Official Shiny Things thread—Part III

[BBCWatcher]

Should i set up a IB US or IB SG account?
or can I only set up IB SG account now that they have an SG office?

right now are u still able to set up IB US?

If you're a resident of Singapore then the only current way to open an account with Interactive Brokers LLC (U.S.) is to open a joint account. Otherwise, you're opening an account with Interactive Brokers Singapore Pte. Ltd.

The basic differences are that the U.S. entity has SIPC coverage while the Singapore entity doesn't, but the Singapore entity lets you trade Singapore-listed securities while the U.S. entity (for residents of Singapore) doesn't.

 

[polyglob]

if you read about the FIRE movement you’ll find lots of articles about how early retirement can be a real downer. Famed CNBC financial planner Suze Orman said it even more bluntly - don’t do it.

Those would be written by the anti-FIRE movement.

 

[swan02]

There are indeed advantageous to FIRE but it is also at which stage of life.

Imagine at the extreme end retiring at 30, it won’t take at least for me more than 3 years to do what you’ve missed out after slogging for the first 10 years for the sake of money.

once the drive for money runs out, ie money is sufficient and doing whatever u wanted to do. Then what ?

one thing I probably regretted was not taking up another degree at the outset of retiring.

I’ll prolly would have embarked on a journey in a new exciting career until it finally becomes a bore just as my first two careers lol. Still this to me colours my life and likely be for the rest of it.

Those would be written by the anti-FIRE movement.

 

[polyglob]

one thing I probably regretted was not taking up another degree at the outset of retiring.

I know people in their late 40s and early 50s taking up masters degrees. They decided doing a masters at that (traditionally considered 'advanced') age is a good use of their time and money.

 

[limster]

You really hit the nail on the head!

In most other Blackrock index ETFs, they state "Total Expense Ratio".
For 2801 HK, suddenly they don't state "Total Expense Ratio" but only mention "Management Fee", which is usually much lower than "Total Expense Ratio". So what is the "Total Expense Ratio" for 2801 HK then?

Also, I don't like 2801 HK for the fact that just its 2 top holdings constitutes about 35% of the total weights or market value of the fund! Where is the diversification in buying index ETF? Unfortunately this is the problem with many index ETFs isn't it?! They are always over-weight on biggest market cap stocks that will have more limited price growth.

So I rather pick stocks. Example I bought BYD at about HK$26 in 2015 and now it has gone up by about 500% to HK$154.10!

Agree one is not buying 2801.HK for diversification. Thats why its important to read ETF factsheets and index methodology. If I wanted diversification I would stay with my Asia or EM focused ETFs which also hold 30%+ China.

Its for those who are fully diversified, say, into World ETF like IWDA but want to specifically overweight a particular area - China & China Tech.

Those that know how to read annual report can easily find out the TER. For 2019 its 0.263% . The ETF has to pay stamp duty for buying individual shares (and so do individual investors) so this has to be factored in. But it seems that the fund size hasn't changed that much, so the transcation costs are low.

Those that don't bother to read annual report and financial statements..I wouldn't recommend these people to do individual stock picking.... after all, if they are not prepared to do fundamental analysis.... stock picking is not for them.... unless they are the pure "TA" type that ignores fundamentals.

 

[tchen003]

Hi ST, all,

Am new to the forum. Planning to get exposure to international market. Considering opening account with IB due to its lowest fee (if sufficient balance)and wide range of selection.

I am 28 yo, and haven’t touch stock previously (except do a few RSP on STI with DBS). Prefer Low cost index, buy and hold.

ST mentioned in his book about IWDA, 0.2% expense ratio, no-div, tracking the whole world (MSCI), I agree with it.

Question 1: what is the difference between TER and expense ratio? Am cost aware and do want to get the lowest cost as possible.

Question 2: even though am a ride-through-market investor, do you think if this is the time to purchase IWDA or Sp500 given the current bubble?

Question 3: is there any other index funds/ETF you can recommend with exposure to US/World?

Question 4: what do you think of factor investing (small value)? Besides Endowus, any product recommend to get such exposure with Low fees?


Thx!

 

[hwckhs]

ST mentioned in his book about IWDA, 0.2% expense ratio, no-div, tracking the whole world (MSCI), I agree with it.

The "MSCI World" index only tracks the developed world, not the whole world. It does not include EM (eg. China).

If you want EM exposure, people generally recommend VWRA (accumulating) or VWRD (distributing) in place of IWDA.

 

[parkson]

Sorry if this has been asked before, for IWDA you can't see what are the dividends right since they reinvest it automatically for you?

 

[limster]

Sorry if this has been asked before, for IWDA you can't see what are the dividends right since they reinvest it automatically for you?

Yes you can, by reading the annual report.

Its like wow... so many investors not aware of the existence of annual report /financial statements

but for ETFs that follow the index, the index dividend yield is good enough for most investors.

 

[Kayeesha]

ES3 has been around for longer, has a larger AUM (which reaps economies of scale), slightlynmore liquid, and lower tracking error. But both are good. If you feel like G3B is better for you go for it. Much like how people debate between IWDA, SWRD and LCWD which track the same index.

Thanks cassowary18.

Those are valid reasons to choose ES3 over G3B. Apologies but it seems that I got it wrong about G3B paying dividends annually. My erroneous info came from an article by Dollars and Sense summarising the differences between the two.

 

[Kayeesha]

At an etf level, There isn’t any currency risk.

Unless you actually perceive Fx risk at a company level before net profit. Eg weaker currency benefits export oriented companies or have many operations overseas such as coke. Hence an etf viewed this way exposes u to fx risk but u r not the Treasurer.

FX risk or benefits to the investor is shown in research to b equity related due to diversification. however at bond level, the benefits was just too little.

Hence vanguard typically hedge an international bond etf, as well as some at equity level. Shiny argues it’s just marketing giving consumers what they want and it’s irrelevant to have hedging of equities and perhaps also international bonds for Singapore domiciled.

As for me, USD bonds only provides one benefit which is to fill in the gaps of our sgd bond market such as illiquidity, poor buffer in event of deflation...but only after u really understood the notion of diversification, volatility and especially rebalancing. U will belong to the school believing equity helps u to eat, high quality bonds helps u to sleep.

Via rebalancing, the negative correlated assets to each other will truly shine. Hence USD GOVT bonds in a deflationary situation is the best negative correlated asset class to a Singapore investor I can find. U can magnify it’s beta by having a longer maturity along with greater interest rate risks. Instead of USD bonds, u can keep USD currency, protects u from expected inflation aka expected interest rate rise as well as deflation though not as potent as USD govt bonds due to USD strengthening in deflationary crisis for a Singapore investor.

however there are many ways to skin the cat. Hence u can achieve similar results just by having mbh, but lowering your equity risk level instead.

Or having unhedged usd bonds and top it up with a small allocation to gold or TIPS, or instead of gold, increase exposure to international equities.

Thanks swan02.

My view of currency risk is at the investor level. Suppose global stocks plummets and the US$ appreciates. You will have to sell more S$ bonds in order to purchase the cheaper stocks during the rebalancing compared with if you had hedge your US$ exposure with US$ bonds? Sorry if I don’t make sense. I can never get my head around foreign currency and its effects.

 

[bobobob]

Thanks swan02.

My view of currency risk is at the investor level. Suppose global stocks plummets and the US$ appreciates. You will have to sell more S$ bonds in order to purchase the cheaper stocks during the rebalancing compared with if you had hedge your US$ exposure with US$ bonds? Sorry if I don’t make sense. I can never get my head around foreign currency and its effects.

What if SGD appreciates? Then if you are holding USD bond, you'll have to sell more USD bonds, comparatively, to buy the stock, right?

 

[chekseng80]

Agree one is not buying 2801.HK for diversification. Thats why its important to read ETF factsheets and index methodology. If I wanted diversification I would stay with my Asia or EM focused ETFs which also hold 30%+ China.

Its for those who are fully diversified, say, into World ETF like IWDA but want to specifically overweight a particular area - China & China Tech.

Those that know how to read annual report can easily find out the TER. For 2019 its 0.263% . The ETF has to pay stamp duty for buying individual shares (and so do individual investors) so this has to be factored in. But it seems that the fund size hasn't changed that much, so the transcation costs are low.

Those that don't bother to read annual report and financial statements..I wouldn't recommend these people to do individual stock picking.... after all, if they are not prepared to do fundamental analysis.... stock picking is not for them.... unless they are the pure "TA" type that ignores fundamentals.

What's yr view on 2801 and 3067?

 

[Kayeesha]

What if SGD appreciates? Then if you are holding USD bond, you'll have to sell more USD bonds, comparatively, to buy the stock, right?

So, we should hold a mix of S$ and US$ bonds? I don’t think we can achieve a perfect currency risk match, though.

Maybe I'm being too pedantic?

 

[tchen003]

What’s your opinion on IWDA+EIMI? What could be the AA between the two?

IWDA cover developed countries with heavy emphasis on US

EIMI cover emerging countries with heavy emphasis on China

Both are non-div, Low expense ratio.

 

[swan02]

I wonder whether it would have helped that u perceive an ETF as a currency as much as I perceive gold as such ?

This way, u will quickly realise that every THING has a perceived inherent value. And this value at time zero is affected by zero FX risk whether it’s denominated in SGD or USD or AUD.

Once u keep USD Bonds which has in itself its own inherent value that runs slightly counter to SGD due to USD being a superior safe haven, then u r exposed to FX risks as it’s USD vs SGD, currencies are a reflection of the perceived value of the country.

USD is expected to weaken especially in risk on mode, thus r negatively affected in rebalancing if the sunshine persists assuming no change in interest rates.

In risk off mode in deflation aka crisis, then your USD bonds strengthens along with USD strengthening against SGD giving u dual impact to buy more shares.

Looks like u r actually focussing more on negatively correlated diversification rebalancing strategy rather than FX risks.

If so... USD FX risks obviously is apparent but it’s a necessary evil due to its buffering negative correlation.

However over long term, currencies as I understand it, tend to move back in circles. Question u have to ask is whether USD remains a reserve currency or it starts to move more like an emerging currency. Due to currency cyclical nature, i deduce that the research I’ve seen supports little merit over long term for keeping foreign unhedged bonds.......

short term, i speculate it has merits when USD is held.

Anyone correct me if I’m wrong.

Thanks swan02.

My view of currency risk is at the investor level. Suppose global stocks plummets and the US$ appreciates. You will have to sell more S$ bonds in order to purchase the cheaper stocks during the rebalancing compared with if you had hedge your US$ exposure with US$ bonds? Sorry if I don’t make sense. I can never get my head around foreign currency and its effects.

 

[chrisloh65]

Currency values move in cycles.
If you can buy US$ at cheap rate (vs S$), then it is more advantageous to exchange at cheap rate and hold on to the US$ and buy US$ bonds instead of switching back to S$ and then back to US$ to buy stocks listed in US$. Every forex transactions will incur costs.
And not to forget if you keep these cash/bonds in IB US for long term, beware of US estate tax duty! This is the primary reason why I don't use IB US.

So, we should hold a mix of S$ and US$ bonds? I don’t think we can achieve a perfect currency risk match, though.

Maybe I'm being too pedantic?

 

[chrisloh65]

The world is changing. US is going down the drain.
IWDA consists of >65% US stocks, so I don't suppose you want to over-weight stocks of a sun-set economy?

What’s your opinion on IWDA+EIMI? What could be the AA between the two?

IWDA cover developed countries with heavy emphasis on US

EIMI cover emerging countries with heavy emphasis on China

Both are non-div, Low expense ratio.

 

[cassowary18]

What’s your opinion on IWDA+EIMI? What could be the AA between the two?

If you go by free-float market-cap, about 88% IWDA to 12% EIMI.

 

[D-Aced]

if want more exposure in US for higher gains,

wouldnt VUSD be better than IWDA+EIMI or VWRA combo?

TER is much much lower too