*Official* Shiny Things club - Part 2

[flowerpalms]

http://richbyretirementbook.com/

Wheres the link to shiny book?

 

[swan02]

I believe u r right. It’s 0.05% tiered.. 0.05% also is fixed. I recall IB changed the pricing recently.

I rechecked the math, hence the range is now 10k usd to 78k usd to use fixed.

Am I missing something or is tiered also 0.05% and not 0.08%?

I see this under "EUR, CHF, USD, PLN, ILS and HUF-Denominated Products Tiered"

 

[kingboonz]

I have a maturing investment in USD, US Bank which I would like to transfer to Interactive Brokers directly if possible to avoid fees.

Can anyone enlighten me if this transfer is possible if

1. I do not have control over the memo field of the transfer.
2. I do not know the exact amount, only a range.

 

[kennethtbh]

You need to use the correct term called risk adjusted returns which I presume MBH has higher over A35 over the long term.

But purely on a Yield to maturity basis...ending july 2019 as per fact sheet.

Last I checked. Yield to maturity was higher with mbh being 2.91% vs A35 at 2.24%. In fact with the recent A35 bull run, I would assume mbh has even greater YTM now making it together with gold more attractive than govt bonds.

r u sure ya not confused with annualised return ? A35 did indeed has higher total returns if viewed over short run.

I'm not confused over anything. I'm just trying to understand what is the higher yield that was stated in ST's book.. think there wasn't much explanation what it meant. Just a footnote.

 

[swan02]

I'm not confused over anything. I'm just trying to understand what is the higher yield that was stated in ST's book.. think there wasn't much explanation what it meant. Just a footnote.

I've not read Shiny's book. but this website like many research done can help you.

https://thebamalliance.com/blog/are-corporate-bonds-worth-the-risk/


1. However, MBH has a duration of only 5 years, whereas A35 has close to 8 years. This is a poor apple to apple comparison. Purely on a duration aspect, MBH may seem to be less risky than A35. On credit aspect, MBH seem more risky. Also with the current inverted curve, MBH is attractive.

2. I've also noticed MBH in this short time frame, didn't move as much as a typical investment grade corporate bond should such as in the US, or Australia implying MBH may actually have a lower standard deviation than expected of a typical investment grade corporate bond (maybe Shiny's fans are busy buying up MBH) skewing the results--i get these many people selling mini 500 units of A35 or MBH to me. MBH also has more A grade corporate bonds than other ETF corporate bonds pushing it close to being credit risk free ?. The allure of Singapore as a safe haven ?

3. Currently I prefer A35 to fit into my bond component to counter huge draw downs such as GFC, and MBH into my cash component mixed SSB as duration risk is lesser and also providing good YTM. We shall see how the next recession affect MBH, perhaps its A credit rating corporates are more resilient than I initially thought.

 

[flowerpalms]

Hi everyone, slight confusion i have over the target allocation.

When i have reach my target allocation 40 40 20 in the 5th month, my next investment will still be rotation among the 3 assets to be back to 33 33 33 then 40 40 20 and the cycle repeats

Or

After 40 40 20, the monthly investment amount will not be fixed and will depend on which asset does not meet the target % and top up from there??

 

[pathfinder6]

I believe u r right. It’s 0.05% tiered.. 0.05% also is fixed. I recall IB changed the pricing recently.

I rechecked the math, hence the range is now 10k usd to 78k usd to use fixed.

Thanks for the update, can you share what's the difference at 10k usd for tiered versus fixed

 

[swan02]

10k usd is the equilibrium ie makes no diff whether u r tiered or fixed. However at exactly 10k, I’m leaning towards fixed because there isn’t penalties when u transact at a price that draws away liquidity unlike tiered. I don’t know how much much is the penalty. Shiny may have answered this before.

So basically transactions less than 10k usd favors tier and also exceeding 78k due to the cap $39 usd that exists in tier.

Thanks for the update, can you share what's the difference at 10k usd for tiered versus fixed

 

[swan02]

Can you point the link that where you read that trading in London Stock exchange got 'penalty' for removing liquidity?

A lot of misinformation going around. interested to find out who is doing the spreading... dubious financial advice site, anonymous blogger, or someone in this forum.

https://www.interactivebrokers.com/en/index.php?f=713

found one E.g. as above.

But I’m certain I’ve read it in some educational emails from IB.

 

[ydnar1]

Hi all,

On the bonds portion, I was wondering if an annuities make sense too? Was introduced by Bank RM on this PruLifetime Income Premier II

Single Premium:
Invest: $100k
Leverage: $150k

Annual Distribution (based on par fund 4.5% performance):
From year 2: 1.5%
From year 5: 3.0%
From year 20: 4.0%
Of which, 1.5% is guaranteed from year 2.

After leverage cost, I am looking at 3% (guaranteed) to 6% (+ non-guaranteed) net returns.

Would this make more sense than MBH?


At leveraged basis, it will earn me minimum 1.5% pa. guaranteed.

Thanks in advance for your time to read and share your view.

 

[Shiny Things]

Hi Joseph99,

Customers may invest in BCIP using cash or SRS.

Hey OCBC! Any chance you'd consider cutting the minimum transaction fee on BCIP? $5 per clip is a lot for your smaller customers who might only be investing a couple hundred dollars a month; POSB IS is a lot more competitive than you are.

(Oh, and if you added an international-equity ETF option you'd win a whole lot of brownie points from the crew on this thread.)

Most people here must be investing at least 1k per month. All using IB....not MBKE

On the contrary. I'd say most of the people on here are investing less than $1k a month.

[..]
Ultimate question: in posb IS, can you rotate your monthly investments and rebalance by entering the amount manually and not auto recurring???

Unfortunately no, you can’t do this - POSB IS isn’t perfect but it’s the best we’ve got for small investors.

When i have reach my target allocation 40 40 20 in the 5th month, my next investment will still be rotation among the 3 assets to be back to 33 33 33 then 40 40 20 and the cycle repeats

After 40 40 20, the monthly investment amount will not be fixed and will depend on which asset does not meet the target % and top up from there??

I’ll be honest, I thought it was pretty self-explanatory? You’re investing x dollars per month; each month, you spend that x dollars on whichever one of your three funds is furthest below your target percentage. Eventually, that’ll make you converge to your target percentage.

Shiny's book is like my martial arts manual now, am literally hugging it to sleep.

…doesn’t that get uncomfortable?

If not going for bond, reits can be a good consideration where es3 + clr + iwda

No, in fact I don’t think this is a great idea. Couple of things here!

Firstly, saying “if you’re not going for bonds”… there’s no reason for people to “not go for bonds” in the first place, and it might confuse people when you say that.

Secondly, REITs aren’t a substitute for bonds. REITs are a lot riskier than bonds, and a lot more volatile, and they do a lot worse in market downturns.

Hey ST and senior forumers here,

Was scrolling through over 400 pages & got the ebook (good read btw).
[...]

1. S$1k into IWDA via IB every month
2. S$500 into G3B via POSB IS every month
3. ~S$900 savings into high interest rate savings account (~2% p.a) for the bond component. I am looking to get a house within the next 2 years and would prefer to have the added liquidity.

Hmm. If you're saving for a house in a couple of years, I'd keep that lump of cash completely separate from your retirement portfolio, and just put it straight into a high-interest savings account.

Other than that, this looks fine, though I'd suggest a couple of things:
1) You don't need to buy IWDA and G3B every month. You can get away with buying IWDA one month, G3B the next month, etc etc etc... it'll save you a few bucks on transaction fees.
2) Is there a reason you're not going for a 50/50 local/global split on your equities? Don't tell me you're buying more international equities because they did better in the past.

Yes there is below but in the form there is no tick for lse

You seem to have confused currencies with exchanges. The list in your screenshot is a list of currencies; the London Stock Exchange is an exchange.

is it still recommended to invest in mbh with the interest rate cuts?

Yes. MBH is perfectly good, and you’ll find it yields more than A35… see below.

how abt ocbc g3b? any diff from posb Es3?

No, they’re basically the same thing.

Now some bond questions:

ST can u kindly explain why MBH became a better alternative than A35? It was stated in the book that it is higher risk and higher yield than A35. I can understand the higher risk due to corporate bonds as underlying assets than govt bonds. And with higher risk the coupons of the underlying bonds also have higher rates.

However, when I checked the dividends given by MBH vs A35, it is actually alot less? Seems the higher risk and higher coupons is not translated to higher dividends for the ETF..

Don't get how is it higher yield... And how is the higher yield translated to holders of MBH?

What are the pros and cons between buying ssb and mbh?

Den why is mbh recommended?

I prefer MBH over A35 because it has a higher yield - and it’s a more than fair tradeoff between the higher yield and the slightly higher default risk.

I prefer MBH over SSBs because MBH is easier to get in and out of (you don’t have to wait for the monthly issuance) and there’s no cap on how much you can invest.

Kenneth - I think the reason you’re seeing a low dividend yield for MBH is because the end-of-2018 dividend was only for about half a year, because the fund only launched in September 2018. So if you look at the actual dividends that MBH paid out last year, you’ll be understating the div yield.

At what exact amount should I choose fixed over tiered commission?

I have received dividends from ES3 and my salary bonus this month. I wish to use them to purchase IWDA in a lump sum. Thank you.

You’re thinking a bit too hard about this? Just leave it on tiered.

Can you point the link that where you read that trading in London Stock exchange got 'penalty' for removing liquidity?

And there is the issue with adding and removing liquidity when u trade in tiered.

Anyone knows how much r u penalised or rewarded and by how much when u add or remove liquidity ?

Hey Swan, this is incorrect and Limster is correct. IBKR’s tiered pricing charges the same price for LSE trades, whether you’re adding or removing liquidity. You can check it right here: https://www.interactivebrokers.co.uk/en/index.php?f=1590&p=stocks2

I see where this might have come from, because when you trade US equities with IBKR, the tiered pricing does give you access to maker/taker (or taker/maker!) rebates (and I’ll grant you, BATS UK offers lower prices for makers, but you’re not manually routing to BATS, are you?!). But that doesn’t happen on the LSE, it's the same price whether you add or remove liquidity… can you do me a favor in future and check before you post, just so people don’t get confused?

So he is not the god in Money Mind anymore? Hahaa

Ignore Purplestars, he’s been raging out in this thread for close on a year now.

He came in arguing that high-interest savings accounts were somehow better than A35 or MBH. I listened to him, agreed that high-interest savings accounts were a good idea for emergency funds but not for your regular retirement savings, and then he chucked a gigantic tantrum because I didn’t agree with everything he said.

I think he was also the guy who was chucking a tantrum because he bought A35 and then it went down (because interest rates went up toward the end of 2018). Last I checked he’d spewed it all out at the lows, and since then A35 has gone up about 5% in six months. Moral of the story: patience is a virtue.

 

[Shiny Things]

Hi all,

On the bonds portion, I was wondering if an annuities make sense too? Was introduced by Bank RM on this PruLifetime Income Premier II

God no. Absolutely not. This product is terrible and your bank manager is trying to rip you off. Let's have a look.

Annual Distribution (based on par fund 4.5% performance):
From year 2: 1.5%
From year 5: 3.0%
From year 20: 4.0%
Of which, 1.5% is guaranteed from year 2.

So what you're saying is that this thing is actually only guaranteed to yield 1.5%, in fact zero in the first year, and everything else is just the bank manager saying "here's what you might make!" and hoping you don't realise that it's not guaranteed.

1.5% is significantly less than what you would earn with MBH.

After leverage cost, I am looking at 3% (guaranteed)

No you're not. That leverage is going to be floating-rate, and if interest rates go up your net yield will plunge. Just eyeballing it, I think that if your leverage cost exceeds 2.5% at any point in the next twenty years (twenty years!), you'll actually be paying instead of earning interest.

Think about this for a second. If you could really get 3% guaranteed for twenty-plus years, EVERYONE would be doing that. Goldman Sachs would be emptying their Singapore dollar treasury accounts and heading down to the Prudential office and saying "we would like eleventy zillion dollars of the PruLife Whatever Whatever". The fact that they're not doing that should give you some idea.

Would this make more sense than MBH?

No.

At leveraged basis, it will earn me minimum 1.5% pa. guaranteed.

No it won't, your bank manager is lying to you. See above.

And your bank manager has a huge incentive to get you to buy this thing, because they get paid twice: they earn a commission on the insurance policy, and they earn a commission on the loan. They're looking at you and they're seeing a giant bag of money that they're going to get a huge cut of.

 

[flowerpalms]

Hello Shiny,

More questions:

1. Do you mean that for the first 5 months until i reach my target allocation of 40 40 20, the monthly investment according to your book is the same. Take for example i invest 1k per month for 5 months until i reach 40 40 20 . This is what i understand from the book. What about after this? Do we still continue at 1k per month rotation cycle or the investment amount after we reach the target percentage will then depend on whichever asset does not meet the percentage and we top up from there?

2 Since MBKE MIP is discontinued, up till now is the POSB IS still the best alternative to go for with IWDA in SCB. Or put all with SCB?

3. With POSB IS, if it is the same recurring amount every month, then how do we reach the target allocation of 40 40 20 and do rebalancing? For example, POSB IS has 2 counters. We do not want to invest in g3b because we need to invest in a35 for the 2nd month (if following ur book). But you mention it is recurring so this cant be done? What is ur advice then? Start with a lump sum with the allocations then back to monthly? Again, how can we do rebalancing with a recurring deduction with limitations to enter manually the amount to buy and sell?

 

[Maeda_Toshiie]

Hi all,

On the bonds portion, I was wondering if an annuities make sense too? Was introduced by Bank RM on this PruLifetime Income Premier II

Single Premium:
Invest: $100k
Leverage: $150k

Annual Distribution (based on par fund 4.5% performance):
From year 2: 1.5%
From year 5: 3.0%
From year 20: 4.0%
Of which, 1.5% is guaranteed from year 2.

After leverage cost, I am looking at 3% (guaranteed) to 6% (+ non-guaranteed) net returns.

Would this make more sense than MBH?


At leveraged basis, it will earn me minimum 1.5% pa. guaranteed.

Thanks in advance for your time to read and share your view.

The SSB returns are rather trash right now compared to the past, and yet they give you more than 1.5% guaranteed over 10 years, with virtually no lock in (up to 1 month to redeem).

That leverage will only serve to mess things up if interest rates go up. Shiny explained above.

Forget the "projected" returns. Those numbers printed are the values approved by MAS to be put into these "literature". Stop paying for your RM's new car.


If I'm investing for 20 years, I'm expecting higher returns. I'd go for a mix of low cost equity ETF instead. Leverage + mostly bond fund (which is what insurance PAR funds anyway) for 20 years just doesn't make sense to me.

Another thing, if you aren't retired, you don't need such "income". If you are retired, you shouldn't be playing with leverage to invest in bonds.

 

[Shiny Things]

Hello Shiny,

More questions:

How about you just try it, and get used to it? It's a learning process!

1. Do you mean that [...] the investment amount after we reach the target percentage will then depend on whichever asset does not meet the percentage and we top up from there?

Yes, you've got it.

2 Since MBKE MIP is discontinued, up till now is the POSB IS still the best alternative to go for with IWDA in SCB. Or put all with SCB?

I thought I was pretty clear about this. Stanchart's $10/trade minimum brokerage means they're uneconomic for small amounts of Singaporean stocks; POSB IS is the better alternative.

3. With POSB IS, if it is the same recurring amount every month, then how do we reach the target allocation of 40 40 20 and do rebalancing?

Yeah, this is why I said POSB IS isn't ideal - you have to change the allocation every so often. But here's the thing: as long as you're close enough to your target allocation, that's totally fine.

 

[flowerpalms]

Thank you shiny, that really helps

You should revise ur book soon though
Esp for us who cant use mbke now but with posb rsp

How about you just try it, and get used to it? It's a learning process!



Yes, you've got it.



I thought I was pretty clear about this. Stanchart's $10/trade minimum brokerage means they're uneconomic for small amounts of Singaporean stocks; POSB IS is the better alternative.



Yeah, this is why I said POSB IS isn't ideal - you have to change the allocation every so often. But here's the thing: as long as you're close enough to your target allocation, that's totally fine.

 

[PholkLorr]

can use SRS for OCBC BCIP/POSB Invest saver ? i thought only cash ?

https://heartlandboy.com/invest-srs-in-etf/ this guy say can. also another dollars and sense article also said can. Ill call and check. Apparently, OCBC BCIP makes u pay on buying and selling the counter so it wont be as good as POSB Invest Saver so ill probably SRS to POSB instead.

Also, thanks shiny for confirming my thoughts on this double dipping strat.

 

[hwckhs]

1. Do you mean that for the first 5 months until i reach my target allocation of 40 40 20, ...

Your 20% allocation is bond (A35/MBH) or equity? Normally, we use equity/bond notation when specifying asset allocation, and we would assume your 20% is bond.

However, in your BBCW post https://forums.hardwarezone.com.sg/...bbcwatcher-club-5855578-93.html#post122390143, you said your 20% is IWDA instead:

Anyway i am following shinys book as i am a noob invester. As the mbke is discontinued, shiny suggested best alternative is posb IS. Is it ok to use posb IS and iwda with scb?
G3b 40
A35 40
Iwda 20

 

[flowerpalms]

Sorry i see wrong

According to shinys book it should be
40% g3b
40% iwda
20% a35

Your 20% allocation is bond (A35/MBH) or equity? Normally, we use equity/bond notation when specifying asset allocation, and we would assume your 20% is bond.

However, in your BBCW post https://forums.hardwarezone.com.sg/...bbcwatcher-club-5855578-93.html#post122390143, you said your 20% is IWDA instead:

 

[MichealScott]

Hey Shiny and fellow advisors! Can I just check if anyone tried those roboadvisors like Stashaway and what you guys think about it??

Sent from Stamford Bridge using GAGT