Official Shiny Things thread—Part III

[BBCWatcher]

So let's look at the wealth side of the equation. Let's suppose you're age 45 today, you want to retire, and you want to support a S$6,000/month (2020 dollars) lifestyle. How much wealth would you need, today, to assure you won't outlive your savings and that you can cope with 2%/year average inflation?

Well, we have to support about S$9.37 million of total nominal spending as we've just seen. First we need a real growth assumption (an assumption about how much we can reliably grow a diminishing pile of wealth above the 2% inflation rate). So let's suppose we forecast 1.5 percentage points above inflation, i.e. 3.5% nominal. Then if we toss these figures into a retirement calculator it looks like we need about S$3 million of wealth (2020 dollars) to pull this off. In the first year (2020) our $3 million portfolio earns $105,000 nominal (3.5%), which is above the $72,000 year one draw ($6,000/month in 2020 dollars). But the draw increases by 2%/year, and eventually we start drawing from prior nominal gains. Then we eventually start drawing from principal until we've exhausted all wealth.

 

[swan02]

CPF life is the only insurance for me if I want a higher safe withdrawal rate. And Flexi flats are so good value, it’s another form of insurance to me if I start to believe I live forever.

No, that's not quite right. You have to adjust for inflation, and age 90 isn't actually a very good estimate. It looks like roughly 30% of males age 38 today are going to live past 90.

So let's assume you incorporate 2%/year average inflation and age 110 as your assumptions. That's 71 years of spending at $6,000/month (2020 dollars). Add that all up and you'll spend a total of S$5,112,000 in 2020 dollars which equates to about S$11,308,000 in nominal dollars.

My point here is that early retirement math is hard if you're sober and realistic in your forecasting. Let's run those numbers again but with one "small" change: age 45 retirement (7 fewer years of spending). Age 45 is also pretty ridiculous for the vast majority of people, but it's less ridiculous than age 38. So that's 64 years of non-covered spending at $6,000/month (2020 dollars), or S$4,608,000 total (2020 dollars), or about S$9,370,000 total nominal. Yes, that's right, if you work 7 more years on the front side then you reduce your total nominal retirement spending by about S$2 million with these forecast assumptions.

This daunting math also helps explain why I keep harping on the absolute critical importance of insuring your future income potential against disability (Disability Income Insurance). Most people are f**ked in Singapore if they lose their future income earning potential. Don't be f**ked: insure it, at least to a reasonable extent.

 

[farfaraway888]

Margin

hi

for one of my US trade on IB, I think I might have entered into a trade without sufficient USD but I subsequently topped it up. Now for my margin position, it is showing the below instead of being all zero. Does it matter and how do i get it back to zero again?

 

[cassowary18]

Thanks for sharing your experience, & please continue to post such fresh views.

Please ignore those losers here & don't put to heart. I suppose they are jealous of your performance?

LOL are you a clone account? There are plenty of threads to share active investment strategies in SSI. Heck he even has his own fan club thread. In my opinion he's the jealous one, envious of the attention ST is getting.

 

[limster]

HUAT AH! Just look at that 2 days ' graph. **** doesn't even make sense.

Sent from Ilovennp using GAGT

Don't worry, its just a dead cat bounce!

 

[chrisloh65]

US debts is getting worse:

America’s public-pension funding crisis worsens

http://www.economist.com/finance-an...mericas-public-pension-funding-crisis-worsens

US debt crisis coming is just a matter of time!

What does this mean to you and me? Since US debt crisis is US-specific, watch out your exposure to US stock and debt/bond markets and currency, and index ETFs with large US exposure.

 

[Prussia]

Reading Shiny Things' book..
Can't quite decide whether to go with SCB/IB for IWDA - any advice?

For ES3, thinking of DBS Vickers Cash Upfront + sell with another brokerage

 

[polar27]

From a beginner, I can say IB has been easy to set, to transfer funds and to start trading (of course with the good advice from others in the forum ).

IB might be cheaper if DCA-ing every month especially when compared to SB standard acct.

If using IB, keep atleast 2k usd in stocks / cash asserts to enjoy 10usd monthly fee if above 26 y, otherwise anything below attracts 20usd a month. And minimum monthly fees in IB is offset by trade commissions and fx conversion commissions and has a tighter fx spread.

Cant comment on SCB as have not used it before, guess might be more worthwhile if you are doing lump sum say occasionally or have a priority acct.

Reading Shiny Things' book..
Can't quite decide whether to go with SCB/IB for IWDA - any advice?

For ES3, thinking of DBS Vickers Cash Upfront + sell with another brokerage

 

[Prussia]

From a beginner, I can say IB has been easy to set, to transfer funds and to start trading (of course with the good advice from others in the forum ).

IB might be cheaper if DCA-ing every month especially when compared to SB standard acct.

If using IB, keep atleast 2k usd in stocks / cash asserts to enjoy 10usd monthly fee if above 26 y, otherwise anything below attracts 20usd a month. And minimum monthly fees in IB is offset by trade commissions and fx conversion commissions and has a tighter fx spread.

Cant comment on SCB as have not used it before, guess might be more worthwhile if you are doing lump sum say occasionally or have a priority acct.

Thanks for the tips! This is reassuring - will admit that IB was intimidating. Starting with about ~$10k to distribute across the 3 pots, will get to setting up my IB to get some IWDA once my CDP's all done.

 

[CWL84]

Reading Shiny Things' book..
Can't quite decide whether to go with SCB/IB for IWDA - any advice?

For ES3, thinking of DBS Vickers Cash Upfront + sell with another brokerage

For ES3, if you are investing more than $100 per month, you should just go with FSMone regular savings plan. Their low fees beat all other local brokerages by a large margin. Purchase fee: 0.08%, minimum S$1. Selling fee: 0.08%, minimum S$10.

For a more detailed breakdown of their RSP cost: https://betterspider.com/fsm-one-review/

 

[streetfighter]

Thanks for the calculation.

So let's look at the wealth side of the equation. Let's suppose you're age 45 today, you want to retire, and you want to support a S$6,000/month (2020 dollars) lifestyle. How much wealth would you need, today, to assure you won't outlive your savings and that you can cope with 2%/year average inflation?

Well, we have to support about S$9.37 million of total nominal spending as we've just seen. First we need a real growth assumption (an assumption about how much we can reliably grow a diminishing pile of wealth above the 2% inflation rate). So let's suppose we forecast 1.5 percentage points above inflation, i.e. 3.5% nominal. Then if we toss these figures into a retirement calculator it looks like we need about S$3 million of wealth (2020 dollars) to pull this off. In the first year (2020) our $3 million portfolio earns $105,000 nominal (3.5%), which is above the $72,000 year one draw ($6,000/month in 2020 dollars). But the draw increases by 2%/year, and eventually we start drawing from prior nominal gains. Then we eventually start drawing from principal until we've exhausted all wealth.

 

[streetfighter]

Doubt i will live till 110, & if worst case i still have cpf life payout to depend on (that i didn't take into account). After 80 i doubt i can spend much due to immobility & poor health. Medical costs will be covered by insurance. DII is good only when we are working.

No, that's not quite right. You have to adjust for inflation, and age 90 isn't actually a very good estimate. It looks like roughly 30% of males age 38 today are going to live past 90.

So let's assume you incorporate 2%/year average inflation and age 110 as your assumptions. That's 71 years of spending at $6,000/month (2020 dollars). Add that all up and you'll spend a total of S$5,112,000 in 2020 dollars which equates to about S$11,308,000 in nominal dollars.

My point here is that early retirement math is hard if you're sober and realistic in your forecasting. Let's run those numbers again but with one "small" change: age 45 retirement (7 fewer years of spending). Age 45 is also pretty ridiculous for the vast majority of people, but it's less ridiculous than age 38. So that's 64 years of non-covered spending at $6,000/month (2020 dollars), or S$4,608,000 total (2020 dollars), or about S$9,370,000 total nominal. Yes, that's right, if you work 7 more years on the front side then you reduce your total nominal retirement spending by about S$2 million with these forecast assumptions.

This daunting math also helps explain why I keep harping on the absolute critical importance of insuring your future income potential against disability (Disability Income Insurance). Most people are f**ked in Singapore if they lose their future income earning potential. Don't be f**ked: insure it, at least to a reasonable extent.

 

[streetfighter]

I need $6k a month from age 38 to 90.
So total needed = 6k x 12 x 52 = $3744k at age 38 to retire.
I ignore inflation because i assume that can be taken care of by investment returns. I expect to spend more in earlier years & much less after 75 because of immobility etc.
I still have a cpf life payout from 65 which i have not taken into account (just in case i live past 90).

You need to base on your safe withdrawal rate. Inclusive of cpf, I have a withdrawal rate of 1.56 percent currently living in HDB. But I also have a low cost of living for the family which has gone down considerably. To b safe, I aim to be less than 3 percent SWR.

I might be buying a private property and that might jack up the withdrawal rate but will be less than 3 percent.

Even With my low withdrawal rate, keeping my previous extremely low allocation to risk assets is still unviable. Considering that I have missed the rally, and interest rates are low, I have no choice But to up the equity asset allocation and seek to invest everything maybe within 3 years or less keeping 200k in cash/bonds. I have also lean towards Singapore banks and reits for psychological buffer of dividends n safety. I keep only 30 percent international and leaning to Berkshire atm.

I might also shield sequence of risk using debt via pledging cash assets as debt is cheap.I’ve also decided to become a real estate sales person to hedge that risk starting next year.

I think u need 2.9m for a SWR of 2.5 percent at today’s money with an asset allocation starting at 50 percent risk assets and 50 percent safe assets and reaching 100 percent in risk asset between 5 to 10 years. Your 3.74m sounds overkill maybe it’s future value ?

how did u derive that figure ?

 

[foozgarden]

hi ST,

what are you thoughts on investing in
IWDA vs VWRA ?

also, buying using IB, do we need to move our equities back into SG when we retire?
how is this process?

 

[crystalnox]

hi ST,

what are you thoughts on investing in
IWDA vs VWRA ?

also, buying using IB, do we need to move our equities back into SG when we retire?
how is this process?

There's a recent article posted on a local blog site comparing IWDA and VWRA.
https://investmentmoats.com/passive...sus-vwra-significant-performance-differences/

You basically sell them on IB, then convert to SGD and wire them back.

 

[ahfrog]

Hi Shiny Things,

Where can I get your latest book? Thks!

 

[Duhlazer]

I know there are differing views on this, but I'd just like to understand why some would recommend Singaporeans to buy ES3 just because it's their local ETF. I don't quite get why we should have exposure to the country we intend to retire in. I thought it might be FX, but apparently that's not significant, if at all relevant.

Is it taxes? Is it our homeground advantage - we are closest to the ground so we would know best when things are going south and we should sell? Would those in the pro-ES3 camp also advise people from other countries to also have some form of local exposure, ignoring market cap and future prospects?

I've been religiously DCAing ES3 for years, and am now considering reallocating my monthly investments, either not buying any more ES3 or reducing its weight in my portfolio to 20% as some have suggested. Not just because of its declining prospects, but also because I've bought a fair bit of local REIT ETF and this thread has taught me that there's massive overlap between the two...

 

[limster]

There's a recent article posted on a local blog site comparing IWDA and VWRA.
https://investmentmoats.com/passive...sus-vwra-significant-performance-differences/

You basically sell them on IB, then convert to SGD and wire them back.

What is more important is to :

Get started
Create an allocation
Start funding and do regular contribution
Capture the returns

This is the most important part of the advice. Those who are paralyzed by 'which broker', 'which ETF' sort of questions (even though Shiny Thing's has given a clear, easy to follow recommendation, they still cannot decide) will end up missing most of this rally, and end up not buying and asking "has the boat left?"

 

[foozgarden]

There's a recent article posted on a local blog site comparing IWDA and VWRA.
https://investmentmoats.com/passive...sus-vwra-significant-performance-differences/

You basically sell them on IB, then convert to SGD and wire them back.

thanks for that..
is EM exposure neccesary? or IWDA will suffice?

 

[lowveld]

thanks for that..
is EM exposure neccesary? or IWDA will suffice?

I think if you study the article in detail the TLDR is to just stick to one and invest diligently, as espoused by many here. There is no clear advantage to choosing one over the other, as the rolling backtest has demonstrated.