*Official* Shiny Things club

[chenqien]

Thanks Shiny Things & kehyi4, will have a read and decide what's best for my situation !

The point is that you should rebalance as opposed to just leaving your money sitting there and forgetting about it. Rebalancing more than once or twice a year really doesn't add much to your returns.

School Holidays and Stock Market Seasonality, dated Nov 15, 2014.

 

[chenqien]

Er, I don't think so - as Perisher said, I think you need to have a multicurrency account at Stanchart with the USD sitting in it, and then you can move cash into the USD securities settlement account from there. Don't take my word for this, though - you need to check it for yourself.

Yup, you can't directly input USD into their trading account in SCB. You need a savings account(SGD) or a multicurrency account(which has some requirements in itself)
https://www.sc.com/sg/save/current-f...-currency.html

Perisher, Shiny Things

You both are pretty much bang on. Went to open an account today and opened a multicurrency account - They call it the FCY$aver Account (USD) where I can deposit my USD via cheque and then transfer it to the securities settlement account. Like this, I do not expose myself to the FX spread.

On the flip side, the FCY$aver Account requires I maintain a US$2000 balance falling below which, i will incur the fall-below fee. I feel that this arrangement is the lesser evil.

Important: For those who wish to open a SCB brokerage account, passing the Customer Account Review (CAR) is a must. For other banks, failing the CAR simply means you cannot trade SIPs. For SCB, you cant even proceed with account opening. Not sure why SCB is so stringent though.

 

[chenqien]

HI Shiny,

Could you kindly elaborate on below? Is it difficult because administratively cumbersome or legislation makes foreign investors jump through hoops etc.?

One reason they're not being brought up is that all the funds you listed are American mutual funds, and it's pretty difficult for Singaporean investors to buy US mutual funds. It's a hell of a lot easier to invest in ETFs.

 

[chenqien]

I'll be honest, I'm confused by this. None of those things track the STI particularly well - the 1yr chart of the five of them is pretty much a random scribble.

Shiny Things - Perhaps my phrasing was inappropriate. What I actually meant was that the general trend of those stocks follow the same peaks and troughs of ES3 for most part, albeit with more volatility, instead of splitting away like this (5-year view)

And you're right that over the next few years (even the next 5 years), there's no guarantee that these stocks will perform in line with the STI as a whole - if anything, they might well underperform, because the REITs' asset values will go down and their funding costs will go up.

If you are just randomly picking, one of the worst performer like G13 can easily pull you in the wrong direction and deviate a lot from the overall index.

For myself I do dividend and index investing, which means I buy dividend yield counters (REITs, some STI components and a few other mid cap ones), and I also go into indices (STI ETF) through monthly purchases.

Thanks Shiny, Perisher, Bedokian - Think I will have a retirement fund based on ES3, A35, IWDA/VWRD and a seperate pool just for high dividend yield/high risk stuff.

 

[nicholasmong]

Yep, exactly right.

I agree with Limster - you're thinking way too hard about all this. Just save yourself a lot of hassle and buy IWDA. Add a small slug of EIMI if you want EM exposure.

Thanks Shiny, that helped clarify things for me. Following limster's approach to keep trades on IBKR on LSE in USD/GBP in any case. Am in on IWDA, will allocate 5% to EIMI this week Going to see SCB about that account to replace POEMS too.

 

[SpeedingBullet]

Learnt smth new today, thanks again!

 

[limster]

You both are pretty much bang on. Went to open an account today and opened a multicurrency account - They call it the FCY$aver Account (USD) where I can deposit my USD via cheque and then transfer it to the securities settlement account. Like this, I do not expose myself to the FX spread.

On the flip side, the FCY$aver Account requires I maintain a US$2000 balance falling below which, i will incur the fall-below fee. I feel that this arrangement is the lesser evil.

Note that you avoid the FX spread when depositing but withdrawing have to pay 1.5%. But at least you avoid FX spread in one direction.

http://forums.hardwarezone.com.sg/95777132-post4287.html

 

[Joeil-]

For a start, I just went to order 1 lot of ES3 shares at $3.15 via SCB (price taken from yahoo finance). But the order got rejected due to insufficient purchasing power. May I know why is this so?

 

[watsum]

You need to transfer funds from your Savings account to the Trading account.

Payments & Transfers -> Funds Transfer Between Own Accounts

 

[chuanz]

For a start, I just went to order 1 lot of ES3 shares at $3.15 via SCB (price taken from yahoo finance). But the order got rejected due to insufficient purchasing power. May I know why is this so?

Money needs to be in your settlement account before can purchase.

 

[Joeil-]

Ahh I see. So dividends will go straight to esaver account? Or to settlement and I'll need to manually transfer to esaver from there?

 

[Bedokian]

Ahh I see. So dividends will go straight to esaver account? Or to settlement and I'll need to manually transfer to esaver from there?

No. All transactions involving buying and selling of shares, and receipt of dividends are on the securities settlement account.

The esaver is just a normal bank savings account.

 

[Asphodeli]

Ahh I see. So dividends will go straight to esaver account? Or to settlement and I'll need to manually transfer to esaver from there?

Dividends and proceeds from selling will be deposited in your settlement account

Sent from Sony D5833 using GAGT

 

[Joeil-]

Appreciate all for the replies.

If dividend payout date is on 20 Aug, does it mean if I purchase the share before this date, I'll be expecting dividend on 20th?

 

[doody_]

Appreciate all for the replies.

If dividend payout date is on 20 Aug, does it mean if I purchase the share before this date, I'll be expecting dividend on 20th?

If you purchase the share before the XD date, you will get the money on the dividend payout date.

 

[Perisher]

Appreciate all for the replies.

If dividend payout date is on 20 Aug, does it mean if I purchase the share before this date, I'll be expecting dividend on 20th?

If you are really interested to know the basics of dividends, read this
http://forums.hardwarezone.com.sg/stocks-shares-indices-92/all-about-dividends-5064974.html

 

[hhhnnn]

Backtesting DCA methodology

Hi,
Thank you Shiny for your wonderful advice and response. You are a shiny stone in this forum . I have learnt plenty from your posts.
I've been reading the thread and very interested in the Shiny's suggestion for ES3, A35 and IDWA portfolio. It seems to me the essence of this strategy is DCA. By adding money monthly, and then re-balance yearly.
I decided to back testing the DCA methodology for STI index using excel from 1990 to 2015 to gauge the return we expect why applying this methodology. I think maybe someone already did this, but I can't find so I do it myself.

I'm sharing the excel below. One is Microsoft excel and the other one is google speadsheet (some formula are not working on google spreadsheet since I create from excel)
Excel: http://tinyurl.com/p6ean2y
G spreadsheet: http://tinyurl.com/onur45x

Setup:

• 10000 Initial fund
• Monthly contribution $1500
• Commission $25
• Dividends are not re-invested
• No-rebalancing
• Database from Yahoo finance

I don't know how accurate my modelling is. If you find any faults, please let me know. I'm happy to re-visit it.
The result from the exercise suggests a IRR of ~4% (excluding dividend). The reasone IRR is used instead of CAGR is because CAGR we are keep adding funds to the investment, so CAGR will not be accurate. Are there other ways to calculate return?

• If we include dividend, can I say that we could add about ~2.5-3% on top of 4%? Hence, 6.5% annual return (including dividend).

• This modeling does not have any bond component and re-balancing aspect. If these 2 are added, could the total return improve another 1% or would it actually get worse?

Another findings is that it does matter if we DCA monthly or quarterly. The result are quite similar. So, we can actually DCA quarterly to reduce maintenance effort. Does it make sense?

I also back-tested with IJR (iShares S&P SmallCap 600 Index). IJR has been consistently outperforming S&P500 or any other index by a BIG margin in the past except this year. In the long run it will. Since 2000, IJR has gained a whopping 266% compared to a mere 52% on SPY. IWDA is quite new, but the result seems comparable with SPY.
See the performancce here http://tinyurl.com/qzqzv6k
The back-testing shows that IJR yields an amazingIRR of 11.1% excluding dividend. I have tried on SPY or IWDA but I think the performance may not be as good as IJR. someone can try.
I know Shiny suggests IWDA because it's listed on LSE which allows us to enjoy lower tax compared to US ETF. However, the amazing return in the long run could well compensate for the 30% dividend withholding tax on US ETF, doesn't it? or am I missing something here?
From this result, do you think it's make it's make sense to have IJR in our portfolio?

Regards,

 

[Joeil-]

If you are really interested to know the basics of dividends, read this
http://forums.hardwarezone.com.sg/stocks-shares-indices-92/all-about-dividends-5064974.html

Thanks Perisher. Indeed very helpful

 

[slackerz]

I know Shiny suggests IWDA because it's listed on LSE which allows us to enjoy lower tax compared to US ETF. However, the amazing return in the long run could well compensate for the 30% dividend withholding tax on US ETF, doesn't it? or am I missing something here?
From this result, do you think it's make it's make sense to have IJR in our portfolio?

Regards,

past performance is not indicative of future performance

 

[Shiny Things]

I don't know how accurate my modelling is. If you find any faults, please let me know. I'm happy to re-visit it.

I'm gonna point you toward this tool, which does pretty much the same thing you built and ges back to the early 1970s. It doesn't specifically include Singapore stocks, but the results will be pretty suggestive of what you should expect.

If we include dividend, can I say that we could add about ~2.5-3% on top of 4%? Hence, 6.5% annual return (including dividend).

Call it 2%-4% (because your dividends will include the coupon payments on bond ETFs), but don't forget to include compounding on reinvested dividends.

This modeling does not have any bond component and re-balancing aspect. If these 2 are added, could the total return improve another 1% or would it actually get worse?

The bond component will increase your returns in market downturns (1998, 2001, 2008), and reduce your portfolio volatility in pretty much any market. Don't forget, we don't just care about returns - if all you cared about was returns you'd pile 100% of your money into stocks and you'd have massive, painful drawdowns all the time. Reducing volatility is important too, especially when you get close to retirement - you don't want to lose 50% of your portfolio if the market plunges six months before you're due to retire.

Another findings is that it does matter if we DCA monthly or quarterly. The result are quite similar. So, we can actually DCA quarterly to reduce maintenance effort. Does it make sense?

I'd recommend monthly, because that's when people (usually) get paid. If you invest the money as soon as it hits your account, then you don't miss it.

I know Shiny suggests IWDA because it's listed on LSE which allows us to enjoy lower tax compared to US ETF. However, the amazing return in the long run could well compensate for the 30% dividend withholding tax on US ETF, doesn't it? or am I missing something here?
From this result, do you think it's make it's make sense to have IJR in our portfolio?

Yeah, slackerz nailed it: past performance is not indicative of future performance. Small caps and US stocks have had a phenomenal run over the last few years, but they tend to underperform badly in market downturns.

Chasing performance - buying small-cap stocks because "they've done so well in the last five years!" is the absolute worst thing you can do, because you'll tend to buy whatever stocks are the most expensive and you'll incinerate your money.