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revhappy 08-07-2018 10:23 PM

Quote:

Originally Posted by BBCWatcher (Post 115372138)
Sure. The Global Financial Crisis was the biggest and a genuine crash.

Thoughts? The biggest one was, “Wow, this is epic.” Then I thought about what I might buy, and I did a little extra buying.

What works for me fairly well is to consider what I’d do if Fairprice had a once-a-decade low sale price on laundry detergent, to pick a random example. “Stock up” is the sensible response. People seem to understand this in supermarkets. Why not in stock markets? It’s the same thing.


I assume that was true for a few years at the beginning, sure.


I haven’t fundamentally changed my saving/investing program in many years. I continue to accumulate stocks. But that also means I’m somewhat on the sidelines since cash has piled up a little faster than I expected, a happy problem to have. I’ll need to make an adjustment at some point, but it won’t be a big one.


U.S. data are quite reliable. I agree the data from mainland China are not, but that’s nothing new.

What if fairprice drops price daily by $x? People will rather wait and watch if tomorrow is going to be cheaper than today.

If I am not wrong Japan has already experienced this. It is called deflation. People postpone their purchases if they know prices are going to fall.

Sent from Xiaomi REDMI NOTE 4 using GAGT

revhappy 09-07-2018 12:05 AM

In fact, think about booking a flight ticket and next day you see that the airline has dropped its price. How badly it hurts your psyche. But on the other hand if you see that the price of the ticket had increased, how nice it feels. Even though in both cases there is no impact to you. So shopping or buying stocks there is no difference. In both cases, people want the best deal and don't want to overpay.

Sent from Xiaomi REDMI NOTE 4 using GAGT

BBCWatcher 09-07-2018 05:02 AM

Quote:

Originally Posted by revhappy (Post 115373936)
People will rather wait and watch if tomorrow is going to be cheaper than today.

Right, but that’s called trying to time the market, something I don’t do(*) and don’t recommend. The supermarket analogy is a decent one, because you’ve still got to eat. You’re always buying during the accumulation decades.

(*) Except only in a very rare and very marginal way, e.g. 1% or less once a decade or less. There’s absolutely no requirement to do that.

klarklar 09-07-2018 10:58 AM

Hi BBCWatcher,

How do you handle the fixed income portion of your portfolio? For stocks, it is logical to buy passive stock index ETFs/funds given their long-term track record of beating professional fund managers despite being cheaper. For bonds, do you buy bond index funds/ETFs? I find it somewhat illogical that bond indices components are made up of companies that carry the most debt in absolute terms. Wouldn't more debt mean higher chance of default?

What is your opinion? What is your fixed income strategy?

BBCWatcher 09-07-2018 12:07 PM

Quote:

Originally Posted by klarklar (Post 115380372)
For bonds, do you buy bond index funds/ETFs?

Yes, for most. I also hold some sovereign bonds directly.

Quote:

I find it somewhat illogical that bond indices components are made up of companies that carry the most debt in absolute terms. Wouldn't more debt mean higher chance of default?
It depends on how the bond index is constructed. If the index is constructed based on percentages of absolute debt floatation, then what you describe might be a concern. But it's also possible to construct a bond index in other ways, with different weighting formulas. The devil is in the details.

However, even for bond indices that are constructed based on absolute floatation shares, there are still a couple factors working to mitigate risks. One is that some industries simply generate lots of bonds as part of the normal course of their business, more than other industries. This "industry skew" doesn't come with any particular risk as such, but it tends to crowd out the companies that have the higher debt ratios within lower debt issuing industries. For example, Exxon issued a lot of bonds not too long ago, as is fairly typical in the oil and gas industry. And that's a pretty safe thing to do, because their bonds fund oil extraction of (typically) well proven resources. It's a capital intensive business, so floats can be big, but well established oil companies know this drill (pun intended). Relatedly, some U.S. companies in certain industries with lots of overseas profits issued a lot of bonds due to how the U.S. corporate tax code worked, as a way to repatriate earnings in a lower tax way. There was/is nothing particularly risky about that. It was just a money laundering exercise, really. Another factor is that there are rating agencies hopefully doing at least a decent job to filter out junk, assuming you choose investment grade bonds and bond funds.

Quote:

What is your fixed income strategy?
Since I expect many years ahead before retirement, the fixed income elements are not too big for me yet. I just do three basic things, really:

1. An investment grade, low cost, corporate bond index fund;
2. Some high quality sovereign bonds, held both directly and via a fund, and including a little bit of U.S. TIPS and I-Bonds (U.S. dollar inflation-protected bonds);
3. Bond-like sovereign life annuities, especially when there's a tax benefit.

MrHighlander 09-07-2018 02:26 PM

Hi BBCW,

Can you share which investment vehicles/ETFs you use to buy the bonds (investment grade corp, sovereign, TIPS etc)?

Thank you

BBCWatcher 09-07-2018 02:41 PM

Quote:

Originally Posted by MrHighlander (Post 115384017)
Can you share which investment vehicles/ETFs you use to buy the bonds (investment grade corp, sovereign, TIPS etc)?

I'm a U.S. person, so Vanguard (U.S.) works for me in most of those areas, with a little bit of help from TreasuryDirect.gov at the margins.

For non-U.S. persons, there's CORP, the iShares bond ETF listed/traded in London, and its various brothers and sisters as potential choices.

In Singapore, in Singapore dollars, the sovereign bonds are well covered with Singapore Savings Bonds (SSBs), other Singapore Government Securities (SGSes), and A35, the reasonably popular bond fund -- in that order, I'd suggest. CPF is quite bond-like and with some Singapore tax benefits, so that's another nice choice. The Singapore dollar denominated corporate bond universe is pretty dismal, I'm afraid, especially for retail investors. Unless and until that changes, I think you just have to work around that gap, using the government bonds and possibly CORP or something else offshore.

Occasionally an insurance company in Singapore offers a fixed deposit-like endowment plan that's reasonably attractive, so you could consider that if/when it pops up.

little pupsky 09-07-2018 08:15 PM

BBCW, since we are on the topic of bond funds, what are your views on N6M/QL2? You’ve already given your views in response to Tangent’s suggestion of QL3 somewhere upthread.

BBCWatcher 09-07-2018 08:50 PM

Quote:

Originally Posted by little pupsky (Post 115390185)
BBCW, since we are on the topic of bond funds, what are your views on N6M/QL2?

Let's take a quick look....

The management fee is pretty reasonable. Trading volume looks on the low side, which is a common problem and which can result in some wide bid-ask spreads. All of the bonds the fund holds are U.S. dollar denominated, and the fund itself is quoted/listed in the same currency. So it's a 100% U.S. dollar play, which fits if you're retiring in the United States, Panama, any of several Middle Eastern petro countries, or some other U.S. dollarized country.

I don't understand why Asian (ex-Japan) bonds are any better or worse than bonds from other continents. Has anybody got a reasonable investment strategy argument for that part?

little pupsky 09-07-2018 09:03 PM

Thanks, BBCW. For me, my simple (simplistic?) layman reasons for having QL2 in my bond portfolio is because it seems less risky than QL3, and yields better than CORP and A35; and also like you have already mentioned several times, the lack of better alternatives in good corporate bond funds locally. The USD denomination doesn’t bother me yet as I’m still open as to where I would like to retire eventually.

klarklar 10-07-2018 02:29 PM

A few things I don't understand with your fixed income portfolio.

Junk bonds are absent in your fixed income portfolio. Why no junk bonds since you are ok with equity risks? When it comes to risks, equity is more "junk" than junk bonds.

Another puzzling aspect of your fixed income portfolio is annuities. Annuities are for retirees, not for people of your age. I am guessing you are middle-aged since you sound too wise to be too young, and you mention you still have many years ahead before retirement. You are probably in your 30s or early 40s. Why buy annuities at your age?

Quote:

Originally Posted by BBCWatcher (Post 115381601)
Yes, for most. I also hold some sovereign bonds directly.


It depends on how the bond index is constructed. If the index is constructed based on percentages of absolute debt floatation, then what you describe might be a concern. But it's also possible to construct a bond index in other ways, with different weighting formulas. The devil is in the details.

However, even for bond indices that are constructed based on absolute floatation shares, there are still a couple factors working to mitigate risks. One is that some industries simply generate lots of bonds as part of the normal course of their business, more than other industries. This "industry skew" doesn't come with any particular risk as such, but it tends to crowd out the companies that have the higher debt ratios within lower debt issuing industries. For example, Exxon issued a lot of bonds not too long ago, as is fairly typical in the oil and gas industry. And that's a pretty safe thing to do, because their bonds fund oil extraction of (typically) well proven resources. It's a capital intensive business, so floats can be big, but well established oil companies know this drill (pun intended). Relatedly, some U.S. companies in certain industries with lots of overseas profits issued a lot of bonds due to how the U.S. corporate tax code worked, as a way to repatriate earnings in a lower tax way. There was/is nothing particularly risky about that. It was just a money laundering exercise, really. Another factor is that there are rating agencies hopefully doing at least a decent job to filter out junk, assuming you choose investment grade bonds and bond funds.


Since I expect many years ahead before retirement, the fixed income elements are not too big for me yet. I just do three basic things, really:

1. An investment grade, low cost, corporate bond index fund;
2. Some high quality sovereign bonds, held both directly and via a fund, and including a little bit of U.S. TIPS and I-Bonds (U.S. dollar inflation-protected bonds);
3. Bond-like sovereign life annuities, especially when there's a tax benefit.


LittleFinger123 10-07-2018 04:52 PM

Any advice on P2P lending platforms?

MrHighlander 10-07-2018 05:51 PM

Hi BBCW, for disability income insurance, any views on GE PayAssure versus Aviva idealincome ?

The way I see it:

GE pay assure has a decidedly more pro-assured definition of disability - i.e. the occupation you are engaged in immediately prior to the disability fullstop. For Aviva, it’s the occupation you are immediately engaged in prior to disability (same as GE) but after 2 years it reverts to the more stringent standard of not able to perform any job you are suited for by reason of your training/education (for instance, a doctor could perform the job of a male nurse and thus disability coverage would presumably not be triggered).

Aviva non- working disability is triggered by 3 out of 6 ADLs whilst GE is 2 out of 6.

Aviva has 3 % annual inflation whilst payout has been triggered whilst GE don’t have.

Having said the above, I think Aviva is 25-30% cheaper in premium on a same sum assured, same coverage period than GE.

Wondering if you have any thoughts to go with which ?

Thank you !

BBCWatcher 10-07-2018 07:28 PM

Quote:

Originally Posted by klarklar (Post 115402927)
Junk bonds are absent in your fixed income portfolio. Why no junk bonds since you are ok with equity risks? When it comes to risks, equity is more "junk" than junk bonds.

Precisely because there’s already equity in the portfolio. There’s no need to add more vehicles to achieve my goals at this point in time.

Where junk bonds might get slightly interesting is if you want more Singapore dollar denominated bonds, and the junky ones are the best you can do in the circumstances since the Singapore dollar denominated bond market just isn’t offering too many investment grade corporate bonds. Then you’d blend the junky bonds with government bonds, of course.

Quote:

Another puzzling aspect of your fixed income portfolio is annuities. Annuities are for retirees, not for people of your age.
You might be confusing “annuities” with “immediate annuities,” a particular sub-type. I never mentioned that I’m receiving annuity income at present, and I’m not. However, I’m adding to assets that will generate higher annuities with future starting payouts. CPF is an obvious, typical example, but others are possible.

Like practically anything else, annuity prices fluctuate. That’s even true for CPF, to a degree, because alternative outlets for cash, and tax brackets, can fluctuate. So when annuity prices are relatively, comparatively low, and you’d like some more, it’s a good time to buy them.

That’s not to suggest you need a super abundance of lifetime annuity income, and I also don’t recommend trying to time markets. But you can generally predict your tax bracket fairly well, and it’s quite reasonable to make such timing decisions with that information.

BBCWatcher 10-07-2018 09:53 PM

Quote:

Originally Posted by MrHighlander (Post 115406416)
Wondering if you have any thoughts to go with which ?

How do the premiums compare if you look at GE’s policy with a 6 month waiting period versus Aviva’s longest waiting period?

Bear in mind you can blend policies. For example, if you’re trying to obtain $5,000 of coverage then you’re allowed to buy $3,000/month from Aviva and $2,000/month from Great Eastern, as an example. There are situations when that “dual allegiance” makes sense.


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