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swan02

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The decision is based on an arbitrary assessment that the STI is just poorly diversified. Poorly diversified is good enough a reason that 20 percent is still way too much a risk to take a punt on mean reversion and FX stability, on top of already mega amounts of SG assets I hold such as an abode.

That even if STI beats the VWRA, will still leave me thinking that because of its historicL poor risk adjusted returns will be left in the dust over time vs VWRA. And hence unlikely for me to persists with STI outperformance.

I am confident to stick with VWRA even in a crash and will continue dca along. It is just easier for the mind and discipline.

Every time I buy SG stocks, I always feel it’s a mistake no matter what good reason there is, will still not be as good as a peace of mind.

And as we know, the best plan is one u can keep. Simplicity works for me.

OK, but are you making a reallocation decision because a very few -- and it is a very few -- stocks outside SGX-listed stocks are currently soaring?.
 
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Sweetangtang

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The decision is based on an arbitrary assessment that the STI is just poorly diversified. Poorly diversified is good enough a reason that 20 percent is still way too much a risk to take a punt on mean reversion and FX stability, on top of already mega amounts of SG assets I hold such as an abode.

That even if STI beats the VWRA, will still leave me thinking that because of its historicL poor risk adjusted returns will be left in the dust over time vs VWRA. And hence unlikely for me to persists with STI outperformance.

I am confident to stick with VWRA even in a crash and will continue dca along. It is just easier for the mind and discipline.

Every time I buy SG stocks, I always feel it’s a mistake no matter what good reason there is, will still not be as good as a peace of mind.

And as we know, the best plan is one u can keep. Simplicity works for me.

Hi BBCW,

My reason for adjusting the allocation in particular to reducing STI allocation is due to the fact that STI has been underperforming over the years. I also understand that if you are retiring in Singapore, it will be good to hold the STI to hedge the currency risk. I am not saying that I am going to eliminate STI at all, I am just asking if it makes sense to reduce the allocation to STI and increase the allocation to global index VWRA? Thank you!
 

swan02

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It is not good enough a reason to justify hedging currency risk when your allocation is so small.

Maybe the term currency risk should not even be used because stocks over long term actually diversify each other and FX unhedge is significant a reason to provide such diversification

It is different to say bonds, where FX exposure is overwhelms the risk In the asset instrument.

Lastly, if u go any lesser than 20 percent, u might as well forgo STI. Vanguard and a few research articles talks about these issues. Basically u decide whether u follow the volatility diminishing method or the dominance of GDP in relation to the world. Singapore being a minuscule contributor to world trade, the articles suggest 10 percent or below.

If u choose volatility or diversification method. I did come across an article of the optimal 37 percent allocation to STI. Many other indices require approx 40 local shares. USA is no doubt exceptional and they themselves optimally require a lot more local shares, namely 60 percent to b optimal.

But do remember the STI has changed a lot n might not hold true.

For these reasons, I would rather adhere to trade weighted hence 20 or 10 or less percent.

and if u go any lesser than 10 percent, u might just ignore completely because it won’t be a significant contributor to your overall asset allocation.

Hi BBCW,

My reason for adjusting the allocation in particular to reducing STI allocation is due to the fact that STI has been underperforming over the years. I also understand that if you are retiring in Singapore, it will be good to hold the STI to hedge the currency risk. I am not saying that I am going to eliminate STI at all, I am just asking if it makes sense to reduce the allocation to STI and increase the allocation to global index VWRA? Thank you!
 
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BBCWatcher

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The diversification argument is "interesting," and you didn't pick a terrific time to make that argument. Consider the U.S. S&P 500 stock index, which represents something over half of total global stock market capitalization (for publicly listed/traded stocks). As of July 31, 2020, here are the top stocks and their shares (market capitalization weights) within that particular index:

Apple: 6.4%
Microsoft: 5.8%
Amazon: 4.9%
Alphabet: 3.3% (Class A+Class C)
Facebook: 2.3%

Yes, that's right: these top 5 stocks alone represented over 22% of the value of the 505 stock U.S. S&P 500 index on July 31, 2020. (I don't have the exact figures for August 31, 2020, but "even more.") Roughly that rolls up into VWRA as about 22% of 55%, so something north of 12% of VWRA's value is in those 5 stocks, give or take.

I don't think you should be making major strategic portfolio allocation decisions based primarily or exclusively on the incredible bull run these very few stocks (and a very few others, e.g. Tesla) have enjoyed lately. I could be wrong, but you probably haven't picked a terrific time for this particular strategic epiphany.
 

swan02

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Frankly I was concerned of the high concentration of those stocks u mentioned but knowing them to be established names helped to allay some fears.

Hence actually VWRA or iwda + eimi, already did help provide that diversification as I was once s&p 500 heavy.

However I’m also in the strong belief that USA stocks have a natural ballast to crashes when viewed as a Singaporean investor due to my belief it entails intrinsic USD exposure, hence likely among other reasons contributed to its high long term risk adjusted returns. Whether my naive observation holds true, I’m not certain. Hence the geographic concentration is not an issue to me. But this particular point runs deep in my investing psyche.

However I’m also timing to shift into cyclicals maybe in 6 to 12 months buying up world small, mid caps and reits, financials, industrials etc to shift away even more from tech. All these etfs are to me better than STI in contributing to a balance equity portfolio.

Thus till now, I can’t see how STI can be a good option when many other good options are available. Even SG reits are superior IMO.



The diversification argument is "interesting," and you didn't pick a terrific time to make that argument. Consider the U.S. S&P 500 stock index, which represents something over half of total global stock market capitalization (for publicly listed/traded stocks). As of July 31, 2020, here are the top stocks and their shares (market capitalization weights) within that particular index:

Apple: 6.4%
Microsoft: 5.8%
Amazon: 4.9%
Alphabet: 3.3% (Class A+Class C)
Facebook: 2.3%
.
 
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CrashWire

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Hi BBCWatcher,

I have a quick question on US income tax, since you're familiar with it.

I am Singapore-domiciled and haven't been in the US for years, so I'm definitely a non-resident alien.

I did some freelance work for a US company in 2020. They will not withhold 30%. The income is under $600, but they're likely to issue a 1099-MISC.

What I'm having trouble finding information on: Is there a reporting threshold before I'm required to file a tax return with the IRS? Can I ignore the 1099, since it's an insignificant amount?

Thanks!
 

BBCWatcher

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I am Singapore-domiciled and haven't been in the US for years, so I'm definitely a non-resident alien.
That’s not a given, actually. For example, if you were a “long-term” U.S. permanent resident but have not filed IRS Form 8854 yet, surprise! ;) But let’s assume you are not a U.S. person....

I did some freelance work for a US company in 2020. They will not withhold 30%. The income is under $600, but they're likely to issue a 1099-MISC.

What I'm having trouble finding information on: Is there a reporting threshold before I'm required to file a tax return with the IRS? Can I ignore the 1099, since it's an insignificant amount?
A couple questions:

1. Where were you physically located when you performed this freelance work? In Singapore?

2. Is any portion of this income associated with non-work? A royalty payment is one example of non-work.
 

CrashWire

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1. Where were you physically located when you performed this freelance work? In Singapore?

2. Is any portion of this income associated with non-work? A royalty payment is one example of non-work.

1. Yes, in Singapore.

2. No, the income would come under Box 3 of the 1099 instructions: https://www.irs.gov/pub/irs-pdf/i1099msc.pdf

It's also not possible to file a W-8BEN with the payer, so I'm wondering how I should handle any potential tax liability I would have with the IRS.

For the sake of the discussion, it's probably easier to assume that I won a small prize for a contest that was only open to US residents. I believe the constraints would be the same.
 
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zoneguard

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But what I’m really interested in is 60 year retirement or forever, that’s the situation I’m in. Difficult to find.

University Endowments time frame is forever?
You can also look at Moshe Milevsky's papers.
 

GloryKnight

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Hi @bbcwatcher, what would be your advice for the best use of monies in a SRS account?

Would you recommend roboadvisors? I was thinking of endowus platform vs buying reits/divvy stocks using SRS monies. Appreciate your advice!
 
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celtosaxon

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Hi @bbcwatcher, what would be your advice for the best use of monies in a SRS account?

Would you recommend roboadvisors? I was thinking of endowus platform vs buying reits/divvy stocks using SRS monies. Appreciate your advice!

It would help if you could provide a bit more information.

How many years are you from retirement? Any risk you may not retire in Singapore? Do you currently have any bond investments?

SRS has limited investment options and a unique tax structure that tends to favor allocation to the lower-growth, non-equity portion of your overall investments depending on your situation, more so if there is a risk you may not retire in Singapore.
 

BBCWatcher

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1. Yes, in Singapore.

2. No, the income would come under Box 3 of the 1099 instructions: https://www.irs.gov/pub/irs-pdf/i1099msc.pdf

It's also not possible to file a W-8BEN with the payer, so I'm wondering how I should handle any potential tax liability I would have with the IRS.

For the sake of the discussion, it's probably easier to assume that I won a small prize for a contest that was only open to US residents. I believe the constraints would be the same.
No, the facts of the income matter, even if it’s reported in the same box on a form. In this case I don’t see how your income is U.S. taxable. You didn’t work in the U.S., don’t have U.S. personhood, and this was straight compensation for services rendered from what you’ve described. So all you’d do is keep this form and other, related records in your personal files, and that’s that. This income is IRAS reportable and taxable, however (I don’t see why it wouldn’t be), and you’ll need to check on CPF obligations.

As a reminder, these are nonprofessional opinions from afar.
 

purpleberry

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How do I start learning on ETFs? Any good platform to choose for beginners? Good time to buy STI, Dow, S&P now?
 

BBCWatcher

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How do I start learning on ETFs? Any good platform to choose for beginners? Good time to buy STI, Dow, S&P now?
Well, let's start with these lessons:

1. There is no "good time" except for now and as continuously as you can manage for the next 35+ years, which is your retirement time horizon.

2. With the possible exception of the STI stocks, you, a person planning to retire in Singapore, shouldn't be placing any bets on any specific other country's stock market(s). Just bet on the whole world, every month for the next 420+ months.

3. It doesn't matter whether a fund is exchange-traded (the ET part) or not, really. It just matters what it is (the assets it holds, the fund managers, and what formula the fund managers use to manage the assets), whether it's reasonably purchasable and salable, and what its costs are (taxes, management fees, etc.) And all you need is a very few low cost, well diversified funds. So few that you can count them on one or a couple fingers.

It just so happens that "ETF" is shorthand in Singapore for "low cost" because typically unit trusts sold in Singapore are higher cost than analogous exchange-traded funds. But that's not necessarily true always; it's just an accident of financial history and could easily change. Right now the lowest cost stock index funds in the United States (for U.S. resident retail investors) are mutual funds (the equivalent of unit trusts), which are not exchange-traded. Long-term investors don't and shouldn't care about whether a fund is exchange-traded. They just focus on the fund's characteristics, including especially its costs.

Any questions? ;)
 

GloryKnight

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It would help if you could provide a bit more information.

How many years are you from retirement? Any risk you may not retire in Singapore? Do you currently have any bond investments?

SRS has limited investment options and a unique tax structure that tends to favor allocation to the lower-growth, non-equity portion of your overall investments depending on your situation, more so if there is a risk you may not retire in Singapore.

I am still in my early 30s, thus i would say maybe about another 25 to 30 years to retirement. I have MBH & VWRA dca-ed monthly, split about 30/70.

About retiring in singapore, im unsure of it for now but definitely going to setup my family here with my kids. I might either get a house to retire in Malaysia or continue in Singapore.
 
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brfish

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1. You probably shouldn’t buy insurance to pay for a new coffee cup when you drop a coffee cup and it breaks. Coffee cups cost $10 (or thereabouts). This isn’t a genuine calamity or catastrophe. Don’t worry about the small stuff, not with insurance. One easy way you can sanity check this is to calculate the policy’s maximum possible payout. If that maximum isn’t at least 6 digits ($100K+), it’s probably too small to bother with. $2K or $20K probably ain’t going to rock your world much. (Middle class in Singapore assumed here.) A $3,000 deductible? A 6 month waiting period before disability payouts begin? Probably OK.

4. I’m probably going to classify CareShield Life as an insurance necessity for most people, but that really doesn’t matter since, if you’re young enough and a Singaporean citizen or PR, it’s compulsory.

Really like your summary of insurance needs. Just one question. Given CareShield Life's small payout every month, doesn't it fall into the category that is too small to bother?
 

purpleberry

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Well, let's start with these lessons:

1. There is no "good time" except for now and as continuously as you can manage for the next 35+ years, which is your retirement time horizon.

2. With the possible exception of the STI stocks, you, a person planning to retire in Singapore, shouldn't be placing any bets on any specific other country's stock market(s). Just bet on the whole world, every month for the next 420+ months.

3. It doesn't matter whether a fund is exchange-traded (the ET part) or not, really. It just matters what it is (the assets it holds, the fund managers, and what formula the fund managers use to manage the assets), whether it's reasonably purchasable and salable, and what its costs are (taxes, management fees, etc.) And all you need is a very few low cost, well diversified funds. So few that you can count them on one or a couple fingers.

It just so happens that "ETF" is shorthand in Singapore for "low cost" because typically unit trusts sold in Singapore are higher cost than analogous exchange-traded funds. But that's not necessarily true always; it's just an accident of financial history and could easily change. Right now the lowest cost stock index funds in the United States (for U.S. resident retail investors) are mutual funds (the equivalent of unit trusts), which are not exchange-traded. Long-term investors don't and shouldn't care about whether a fund is exchange-traded. They just focus on the fund's characteristics, including especially its costs.

Any questions? ;)

Apologies for the noob questions. I am reading a bit on ETF and taking STI as a starting ground with Yahoo finance as reference. Supposing I purchased it in early 2020 when it was >3.3. Perhaps 10-11 years time there's another global tragedy and it looks like it is trading now at 2.5. This means I will make a loss of around 25%? Even if I purchased it 10 years ago, it looks like I will still make a loss.

On the other hand, other ETFs like Dow Jones and S&P500 looks healthy and still manage to recover quite fast despite global crises. Nikkei a bit volatile looking at the chart.
 
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