*Official* Shiny Things club

[The Accountant]

Shiny, I hear you. I see why you advocate IWDA. I think is a great pick too. Is like all one has to do is to buy ONE ETF... and they are covered. My plan for IWDA is long term. 10-15-20 year kinda' thing. It's one thing trying to do everything.

DXET, ISPA, 1348 JP, and ISF - As for the rest, those are areas i believe to have potential growth/value opportunities (3-5 years). Some will argue the US should be in my list too if that's the case; well i could just add VUSD too... and Thailand too... and S. Korea too... and Russia or and Malaysia just got cheap too... Let's buy the whole world! Wait, what? I already did with IWDA.

I'm trying to additionally target specific regions for more exposure. I am aware of the overlap but removing IWDA totally is just pure dumb. I might be a fool at times but not that dumb yet.

I have set aside $/mth for investments. Ratio will change as necessary but the norm should be 60:SGX, 40:IBKR. Ideally, I am able to correctly identify one ETF for SG/IBKR every month for reinvestment. I reckon my 'rebalancing' naturally becomes rather active just by doing this. My thinking is if there is potential, I am happy to increase exposure. I intend to regularly take profit from 'regions' and hold as emer funds (ES3/IWDA). I have left out APAC, BRIC, A50. H-Share and whatever potato chips CN has to offer.

Right now, that's the plan. Does it make sense? Can I still cut my cake many ways and eat it? - I don't know yet hence my asking here. My FA at AIG isn't able to offer any insightful thoughts on portfolios. If you have thoughts, please do share. If you think it's a dumb idea, say it as it is.

Hi nicholasmong, although your question is throwing to Shiny things, but i though i will just clarify a few things with you.

i get Limster's logic of slicing up the world index into US, Europe and Asia Pac for the sake of a lower expense ratio compared to VWRD. That is fairly acceptable.

However, your logic is to overweight towards a certain region depending on the market/economy situation. That, my friend is a zero sum game. Some people have an edge in that, most don't and on top of that, you need to cover the fx spread and trading fees to breakeven. This may be just for the period of 3 years. Over the long run, i suppose you will keep allocation to different regions? If you only weight it to say 5% of your portfolio, its fine as it won't cause you a huge damage if you are wrong.

i think i note the ISPA etf is denominated in Germany. there should be a 5% withholding tax for that. Have you ever receive some funny deduction from your account?

 

[potatoe8]

Shiny, what do you think of investing in IPOs? Why should you or should you not invest in them?

 

[nicholasmong]

However, your logic is to overweight towards a certain region depending on the market/economy situation. That, my friend is a zero sum game. Some people have an edge in that, most don't and on top of that, you need to cover the fx spread and trading fees to breakeven. This may be just for the period of 3 years. Over the long run, i suppose you will keep allocation to different regions? If you only weight it to say 5% of your portfolio, its fine as it won't cause you a huge damage if you are wrong.

i think i note the ISPA etf is denominated in Germany. there should be a 5% withholding tax for that. Have you ever receive some funny deduction from your account?

Thanks for your thoughts; and very much appreciated.

You are right about the duration. Assuming regions are different in 3 years, I should have been taking profit and liquidated most of EU and JPN. If I haven't done that, then I should have just went with IWDA alone.

I have not bought ISPA as of yet... so haven't seen much to be honest but i thought it was more.
1. https://en.wikipedia.org/wiki/Flat_rate_withholding_tax_(Abgeltungsteuer)
2. http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-germanyguide-2015.pdf

There's DXSB/XGDD as an alternative in Luxembourg but... synthetic and doesn't look like any trade happens and small asset value - https://etf.deutscheawm.com/GBR/ENG...H6/Stoxx-Global-Select-Dividend-100-UCITS-ETF

 

[limster]

My interest in VUKE, CPJ1 (as an Australia proxy) is partly due to an interest in those countries as a future place to buy property for a dream retirement/holiday home. Others may want to do their further degree or send their children to uni there.

This assumes that increases in UK/Australia stock market will correlate to increase in the cost of living/ cost of uni education in those countries.

This is one of the reasons why I underweight US, irrational as it may be. I have no interest in US universities and no interest in living in US.

Finally, why German-listed ISPA when LSE listed VHYD is available?

 

[Shiny Things]

My interest in VUKE, CPJ1 (as an Australia proxy) is partly due to an interest in those countries as a future place to buy property for a dream retirement/holiday home. Others may want to do their further degree or send their children to uni there.

This assumes that increases in UK/Australia stock market will correlate to increase in the cost of living/ cost of uni education in those countries.

This is one of the reasons why I underweight US, irrational as it may be. I have no interest in US universities and no interest in living in US.

Eerrrmm... problem is, you're underweighting the biggest economy in the world. I get your thinking, though, and you're pretty much in the ballpark. Full disclosure, I'm going to do the same thing eventually - when AUD gets down to 60-65 cents, I'm going to move some of my S&P 500 index fund exposure over to the ASX 200.

Finally, why German-listed ISPA when LSE listed VHYD is available?

Good question!

Shiny, I hear you. I see why you advocate IWDA. I think is a great pick too. Is like all one has to do is to buy ONE ETF... and they are covered. My plan for IWDA is long term. 10-15-20 year kinda' thing. It's one thing trying to do everything.

I'm trying to additionally target specific regions for more exposure. I am aware of the overlap but removing IWDA totally is just pure dumb. I might be a fool at times but not that dumb yet.

So I don't think this is a great idea - you're basically stockpicking, and that's pretty much always doomed to fail - but I'm not going to talk you out of it. As long as you stick to your allocations and your rebalancing you'll do fine. Just don't sell your single-country ETFs if they go down; if you do that, then you're locking in losses, and that's the exact opposite of what you want to do.

Right now, that's the plan. Does it make sense? Can I still cut my cake many ways and eat it? - I don't know yet hence my asking here. My FA at AIG isn't able to offer any insightful thoughts on portfolios. If you have thoughts, please do share. If you think it's a dumb idea, say it as it is.

I reckon it's a dumb idea, yeah, but it's not a bad dumb idea (if that makes sense!). You've still got your bond component, right? If you keep your bond and your equity mix in the "110 minus your age" ratio, and you're diligent about rebalancing, you should end up OK. I just think you're adding a whole lot of complexity that doesn't need to be there; if you can do it with three ETFs (ES3, IWDA, A35), you should keep it simple.

Shiny, what do you think of investing in IPOs? Why should you or should you not invest in them?

Nope. Nope nope nope. Stagging IPOs is a high-risk, low-reward strategy - it's picking up pennies in front of a steamroller. Here's why.

You know how your allocation always gets scaled back when you try to get a stake in a hot IPO?

Let's imagine that you had a strategy of investing in every single IPO that hit the boards. On all of the big, popular IPOs, your allocation would get scaled back to one-fifth or one-tenth or one-twentieth of what you asked for, and you'd make a small profit.

But on the bad IPOs, where nobody wanted to buy the stock, you'd get your full allocation just as the stock tanked (because nobody else wants the IPO), and you'd take huge losses.

So you'd have a few small gains offset by some huge losses, and you'd probably end up down overall. Don't do it.

Hi Shiny,

I found out that Vanguard has an S&P 500 index listed on the HKex (Stock code: 3140, lot size: 100)!

Link: https://www.vanguard.com.hk/portal/investments/detailoverview.htm?portId=9583#overview

Is this the same S&P 500 index which is found on the LSE/NYSE? If so, wow, I can vest in a (mostly) tax-free S&P 500 ETF on the HKex using my SCB account for about $1500 HKD ($265 SGD) a month!

Not quite: the one listed in HK doesn't get the dividend tax breaks that the LSE-listed one does. So the LSE one is still better. (And the LSE lot size is one share, so...)

 

[Perisher]

Not quite: the one listed in HK doesn't get the dividend tax breaks that the LSE-listed one does. So the LSE one is still better. (And the LSE lot size is one share, so...)

You mean the HK listed one gets the full 30% tax?
I read that HK has 0% tax so the 30% is already taxed before passing to HK back to us?

The 0% dividend tax for Singaporean buying HK stock link
http://singvestor.com/withholding-taxes-for-singaporean-investors-of-foreign-stocks/

 

[nicholasmong]

My interest in VUKE, CPJ1 (as an Australia proxy) is partly due to an interest in those countries as a future place to buy property for a dream retirement/holiday home. Others may want to do their further degree or send their children to uni there.

This assumes that increases in UK/Australia stock market will correlate to increase in the cost of living/ cost of uni education in those countries.

This is one of the reasons why I underweight US, irrational as it may be. I have no interest in US universities and no interest in living in US.

Finally, why German-listed ISPA when LSE listed VHYD is available?

ISPA tracks top 100, has United States: 24.02%, United Kingdom: 17.1%, Singapore: 10.15% as top 3 holdings out of 100.

Yet, I found VHYD while I looked up VUSD yesterday; thanks to you
Not quite the same thing with 1097 holdings, Singapore: 0.9%. But might do what I'm looking for.

p/s: the drop IWDA being dumb thing, was referring to myself. buying multiple ETFs to replicate IWDA will cost me more; hence dumb. Just want that out in the open so no confusions.

So I don't think this is a great idea - you're basically stockpicking, and that's pretty much always doomed to fail - but I'm not going to talk you out of it. As long as you stick to your allocations and your rebalancing you'll do fine. Just don't sell your single-country ETFs if they go down; if you do that, then you're locking in losses, and that's the exact opposite of what you want to do.

Well, I did get a few very useful viewpoints. I'm likely to swap the EUR/JPY ETFs to something I can find on LSE (VHYD/XESC vs. ISPA/DXET). Maybe HKEx for a 1348 JP replacement. The part on locking in losses will be an extension of my previous question on what new investors should avoid.

I reckon it's a dumb idea, yeah, but it's not a bad dumb idea (if that makes sense!). You've still got your bond component, right? If you keep your bond and your equity mix in the "110 minus your age" ratio, and you're diligent about rebalancing, you should end up OK. I just think you're adding a whole lot of complexity that doesn't need to be there; if you can do it with three ETFs (ES3, IWDA, A35), you should keep it simple.

Yeah, i get the not a bad dumb idea bit. it's the added complexity that has me going "should i, shouldn't i?".

I'm still trying to decide between A35 or SSB. Thoughts?

 

[Shiny Things]

Well, I did get a few very useful viewpoints. I'm likely to swap the EUR/JPY ETFs to something I can find on LSE (VHYD/XESC vs. ISPA/DXET). Maybe HKEx for a 1348 JP replacement. The part on locking in losses will be an extension of my previous question on what new investors should avoid.

Yeah, i get the not a bad dumb idea bit. it's the added complexity that has me going "should i, shouldn't i?".

Yeah, I come down on the side of "simple is better", especially for new investors. You can be quite happy with just buying IWDA and sitting on it; or you can add some complexity. It's not necessarily a bad thing.

I own a couple of extra funds above the basic three (US midcaps as well as the SPY, and short-term bonds as well as a generic bond fund) but for new investors I want to keep the plan as simple as possible.

I'm still trying to decide between A35 or SSB. Thoughts?

We tossed this around and came down on the side of A35. On the one hand, there's a little bit of principal risk; on the other hand, the yield is 60bps or so higher and it's more liquid.

 

[Shiny Things]

You mean the HK listed one gets the full 30% tax?
I read that HK has 0% tax so the 30% is already taxed before passing to HK back to us?

Yep. The Irish-domiciled ETFs get the tax rebate because of the US-Ireland tax treaty; the HK-domiciled ETFs don't have a tax treaty, so dividends from US-based companies to the ETF get withheld at the full 30%.

 

[Shiny Things]

Well, I did get a few very useful viewpoints. I'm likely to swap the EUR/JPY ETFs to something I can find on LSE (VHYD/XESC vs. ISPA/DXET). Maybe HKEx for a 1348 JP replacement. The part on locking in losses will be an extension of my previous question on what new investors should avoid.

Also, check out SJPA LN as a 1348 JP replacement; it's listed in USD on the LSE, so it's easier and cheaper to trade; and the expense ratio is cheap as chips (0.2%).

 

[highsulphur]

I have been thinking. Say if one had bought es3 at its peak this year and is down 8% so far now.

Does one really wait around one year to rebalance (sell bonds and buy more es3) or bring forward the rebalancing process base on some trigger point (eg if es3 is down a certain percentage)?

 

[w1rbelw1nd]

I'm still trying to decide between A35 or SSB. Thoughts?

Don't ever go with SSB in your portfolio bro.... It is essentially a 10 year bond that pays you less interest at the start and higher interest at the end. As time past, the NPV of the bond should increase due to the higher coupons given out at the later stages. However, due to the feature in the SSB, this can never be reflected in the bond price when you redeem the bond before expiry. It will take a significantly high increase in interest rate such that the NPV (of the higher coupons at the later periods and par value) is lower than the par value of bond.

I wouldnt use SSB for any part of my portfolio because a bond allocation will do better in terms of rebalancing. Would probably only recommend it to store emergency funds though, where principal protection is more greatly emphasized.

 

[w1rbelw1nd]

I have been thinking. Say if one had bought es3 at its peak this year and is down 8% so far now.

Does one really wait around one year to rebalance (sell bonds and buy more es3) or bring forward the rebalancing process base on some trigger point (eg if es3 is down a certain percentage)?

Either one or both can work, I would prefer to use both for my rebalancing

 

[Shiny Things]

I have been thinking. Say if one had bought es3 at its peak this year and is down 8% so far now.

Does one really wait around one year to rebalance (sell bonds and buy more es3) or bring forward the rebalancing process base on some trigger point (eg if es3 is down a certain percentage)?

This is a fair question! Some people use an "if it moves 10%" rule; some people use a "once a year" or "twice a year" rule. I like saying "once a year", because that way you don't have to watch the market like a hawk; if you use an "if it moves 10%" rule you have to watch the market every day to see if something has moved.

 

[Shiny Things]

I wouldnt use SSB for any part of my portfolio because a bond allocation will do better in terms of rebalancing. Would probably only recommend it to store emergency funds though, where principal protection is more greatly emphasized.

I wouldn't be that harsh about it. The SSB's a pretty great product if you care about principal protection, and the embedded put option (the "sell it back at 100" clause) could potentially be very valuable if (when) interest rates head higher. If you were thinking of buying government bonds in your retail account, because you absolutely can't afford any principal loss, the SSB is pretty much always better; it's not quite as good as A35, but it's certainly not bad.

 

[The Accountant]

ISPA tracks top 100, has United States: 24.02%, United Kingdom: 17.1%, Singapore: 10.15% as top 3 holdings out of 100.

-

Well, I did get a few very useful viewpoints. I'm likely to swap the EUR/JPY ETFs to something I can find on LSE (VHYD/XESC vs. ISPA/DXET).

Not sure about your objective of holding VHYD or ISPA. if its just about the dividend, you might wanna reconsider it again. The growth of companies depends on their reinvestment of retained earnings. Dividend paying company that pays 100% of earnings do not reinvest their earnings hence, there is no earning growth except when they uses leveraging.

This point is proven when you compare the earnings growth of VWRD (earnings growth of 13.8%), VEUR (earnings growth of 9%), VJPN (earnings growth of 19%), VAPX (earnings growth of 13.8% vs (VHYD earnings growth of 8.4%).

Here's another quote about dividend etfs.

Dividend Vs. Nondividend
Over the first six months of 2015, the average return to the 421 dividend-paying stocks in the S&P 500 was 0.0 percent. The average return to the nondividend-paying stocks in the index was 6.5 percent. Over the past 12 months, the gap was even wider. The dividend-payers returned 4.7 percent, underperforming the nonpayers (which returned 13.1 percent) by 8.4 percentage points.

In case you may be thinking this underperformance was just a very recent occurrence, we'll also look at returns for both 2014 and 2013. In 2014, the 423 dividend-paying stocks in the index (equal-weighting them) returned 14.0 percent. Nondividend-paying stocks returned 14.4 percent, an outperformance of 0.4 percentage points. In 2013, dividend-paying stocks in the index (again equal-weighting them) returned 40.7 percent compared with 46.3 percent for the nonpayers.

From January 2013 through June 2015, each dollar invested in the dividend-paying stocks grew to $1.60. Each dollar invested in the nondividend-paying stocks grew to $1.89, a cumulative outperformance of 18 percent.
The trend goes back even further. For the five-year period ending July 20, 2015, SDY returned 14.5 percent and underperformed the 16.7 percent return for Vanguard's 500 Index Fund (VFINX) by 2.2 percentage points per year.

Source: etf.com

Yeah, i get the not a bad dumb idea bit. it's the added complexity that has me going "should i, shouldn't i?".

This is what experts says about simplicity.
link

I'm still trying to decide between A35 or SSB. Thoughts?

i choose not to have SSB in my portfolio as i don't really understand the mechanism of calculating the step up "average yield" . in addition, triple A govt bonds are suppose to "zip" while equity "zag" because they are safe heaven assets, hence i see no benefits on holding SSB in my retirement portfolio.

They do make a good place to hold your emergency funds.

 

[henrysim83]

Hi Shiny, what do you think about BRK B as part of portfolio?

 

[nicholasmong]

Thanks

To The Accountant, Limster and Shiny, thanks for your input. Best I keep things simple for now. The more I try to re-engineer, I find myself going back to the drawing board.

 

[cowdragon]

Hi,
Have read quite a lot of the past threads, but have yet to invest cos still unsure
For $40k ready cash, how should one go about investing in ES3 and A35?
Should I buy in lump sum $30k and the rest at $500 monthly?
Which should I use, POSB invest saver, SCB, or poems? Any reason for this?
Pls excuse the noob question cos really new in this.
Would appreciate help for this first time investor.

 

[highsulphur]

Hi,
Have read quite a lot of the past threads, but have yet to invest cos still unsure
For $40k ready cash, how should one go about investing in ES3 and A35?
Should I buy in lump sum $30k and the rest at $500 monthly?
Which should I use, POSB invest saver, SCB, or poems? Any reason for this?
Pls excuse the noob question cos really new in this.
Would appreciate help for this first time investor.

There is no right answer. For me, I split up my amount into about 5 parts with specific levels to buy for a specific volume. If I don't get done within a month, I would increase my bid slightly. The idea is to balance between trying to hard to buy cheap and end up not buying anything vs going in too quickly and seeing the market moves against you.

Again my view is that there is no right answer.