*Official* Shiny Things club - Part 2

[Shiny Things]

Hi Shiny, thanks for the reply. So the message is it is overly conservative? And certainly the fees are .

Exactly right.

 

[evonne_chua]

Today is the first day I trade using SC for IWDA

can tell me if I did everything correct?

1. I transfer USD2800 to the USD trading account

2. then I go trading account I search for IWDA, and buy 49 IWDA, around USD 2837

Then I select Buy and order type I put limit, and valid until day

is it correct?

so now what will happen? just wait until it deduct?

 

[Geeezz]

if the order is ack. then yes. just wait fr the transaction to go thru if thr is a match. but relax, the uk market is still nt up yet

 

[flowerpalms]

You are right with limit order but i hope you also put a few cents above ur buying price in case the price moves before ur order gets filled.

Remember it is "not more than"

Today is the first day I trade using SC for IWDA

can tell me if I did everything correct?

1. I transfer USD2800 to the USD trading account

2. then I go trading account I search for IWDA, and buy 49 IWDA, around USD 2837

Then I select Buy and order type I put limit, and valid until day

is it correct?

so now what will happen? just wait until it deduct?

 

[FnangB]

Actually for the 0.75% there is a catch, I just found out that the max you can put inside this account (Livret A) is 23k.. (in 2010 the rate was 4% btw..)

They don't seem crazy as a choice for your "bonds" allocation, but I think you'd still do better owning a mix of IEAC LN (the iShares EUR investment-grade corp bond ETF) and HIGH (the same thing, but with high-yield bonds). The fees will definitely be lower, at least.

I started to dig in to that thank you, and from what I understood, because ETF bonds don't have a maturity date (they keep buying / selling) they can loose money.
Where if you hold a bond 2% and the rate rise 5%, the bond price will decline but in the end if you keep it until maturity you still make 2% (if there is no default from the Corp / gov).
So, while digging for infos I've found out about "Target Maturity ETF bonds" which are fund in which all bonds have the same maturity date and they run the fund until they expire.
Taking away the potential loss from selling bonds before maturity.. It's sounds too good to be true, what's the catch ? maybe if investor withdraw before the end ?

Are you allowed to cycle funds through these accounts, and does that make sense? In other words, you push euro into one end, and some greater number of euro pop out the other end 8 years later that you can then reinvest in a lower cost way? And you get the full tax benefit that way?

Yep, that's one trick, withdraw the yearly limit not taxed and put it back in. As we have heavy tax, we have to find way to bypass . Like for example we can open another kind of account (PEA) which is limited to 150k euros and ""only"" 17.4% tax on it, but the counterpart is you can only invest in French / Euro stocks. The way to bypass this one is some ETF like CW8 by Amundi does a synthetic replication of MSCI world (0.38% mgnt fees) because Amundi is French the ETF is not physical but buy swap you can have it .
This way you can buy it without needing a classic brokerage account (30% tax).

I'm also a little confused how you would get a tax benefit as a non-U.S. person who is resident in Singapore paying no tax to the French government. Are you referring to a tax benefit that kicks in when you move back to France?

Yep it's when I'll go back there, I'll want to avoid getting full amount, so I opened the accounts and just let them there for later.. Except if I start to use the 0.6% one for the eur fund. ( but Objet Brillant just suggested me some iShare alternatives that i'm checking)

 

[ftpofmpo]

Are equities still good? I believe there're arguments made several times that equities will no longer deliver the gains like they did in the past, which had low hanging fruits to pluck:

post-war boom and development
population growth in countries and societies with rule of law
fall of communism and increasing trade
Rapid productivity growth from automation of machinery and rise of telecommunications (telephones and tv in every office and household)\


It would be tough to match the gains seen in the last century. It would be a long march to attempt to transform southeast asia or africa into places with factors for growth in place like postwar europe. Technology wise, many are always thirty years away and ai is overhyped for many applications, though certainly there will be some growth spots.

With the future exit by baby boomers who are invested in equities and the aforementioned reasons, would it still be reasonable to invest into equities? it seems that bonds might be a better option

 

[ftpofmpo]

Hmm. I'll be blunt, I don't


Ahhhh, there's your answer. The US and UK bonds have a much higher yield than the European bonds, but they come with currency risk (which I bet you they're not hedging away).



Firstly, the yield curve that inverted was the US yield curve, not the Singaporean yield curve, so it doesn't have (much of) an effect on Singapore.

Secondly, yield curve inversions tend to lead the economy, not the stock market. (and it's not even a guaranteed relationship, either.)

Thirdly, yield curve inversions tend to lead a downturn in the economy by anywhere between eighteen months and three years.

Once adjusted for currency risk, would the ssb also yield as low as european bonds?

is it possible for yield curve inversions to revert back to the norm without any downturn in the economy?

 

[confusedsuitguy]

They do, but honestly they're kind of lame. The fees are higher, and the criteria they use for picking "ethical" stocks (depending on what your definition of "ethical" is) tend to be opaque.

I say this to people who come in wanting Sharia-compliant ETFs as well, but... if you really want to filter your portfolio for ethical concerns, you're probably going to have to do it yourself.

Thank you, Shiny. Well noted!

 

[FrostWurm]

I started to dig in to that thank you, and from what I understood, because ETF bonds don't have a maturity date (they keep buying / selling) they can loose money.
Where if you hold a bond 2% and the rate rise 5%, the bond price will decline but in the end if you keep it until maturity you still make 2% (if there is no default from the Corp / gov).
So, while digging for infos I've found out about "Target Maturity ETF bonds" which are fund in which all bonds have the same maturity date and they run the fund until they expire.
Taking away the potential loss from selling bonds before maturity.. It's sounds too good to be true, what's the catch ? maybe if investor withdraw before the end ?

1) Normal (distributing) bond ETF

-Bonds with differing maturities
-Perpetual (because those that "mature" are reinvested)
(note! they don't always wait for for the bonds to mature and collect the principal, depending on the mandate, sometimes the bonds are sold before maturity)
-Proceeds from the bonds "maturing" are reinvested into new bonds.
-if i/r increases (from 2% to 5%):
----value of the ETF drops
----magnitude of the drop depends on the portfolio
----bonds that "mature", will now be reinvested at 5%(higher rate)
----coupons you collect depend on the portfolio, but as you can see, based on the preceding step, they will broadly follow the interest rate environment.


2) Target maturity bond ETF

-Bonds with roughly the same maturity
-Liquidated at maturity date (so no reinvestment)
-Proceeds from the ETF(bonds) "maturing" you will get back in cash, and then you need to find new ways to invest it
-if i/r increases (from 2% to 5%):
----value of the ETF drops
----magnitude of the drop depends on the portfolio
----bonds sit there until maturity and there is no reinvestment
----coupons you collect will always be 2%
-another "minus" point is that the coupon rate in the final year (year of maturity) will always be lower. This happens because not all of the bonds mature on the same day. For example, some mature in January, others mature in December. But what happens to those that mature in January? They usually keep the proceeds in cash-like instruments, so that they can be confident of returning you the principal in December when they liquidate the ETF and distribute the money.

Bond math is not as intuitive because of the number of factors involved, and in this case, is made complicated by the comparison of the perpetuity/non-perpetuity of the ETF.

If you read the info of the target maturity ETFs, some of them have stated that their product may suit you if you know you need money in a certain year. For example, if your daughter will likely go to university in 2025 and you need $50k to pay her school fees, then you can get a five-year target maturity ETF that will liquidate in Dec 2024.

You can also get a normal bond ETF of course, but the issue is that its market value may be less than $50k in 2024. It might be more than $50k which would be great, but if it's less, the consequences will be disastrous.

 

[Shiny Things]

I started to dig in to that thank you, and from what I understood, because ETF bonds don't have a maturity date (they keep buying / selling) they can loose money.
Where if you hold a bond 2% and the rate rise 5%, the bond price will decline but in the end if you keep it until maturity you still make 2% (if there is no default from the Corp / gov).

This is a pretty common question that pops up here. Here's why it's not a problem.

Owning a bond ETF is just like owning a lump of bonds yourself. ETFs don't really actively trade their bonds. The ETF generally holds the bond to maturity, or pretty close to it - so they do exactly what you would do if you held a bond that was trading at a discount, they hold it until maturity and they get the full $100 (or whatever) back.

Then, when they get the money back, they reinvest it in whatever bonds are available at that time (which might have a higher yield). So even though you don't see it, the ETF is always holding onto its bonds and letting them drift back to par.

Some bond ETFs don't work like this: they try to target a particular sector of the curve (e.g. the >20yr sector, or the 7-10yr sector). Those kinds of bond funds could sell bonds at a loss. MBH and A35 aren't those kinds of funds.

(To be totally open, there is a little nuance there: MBH and A35 I think are able to sell their bonds when they get to less than a year to expiry. When you're less than a year out from expiry, the bond should be trading pretty close to par even if rates go up by one or two percentage points.)

Once adjusted for currency risk, would the ssb also yield as low as european bonds?

is it possible for yield curve inversions to revert back to the norm without any downturn in the economy?

1) Yep. There's no free lunch. (Give or take cross-currency basis, which is only ever a few tens of basis points.)

2) Sure.

Are equities still good? I believe there're arguments made several times that equities will no longer deliver the gains like they did in the past:

With the future exit by baby boomers who are invested in equities and the aforementioned reasons, would it still be reasonable to invest into equities? it seems that bonds might be a better option

The youngest baby boomers are 55; the oldest baby boomers are 73. They've already sold most of their equities.

I agree that it's not likely that US equities in the future will do as well as US equities over the last ten years, or from 1983-1999. Those were both pretty huge booms. (Anyone who owned US equities since the low in 2009 has made about 16% per annum, compounded, PLUS about 2% a year in dividends!)

But Singaporean equities, and European equities, and emerging-market equities, are very different matters. That's why it makes sense to have a diversified portfolio.

 

[evonne_chua]

My purchase for IWDA is failed

No amount deducted

I have to submit a buy request again

I put the amount to $58

 

[limster]

My purchase for IWDA is failed

No amount deducted

I have to submit a buy request again

I put the amount to $58

If seller want to sell a share for $58.30 and you want to buy it for $58.00, then no shares will change hands.

Either you increase your bid to $58.30, or if the seller is desperate, he will reduce his offer to $58.00. If no one move, nothing happens.

Hope you realised that? Consider getting Shiny's book "rich by retirement" to learn more

 

[flowerpalms]

Yes get the book

Instructions are in there

If seller want to sell a share for $58.30 and you want to buy it for $58.00, then no shares will change hands.

Either you increase your bid to $58.30, or if the seller is desperate, he will reduce his offer to $58.00. If no one move, nothing happens.

Hope you realised that? Consider getting Shiny's book "rich by retirement" to learn more

 

[Fyero92]

Hello Shiny Things,

I am currently looking to go into investing. Hopefully you can take some time and give me some advice. Your time taken in replying would be greatly appreciated!

I am currently a 27 yr old, have 30k in my bank and looking to take out 10k to invest.

Would be looking to invest 100-300 monthly as well from my income side.

What would be a good option?

I would be looking at long term investments hopefully by 40-50 I will be able to sustain myself with just dividends.

I currently have read that dbs invest saver is a good way to start, along with buying SSBs with my cdp account.

Would you recommend the above 2 ways to invest, as well as the % of my 10k that I would be splitting up for both.

Would be going to borrow the book investing for 20s and 30s as well.

Once again, thank you for taking the time to read my WOT. Would love to hear your opinions!

 

[hwckhs]

My purchase for IWDA is failed

No amount deducted

Following ST's book definitely helps. But, I'll add a few notes, speaking from my own experience learning how to buy stocks last year.

You may not want to place your order outside of trading hours. LSE is open from 8am - 4:30pm London time (daylight saving currently in force), which is 3pm - 11:30pm Singapore time. Both today and yesterday, you placed your order before LSE was open. IWDA can move up or down quite a bit from yesterday's last done price. If you order based on the last price, you will be underbidding if the market opens higher (which happened yesterday), or overbidding if it opens lower.

I suggest that you only place your order when LSE is open. That's when you can see Bid, BVol (Buy Volume), Ask, SVol (Sell Volume) etc. You need to understand these terms (try Google and read). Open SC Online Trading and observe how these values change dynamically during trading hours. If you want to buy instantly, order at (or slightly higher than) Ask price. Do note that values shown in SCB is delayed by up to 15 or 20 minutes. If your order is not executed after a long time (eg. 30 minutes), you may want to revise your bid price, or cancel and place a new order.

Personally, I like to save a little money by bidding at the mid point between Bid and Ask. That makes you the highest bidder, and you just wait for someone to sell you at that price. For an ETF with high volume like IWDA, the order should be fulfilled rather quickly. (I use IBKR's Algo option which adjusts my bid price automatically based on prevailing Bid/Ask. My orders for a similar ETF - VWRD are usually fulfilled within 15 minutes.)

Hope it helps.

 

[limster]

I use IBKR's Algo option which adjusts my bid price automatically based on prevailing Bid/Ask. My orders for a similar ETF - VWRD are usually fulfilled within 15 minutes

I have always wondered whether the algo options (eg adaptive order) work if you don't subscribe to live data.... do you have live data?

would be quite good if IBKR allows you to use their algos (which presumably can access live data) even though you are not paying for live data subscription

 

[hwckhs]

I have always wondered whether the algo options (eg adaptive order) work if you don't subscribe to live data.... do you have live data?

Yes, I have a free subscription to live data, IBKR just offered it to me for an unknown reason. Someone on this forum told me it is only free for 3 months, but I am on my 4th/5th month already and still using it.

I'm unsure if adaptive option is available if you don't have live data. If they allow you to select the adaptive option, I believe (guess) it should work.

 

[maitland]

Hi shiny,

What do you think of asset allocation ETFs/targetdate fund etf(if there are such ETFs)?

And also, what a good way to draw down for a university fees portfolio for my child? For example, my portfolio needs to be 100k in 20 years time, and I don’t want to be caught in a situation where the market crashes 1 year before I need it?

 

[Shiny Things]

Hello Shiny Things,

I am currently a 27 yr old, have 30k in my bank and looking to take out 10k to invest. Would be looking to invest 100-300 monthly as well from my income side. What would be a good option?

I would be looking at long term investments hopefully by 40-50 I will be able to sustain myself with just dividends.

So, to be clear, you’re not going to get to the point where you can live off your dividends by age 50. Let’s be realistic. (“Living off a portfolio” means you need a bit more than 30x the income you expect to take from the portfolio, so unless you’re living like a monk...!)

That said, yes, you’re in a great place to start investing, and the amount you invest will grow as your salary grows, so that’ll make your goal more achievable.

The strategy we recommend in here can be summed up pretty neatly:
1) Open a POSB IS account, and a Standard Chartered trading account;
2) Use the POSB IS account to buy Singaporean stock and bond funds (it directs you into good, low-cost fund options); and use the Stanchart account to buy IWDA, listed in London (which is a fund that owns basically every stock in the world);
3) Buy these three funds, one counter each month, until you reach an allocation that’s “110 minus your age in stocks, and the rest in bonds”. At age 27, that would put you at about 41.5% each in POSB IS’s stock fund (which goes by its stock ticker code, G3B) and IWDA; and 17% in POSB IS’s bond fund (which, also, goes by its stock ticker code, A35).
4) Continue this process. Invest regularly, once a month, one counter per month. Every six months, check your allocations and “rebalance” (sell and buy stocks to get you back to your target allocation (110 minus your age). Your target allocation will change each year as you get older - you’ll end up with less stocks and more bonds, which is the idea.
5) Go to the pub.

I have always wondered whether the algo options (eg adaptive order) work if you don't subscribe to live data.... do you have live data?

would be quite good if IBKR allows you to use their algos (which presumably can access live data) even though you are not paying for live data subscription

So...
1) Yes, if you fire off an order using an algo it’ll use live data (it’d be a bit ridiculous not to!);
2) That said, expecting new investors to figure out how to use an execution algo to save, I dunno, a couple bucks a month is a bit excessive. Posting a bid 1% above the last traded price should usually be enough to get you filled immediately.

Hi shiny,

What do you think of asset allocation ETFs/targetdate fund etf(if there are such ETFs)?

They exist over here in the States (though usually in the form of mutual funds/unit trusts rather than ETFs). I think these are a great idea as long as the management fees are low—for example, Vanguard’s target-date mutual funds charge about 0.15%, which is a great rate.

And also, what a good way to draw down for a university fees portfolio for my child? For example, my portfolio needs to be 100k in 20 years time, and I don’t want to be caught in a situation where the market crashes 1 year before I need it?

This is why it makes sense to have an allocation to bonds in your portfolio. You’re like someone who’s 45 years old, planning to retire at 65 - when you retire, you’ll need to draw down those funds that you’ve been diligently saving.

In fact, that would be the strategy I’d use in your situation. Use a “110 minus your age” rule for your allocation, and pretend that you’re going to be 65 in the year when your kid heads to university. So if that’s 20 years from now, you’d pretend you’re 45 right now, and that would put you 65% in stocks and 35% in bonds. Each year, this would glide a little more toward bonds and a little less toward stocks, until you’re 45% stocks and 55% bonds by the time your kid is in college.

When you draw it down, you’ll just sell the parts of your portfolio that you need to in order to keep your allocation at its target (45/55 stocks/bonds, remember).

 

[candy crush]

If seller want to sell a share for $58.30 and you want to buy it for $58.00, then no shares will change hands.

Either you increase your bid to $58.30, or if the seller is desperate, he will reduce his offer to $58.00. If no one move, nothing happens.

Hope you realised that? Consider getting Shiny's book "rich by retirement" to learn more

I think usually he put the buy order and go to sleep le