*Official* Shiny Things club

[nicholasmong]

You could have your bonds in foreign currency, not that i am recommending it, but you could have such bonds in your portfolio base on the argument of currency diversification.

There is a also a case of diversification for high yields (junk). those bonds are denominated in USD(which are alot less volatility vs emerging market currencies. And to make things more juicy, the DTA for UK and US on interest effectively reduces it to zero withholding tax. In addition, the huge portion of the bonds in that Ishare high yield corp bond fund holds BB credit rating bonds.

Curious, why IHYU and not HYLD?

 

[RedSiskin]

Shiny Things, I started reading your advice about investing in local Sti Etf and Nikko Am Sti Etf about two years ago. I am following this thread quite faithfully. However. as the pages progress I find the content getting more and more sophisticated and I find the discussion beyond me. I have collected about 10000 units of etfs at about 3.11. I have not bought any bonds since I regard my CPF as the bond component. Two Decembers have come and I have not sold any units. Should I sell them this December, if the price is higher, like 3.30 and how much should I sell? After selling, should I start buying, even if it is higher than 3.11 or wait patiently for it to be around 3.11? Or should I just buy more etfs at prices lower and higher than 3.11, without selling any of the units I already have? Appreciate your advice.

 

[Shiny Things]

Two Decembers have come and I have not sold any units. Should I sell them this December, if the price is higher, like 3.30 and how much should I sell? After selling, should I start buying, even if it is higher than 3.11 or wait patiently for it to be around 3.11? Or should I just buy more etfs at prices lower and higher than 3.11, without selling any of the units I already have? Appreciate your advice.

Firstly, if you're looking for an intro to the thread, there was a really good "consolidating everything" post a few pages back (is there any way to sticky a single post?).

Secondly, this is a great time to talk about rebalancing.

So you've got the first bit right: you've got a mix of stocks (ES3 and G3B) and bonds (your CPF). But what you need to do now is that you need to make sure you don't have too much of one and not enough of the other.

Remember the "110 minus your age" rule? Here's where it comes into play.

Now, figure out what your ES3 and your G3B are worth right now - get the stock prices from the SGX website, multiply by the number of shares of each that you own, add it up. Forget about what you paid for them. That's in the past; it doesn't matter. Let's say they're worth a total of $30,000.

And let's say you've got $20,000 in your CPF. So you've got 60% in stocks, and 40% in bonds.

That's a pretty conservative allocation! By the "110 minus your age" rule, that's the sort of allocation you'd have when you're 50, so getting close to retirement. But let's say you're 30 now, so you need to move your allocation to 80% stocks, 20% bonds.

What you do is sell some of your bonds (or in your case just use the cash from your CPF), and buy ES3, until you get up to 80% stocks/20% bonds.

In this case, you can't do much, because you're not allowed to invest the first $60k out of your CPF (have I got that right, CPF specialists?). But if you could, you'd take $10k of the cash in your CPF, and use it to buy ES3. That brings you to 80-20 stocks-bonds.

And then each year, you look at your allocations, you say "OK, what do I need to do to bring myself back to that 110-minus-my-age ratio?", and you do it. You don't look at the prices you paid in the past. You don't try to pick which asset classes are going to outperform in the future. All you care about is what your portfolio looks like now.

 

[nicholasmong]

In this case, you can't do much, because you're not allowed to invest the first $60k out of your CPF (have I got that right, CPF specialists?).

$20k min. held in CPF Ordinary account.

 

[RedSiskin]

Shiny Things: Rebalancing to 110 minus age stock-bond ratio every mid December
" Forget about what you paid for them. That's in the past; it doesn't matter. Let's say (ES3 & G3B) worth a total of $30,000(Stock component)" the % of bond will depend on one's age. Thank you once again. I will have to learn to sell and buy in December every year.

 

[doody_]

$20k min. held in CPF Ordinary account.

60k is for the extra 1% interest, which is paid on the first 20k in OA and the rest in SA/MA.

 

[allan_nalla]

Excel? Google docs for price quotes

=GOOGLEFINANCE("LON:IWDA", "price")

Thanks for the recommendation, will take a look!

Mine's sort of like #1. I've got a line for equities, broken down into US, DM-ex-US, and EM; and a line for bonds, broken down into short-term investment-grade, long-term investment-grade, and junk.

I see. Thanks!

 

[zhenjian888]

Hi shiny,

I read the whole thread of this official shiny thing, and understand that your recommendation for new investor is either simple three-fund portfolio of ES3, A35, and Iwda or 2 fund es3 with A35.

Could I just dca and buy es3 and instead of buying a35 for bond component ,i kept the allocated portion in cash?

Regards

Sent from Meow!!! using GAGT

 

[The Accountant]

Curious, why IHYU and not HYLD?

I guess that works too but I prefer funds with larger AUM. I'm assuming you are referring to iShares etf that's listed in UK and not AdvisorShares Peritus High Yield ETF. The later one is an active managed etf with high expenses ratio.

 

[nicholasmong]

I guess that works too but I prefer funds with larger AUM. I'm assuming you are referring to iShares etf that's listed in UK and not AdvisorShares Peritus High Yield ETF. The later one is an active managed etf with high expenses ratio.

I noted the larger AUM immediately too. Thought you suggested the US bond cos' of potential rate hike and strong dollar vs. the Global bond due to QE in the EU.

 

[Shiny Things]

Could I just dca and buy es3 and instead of buying a35 for bond component ,i kept the allocated portion in cash?

You can, but A35 yields something like 2.6%. Why would you give that up?

 

[liquidy]

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?

Just FYI, ES3 ex dividend date is 31 Jul. don't be confused with the payout date of 20 Aug.

 

[The Accountant]

I noted the larger AUM immediately too. Thought you suggested the US bond cos' of potential rate hike and strong dollar vs. the Global bond due to QE in the EU.

No, I suggest US bond etf that are listed in UK because of the tax advantage(effectively zero withholding tax for US bonds). The global high yield still have some tax in the fund(because there are a little non US bonds) but it's very immaterial for the fund as a whole.

I don't know where interest rates are heading, and I most certainly don't know where fx is heading.

My idea is simple: investment return = market return less investment cost. You heard it first here. =P (actually it's by John Bogle)

 

[newjersey]

No, I suggest US bond etf that are listed in UK because of the tax advantage(effectively zero withholding tax for US bonds). The global high yield still have some tax in the fund(because there are a little non US bonds) but it's very immaterial for the fund as a whole.

I don't know where interest rates are heading, and I most certainly don't know where fx is heading.

My idea is simple: investment return = market return less investment cost. You heard it first here. =P (actually it's by John Bogle)

hi The Accountant,

yes, the rationale seems right, regarding lower tax rates, in the pure-cost point of view.

but looking at it comprehensively, does the ETF have sufficient trading volume that would allow it to have the mobility to move upwards?

share with me your thoughts on this, please.

thanks in advance.

 

[The Accountant]

but looking at it comprehensively, does the ETF have sufficient trading volume that would allow it to have the mobility to move upwards?

share with me your thoughts on this, please.

thanks in advance.

Hi new Jersey, do you mean higher trading volume will cause the nav to move upwards?
I don't think that is correct.

Generally I would think larger AUM will have higher trading volume which will give you a tighter spread. So I prefer IHYU. I am using this assumption because I can't find the data for HYLD.

 

[newjersey]

hi The Accountant,

I would think a higher trading volume would ensure an easier entry / exit.

I relate a higher trading volume to it being more speculative, thus, a possible higher volatility, not NAV though.

Perhaps, others / Shiny Things could chip in & share with us their views on it?

That's my thoughts.

 

[The Accountant]

hi The Accountant,

I would think a higher trading volume would ensure an easier entry / exit.

I relate a higher trading volume to it being more speculative, thus, a possible higher volatility, not NAV though.

Perhaps, others / Shiny Things could chip in & share with us their views on it?

That's my thoughts.

I think the real problem about Corp bonds etf is that the underlying assets are not as liquidity as stocks. That means there are alot of sellers, the AP are not able to make the trade to sell the bonds. When that happens, the etf will trade at the discount on nav. The same applies when there are alot of buyers and the etf will trade at a premium against nav. I think this is what you are referring to as the contribution to volatility.

Read: http://www.rickferri.com/blog/strategy/why-we-don%E2%80%99t-buy-corporate-bond-etfs/

But I think as long as you class high yield in the risky part of your portfolio like what shiny things mentioned. You will be fine as you take advantage of the discount and premium when u rebalance. Because Hy are so correlated with stocks, You will tend to sell at premium, and buy at discount.

 

[Rooney3]

Whats the opinion on CPF forming part of bond portion instead?

 

[chuanz]

Whats the opinion on CPF forming part of bond portion instead?

I think that's up to personal preference bah.

Personally I keep it out of my portfolio because it's not something within my control. Anything inside I treat it as supplementary to my retirement fund planning.

 

[highsulphur]

Whats the opinion on CPF forming part of bond portion instead?

I consider it to be part of my bond portfolio. I don't see why not.