medical bills and Integrated Shield base plan/MediShield Life premiums using his MediSave and then, after each payment is withdrawn from MediSave, immediately top back up his own MediSave Account to collect some tax relief, that works. Every MediSave top up must fit within the CPF Annual Limit and within the Basic Healthcare Sum.

 

[unhinged_loon]

hi Shiny Things,

I am totally grateful to you for your participation in the SG ecosystem, where it's full of noise & singlish, haha.

while I totally see myself investing in the passive S&P 500 index fund ETF for retirement, I was wondering are we creating our own bubble / overvaluation when everyone does the same?

that's why leading companies have their mcap pumped as retail investors are getting smarter and realising that S&P500 index investing is the way to go.

ARE WE CREATING OUR OWN BUBBLE ? ( Financial Crisis )


As always, thanks for your thoughts in advance.

Index tracking funds buy from the market, and they do so to minimize friction (ie, not move the market with their trades). The components of S&P500 are highly liquid, and there is a limit to how much index funds can buy into them also. They don't create bubbles. If there is a bubble, it's created by other market participants.

Looking at the P/E ratio will give you a rough gauge of how the market is at the moment. Right now, no one sensible is screaming about a stock market bubble (just switch off CNBC, BTW). I'm not sweating it. The US market is fair valued or even slightly overpriced, but no where near bubble territory. The US economy is in reasonably good shape, and the Feds are not inclined to rock the boat too much. With sluggish growth in inflation, they aren't going to be trigger happy with rate rises. Sure, a black swan event can occur and send things downhill, but that doesn't mean there is a bubble in the stock market. If there is an asset bubble right now, it's somewhere else.

The main effect of broad market index tracking funds is that they reduce the number of active retail investors on the market. What this can result in is poorer market efficiency* when most of the market consists of indexer instead of active traders (we are not near that situation). The skilled investors (contrary to popular opinion, not the vast majority of retail investors!!) can then perhaps exploit those pricing inefficiencies to earn better returns, and whose actions help make the market more efficient. Of course, it actually turns into a zero sum game between traders, since one trader has to lose for another trader to win the trade. An indexer will simply truck along and get market returns while not worrying about it.

tl;dr: there is no bubble.



* I do not buy the theory that the market is nearly 100% efficient or even highly efficient. The stock market is still prone to euphoria, zoning out in the twilight zone, or maniac depressive with crazy mood swings. The key advantage of index based investing is that you reduce your amount of workload as an investor and just let the market engage in its mood swings with an eye on the future where it all evens out.

 

[Trader11]

I think the best combo is a SP500 etf and MSCI World Index etf. We are already exposed to Singapore already with CPF and jobs here. What do you guys think?

 

[Thoreldan]

I think the best combo is a SP500 etf and MSCI World Index etf. We are already exposed to Singapore already with CPF and jobs here. What do you guys think?

Thought of sp500 etf (cspx)too, but isn't world etf already having elements of sp500 ?

 

[Trader11]

Thought of sp500 etf (cspx)too, but isn't world etf already having elements of sp500 ?

So do we just need to buy all world?

 

[BBCWatcher]

Thought of sp500 etf (cspx)too, but isn't world etf already having elements of sp500 ?

So do we just need to buy all world?

Wall Street is part of the world, yes.

Broadway is on the same island, and it has some great plays and shows.

 

[Geeezz]

Index tracking funds buy from the market, and they do so to minimize friction (ie, not move the market with their trades). The components of S&P500 are highly liquid, and there is a limit to how much index funds can buy into them also. They don't create bubbles. If there is a bubble, it's created by other market participants.

Looking at the P/E ratio will give you a rough gauge of how the market is at the moment. Right now, no one sensible is screaming about a stock market bubble (just switch off CNBC, BTW). I'm not sweating it. The US market is fair valued or even slightly overpriced, but no where near bubble territory. The US economy is in reasonably good shape, and the Feds are not inclined to rock the boat too much. With sluggish growth in inflation, they aren't going to be trigger happy with rate rises. Sure, a black swan event can occur and send things downhill, but that doesn't mean there is a bubble in the stock market. If there is an asset bubble right now, it's somewhere else.

The main effect of broad market index tracking funds is that they reduce the number of active retail investors on the market. What this can result in is poorer market efficiency* when most of the market consists of indexer instead of active traders (we are not near that situation). The skilled investors (contrary to popular opinion, not the vast majority of retail investors!!) can then perhaps exploit those pricing inefficiencies to earn better returns, and whose actions help make the market more efficient. Of course, it actually turns into a zero sum game between traders, since one trader has to lose for another trader to win the trade. An indexer will simply truck along and get market returns while not worrying about it.

tl;dr: there is no bubble.



* I do not buy the theory that the market is nearly 100% efficient or even highly efficient. The stock market is still prone to euphoria, zoning out in the twilight zone, or maniac depressive with crazy mood swings. The key advantage of index based investing is that you reduce your amount of workload as an investor and just let the market engage in its mood swings with an eye on the future where it all evens out.

investing in a stock market ish like having a gf, sometimes she will pms but given enough time she will go back to normal n become happy again

 

[unhinged_loon]

Thought of sp500 etf (cspx)too, but isn't world etf already having elements of sp500 ?

Oh sure, IWDA or VWRD do, and they are market weighted. Adding CSPX or VUSD just means overweighing the US.

 

[Trader11]

Oh sure, IWDA or VWRD do, and they are market weighted. Adding CSPX or VUSD just means overweighing the US.

In long term, US is still gonna be better than STI?!?

 

[BBCWatcher]

In long term, US is still gonna be better than STI?!?

One is a country, and another is a stock index. Are you asking whether the U.S. S&P 500 stock index will outperform the Straits Times Index over a relatively long (or longer) time horizon?

I don’t have a crystal ball that works very well. However, if forced to predict, I’ll say yes, probably. I’m basing that prediction on the past several years when the Singapore Stock Exchange has not attracted new and significant listings, whereas the U.S. markets have. I expect that divergence to continue, and it’s due to an economic phenomenon known as “network effects.” A few new listings will inevitably prosper and reach into the top 505 U.S. listed stocks (S&P 500), but that’s not likely to happen on the SGX simply because up and coming companies go elsewhere, notably to Wall Street, to raise capital.

This prediction is similar to trying to forecast which team will win a league championship over the next several years. If one team has a strong farm system, with a big pipeline of new talent, and another has no such pipeline, I would be more bullish about the first team.

My forecast has nothing in particular to do with the overall economies and other aspects of the United States and Singapore. These are merely stock markets, and the companies that list in these markets do business well beyond the countries where those markets are based. That’s particularly true of U.S. markets, but it’s also true for the SGX to some extent. Singtel, for example, is more Australian than Singaporean. (More than half of Singtel is Optus, the Australian telco.)

 

[Shiny Things]

Just signed up for IBKR yesterday and came across their Stock Yield Enhancement Program that they seem very eager to persuade you to take part in.

1. What's the catch? If any.

2. Their website claim that they use cash as collateral for the amount of shares that I lend out. Should I be concerned? What happens if another 2008 happens and the borrowers default (can they?) and kaboom.

Aside from that it only applies to US-listed stocks?

The catch is that you’re lending your shares to people who want to bet that the price of your stock will go down. That said, this is generally not something you need to worry about.

People who are shorting stock are generally looking for short-term moves down, they’re not betting that it will go to zero; you, on the other hand, are in this for the long, long term, so you can lend your stock out, ride out short-term downturns, and earn interest from the short-sellers along the way.

(And don’t think “well I’m not going to lend my shares then, that’ll stop those evil short-sellers!”. You are not big enough to have a material effect on the stock-borrow market. If you don’t lend your shares and capture that yield, someone else will.)

2 - yes, the borrowers can default (fail to return the shares). This is vanishingly rare, but if they do, you get to keep the cash.

For what it's worth, I'm enrolled in the stock yield enhancement program. I regularly get my shares borrowed; I've never had a default (which isn't surprising, defaults basically never happen), and it adds about 0.2% to my annual returns for literally no work, so... sure, I'm fine with that!

1. Is that a fairly accurate way to look at it and hence your estimate that I would save roughly $10 if I picked IKBR instead of sticking with Standchart?

2. Other than the inactivity fees, are there other fees I shd take into account?

3. Also, another question I'm scratching my head over -
So Standchart is a custodian model.. is Interactive Brokers the same?

Thank you so much!

1 - Yep.
2 - Nope.
3 - Yep. Custodian models are totally normal; the vast majority of stock markets and stockbrokers worldwide work that way.

Hi Shiny and Experts

My current portfolio is only ES3 and A35. I am thinking to add IWDA as I was following some of the post here. The question is how many % should I buy? Any other investment options to go for? My objective is to set aside funds for retirement and I have already catered cash for rainy days.

Unless you have some special circumstances, you can go with the standard rule: split your equities 50-50 between local and global stocks.

Also, I'd use MBH instead of A35. It owns corporate bonds instead of government bonds; they're slightly riskier but they have a notably higher total return.

hi Shiny Things,

I am totally grateful to you for your participation in the SG ecosystem, where it's full of noise & singlish, haha.

Not a prob!

while I totally see myself investing in the passive S&P 500 index fund ETF for retirement, I was wondering are we creating our own bubble / overvaluation when everyone does the same?

that's why leading companies have their mcap pumped as retail investors are getting smarter and realising that S&P500 index investing is the way to go.

ARE WE CREATING OUR OWN BUBBLE ? ( Financial Crisis )

So this is a fair question, though it does tend to get trotted out a lot by the sort of Zero-hedgey weirdos who think that alien lizards are putting fluoride into the Wall Street water system to turn the frogs gay, or whatever the conspiracy-theory-du-jour is.

Anyway: the answer is no. Maybe if everyone put all their money into top-market-cap index funds—but that's assuming that hedge funds and active management and pension funds and endowments and everything disappear entirely, and that's not going to happen. There's always going to be people who will look for underpriced stocks, who will sell the large-caps and buy value stocks.

And the scene of large-cap stocks wildly outperforming small-caps has happened in the past, well before index funds were even a glint in the eye of the guys who invented them. There was a craze in the 1960s and 70s USA for the "Nifty Fifty" large-cap stocks; there was no fund or ETF to buy back then, so retail investors went and bought the stocks directly. If ETFs didn't exist, people would still go and buy whatever is outperforming... and if "what's outperforming" is large-cap stocks, then people will buy large-cap stocks.

So, no, I'm not worried about this.

I don’t have a crystal ball that works very well. However, if forced to predict, I’ll say yes, probably. I’m basing that prediction on the past several years when the Singapore Stock Exchange has not attracted new and significant listings, whereas the U.S. markets have. I expect that divergence to continue, and it’s due to an economic phenomenon known as “network effects.” A few new listings will inevitably prosper and reach into the top 505 U.S. listed stocks (S&P 500), but that’s not likely to happen on the SGX simply because up and coming companies go elsewhere, notably to Wall Street, to raise capital.

It takes two to make a market, so: I lean toward the other side; I think over the next few years the STI will outperform the S&P 500. (Admittedly, I've been wrong about this for at least a couple of years now.)

BBCW is right that Singapore’s capital markets are too small to support really big listings, but I don’t think that means that the market itself will underperform. Singaporean market valuations have been held back by two things:
1 - It’s heavy on banks, and nobody has liked banks since 2008. Eventually the pendulum will swing back to financial services, though;
2- It’s fairly tightly coupled to “emerging markets”, which haven’t exactly been stellar performers lately, and that’s held Singapore back by association.

If and when we see investor sentiment toward banks or emerging markets start to turn around, Singapore will be a beneficiary of that. (But yeah, if you wanted to list a company you’d absolutely go to HK or NYC.)

I think the best combo is a SP500 etf and MSCI World Index etf. We are already exposed to Singapore already with CPF and jobs here. What do you guys think?

I disagree with your "we're already exposed to Singapore" point, though I do get where you're coming from.

Think about what happens when you retire. You won't have a job any more; and your CPF growth rate is linked to interest rates, not to economic growth or to cost-of-living. Your expenses will be going up with the cost of living and the rate of economic growth, though.

So the best match for your "liability" (the cost of living when you retire) is a decent allocation to Singaporean equities. Obviously you need to turn that down a bit as you get closer to retirement, because you don't want to get your retirement fund blown up by another 1998 or 2008, but the point still stands.

So do we just need to buy all world?

Yep! Global ETFs like IWDA and VWRD already have a proportional allocation to the US stock market.

investing in a stock market ish like having a gf, sometimes she will pms but given enough time she will go back to normal n become happy again

Ben Graham came up with a very similar analogy. Meet Mr. Market.

Shiny, what do you think of USHY?

Uh, no US-listed ETFs if you're not a US taxpayer.

Even if that weren't the case, I don't think US corporate high-yield is particularly compelling at the moment. The spread you get doesn't really compensate for the higher default risk right now.

 

[Twiggyythng]

Hi shiny things,

Just purchase your book and love it!

I have a few queries and hope are u able to answer me. Newbie still learning.

I only have $300 to invest every month. Do I use the $300 to alternate buying Es3, follow by the next month IWDA and the following month mbh?

By doing so, will it help me to reach my target portfolio? I am 34 this year. I wanna do this so that this can form part of my retirement savings.

I already have SSB & retirement plan.

I also hope the next few years, I can increase the amount to invest every month!

Thank u!

 

[Fcesca]

Hi Shiny,

Since opening my IB account I have spent some time on the client portal figuring out the basics before I fund the account.

I was wondering what your thoughts were regarding cyber security around using the IB platform. I see that the security into accessing your account is your password + OTP. It seems once you can access the account, you can withdraw very large amounts easily (i think the limit is something big 50k).

I have read a few articles on security holes in online trading which scare me.. (unfortunately my post count is too low so I can't link them)

I'm not so familiar with IB - do you know if you can add some additional security layers - or a impose a lower limit on withdrawals?

Furthermore I understand if your account is somehow comprised through a cyber attack, than IB won't be liable for your losses.

However, I understand some other brokers will cover you e.g. Charles Schwab

What are your thoughts around this??

As a side note - I bought and read your book mid last year (great read thanks ) . What does the 2019 edition touch on - is there any new info on other broker options?

 

[hwckhs]

As a side note - I bought and read your book mid last year (great read thanks ) . What does the 2019 edition touch on - is there any new info on other broker options?

The earlier version recommends using A35 (ABF Singapore Bond Index Fund) for the bond portion but the new version recommends MBH (SGD Investment Grade Corporate Bond ETF) instead. The latter was launched last year and has a higher yield.

Not sure about other changes.

 

[vofzxy]

The earlier version recommends using A35 (ABF Singapore Bond Index Fund) for the bond portion but the new version recommends MBH (SGD Investment Grade Corporate Bond ETF) instead. The latter was launched last year and has a higher yield.

Not sure about other changes.

i also bought the 1st edition

how do i buy the latest edition ?

 

[tangent314]

I was wondering what your thoughts were regarding cyber security around using the IB platform. I see that the security into accessing your account is your password + OTP. It seems once you can access the account, you can withdraw very large amounts easily (i think the limit is something big 50k).

Withdrawals can only be made into bank accounts that belong to the account holder. You will find it's not so simple to link a bank account to your IBKR account, you will be required to submit some proof of bank account ownership. They are doing this not just to prevent theft, but also money laundering and tax evasion.

 

[tangent314]

how do i buy the latest edition ?

Search for "rich by retirement" on amazon