*Official* Shiny Things club - Part 2

[flowerpalms]

IB is manual

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!

 

[Okenba]

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.

Thanks ST.
Quick question.
Any reason why you mentioned POSB IB?
Or any RSS will do. (Depending on what stocks and fees involved...)
I'm currently thinking of Poems...

 

[JadenQ]

Hi Shiny,

I've seen your RBR book and read through a good amount of suggestions in this thread, but it seems like most of the investment strategies are centred around monthly DCA of smaller amounts.

I'm in a bit of a peculiar spot at the moment, with a lump sum around ~200k SGD spread between a high interest rate (2-2.5%) savings account (34.5%) and SSBs (2%+) (65.5%). I put my funds into those investment vehicles first (still a student without salary income) to read up in order to decide what strategy is best moving forward. I want to gradually shift into the 3 fund portfolio as described in your book.

However, I'm not very sure what is the best way to go about doing this. If I go with only DCA-ing around $1000 a month, this would take way too long (~15 years) and most of the funds would sit there at only ~2%. In that case, what would be an appropriate amount X to split into Y months to "DCA" into ES3, IWDA and MBH?

Additionally, because I'm still currently a student, it's hard for me to anticipate what would be the suitable amount that I would be DCA-ing in the future when I start work. So in terms of brokerage choice (POSB IS/SCB/IB), it seems like at least for the purpose of shifting the above mentioned funds into ETFs/bonds, I should go with SCB (local) + IB (global). However, I'm not sure if that would still be the best way after I start work since if my monthly investment is not that high it seems that I should be using POSB IS + SCB instead (due to minimum transaction fees, inactivity fees etc).

One option I am considering is to prioritise on hitting the 100k (I assume this is USD, correct me if I'm wrong) minimum on IB to avoid inactivity fee. This would leave me a bit skewed on the global ETF side (66:33 ratio) but I think it is fine since once I start work I can prioritise on investing into local ETF/bonds first to reach the 50:50 ratio.

Hope to be able to get some advice on this as I'm completely new to investing. Thanks!

 

[crystalnox]

Thanks ST.
Quick question.
Any reason why you mentioned POSB IB?
Or any RSS will do. (Depending on what stocks and fees involved...)
I'm currently thinking of Poems...

Lowest cost for small sum investing.
Poems levies many fees, even ocbc is cheaper than them. https://www.poems.com.sg/rsp/#demodrop7

 

[cassowary18]

So in terms of brokerage choice (POSB IS/SCB/IB), it seems like at least for the purpose of shifting the above mentioned funds into ETFs/bonds, I should go with SCB (local) + IB (global). However, I'm not sure if that would still be the best way after I start work since if my monthly investment is not that high it seems that I should be using POSB IS + SCB instead (due to minimum transaction fees, inactivity fees etc)

For those under 25, IB has a discounted minimum monthly activity fee of USD 3 (instead of USD 10).

For local counters, have you considered DBS Vickers Cash Upfront or Saxo, instead of SCB? All 3 have a minimum commission of $10, but you're unlikely to go above it at your age. Saxo has the lowest percentage commission fee out of the 3 (0.08%) making it the best for long term investment. DBS Vickers Cash Upfront places your equity in your CDP account instead of a custodian account, which gives you better control over your stocks.

But overall, for local counters, you should start with POSB IS especially if the sum is small, because the commission you'll pay will be lower.

 

[BBCWatcher]

For those under 25, IB has a discounted minimum monthly activity fee of USD 3 (instead of USD 10).

It’s under age 26.

Here’s a bit of trivia: in the U.S., as long as you’re under age 26, you’re allowed to stay enrolled as a household member on your parents’ health insurance plan, as long as they agree of course and even (with some caveats) if you don’t live under the same roof. Interactive Brokers is following that same age limit in its fee schedule, worldwide.

For local counters, have you considered DBS Vickers Cash Upfront or Saxo, instead of SCB?

DBS Vickers Cash Upfront can occasionally be interesting for “batched up” MBH and/or ES3 orders particularly since you might get a little more bonus interest in certain months if you have a DBS Multiplier account. Don’t bend yourself into a pretzel over this stuff, though. That sort of factor is just a tie breaker if it applies.

 

[EmporioArmani]

Hi ST, if I bought your ebook previously, and i know you have made updates to it, i will have to buy it again right?

Sent from Xiaomi MI 8 using GAGT

 

[cfleee]

This is something that some people seem to be missing out.

But what puzzles me is that this is essentially a maths question. All you need to calculate this yourself are:
(1) The commission rates (easily available on the websites) (including the minimums)
(2) The Fx spread (not on their website, have to read HWZ, for ease of reference call it 0% for IBKR and 0.4% for SCB).
(3) Your expected buying pattern

If an investor is unable to calculate which brokerage is cheaper for his/her own buying pattern, then perhaps stick with SCB, because I wouldn't recommend IBKR for someone who is unable to calculate the above (Yes, I managed to do the calculations myself before opening an IBKR account and I don't have a maths degree ).

Someone without a computer science degree could reduce (1)-(3) into an excel spreadsheet where you key in your annual buying pattern and it can tell you whether to pick SCB or IB... (you could do that for the endless tiered or fixed questions too....) If Shiny has a book website, maybe he should put something like that on the site.

@cfleee shared his spreadsheet not long ago - at the top of page 441.

https://forums.hardwarezone.com.sg/...*-shiny-things-club-part-2-a-5813566-441.html

I've just made some tweaks to it, including adding IBKR Fixed, and moving the buy freq up into a comparison table. I squinted at the annualized effective cost calculation and I think it works for 5-month frequency (for the IWDA/ES3/IWDA/ES3/A35 type of 5-month cycle that ST sometimes recommends), but I'm thoroughly uncaffeinated right now so I'm not sure why I thought it wouldn't work two months ago.

Here is the link again for convenience: https://docs.google.com/spreadsheets/d/1BqIhbYNJF7VJbtj6PS08Csbyx1s4vs_03Kvh0pPRUCI/edit?usp=sharing

I think there are always intangibles that we can't address so easily though, because different folks value them very differently -- some folks really value CDP vs custodian brokers, some folks ignore custody and dividend fees, some are more comfortable with new robo-type platforms, some prefer not fiddling with RSP settings with specific deadlines every month...

Like I consistently have problems submitting SSB orders on time thanks to their silly operating hours not intersecting with my sit-down-at-non-work-computer time, so if I used RSPs I'd want to set it and forget it instead of fiddling with it on a calendar schedule. Others might legitly be ok with logging in to i-banking on the 12th of every month or whatever and changing a value, and that's good for them, but I think I'll lose a few dollars to save me the stress of timing things.

If you're buying less frequently than every month, and you're doing less than about $1000 at a clip, it's StanChart.

If you're buying every month, OR you're doing > $1,000 a clip, it's Interactive Brokers.

This confuses me a little -- "OR you're doing > $1,000 a clip" seems to suggest that if you're allocating $400/mth to IWDA, and you batch it up into quarters to $1200/quarter, then you should use IBKR? For that case, SCB would be around $80/year (4x USD 10.70 + forex spread on $4800) while IBKR would be $160/year (12x USD 10), so it's a bit odd.

It seems like the crossover point should be closer to $1000/mth into IWDA, not $1000 per transaction or $1000 per month? I don't have the 3rd ed. of the book to check but the 2nd ed. seems to refer to $1000 per month, at least based on my reading of it.

That aside, this rule of thumb also leaves it wide open for the follow-up FAQ -- when should you buy less frequently than every month? What if we inverted the framing: if your monthly IWDA allocation is $1000 or more, buy IWDA every month through IBKR; otherwise, buy IWDA less frequently through SC, frequency decided by whatever gets the cost below x%.

That might squash at least one FAQ, so some people will ask the next FAQ about chionging to IBKR's USD 100k, but at least then that's a more interesting asset allocation / risk question than a fees question...

 

[dullthings]

I've just made some tweaks to it, including adding IBKR Fixed, and moving the buy freq up into a comparison table. I squinted at the annualized effective cost calculation and I think it works for 5-month frequency (for the IWDA/ES3/IWDA/ES3/A35 type of 5-month cycle that ST sometimes recommends), but I'm thoroughly uncaffeinated right now so I'm not sure why I thought it wouldn't work two months ago.

Here is the link again for convenience: https://docs.google.com/spreadsheets/d/1BqIhbYNJF7VJbtj6PS08Csbyx1s4vs_03Kvh0pPRUCI/edit?usp=sharing

I think there are always intangibles that we can't address so easily though, because different folks value them very differently -- some folks really value CDP vs custodian brokers, some folks ignore custody and dividend fees, some are more comfortable with new robo-type platforms, some prefer not fiddling with RSP settings with specific deadlines every month...

Like I consistently have problems submitting SSB orders on time thanks to their silly operating hours not intersecting with my sit-down-at-non-work-computer time, so if I used RSPs I'd want to set it and forget it instead of fiddling with it on a calendar schedule. Others might legitly be ok with logging in to i-banking on the 12th of every month or whatever and changing a value, and that's good for them, but I think I'll lose a few dollars to save me the stress of timing things.



This confuses me a little -- "OR you're doing > $1,000 a clip" seems to suggest that if you're allocating $400/mth to IWDA, and you batch it up into quarters to $1200/quarter, then you should use IBKR? For that case, SCB would be around $80/year (4x USD 10.70 + forex spread on $4800) while IBKR would be $160/year (12x USD 10), so it's a bit odd.

It seems like the crossover point should be closer to $1000/mth into IWDA, not $1000 per transaction or $1000 per month? I don't have the 3rd ed. of the book to check but the 2nd ed. seems to refer to $1000 per month, at least based on my reading of it.

That aside, this rule of thumb also leaves it wide open for the follow-up FAQ -- when should you buy less frequently than every month? What if we inverted the framing: if your monthly IWDA allocation is $1000 or more, buy IWDA every month through IBKR; otherwise, buy IWDA less frequently through SC, frequency decided by whatever gets the cost below x%.

That might squash at least one FAQ, so some people will ask the next FAQ about chionging to IBKR's USD 100k, but at least then that's a more interesting asset allocation / risk question than a fees question...

Thanks cfleee for the spreadsheet!

I am still new to these things, and have also been trying to understand more precisely when it makes sense to use IBKR if the account value is below USD 100K. It took me a long while to look thru your spreadsheet to realise that I should have been looking at the Europe fees, not Singapore fees chart.

So the breakeven point to use IBKR instead of SC is USD 1000 per month of IWDA. And to 'breakeven' the USD 10 per month of minimum account fees (accounts below USD 100K), we need to buy SGD 14K of IWDA per month.

May I ask if there're important things to note between using the Trader Workstation, the IBKR website, or the IBKR iOS app? The website seems appears less daunting to a newbie.

IWDA LSEETF stock is the correct one to buy, right? Not IWDA AEB (i found an earlier post that AEB is amsterdam based).

While on the IBKR website, I encountered an error "you do not have trading permissions for this instrument type... update trading permissions from the trade configuration page in account management". Do i just go to Settings > Account Settings > Trading Permissions and Experiences and tick everything under US and Europe?

 

[flowerpalms]

LSEETF is the correct one

You will need to enable your trading permission before buying IWDA

Thanks cfleee for the spreadsheet!

I am still new to these things, and have also been trying to understand more precisely when it makes sense to use IBKR if the account value is below USD 100K. It took me a long while to look thru your spreadsheet to realise that I should have been looking at the Europe fees, not Singapore fees chart.

So the breakeven point to use IBKR instead of SC is USD 1000 per month of IWDA. And to 'breakeven' the USD 10 per month of minimum account fees (accounts below USD 100K), we need to buy SGD 14K of IWDA per month.

May I ask if there're important things to note between using the Trader Workstation, the IBKR website, or the IBKR iOS app? The website seems appears less daunting to a newbie.

IWDA LSEETF stock is the correct one to buy, right? Not IWDA AEB (i found an earlier post that AEB is amsterdam based).

While on the IBKR website, I encountered an error "you do not have trading permissions for this instrument type... update trading permissions from the trade configuration page in account management". Do i just go to Settings > Account Settings > Trading Permissions and Experiences and tick everything under US and Europe?

 

[cfleee]

I'm going to butt in on this question because it looks interesting.

I'm in a bit of a peculiar spot at the moment, with a lump sum around ~200k SGD spread between a high interest rate (2-2.5%) savings account (34.5%) and SSBs (2%+) (65.5%). I put my funds into those investment vehicles first (still a student without salary income) to read up in order to decide what strategy is best moving forward. I want to gradually shift into the 3 fund portfolio as described in your book.

Just to be clear, this is already after you factor out your emergency fund (potentially partially held in SSBs), and money meant for the medium term, so this amount is indeed all for long-term investing?

(cue obligatory mention of hospitalisation insurance, term life insurance if you have dependents, and BBCWatcher usually mentions disability income insurance )

However, I'm not very sure what is the best way to go about doing this. If I go with only DCA-ing around $1000 a month, this would take way too long (~15 years) and most of the funds would sit there at only ~2%. In that case, what would be an appropriate amount X to split into Y months to "DCA" into ES3, IWDA and MBH?

Y is simply as few months are you're comfortable with. It sounds like you think 180 months is a lot, 1 month might be too little, so just pick a number in between. I think the book says 1 lump and that realistically nobody will do it that way so perhaps over 4 months; I think ST has recently mentioned in this thread 3-4 or maaaybe 6 months at a stretch.

The thing about this question is that even if everyone suggests some magic number like 4, and you don't like it and won't be able to sleep well if you do that, there's no point in getting more advice to psycho yourself, just pick whatever you're comfortable with. There are better things to spend your energy on or lose sleep over.

Additionally, because I'm still currently a student, it's hard for me to anticipate what would be the suitable amount that I would be DCA-ing in the future when I start work. So in terms of brokerage choice (POSB IS/SCB/IB), it seems like at least for the purpose of shifting the above mentioned funds into ETFs/bonds, I should go with SCB (local) + IB (global). However, I'm not sure if that would still be the best way after I start work since if my monthly investment is not that high it seems that I should be using POSB IS + SCB instead (due to minimum transaction fees, inactivity fees etc).

You can actually compute this with some assumptions. After you figure out how you want to DCA your lump sum in, compute the cost of using IBKR vs SCB, at least until the point that you expect to start earning a salary and be able to resume DCA.

At SCB, the calculation is simpler, it should be the forex spread (0.4%?) plus the trade commissions for however many parts the lump sum is split.

At IBKR, you have the very low forex commissions (the min USD 2.00 commission covers up to a USD 100k conversion!) and trade costs for your lump sum chunks (for these amounts, you should check both Tiered and Fixed pricing). Then "top up" any difference between that and the 0 minimum monthly commission for first three months, reduced minimum monthly commission of USD 3 before you reach age 26, then maybe min monthly commissions of USD 10 after that (depending on the below question).

Go for whichever option costs less.

Or you could just go for IBKR on the basis that you'll be in pretty good starting position for the USD 100k mark. Hmm.

After that you need to do the same type of cost calculations for POSB-IS vs SCB vs the other options, depending on your lump sum sizes? The advice in the book and this thread is essentially pre-calculated advice for DCA of certain sizes, so you really just need to do the same sums yourself. I think what's obvious is the 0.82% for POSB-IS (and RSPs in general) is really really really not meant for large lumps, so you must look at other methods.

One option I am considering is to prioritise on hitting the 100k (I assume this is USD, correct me if I'm wrong) minimum on IB to avoid inactivity fee. This would leave me a bit skewed on the global ETF side (66:33 ratio) but I think it is fine since once I start work I can prioritise on investing into local ETF/bonds first to reach the 50:50 ratio.

I'm curious about this too, I think it's been some time since this was last discussed in the thread.

 

[Rknight]

So i just started using IB to buy IWDA.
I got the message:

"Confirm Mandatory Cap Price

To avoid trading at a price that is not consistent with a fair and orderly market, IB may set a cap (for a buy order) or floor (for a sell order).
THIS MAY CAUSE AN ORDER THAT WOULD OTHERWISE BE MARKETABLE NOT TO BE TRADED,

Cancel or OK"

I clicked OK, and nothing happens.

 

[cassowary18]

It’s under age 26.

Ah yes, my bad.

DBS Vickers Cash Upfront can occasionally be interesting for “batched up” MBH and/or ES3 orders particularly since you might get a little more bonus interest in certain months if you have a DBS Multiplier account. Don’t bend yourself into a pretzel over this stuff, though. That sort of factor is just a tie breaker if it applies.

POSB IS works for the Multiplier investment requirement too. Alternative, purchase SSB for 6 consecutive months and voila, you have a bond ladder that pays out dividends (which fulfills the investment requirement too).

But I agree. For local, it would be a tie for me between DBS Vickers Cash Upfront, Saxo and SCB. All 3 have minimum commissions of $10 but:

DBS Vickers Cash Upfront for CDA deposit (the other 2 are custodian)
Saxo for rock bottom % fees
SCB for consolidating local and overseas counters, and hitting the 200K AUM for priority banking and hence waiving the fees (might seem far, but gotta start somewhere right?)

 

[CuriousG]

Hi Joshua, I have read your book Rich by Retirement. Very enlightening. Thanks for sharing. Hard to come by one that is tailored for the average Singaporean.

I have some friends who have been advocating the Permanent Portfolio by Harry Browne. They recommend it to use this portfolio approach for retirement. What are your thoughts on this? At least in the Singapore context.

Thanks.

 

[yellownova]

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.

Just a thought: Would it make more sense to hold 100% equities long term if we're discussing this for a kid? The idea that we should diversify as we get older because we are more risk-adverse.

But in this case, a kid has a very high risk tolerance, plus a horizon of at least 10-15 years.

And if it does make sense, would a global etf be better than the STI then?

 

[Okenba]

Just a thought: Would it make more sense to hold 100% equities long term if we're discussing this for a kid? The idea that we should diversify as we get older because we are more risk-adverse.

But in this case, a kid has a very high risk tolerance, plus a horizon of at least 10-15 years.

And if it does make sense, would a global etf be better than the STI then?

I think Shiny is just presenting the easiest low fuss method of regular investing.

I personally would want it to be global equities, but from what I know, there are no regular investment plans for such a situation.

Am considering a Robo that would automate regular investing. The fees probably aren't too different from a RSS with DBS/OCBC and it gives more global exposure.

Still reading up and shopping for opinions/ ideas. Will decide and take action before the year is out.

 

[ChinoGirl]

Noob question.
In a 100% equities portfolio, how do you rebalance the portfolio without a bond component?

 

[revhappy]

Noob question.
In a 100% equities portfolio, how do you rebalance the portfolio without a bond component?

You take on leverage. Example when sp500 is 3000 and you are 100% allocated. When sp500 hits 2500, you can go to 125% allocated.

 

[Prof. Utonium]

Noob question.
In a 100% equities portfolio, how do you rebalance the portfolio without a bond component?

There are different sectors.

In a simple 3 fund, equities tend to be developed and emerging market tracker.

Let's say you allocated 10% to emerging and the rest to 90%. Just ensure that the value of your holdings are balanced as such when you are doing your rebalance for the year.

If you have more sectors, healthcare, reits etc. Same thing applies, follow the ratio you had decided at the start of your investment journey. Allocation ratio doesn't have to be fixed but a good guide to ensure diversification.

 

[thinkpad79]

reading the 2019 version rich by retirement now. thanks a lot for the valuable suggestions. also recommended to my friends as well