*Official* Shiny Things club - Part 2

[flowerpalms]

A good starter for you is the POSB RSP

Seeking advice

As I start my investing journey, I'm also keen to start investing for my kids.

I thought it might be a alternative to a savings account, but also useful as an educational tool to teach them about investing and compounding in the future.

Any suggestions on how this could be done?
Likely a simple DCA to an index etf.

Am wondering if I can create different portfolios within IB to do this so that I can differentiate between their portfolio and mine?

 

[klarklar]

No. You've been led astray by people who market option-selling strategies as a "source of income", which they're not: they're a source of risk. Option selling always, always, always ends in a blowup. Don't do it.

Hi Shiny Things,

May I ask do you have professional experience with options as you were working in the financial industry? Have you seen people blowing up with options around you?

Your warning certainly carries more weight with actual professional experience. Very useful to people who are paying thousands to attend courses conducted by trainers using options selling as a means to achieve stable income.

Thank you.

 

[Geeezz]

Hi Shiny Things,

May I ask do you have professional experience with options as you were working in the financial industry? Have you seen people blowing up with options around you?

Your warning certainly carries more weight with actual professional experience. Very useful to people who are paying thousands to attend courses conducted by trainers using options selling as a means to achieve stable income.

Thank you.

it has been ard fr years and there’s a saying ppl who can’t do teach. if option trading is such a profitable thing to do why waste time to teach instead of actually doing it? chances are their main income comes frm teaching instead. so many times ppl actually came to hwz and started thread on beware of xyz course and the funny thing is others nvr learn

 

[cassowary18]

Hi ST,

I'm a 26 year old Singaporean, working for about 1 year now, looking to start my own investment portfolio. I'm looking for long term returns (50 year horizon).

Emergency funds: 6 months salary

Target allocation:
20% bonds
10% ES3 (SPDR STI ETF)
70% VWRA (Vanguard All-World UCITS ETF)

Questions:
1. Thoughts on the asset allocation?
2. Is it a good idea to place all my bond portfolio in CPF SA (planning to do RSTU), or is it better to hedge with MBH?

 

[cheeyen]

You should generally be buying one counter every month - whichever one you're short of compared to your target allocation. So it'll go something like:

Month 1: ES3 or G3B
Month 2: IWDA
Month 3: ES3 or G3B
Month 4: IWDA
Month 5: A35 or MBH.

If you do that for five months, you'll be at an 80/20 allocation. (If your target allocation is lower - say, 60/40 because you're 50 years old - you'd buy A35/MBH in more months, and ES3/G3B/IWDA in fewer months.)

Hi ST, I've read your book and understand that if I were to invest 1k every month in total,I should go for SC to buy the local stocks and IB for IWDA, and that I should buy one counter every month to prevent multiple management fees.

My question is, should I be only buying one counter a month, example 1st month ES3 and 2nd month MBH with SC, 3rd month IWDA with IB in order to balance the allocation, it will not make sense to use IB since I understand IB is only worthwhile if I Invest monthly?

Last but not least,I'm 35 and say if I would like to retire at 65 with 1m, what is the suggested monthly investment? (Not sure how to count). My gf is also curious how is the estimated % growth per year as she's interested too.

Appreciate your advice!

 

[BBCWatcher]

I'm a 26 year old Singaporean, working for about 1 year now, looking to start my own investment portfolio. I'm looking for long term returns (50 year horizon).

Welcome!

Emergency funds: 6 months salary

It's best to think of this pool of funds in terms of "emergency lifestyle continuation," i.e. what you'd need to keep your household running in a non-lavish way (cutting out the entirely discretionary stuff like expensive vacations that you wouldn't take in an emergency).

Also, it's important to make sure genuine insurance necessities are covered, which in my view, for a typical 26 year old in Singapore without dependents, would be a mere two policies: a basic public hospital Integrated Shield plan (Great Eastern's SupremeHealth B Plus fits this role nicely for citizens) and Disability Income Insurance (available from Great Eastern, AIA, and Aviva -- and Aviva also offers MINDEF/SAF DII to those who qualify). Above that pair is optional non-necessity, typically.

OK, moving on....

Target allocation:
20% bonds
10% ES3 (SPDR STI ETF)
70% VWRA (Vanguard All-World UCITS ETF)

Questions:
1. Thoughts on the asset allocation?

Looks good to me. It's appropriate for a non-U.S. person planning or at least inclined to retire in Singapore, which is entirely reasonable for a 26 year old citizen or PR working in Singapore. There's a point of view that favors 40% ES3/40% VWRA (or VWRA alternative), but I prefer the more globally skewed portfolio during most of one's accumulation phase.

2. Is it a good idea to place all my bond portfolio in CPF SA (planning to do RSTU), or is it better to hedge with MBH?

It's up to you, but in terms of CPF top up strategy (for tax relief) I suggest leaning more heavily into your own MediSave Account first. MA top ups must fit within both the CPF Annual Limit and the Basic Healthcare Sum, but they still qualify for tax relief and still earn 4% interest (and bonus interest if applicable). Because of the CPF Annual Limit constraint it can be tougher to top up MA as you progress in your career. MA funds can be useful at any age (and to assist qualified family members with their medical needs), unlike SA funds which are basically locked until age 55. MA funds are paid in full to your CPF nominee(s) should you die much too early, just like any other CPF subaccount. And once your MA hits the Basic Healthcare Sum the compulsory contributions earmarked for MA then "spill over" into your Special Account (unless that's at the Full Retirement Sum; then they spill over into your Ordinary Account). For all those reasons I think early career workers are better off taking their MA top up tax reliefs first.

Another factor to consider is what your savings flow (average monthly amount) will be and whether a "three fund" strategy is too fee/commission expensive in the circumstances because your savings flow is still modest at this stage in your working career. And therefore you'll just focus on a "two fund" strategy for now, with CPF (and your emergency reserve, a portion of which is typically in SSBs) serving as your bond-like leg. Portfolio rebalancing is much less important when you're starting out since you've got so many decades ahead to run, so not having a liquid bond fund yet for rebalancing purposes isn't really a problem.

 

[BBCWatcher]

Last but not least,I'm 35 and say if I would like to retire at 65 with 1m, what is the suggested monthly investment? (Not sure how to count).

Let's suppose your investments enjoy an average net nominal yield of 4%/year over that 30 year period (net of all costs), compounded annually, inclusive of dividends which are all reinvested. And you want to end up with a projected S$1 million nominal 2049 dollars. (Note: S$1 million in 2049 will have substantially less purchasing power than S$1 million in 2019 because of inflation.) With that set of assumptions you'd need to save and invest approximately S$1,455 per month (fixed nominal amount) to reach that goal. (Total nominal savings in this example = S$1,455 * 12 * 30 = S$523,800.)

OK, let's change some of the variables now. If the net nominal yield averages 3.5%/year then you'll need approximately S$1,585 per month. Or, at 4.0%/year average net yield, if you can increase your monthly savings by 1% per year every year, then S$1,292/month (first year amount) would do it.

To run these various "What if?" scenarios just find an online monthly savings calculator at a reputable financial planning Web site. I think Moneysense offers some online calculators, for example. And, by the way, I prefer to run real dollar scenarios, meaning I'm trying to answer questions like "What should I be saving every month (with a particular yield assumption and annual nominal savings increase) in order to obtain a particular number of dollars that will have the purchasing power of X dollars today?" That's a slightly different question than the one you asked.

 

[flowerpalms]

Same for forex and other forms of value investing

it has been ard fr years and there’s a saying ppl who can’t do teach. if option trading is such a profitable thing to do why waste time to teach instead of actually doing it? chances are their main income comes frm teaching instead. so many times ppl actually came to hwz and started thread on beware of xyz course and the funny thing is others nvr learn

 

[cheeyen]

Let's suppose your investments enjoy an average net nominal yield of 4%/year over that 30 year period (net of all costs), compounded annually, inclusive of dividends which are all reinvested. And you want to end up with a projected S$1 million nominal 2049 dollars. (Note: S$1 million in 2049 will have substantially less purchasing power than S$1 million in 2019 because of inflation.) With that set of assumptions you'd need to save and invest approximately S$1,455 per month (fixed nominal amount) to reach that goal. (Total nominal savings in this example = S$1,455 * 12 * 30 = S$523,800.)

OK, let's change some of the variables now. If the net nominal yield averages 3.5%/year then you'll need approximately S$1,585 per month. Or, at 4.0%/year average net yield, if you can increase your monthly savings by 1% per year every year, then S$1,292/month (first year amount) would do it.

To run these various "What if?" scenarios just find an online monthly savings calculator at a reputable financial planning Web site. I think Moneysense offers some online calculators, for example. And, by the way, I prefer to run real dollar scenarios, meaning I'm trying to answer questions like "What should I be saving every month (with a particular yield assumption and annual nominal savings increase) in order to obtain a particular number of dollars that will have the purchasing power of X dollars today?" That's a slightly different question than the one you asked.

Thanks BBCWatcher for your swift reply, just explored MoneySense savings calculator and it works based on what you have said.

Only thing that I would like to clarify is based on ST suggestions to invest in the local/foreign + bonds, what's the average net norminal yield that makes it a worthy investment (so that I can also explain to my partner to start investing), cause I don't remember reading the estimated yield except it is a sound investment (correct me if I am wrong).

 

[IZI092]

Hi All,

Background:
27yo, PR (Malaysian)
Cash: 10000sgd
SSB: 25000sgd
ES3: 22000sgd
IWDA: 7000usd

My cpf amount is still low as I am just nearing the end of 2nd year pr.
Was thinking if it is worth to top up cpf for tax relief or I should just leave it in ssb/investment. 7k top up would save 490 in tax but would not be able to touch it till retirement.

Would you guys choose tax relief or flexibility?

 

[BBCWatcher]

Only thing that I would like to clarify is based on ST suggestions to invest in the local/foreign + bonds, what's the average net norminal yield that makes it a worthy investment (so that I can also explain to my partner to start investing), cause I don't remember reading the estimated yield except it is a sound investment (correct me if I am wrong).

We don't know. That's the future, and the future is not guaranteed. For all we know a giant space rock could be an unwelcome, catastrophic visitor next Tuesday.

I picked a couple percentages that seem like reasonable, conservative forecasts to me. I could certainly be wrong, but it's better to be wrong on the low side (to underestimate the long-term average yield). Also, you may wish to incorporate the effects of skipping some months because you have a bout of unemployment or other such hiccup.

Background:
27yo, PR (Malaysian)
Cash: 10000sgd
SSB: 25000sgd
ES3: 22000sgd
IWDA: 7000usd

Nice.

My cpf amount is still low as I am just nearing the end of 2nd year pr. Was thinking if it is worth to top up cpf for tax relief or I should just leave it in ssb/investment. 7k top up would save 490 in tax but would not be able to touch it till retirement.

Actually you can put some money in your MediSave Account for tax relief, and that's not locked up until age 55. It's reserved for qualified medical spending in Singapore, MediShield Life premiums, and base Integrated Shield plan premiums. Also MediSave dollars will pay your CareShield Life premiums, and you'll start paying CSL premiums from age 30. Right now I assume you'll earn 5% interest on your MediSave Account because you're still within bonus interest territory. So how about topping up your own MediSave Account for tax relief?

You have a little time to decide. As long as your top up is credited within this month (October as I write this), you'll start earning interest on the top up from the first of the next month. Getting the top up done a few business days before the end of the month should give CPF enough time to process and credit your top up.

 

[RMCWMR]

Hi All,

Background:
27yo, PR (Malaysian)
Cash: 10000sgd
SSB: 25000sgd
ES3: 22000sgd
IWDA: 7000usd

My cpf amount is still low as I am just nearing the end of 2nd year pr.
Was thinking if it is worth to top up cpf for tax relief or I should just leave it in ssb/investment. 7k top up would save 490 in tax but would not be able to touch it till retirement.

Would you guys choose tax relief or flexibility?

Wait...PR can buy SSB meh? I thought only open to singaporeans? But your cash balance is seriously low

 

[BBCWatcher]

Wait...PR can buy SSB meh? I thought only open to singaporeans?

Anyone who has an ordinary bank account in Singapore at DBS/POSB, OCBC, or UOB can buy Singapore Savings Bonds. Even former foreign residents of Singapore who still have a bank account from 20+ years ago.

But your cash balance is seriously low

No, not really. SSBs are fully liquid no later than about 5 weeks after you decide you need to tap them, so the cash portion (plus responsible, zero interest maneuvering within credit card billing cycles) only has to last 5 weeks. And that's still excluding the "Bank of Mom" and "Bank of Dad," if/as applicable, and ES3 and IWDA sales if absolutely necessary.

 

[MrCoolStoryBro]

I'm currently investing 1300 per month into IWDA via IB only.

Is it alright for me to just buy IWDA? should i diverse out? Is it bad to just focus on IWDA?

Thank you.

 

[flowerpalms]

You can also diversity to ES3 and MBH

I'm currently investing 1300 per month into IWDA via IB only.

Is it alright for me to just buy IWDA? should i diverse out? Is it bad to just focus on IWDA?

Thank you.

 

[ftpofmpo]

Do you think it's better to rent in singapore and park the savings in stocks for the average local in singapore? the home ownership idea aka long term lease seems to be oversold

 

[Shiny Things]

S=As I start my investing journey, I'm also keen to start investing for my kids.

I thought it might be a alternative to a savings account, but also useful as an educational tool to teach them about investing and compounding in the future. Any suggestions on how this could be done? Likely a simple DCA to an index etf.

Oh man yes I love this idea. If you’re doing it for a kid, you could just use POSB IS to buy stock and bond index ETFs, and skip the IWDA bit to make it easier.

Am wondering if I can create different portfolios within IB to do this so that I can differentiate between their portfolio and mine?

IB does have a friends-and-family account setup, but it’s kind of a pain in the ass and designed for professional investors. I wouldn’t bother.

May I ask do you have professional experience with options as you were working in the financial industry? Have you seen people blowing up with options around you?

Oh my, yes. I’ve even done a bit of blowing up myself: my single worst day in my career (mid-six-figures euro, if you’re wondering; I almost always traded from the long side, so I didn’t see many big one-off losses) was a short NZDUSD options position that went HORRIBLY f*cking wrong.

Maybe when it gets to the 10th anniversary in late 2021 I’ll get a few drinks into me and tweet that particular story… the only consolation is that the hedge fund that did it to me is no longer around.

Moral of the story: never sell options. Leave that to the pros.

HQuestions:
1. Thoughts on the asset allocation?
2. Is it a good idea to place all my bond portfolio in CPF SA (planning to do RSTU), or is it better to hedge with MBH?

1 - I think it’s a little light on Singapore stocks. Also, how are you planning to scale down your stock allocation as you get older?
2 - Yeah, CPF-SA (up to the maximum amount) is a fine option for your bond component.

I'm currently investing 1300 per month into IWDA via IB only.

Is it alright for me to just buy IWDA? should i diverse out?

Yes. You want some diversification into local stocks; and you want a bond allocation as well. MBH and ES3 are not just there to look pretty.

Do you think it's better to rent in singapore and park the savings in stocks for the average local in singapore? the home ownership idea aka long term lease seems to be oversold

Ooohhhh, this is a touchy subject even over here in the states.

My opinion on this topic is definitely not for everyone, and it's absolutely influenced by how much and how far I've moved house in my life - but I tend to think that if you don't need the stability of owning a home, and you want to live in big cities where the opportunities (and the expensive houses) are, then there's no reason to own a home. A primary residence is not an investment.

This changes a bit if you want to live in a less popular town—say Sacramento or Arlington (where the rental yields are around 7% gross) or an ass-end-of-nowhere town in Australia where the rental yields are >10% because nobody in their right mind wants to rent there. In one of those towns, it might make sense to buy. But most of the time, it doesn't.

 

[BBCWatcher]

A few more reasons you might buy a home — er, rent on a 99 year leasehold:

1. You’re not going to save much, or enough, except with a mortgage bill to pay and the threat of losing your home to foreclosure. Some people just don’t have the discipline to save otherwise.

2. If there’s a tax or other government incentive to do so. In Singapore, if you’re relatively far away from age 55 and have reached the Full Retirement Sum in your Special Account, you may have Ordinary Account funds piling up. A home purchase is one possible outlet for those particular dollars. HDB BTOs are still quite compelling as another example (government subsidies).

3. You want to outfit your residence a particular way that’s simply not available otherwise.

4. You just don’t care about whether it makes financial sense in pure mathematical terms, and you can afford it.

 

[cassowary18]

Also, it's important to make sure genuine insurance necessities are covered

Yes!! Insurance is important too. My insurance needs are mostly met by riders to the SAF Group Term Life Insurance plan. It isn't perfect, but it gets most of my needs covered. In terms of medical insurance, I plan to rely on just Medishield Life (since if I get hospitalised I don't plan to stay in higher than B2 ward).

It's up to you, but in terms of CPF top up strategy (for tax relief) I suggest leaning more heavily into your own MediSave Account first.

Good idea. Thanks for the suggestion!

Another factor to consider is what your savings flow (average monthly amount) will be and whether a "three fund" strategy is too fee/commission expensive in the circumstances.

I plan to use Standard Chartered to invest quarterly into VWRA; I chose a single global fund rather than two funds (e.g. SWRD/IWDA and EIMI) to cut down on sales commission. ES3 through Kristal.AI which has no sales commission. If I invest more frequently then I will switch to Interactive Brokers.

1 - I think it’s a little light on Singapore stocks.

My initial asset allocation was equal amount on ES3 and VWRA, but I read that it's better to invest more heavily in global stocks to reduce geographical risk, so I allocated more to VWRA. Also, I feel that there is limited growth potential in Straits Times Index. As a 26-year-old, I think I would need more growth stocks.

Also, how are you planning to scale down your stock allocation as you get older?

Probably going to stick with the "110 minus your age" rule; will max out CPF Basic Healthcare Sum and Full Retirement Sum first before looking for bond funds

2 - Yeah, CPF-SA (up to the maximum amount) is a fine option for your bond component.

As per BBCWatcher's suggestion, will look to top up Medisave first before SA!

 

[MichealScott]

Hey guys, about to buy IWDA using IBKR. Just wanna check that, do I have to manually buy the stocks every month? Or can I just set a fixed amt to buy it monthly for me like POSB IS?? Thanks!