Official Shiny Things thread—Part III

[BBCWatcher]

Based on historical returns....

Correct, HISTORICAL. Past performance is not indicative of future results.

 

[moolala]

Correct, HISTORICAL. Past performance is not indicative of future results.

Haha, this pandemic has shown why it's indicative of future results. Because central banks around the world will backstop it.

 

[RuiQi_91]

Hello, I have been purchasing the G3B and A35 ETFs via the POSB Invest Saver because of the cashback that will end on Oct 31 so am planning to move to another platform and was wondering if it should be FSMOne or IBKR SG. In case it's worth mentioning, I currently have an IBKR account to purchase the IWDA LSEETFs and am keen to use the SG version to keep everything centralized.

I also have an FSMOne account since 6 months ago but ended up not using it (zero dollars in it) because I was still new and felt the POSB IS to be more convenient. Does FSMOne have a monthly maintenance fees like IBKR's 10 USD ?

https://www.posb.com.sg/personal/promotion/invest-saver

 

[BBCWatcher]

In case it's worth mentioning, I currently have an IBKR account to purchase the IWDA LSEETFs and am keen to use the SG version to keep everything centralized.... Does FSMOne have a monthly maintenance fees like IBKR's 10 USD ?

Neither has monthly maintenance fees as such. Interactive Brokers has a minimum monthly activity fee for accounts with total values below US$100,000. Those account holders pay actual commissions or US$10, whichever is higher. FSMOne has some custody, dividend distribution, and corporate action fees that apply in certain situations depending on the source of funds and/or specific holdings. Just check their pricing schedule for details.

In the situation you describe probably you’ll just compare the core commission pricing, and that’ll settle the question. If the commission pricing is very close, if you routinely get charged substantially above actual commissions to reach US$10, and if you can get to the US$100,000 level much faster with SGX-listed trades at IB, then you might use IB for those securities, too, then shift to FSMOne after hitting US$100,000 (and a little more as a volatility buffer).

 

[pathfinder6]

Hi guys, any comments on this allocation? And if its recommended?

No harm giving this a go, then shifting between 80/20 to 50/50 as you reach draw-down age

 

[celtosaxon]

Just curious, I've read ST book and all but other than fx risk, I don't see why I should have a allocation to STI. Wouldn't 100% VWRA work?

I totally agree with 100% VWRA for long term. Local stocks are not as local as they appear, and SGD is pegged to a trade weighted basket of currencies, so it’s not as risky a move as it appears. As you get closer to retirement you can shield your SA, max out your RA and start funding SRS with safer SGD investments to secure your local income needs in retirement... then VWRA can supplement that and hedge inflation.

 

[hellvolhardzelinsky]

Hi ST or anyone else.
My father signed a pruactive saver. Good thing I went to see the plan and I'm going to activate the free look. He's putting in almost 50k a year.

He's past his retirement now. Where should he put his money?

 

[swan02]

Yeh that’s why I also went for a iwda eimi mix and in future vwra once spread and volume Improves. Also have IDTM as I view it as the best safe haven fixed income.

I totally agree with 100% VWRA for long term. Local stocks are not as local as they appear, and SGD is pegged to a trade weighted basket of currencies, so it’s not as risky a move as it appears. As you get closer to retirement you can shield your SA, max out your RA and start funding SRS with safer SGD investments to secure your local income needs in retirement... then VWRA can supplement that and hedge inflation.

 

[cassowary18]

Hi ST or anyone else.
My father signed a pruactive saver. Good thing I went to see the plan and I'm going to activate the free look. He's putting in almost 50k a year.

He's past his retirement now. Where should he put his money?

Perhaps top up his CPF RA to ERS so he can get a higher CPF life payout?

 

[hellvolhardzelinsky]

Perhaps top up his CPF RA to ERS so he can get a higher CPF life payout?

Already pass the cpf life payout.

 

[swan02]

If I’m not mistaken. U can still top up and get ERS level payout even after cpf life commencement.

Already pass the cpf life payout.

 

[BBCWatcher]

If I’m not mistaken. U can still top up and get ERS level payout even after cpf life commencement.

You are not mistaken. You can top up a CPF Retirement Account as high as the current Enhanced Retirement Sum at any time, starting from the day your RA is created, any day for the rest of your life. This top up limit is calculated based on principal only, not any interest that your RA earned. (Interest earned prior to RA formation then carried over into your new RA counts as principal for these purposes.) Moreover, every time the ERS is raised you can add more funds to your RA up to the new ERS.

If you're already receiving CPF LIFE payouts then these RA top ups can stream out in one of two ways. If you do nothing, they'll start streaming out from the next July as "Additional Monthly Payouts" (AMPs), which are quite similar to the classic Retirement Sum Scheme payouts. Your other alternative is to contact the CPF Board at least a little before the next July and request that your CPF LIFE payout be recomputed (increased).

 

[mozzozo]

Yeh that’s why I also went for a iwda eimi mix and in future vwra once spread and volume Improves. Also have IDTM as I view it as the best safe haven fixed income.

Hi are you able to share more about why you think IDTM is the best safe haven FI?

 

[Converged]

Any admin fees for stock split in ibkr or scb?

Posted from PCWX using 999

 

[Kaypohji]

Hmm u r holding it long term not selling now I think the bid ask spread is of a lesser concern?
I might have the wrong idea

Yeh that’s why I also went for a iwda eimi mix and in future vwra once spread and volume Improves. Also have IDTM as I view it as the best safe haven fixed income.

 

[swan02]

Hmm u r holding it long term not selling now I think the bid ask spread is of a lesser concern?
I might have the wrong idea

1. You made an assumption I'm holding long term which may or may not transpire as I'm also a physical property investor as well as one who alters my asset allocation depending on my perception of the economy. Hence spread and volume are very important
2. My portfolio typically is much larger than most here. Hence meeting USD 1.70 equilibrium is easy even as I handle two or more etfs
3. By having more ETFs, I also find it easier to sell e.g. try selling 200k in 30 mins in an illiquid etf.
4. In fact, I prefer VWRD to VWRA and I'm currently thinking about it seriously, because whenever I change to fixed Tier and sell 200k worth, will cost me little. I'm not too concern that VWRD being distributing, IB fees are already so little and dividends also relatively minuscule. Thus you must see things holistically depending on ones motivation/profile.

Hi are you able to share more about why you think IDTM is the best safe haven FI?

Before I explain.

The context has to be laid so confusion does not set in. It reflects my perception and one who adopts such strategy.

1. Safe haven in this context means the asset class that moves inversely to stocks as much as possible i.e. negatively correlated. Being negatively correlated is NOT enough, it has also be CONSISTENT in being negatively correlated.
2. The investor seeking the "best safe havens" aim for returns directly from equities being a RISK ON asset.
3. Hence negative correlation is expected from the fixed income component.
4. You get the best negative correlation to equities in the fixed income component by first focusing in the safest sovereign countries as perceived by the world. This is RISK OFF quality. Such e.g IMO from safest to least are USD, JPY, CHF, SGD. Other currencies such as the GBP has morphed from safe haven to emerging qualities together with CAD, AUD, in the developed world and are known as RISK ON.
5. As most of us typically hold VWRD type equities, you can tell, it is more RISK ON than one who holds pure VUSD. Of cuz the diversification effects of VWRD may lead to similar variance to VUSD. However, as an investor who is concerned of big draw down events, I'm fully aware in most cases, the tendency of stocks ex USA to exhibit greater fluctuations.
6. This also applies to bonds as in effect, investing in bonds is akin to investing in the currency of the country of origin. In theory for a local domicile, investing in international bonds begets zero/little reward yet exposed to fluctuations (unwanted risk on risk) over the LONG term i.e. having lets say IGLO over the long term is unlikely to produce diversification benefits. The argument is when seeking RISK on, you should be rewarded for that, and u do that by seeking within the equity quadrant, the FX diversification in the equity quadrant has in literature shown to provide substantial benefits.
7. In normal circumstances, ie. largely economic related. Generally high quality bonds even SGD, would do its job. BUT...
8. We typically face a Credit Crisis aka financial crisis in most recessions. And this credit crisis is shown to be more intense and likely continue to do so given the much greater leveraged world we are in. Thus so called high quality sovereign bonds have shown to be quite INEFFECTIVE, and I postulate it has largely to do with the currency of origin. Don't be mistaken with the currency the ETF is denominated in.
8. Hence those who will benefit most are those investors domiciled in currencies of RISK ON nature such as AUD, GBP, CAD, emerging economies by holding on to USD.
9. Singapore sits somewhere in the middle, leaning more towards qualities of USD. However, I postulate also Singapore can't run being known as one who is at high risk due to our trade reliant economy. Investors know that too, and not surprisingly, our A35 even with sufficient duration has produce naught to buffer a SGD domiciled investor, though by not losing any money can be argued as having done its job.
10. But this begets a fundamental question as to why we hold bonds ? One of the most important reason is to ensure a smoother ride up to manage behavioural damaging returns. You only get this if the negative correlation is good and hopefully also consistent. Really if you can control your emotions and not touch your money for 20 years, you really should be DCA or lump sum a 80/20 portfolio or even a 100% equity. Largely many can't, harder when sitting on a portfolio with many zeros. And this bad behaviors likely manifest during large draw downs, the draw downs that bonds are expected to counter.
11. As one who recognises and aim to avoid damaging returns behavior will seek the best asset ETF in these events.
12. And the assets which performed best are based on recent two crisis are.
a. USD currency/short term treasury
b. IDTL
c. IDTM

13. USD currency is obvious. There are people who simply own USD cash. Cash is akin to short term treasury. They benefit in times of expected inflation as well as deflation for a SGD investor. It is also a reserve currency.

As the duration gets longer....while benefiting from the USD currency also..
14. IDTL. Useful for an all season investor due to its convexity and duration to produce high beta. But there are flaws. Investors who are already more risk averse tend also to focus on individual etf rather as the ETF as a whole, and are likely to do return damaging behaviours. Also for the short term, unlikely FED will target/cap long duration yield, hence such bonds being high beta leads to greater susceptibility during inflationary scenarios and market driven interest rates.
15. IDTM. Have shown to produce outstandingly in the recent draw down, a mega +10% from the start aka peak of equity to the bottom for a SGD investor. The benefit is comprised from two fronts 1. demand for USD, 2. USA investors culturally stock investment oriented, form the biggest component of the developed stock market world, and when they divest from equities, they naturally gravitate to their home currency Treasury especially in a financial crisis.
16. IDTM being a 7-10 year treasury, is to a large extent commonly held by large institutions, individuals, pension funds etc etc more so than IDTL. So when RISK OFF mode is turned on, demand for intermediate is more consistent and reliable for the average Joe.
17. So when one ends up with a let say VWRD/ IDTM. It is clear as day, how you wish to adjust your asset allocation tailored to your risk profile and situation. Investment in large sums, is made easier when what happens is expected- a. I expect equities to crash now and then from correction to 50%. b. I expect, when equities crash, my buffers to protect it and not just protect itself. c. I'm also aware that my risk off IDTM will underperform in a RISK on Rally, but willing to accept a falling return and be happy about it because it performs as it should as a negatively correlated asset. I would be concerned if it rises with my equities most of the time.
c. Lastly, I expect that due to the negatively correlation especially in a crash, that I'm still able to liquidate my IDTM to purchase my equities and not be bogged down by liquidity crisis where rates move up and up invoking another return damaging behavior.
18. So I believe due to the huge and liquid nature of the intermediate bond market of the USD Treasury, it is the best ballast aka safe haven asset I have found so far.
19. Yet I'm also aware that the trade off of holding more and more USD treasury, is a lower long term return for a SGD investor as opposed to a USD domiciled investor.......but you counter that by either or both increasing your equity allocation and adhering and remembering to rebalance your portfolio, as I have mentioned before, that's how this strategy especially shines..........and that's also why there are arguments for a 70/30 or 80/20 portfolio or 90/10 portfolio long term as opposed to a 100% equity portfolio. The rebalancing effect may result in similar returns but with lesser risks overall producing a better risk adjusted returns.
20. I welcome anyone who which to add or counter. These are my observations from holding many ETFs and their relations with each other, they are some supported by literature, and the rest maybe supported but have not bothered to research.

 

[parkson]

I've been reading MBH yields more than A35 but looking at the most recent dividend payouts and based on the 52 week average price, the yield is about the same at about 2%. I'm guessing the higher yield is due to higher capital gains for MBH or am I missing something else?

 

[Kaypohji]

@swan02

What r the guidelines for an etf to be considered as having good liquidity?

From what I see now, vwrd has higher volume and lower bid ask spread than vwra. Kinda surprise cause I thought ppl will usually prefer accumulating etf

 

[hellvolhardzelinsky]

You are not mistaken. You can top up a CPF Retirement Account as high as the current Enhanced Retirement Sum at any time, starting from the day your RA is created, any day for the rest of your life. This top up limit is calculated based on principal only, not any interest that your RA earned. (Interest earned prior to RA formation then carried over into your new RA counts as principal for these purposes.) Moreover, every time the ERS is raised you can add more funds to your RA up to the new ERS.

If you're already receiving CPF LIFE payouts then these RA top ups can stream out in one of two ways. If you do nothing, they'll start streaming out from the next July as "Additional Monthly Payouts" (AMPs), which are quite similar to the classic Retirement Sum Scheme payouts. Your other alternative is to contact the CPF Board at least a little before the next July and request that your CPF LIFE payout be recomputed (increased).

He doesn't want to. He feels that money can't be taken out if he put it into the CPF.

Is endowment plan the best for him? Because I'm not sure what he can invest on.
Maybe the 3 fund portfolio but for him, he should put more into the bond etf?

 

[swan02]

He doesn't want to. He feels that money can't be taken out if he put it into the CPF.

Is endowment plan the best for him? Because I'm not sure what he can invest on.
Maybe the 3 fund portfolio but for him, he should put more into the bond etf?

hmm. Age old problem that is commonly heard convincing these herd.

1. If he is close to 65 yo, he can start to draw on his retirement.
2. Convince him on the notion of creating the "CPF bank account". This bank account can be withdrawn at anytime, and earning a high interest and guaranteed.
3. You can only achieve this by ensuring your FRS and medicare is maxed out.
4. After that, you either choose ERS or continue to contribute via the yearly 37.7k cap that spilts across. But since RA and Medisave are maxed out, excess go to the OA.
5. However this is 37.7k yearly, every year.
6. You may also convince your dad, there is another advantage of ERS. Which is that since the CPF life is the BEST annuity in the world, that means he can invest purely in equity assets !!!!..........there'll be literally little risk to his lifestyle as that has been taken care off by CPF life. After ERS, u can DCA everything within 3 years. Any earlier I think he will be too afraid. If so...start 100 percent MBH, by dca over 6 months, and slowly increasing his equity base.
7.However, this is great in theory........convincing these people at their age and lack of CPF knowledge is a terrible hurdle. You yourself would have to prove to your dad the three fund portfolio works....too bad you don't have that history unless at least 5 years.
8. If all fails, like me, I'm already prepared........which is invest in a physical property with your dad-you don't have much a choice. Old chinese people especially tend to like the idea of physical properties.