*Official* Shiny Things club - Part 2

[limster]

if you look at IWDA 3 years total return is only 11% and it is not even recession yet.

buying during recession is a great way to increase the long term return of your portfolio!

 

[hwckhs]

if you look at IWDA 3 years total return is only 11% and it is not even recession yet.

Hmm. Your number does not seem correct...

As of 31/Aug/2019, last 3 years total return is 32.05% (9.71% annualized) - refer to iShares' website. Anyway, 3 years is too short to use as a reference for a 30-years investment, and past performance is not indicative of future results.

 

[Shiny Things]

does it mean I manage to brought it?

"Filled" means that the order has been completed (at least in part). "Filled quantity", in the email confirmation, is the amount you've bought.

One part I dun understand is, how come the money is not deducted from my USD securities account?

Trades take a couple of days to settle. The money will get deducted eventually.

if now I suddenly changed my mind dun want to buy then what should I do?

Your order's already been filled. You own the shares.

I'm guessing you're feeling a bit of buyers' remorse, because you bought something and then the price went down. That's a natural feeling, but it's one you shouldn't act on. Don't forget, you're going to be buying more next month, and the month after, etc. etc. etc... so if the price goes down, you'll actually be buying more at a lower price.

And if the price goes up (don't forget, you can't predict whether the price will go down or up!), then you should be happy because you've bought some and the price went up.

That said, is there any other good dividend growth US stocks that anyone can recommend?

I'm gonna reject the premise of your question. Assuming you're not already retired and living off the interest, why do you care about dividends at all?

So i have calculated that I would need 1.5M to retire at age 60.

[...]

If i invest $1000/month and reinvest for 30 years on both ETF (STI and IWDA) and Bonds (MBH), putting it at a safe return of 6%.
I will get $1,413,070.02 by 60 years old.

Is this calculation correct ? Because i have no way to know the exact return for each assets, i had it set at 6% to be in the middle.

Yeah. I had trouble replicating this, then I realised you're increasing the deposit by 3% each year.

Try it with a slightly more conservative return assumption - if you can hit your goal on a 4-5% return instead of a 6% return, then you're in very good shape.

 

[flowerpalms]

Yes! And when you do DCA you are buying more at cheaper prices!

buying during recession is a great way to increase the long term return of your portfolio!

 

[Shiny Things]

Things You Don't Need To Freak Out About: Repo Rates

Today in our continuing series of Things You Don't Need To Freak Out About: repos! What are they? Why are interest rates skyrocketing? Should I hide all my cash under the mattress? Why are repos, as the kids say, "lit"?

This WSJ article is a pretty good recap of what's happened today.

Now, disclaimer here: this stuff is horrifically esoteric, and I've never actually done this stuff myself (I did all my overnight funding through FX swaps). I may screw up some of the details, so you'll just have to take it from me that this stuff generally works fine.

One thing you have to do, if you are a bank, is to make sure that you have enough money to handle all your incoming and outgoing payments. You might raise money by selling shares; by issuing some bonds; by taking on some new customer deposits; or by borrowing money from other places that have money.

In America, a common way for banks to raise money for extremely short periods of time (generally overnight) is the "repo" market - short for "repurchase". A repo transaction is just a secured loan: a bank borrows money from (usually) a money-market fund, and in return hands the MMF a pile of treasury bonds or bills or whatever. The next morning, the bank returns the money and gets the bonds back. (If the bank does a Lehman sometime between day zero and day one, the money-market fund gets to keep the bonds.)

The interest rate on these repo transactions is usually pretty boring. It's, give or take, within a few basis points of the Fed Funds rate (the benchmark rate that you hear about when the Fed "cuts rates" or "raises rates").

What happened these last few days was, basically, that the banking system found itself unusually short of cash. There was the usual amount of demand to borrow cash, but the supply of cash for banks to borrow was constrained by a couple of short-term effects:

• The US government sold a lot of bonds a few days ago. The banks that bought those bonds had to pay up on the 16th (a total of about fifty billion dollars);
• At the same time, the 16th was one of the quarterly deadlines for "estimated tax payments"—when taxpayers and corporates have to prepay their tax for the 2019 tax year. That takes a lot of cash as well.

So the banks had to send a lot of cash to the government for the bond auction and for estimated tax payments, which reduced the amount of cash that they could borrow in the repo markets - but there was still the same amount of demand chasing that reduced amount of cash.

That squeezed interest rates higher - and if you think of interest rates as the price of cash, that'll make sense. Go back to economics 101: the same amount of demand chasing less supply means prices go up. The interest rate for an overnight repo borrowing spiked as high as 8% p.a. yesterday, and 10% p.a. today.

Now, this is not great. It makes it tough to manage a bank's treasury and its bond-trading book when repo rates swing around crazily like this.

So the New York Fed stepped in, and deliberately soothed the repo market by offering their own repos. They lent tens of billions of dollars overnight in the repo market, and interest rates dropped back to about 3% p.a.

This is certainly unusual—it's been so long since the Fed did overnight repos that they'd actually forgotten how to do it, and had to try it again—but it's nothing out of the ordinary. The Fed did exactly what they're supposed to do, lending money into the banking system to alleviate a funding squeeze.

The upshot is that this is interesting, and it means interest rates have popped a little higher (basically unwinding the rate cut that they did earlier this year to shut Donny Two Scoops up), but it doesn't have any actual effect on you.

Also, this is the US dollar repo market. It has very little to do with Singaporean dollar interest rates.

Anyone saying you should freak out about repo markets is wrong, and they're trying to scare you.

 

[Geeezz]

if that’s the case won’t the bank try to offer higher interest rate to attract cash in? anyway from what I hv read it looks like a short term thing and eventually things will revert back to what it was

 

[Shiny Things]

if that’s the case won’t the bank try to offer higher interest rate to attract cash in? anyway from what I hv read it looks like a short term thing and eventually things will revert back to what it was

1) They did. Banks paid as high as 8-10% annualised for overnight repo during the day yesterday and today; rates dropped back to 3-ish percent when the Fed stepped in.
2) And yes, this is just a short-term weirdness in the market. It won't affect any of us on here directly, but it's the sort of thing where inevitably people hear about it in the news and wonder "what does this mean for me?".

 

[shun07]

Can I check if I going to buy 720 Sgd worth of IWDA every 3 months. Do I use IB or SC? I had bought 1000 Sgd worth of IWDA in IB but realise that alot of people recommend to use SC. Please advise.

Posted from PCWX using LYA-L29

 

[limster]

Can I check if I going to buy 720 Sgd worth of IWDA every 3 months. Do I use IB or SC? I had bought 1000 Sgd worth of IWDA in IB but realise that alot of people recommend to use SC. Please advise.

Posted from PCWX using LYA-L29

If you don't have the ability to do the calculations yourself, then SCB is more suitable. IB is for more advanced investors.

 

[ftpofmpo]

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

While we are investing our cash into the stock market through dca, who's the main party that's selling the shares, baby boomers offloading them for retirement?

When it's time for our generation to retire, where will the demand for stocks come from, given a shrinking population (with disposable income) and a possible slow down in wealth/value creation from greater protectionism/ lower global integration efforts.

 

[shun07]

If you don't have the ability to do the calculations yourself, then SCB is more suitable. IB is for more advanced investors.

Ok thanks!

Posted from PCWX using LYA-L29

 

[IndianChief]

Been buying iwda + eimi for past 3 years

This month bought vwra for first time... how much difference would the additional 0.05 % in expense make in the long run? Material enough to stick with iwda + eimi?

Side note - I qualify for no minimum 10 usd commission in IB... so there's a monthly cost savings of 2usd by buying vwra since its only 1 etf

 

[Converged]

Been buying iwda + eimi for past 3 years

This month bought vwra for first time... how much difference would the additional 0.05 % in expense make in the long run? Material enough to stick with iwda + eimi?

Side note - I qualify for no minimum 10 usd commission in IB... so there's a monthly cost savings of 2usd by buying vwra since its only 1 etf

Woah chief so long nvr see u at edmw

Sent from DTF using GAGT

 

[flowerpalms]

Less than 1k = SCB
1k and above = IB

Can I check if I going to buy 720 Sgd worth of IWDA every 3 months. Do I use IB or SC? I had bought 1000 Sgd worth of IWDA in IB but realise that alot of people recommend to use SC. Please advise.

Posted from PCWX using LYA-L29

 

[candy crush]

I brought the IWDA at the price $58.65

why the average price is show as $58.87? is it because of transaction cost?

 

[flowerpalms]

Yes the average price you see there includes the fees...

I brought the IWDA at the price $58.65

why the average price is show as $58.87? is it because of transaction cost?

 

[Geeezz]

While we are investing our cash into the stock market through dca, who's the main party that's selling the shares, baby boomers offloading them for retirement?

When it's time for our generation to retire, where will the demand for stocks come from, given a shrinking population (with disposable income) and a possible slow down in wealth/value creation from greater protectionism/ lower global integration efforts.

aww our money will be stuck selling all my holdings nao

edit: on a serious note, this isn't sth to worry abt. there will be fund houses, banks etc providing liquidity to the market. try not to read too much into it, besides, how many people actually are invested into the market currently? imo nt much.

mathematically with a population of 1,000,000 but only 1% invest vs a population of 500,000 with 10% invested. the later provides more liquidity isn't it?

 

[Shiny Things]

Can I check if I going to buy 720 Sgd worth of IWDA every 3 months. Do I use IB or SC? I had bought 1000 Sgd worth of IWDA in IB but realise that alot of people recommend to use SC. Please advise.

On the one hand, you're probably too small to get real value out of IBKR - but since you've got the account open anyway you might as well stick to it. It's not the end of the world either way.

While we are investing our cash into the stock market through dca, who's the main party that's selling the shares, baby boomers offloading them for retirement?

Depends on the market you're looking at. The US market is, interestingly, short of sellers: corporations are on the whole flush with cash and buying back their stock. In the Singaporean market, I haven't actually looked at this, but my guess would be that retail investors are net buyers: all that cash that you're all saving has to go somewhere!

When it's time for our generation to retire, where will the demand for stocks come from, given a shrinking population (with disposable income) and a possible slow down in wealth/value creation from greater protectionism/ lower global integration efforts.

I'm assuming this is a rhetorical question?

Anyway: the answer is there will always be buyers. If anything, I think Singaporean retail investors in twenty years are likely to be more willing to buy equities, given the retail market's distate for equities after the S-chip scandal, the Liongold/Asiasons fiasco, etc etc etc, and if you think low yields are going to continue ad infinitum then that makes equities (with their higher dividends) even more appealing.

Been buying iwda + eimi for past 3 years

This month bought vwra for first time... how much difference would the additional 0.05 % in expense make in the long run? Material enough to stick with iwda + eimi?

It's not that much either way. I'd go for VWRA in your case.

 

[phingfanren]

Share Builder's Plan VS Normal Brokers (DBSVick)

Hi Shiny Things,

Read the book rich by retirement and started looking into IWDA, ES3 and MBH investments.

I wanted to practice dollar cost averaging by investing monthly, hence made the following comparison and found that POEMS Share Builder's Plan may make sense to me, with a savings of 175.76 trading fees a year.

Does my comparison makes sense? Anything that I have missed or should take into consideration?


Assumptions:
$1,000 monthly investment, broke into 2 counters: ES3 and MBH

DBS Vickers
Yearly Trading Fee = $10.70x2x12 = $256.8

POEMS SBP
Yearly Trading Fee = $6.42 (for 2 counters Investment Amount ≤ $1000) x12 = $77.04
Dividend Handling Fee = $1x4 times a year = $4
Total Yearly Trading Fee = $81.04

Difference in Yearly Trading Fee
175.76

 

[IndianChief]

Is vwra volume a concern? 292 units traded today while iwda has traded 102k units