Official Shiny Things thread—Part III

[Chisaki]

Hi all, I'm wondering for an etf tracking the s&p500 is it a good option to save close to 40 bps by using a synthetic etf instead of physical replication? I.E using SPXS on the LSE (not SPXS on the nyse) instead of CSPX? From my calculation I will save 2 bps on the management fees and 30bps assuming 2% div yield due to having pay no WHT on the dividend of synthetic etfs.

I understand there is a counterparty risk associated with synthetic etfs but just exactly how severe is this risk?

 

[FrostWurm]

I understand there is a counterparty risk associated with synthetic etfs but just exactly how severe is this risk?

This is an extremetly low frequency but extremely high severity event. As much as I hate the term, it is probably what you would call a "black swan".

Trying to assign a probability is a futile because it is miniscule; but in terms of severity you could possibly lose everything.

 

[chrisloh65]

I know, you (and some others here) prefer some people even if they are telling lies and false claims than the truth, and that is fine with me because that just tells everyone here the state of moral value you have.

Anyway, your post already clearly shows your immaturity, insecurity, and incapability, otherwise there is no reason to be howling and yelling like mad here as though you are the one being exposed to be telling lies and false claims isn't it?

I had met quite a few people in my life who like to tell lies and false claims, and they are pretty irritating considering that they have no moral value, non honesty, and no integrity to start with and still claiming they have highest integrity on earth, so I have no choice but to expose them and had the experience to deal with them readily so that they cannot stop howling and yelling as though they are mad dog all out to attack anybody in their way, I suppose that is the only way to tear through these people's lies and let them expose their true self isn't it?

What's there to report ? You still don't get it ? You obviously has the thickest skin I've ever seen in a public forum. You can see the whole chain of comments about u after my post. Pls open your eyes and read them and stop being in denial.

In plain English, you're not wanted here. People are already telling you to GET LOST. So make everyone happy and abide

I truely do not understand what makes you keep coming back though you're not welcomed here. Grow some spine please.

I certainly hope you're not like that in real life. God bless your poor soul.

Chrisloh65, you may have a lot of money, but to us you're just a pesky little kid. People already asking u to get lost, but you kept stuck here like a bloody leech. Why so thick skin ?

What is wrong with you ? Having some mental issues is it ? Nobody is interested in your life anyway, why don't you just get the f out of here ?

Are you having some inferior complexity and get extremely triggered when other forumers prefer to seek advice from the likes of ST and bbcw ?

U utterly need some help, u are clearly suffering from a lack of attention ... Poor thing

 

[Calpha K]

Hi all,

Is there any other recommended brokerage, but with STOP LOSS function?

Standard Chartered doesn't seem to offer STOP LOSS, all I see is stop limit.

Any advice would be appreciated.

 

[cassowary18]

Hi all,

Is there any particular reason for DBS Vickers' prefunded account not recommended over SC?

Min comm is also $10, Trading Fees is lower at 0.12%, and stocks stored in CDP.

Inertia. Last time SCB was the best, no minimum fees. Now SCB isn't as great but still a decent choice. I prefer FSMOne now because of their RSP, but Vickers cash upfront is a perfectly good choice if you prioritize the CDP custody of your shares. Regarding selling, you can link your CDP to FSMone and sell from there, 0.08% minimum $10.

Hi all,

Is there any other recommended brokerage, but with STOP LOSS function?

Standard Chartered doesn't seem to offer STOP LOSS, all I see is stop limit.

Any advice would be appreciated.

Why would you need stop loss unless you're trading? Anyway, a stop limit order is a stop loss. Once your price hits the STOP price the broker executes a limit order for you. That's the definition of stop loss.

 

[chrisloh65]

Saxo has stop loss order function.
But problem is Saxo charges you custody fees, not suitable to place large sum there, small amount for trading is OK.

The ignorant will never understand the importance of STOP LOSS function. See their reply really so funny!

Hi all,

Is there any other recommended brokerage, but with STOP LOSS function?

Standard Chartered doesn't seem to offer STOP LOSS, all I see is stop limit.

Any advice would be appreciated.

 

[highsulphur]

Say you have 10m of assets, would it be too risky to have 25% of it in iwda with IB at age 55? In terms of counterparty risk with IB and ishare? Would you diversify part of it with another broker and another underlying?

 

[razoreigns]

Say you have 10m of assets, would it be too risky to have 25% of it in iwda with IB at age 55? In terms of counterparty risk with IB and ishare? Would you diversify part of it with another broker and another underlying?

I also had this consideration.
With the fund house, I don't think there is too much of a risk since the underlying assets are 1) physical, 2) legally ring-fenced.
As for the brokerage, there may be some value with diversification but you got to live with higher fees for transactions.

 

[hwckhs]

Say you have 10m of assets, would it be too risky to have 25% of it in iwda with IB at age 55? In terms of counterparty risk with IB and ishare? Would you diversify part of it with another broker and another underlying?

It depends on how much you trust the broker (IB) and fund manager (iShares). Actually, they both have trustee/nominee and assets are ring-fenced. It's more for the peace of mind. With ring-fencing, the possibility of a loss is low, but you may still want to guard against delay in regaining access to your assets. For such an amount, I would diversify to a point I feel comfortable while keeping cost in mind.

Actually, having more broker or fund manager introduces more points of failure. Instead of having 2 possible points of failure (IB, iShares), you may have 4 instead, eg (IB, SCB, iShares, Vanguard). If each failure has the same probability, then having 4 possible failure points means you are more likely to hit one such failure in your lifetime. However, the level of impact will be smaller.

 

[BBCWatcher]

Say you have 10m of assets, would it be too risky to have 25% of it in iwda with IB at age 55? In terms of counterparty risk with IB and ishare? Would you diversify part of it with another broker and another underlying?

No, it's not particularly risky. The hypothetical failure of that particular single broker-custodian pair would reduce your short-term liquidity by approximately $2.5 million, leaving you with a "mere" $7.5 million of other assets (liquid and illiquid) to buy your hamburgers, electricity, and whatever else you're consuming day to day. While you wait, the regulators/trustees/liquidators sort out who owns what. That should happen reasonably quickly, especially for the first tranche of recovery.

Where things could get a little sticky is if you're holding something much more "exciting" than an ordinary stock index fund with direct stock holding. Examples of possibly perilous securities include commodities futures and synthetic funds. Margin-based day trading could be problematic, too. Basically if you're taking significant risks within the holdings already then a broker's or custodian's collapse is problematic simply because of the temporary asset settlement freeze.

BlackRock (IWDA's steward) has over US$7 trillion in assets under management, and its iShares division is the largest ETF provider in the world and in the U.S. Interactive Brokers is the largest U.S. electronic trading platform (per daily average revenue trades) and largest foreign exchange broker. These aren't fly-by-night operators. While any organization could fail, are there any organizations that you perceive to be more reliable?

 

[zoneguard]

Say you have 10m of assets, would it be too risky to have 25% of it in iwda with IB at age 55? In terms of counterparty risk with IB and ishare? Would you diversify part of it with another broker and another underlying?

While I think the possibility/risk of failure of IB/Blackrock is very very very very low, I am mindful of history:
1. Barings Bank.
2. Lehman Brothers.
3. MF Global.

Sometimes it's a rogue trader, sometimes it is outright fraud where the segregation protection fails. I don't want to chance fate at all as I am extremely kiasi.

I personally keep my holdings within the SIPC's 500K USD limit.

 

[highsulphur]

While I think the possibility/risk of failure of IB/Blackrock is very very very very low, I am mindful of history:
1. Barings Bank.
2. Lehman Brothers.
3. MF Global.
Sometimes it's a rogue trader, sometimes it is outright fraud where the segregation protection fails. I don't want to chance fate at all as I am extremely kiasi.
I personally keep my holdings within the SIPC's 500K USD limit.

Need to split over 5 brokers in the scenario above?

For discussion sake, which other brokers would you choose

 

[newjersey]

Even if his “stuff is legit” he is giving bad advice for most people. You really have to be a rare breed to beat the index consistently over the long-run. Someone like Warren Buffet is not born everyday. It is an irrefutable fact that the majority of well paid professionals who manage investments for a living cannot beat the index.

Those who are not famous and brag that they can beat the market are more likely to have simply gotten a streak of good luck that cannot be reproduced. Their story often ends with considerable underperformance in the long run.

I cannot say whether this is the case here — all that I can do is speak in terms of statistical probabilities since we are absent facts and data.

that's pretty much spot-on.

 

[newjersey]

Why you claiming that "viventa" is a loser?
Strange that you will be calling others "loser"

If you are doing "DCA blindly into index ETFs regardless of market conditions", your returns will be pathetic. So who will end up to be a real "loser"? You should know very well

So who really believe in "crap" that you claimed?

jack bogle's returns vs his son's.

jack bogle who did passive index ETF investing only had a few % difference vs his son's active investing, and if i didn't recall wrongly.... it's passive investing that beat active management.

all public info, google it up.

i am a stock picker, isn't easy to replicate it.

that is why i agree w ST's way for everyone else.

passive index S&P500 ETF w some bond ETF and move on w your life.

cause improving yourself is the most profitable investment u can make.

 

[chrisloh65]

Don't understand why you quote Jack Bogle and his lousy son's returns?

Jack Bogle make most of his money from selling ETFs, not from own investment.

Want to quote why don't quote Warren Buffett, or those Graham-Dodd investors like Walter J. Schloss, Tom Knapp, Bill Raune, etc?:

https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors

There are many more, but they don't buy advertisements to advertise themselves, unlike those index ETF companies buying advertisements and journalists to write how wonder and how much their index ETFs outperform actively managed funds.
If index ETFs really outperform most actively managed funds, then all those actively managed funds will need to close shop by now, you won't see so many of them out there. You are talking as though all those people investing in them are so stupid and only you are the only smart one out there?

jack bogle's returns vs his son's.

jack bogle who did passive index ETF investing only had a few % difference vs his son's active investing, and if i didn't recall wrongly.... it's passive investing that beat active management.

all public info, google it up.

i am a stock picker, isn't easy to replicate it.

that is why i agree w ST's way for everyone else.

passive index S&P500 ETF w some bond ETF and move on w your life.

cause improving yourself is the most profitable investment u can make.

 

[BBCWatcher]

While I think the possibility/risk of failure of IB/Blackrock is very very very very low, I am mindful of history:
1. Barings Bank.
2. Lehman Brothers.
3. MF Global.
Sometimes it's a rogue trader, sometimes it is outright fraud where the segregation protection fails. I don't want to chance fate at all as I am extremely kiasi.
I personally keep my holdings within the SIPC's 500K USD limit.

I don’t think that makes sense. There is no equivalent to the SIPC in Singapore, so if you apply the same logic you would hold zero assets in Singapore (except for SDIC protected assets to SDIC limits and government guaranteed assets, such as Singapore Government Securities).

I have a personal rule to avoid entrusting more than half of household assets to one custodian. But a couple or a very few high quality custodians is plenty. Dodgy custodians should always be avoided for anything nontrivial, of course.

For discussion sake, which other brokers would you choose

That’s a good question.

 

[chrisloh65]

There is also no equivalent of Singapore CDP anywhere in the world, and Singaporeans definitely all sleep very well at night even if all their stocks are held in custody of 1 custodian called "CDP", so much safer than SIPC where your assets can be stuck for 3 years or more and there is a limit of US$500k insurance only.

Also, we need to avoid dodgy custodians, or custodians where there is no locally incorporated office with local customer service access to because there is no local recourse if anything goes wrong, like MF Global.

I don’t think that makes sense. There is no equivalent to the SIPC in Singapore, so if you apply the same logic you would hold zero assets in Singapore (except for SDIC protected assets to SDIC limits and government guaranteed assets, such as Singapore Government Securities).

I have a personal rule to avoid entrusting more than half of household assets to one custodian. But a couple or a very few high quality custodians is plenty. Dodgy custodians should always be avoided for anything nontrivial, of course.


That’s a good question.

 

[CWL84]

Don't understand why you quote Jack Bogle and his lousy son's returns?

Jack Bogle make most of his money from selling ETFs, not from own investment.

Want to quote why don't quote Warren Buffett, or those Graham-Dodd investors like Walter J. Schloss, Tom Knapp, Bill Raune, etc?:

https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors

There are many more, but they don't buy advertisements to advertise themselves, unlike those index ETF companies buying advertisements and journalists to write how wonder and how much their index ETFs outperform actively managed funds.
If index ETFs really outperform most actively managed funds, then all those actively managed funds will need to close shop by now, you won't see so many of them out there. You are talking as though all those people investing in them are so stupid and only you are the only smart one out there?

Other people already provided you with Warren Buffet's view towards ETF/index investing but you don't even bother to read his written letter to Berkshire Hathaway's shareholders. His 2016 letter: https://berkshirehathaway.com/letters/2016ltr.pdf

Selected quotes from page 21 to 25 pertaining to index investing:

Now, to my bet and its history. In Berkshire’s 2005 annual report, I argued that active investment management by professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave their clients –again in aggregate– worse off than if the amateurs simply invested in an unmanaged low-cost index fund. (See pages 114 - 115 for a reprint of the argument as I originally stated it in the 2005 report.)

Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017,the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses.

A lot of very smart people set out to do better than average in securities markets.

Call them active investors. Their opposites, passive investors, will by definition do about average. In aggregate their positions will more or less approximate those of an index fund. Therefore, the balance of the universe—the active investors—must do about average as well. However, these investors will incur far greater costs. So, on balance, their aggregate results after these costs will be worse than those of the passive investors.

Costs skyrocket when large annual fees, large performance fees, and active trading costs are all added to the active investor’s equation. Funds of hedge funds accentuate this cost problem because their fees are superimposed on the large fees charged by the hedge funds in which the funds of funds are invested.

A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.

There are, of course, some skilled individuals who are highly likely to out-perform the S&P over long stretches. In my lifetime, though, I’ve identified– early on– only ten or so professionals that I expected would accomplish this feat.

There are no doubt many hundreds of people – perhaps thousands – whom I have never met and whose abilities would equal those of the people I’ve identified. The job, after all, is not impossible. The problem simply is that the great majority of managers who attempt to over-perform will fail. The probability is also very high that the person soliciting your funds will not be the exception who does well. Bill Ruane – a truly wonderful human being and a man whom I identified 60 years ago as almost certain to deliver superior investment returns over the long haul – said it well: “In investment management, the progression is from the innovators to the imitators to the swarming incompetents.”

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle. For decades, Jack has urged investors to invest in ultra-low-cost index funds.In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value.

In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me.

See, reading is not difficult isn't it? What ever views you have against ETFs/index investing, Warren Buffett already provided all the proper counter arguments in those 5 pages. I'm sure you're not illiterate.

I'm still waiting for you to share your detailed "evidence" to back up your claims of ETFs/index investing being a ponzi scheme, in fact, why not use your "evidence" and sue the fund providers? Surely with your expert "evidence", you will win in court right?

If you hate ETFs/index investing so much and yet you have nothing to back up your silly claims then just move along, no one is forcing you to invest in them.

 

[hellvolhardzelinsky]

Everyone should just ignore him and don't even quote him. Let him post all he wants here and when nobody care about him, he will just leave.

Like what people always say, don't feed the troll!

 

[brfish]

I have a personal rule to avoid entrusting more than half of household assets to one custodian. But a couple or a very few high quality custodians is plenty. Dodgy custodians should always be avoided for anything nontrivial, of course.

Following that rule, what custodian would you recommend other than IB? Specifically for IWDA type ETF?