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hengah_ongah 27-09-2018 08:19 AM

Hi.. When shares got replaced in a etf, does e etf loss money and why the price does not seems to be affected? Or will the div distribution be affected

Like noble and starhub, their price were quite low when replaced.

wannabelazy 27-09-2018 09:28 PM

Quote:

Originally Posted by EagleToThesSky (Post 116720873)
Hi wannabelazy,

first of all, sorry for the late reply. I was away from the forum for a few days.

Secondly, I like the shortform you gave to my user name. Never really thought about it. Thank you a lot.

Last but not least, let me try to answer your questions.

Treating CPF as bond, maintaining the "age-appropriate" ratio simply means you allocate a bigger portion of your "controllable" asset for equities. For reallocation nearing retirement, you simply sell your equity and buy more bond. Since CPF is bond and in SGD, you do not touch them or top up if you can. Most likely, it will not mean only purchasing bond when you are 7-10 years from retirement. Remember there is a cap for CPF contribution. I do hope your income will exceed that cap rather quickly and early, say in your late 20s or early 30s. So your "controllable" income will be significantly higher than your CPF contribution. So you allocate your income according to the ratio or as closely to the ratio as possible. Lastly, a bit off from the ratio is not the end of the world.

When your CPF life kicks in, my opinion is that you have reached an age where you use a different and more conservative framework to look at your asset. Instead of the ratio, you think about whether you have enough for your retirement and how much you want to pass down to your children. Whatever you need for retirement should be in bonds or bond-like (come on, you do not want/need to experience the roller-coaster ride of stock market in your 70s for the money you actually NEED for retirement. You should be enjoying life). For whatever you want to pass down to your children (it could be 0), you can maintain your portfolio in such a way that it is age-appropriate for your children's age or simply give to them and let them manage it.

My two cents for your consideration.

Thanks for your detailed reply ETTS. :)

I do understand the need for stable income generation during retirement years and hence am on board with the idea of selling down the stock portion of the portfolio.

I guess my concern about shifting the portfolio allocation towards bonds during the last 7-10 years before retirement is that I'll be at the mercy of the A35 prices over that period.

As compared to Shiny's 110-age yearly rebalancing which does seem to spread bond purchases over a longer period than just the 7-10 years prior to retirement.

Is this something to be concerned about or do you think it isn't?

BBCWatcher 27-09-2018 10:04 PM

Quote:

Originally Posted by wannabelazy (Post 116737537)
I guess my concern about shifting the portfolio allocation towards bonds during the last 7-10 years before retirement is that I'll be at the mercy of the A35 prices over that period.

Only if you buy A35. There's some emerging consensus that SSBs and MBH, which both didn't exist until fairly recently, are better bond vehicles for investors planning to retire in Singapore. (Possibly with portions of other SGSes and CORP in special cases.)

SSBs are always purchased at par, but the interest rates vary over time. MBH's share price can fluctuate. But 7 years is a rather long time.

Quote:

As compared to Shiny's 110-age yearly rebalancing which does seem to spread bond purchases over a longer period than just the 7-10 years prior to retirement.
These are just "rules of thumb." The 7 year "rule" is what Vanguard (the world's largest fund manager) uses as the start date for its automatic portfolio adjustment from an accumulation posture to a drawdown posture in its "Target" funds. I prefer that rule, mostly because it's simpler. It's also analogous to what you'd do in a bus, train, or airplane. Let's imagine an airplane metaphorically for a moment. It has five basic phases of flight:

(a) Takeoff;
(b) Climb;
(c) Cruise;
(d) Descent;
(e) Landing.

Takeoff is basically like doing your financial homework -- setting a plan -- and going to university or otherwise educating yourself. Climb is paying off high cost student loans (for example), building up emergency reserve funds, covering insurance necessities, maybe putting some dollars in Medisave, and opening up a couple accounts (CDP, broker). Cruise is the "80:20" part: just doggedly saving and prudently investing. Descent is shifting from that 80:20 to 30:70 allocation (gradually and steadily, so the passengers stay comfortable), along with lowering the landing gear (putting CPF in retirement order, e.g. a possible ERS top-up). Landing is...retirement and enjoying life, with a steady, reliable, inflation-combatting income stream hopefully with the ability to give away lots of money.

Could you fly an airplane in an arc, so that you climb to altitude then start descending right away, slowly, without any level cruise phase? You could. That's effectively what the "110-age" rule does. But I prefer the climb, level cruise, then descent flightpath. It's somewhat more efficient, and it happens to be simpler.

bin8lee 28-09-2018 01:10 PM

Hi BBCW,

SRS contribution season will come. Do you think if we have any change to buy SSB using SRS next year? Thanks.

BBCWatcher 28-09-2018 03:57 PM

Quote:

Originally Posted by bin8lee (Post 116747475)
Do you think if we have any change to buy SSB using SRS next year?

I'm not forecasting that. It doesn't seem like a good idea in public policy terms.

wannabelazy 29-09-2018 12:46 AM

Quote:

Originally Posted by BBCWatcher (Post 116738304)
Only if you buy A35. There's some emerging consensus that SSBs and MBH, which both didn't exist until fairly recently, are better bond vehicles for investors planning to retire in Singapore. (Possibly with portions of other SGSes and CORP in special cases.)

SSBs are always purchased at par, but the interest rates vary over time. MBH's share price can fluctuate. But 7 years is a rather long time.


These are just "rules of thumb." The 7 year "rule" is what Vanguard (the world's largest fund manager) uses as the start date for its automatic portfolio adjustment from an accumulation posture to a drawdown posture in its "Target" funds. I prefer that rule, mostly because it's simpler. It's also analogous to what you'd do in a bus, train, or airplane. Let's imagine an airplane metaphorically for a moment. It has five basic phases of flight:

(a) Takeoff;
(b) Climb;
(c) Cruise;
(d) Descent;
(e) Landing.

Takeoff is basically like doing your financial homework -- setting a plan -- and going to university or otherwise educating yourself. Climb is paying off high cost student loans (for example), building up emergency reserve funds, covering insurance necessities, maybe putting some dollars in Medisave, and opening up a couple accounts (CDP, broker). Cruise is the "80:20" part: just doggedly saving and prudently investing. Descent is shifting from that 80:20 to 30:70 allocation (gradually and steadily, so the passengers stay comfortable), along with lowering the landing gear (putting CPF in retirement order, e.g. a possible ERS top-up). Landing is...retirement and enjoying life, with a steady, reliable, inflation-combatting income stream hopefully with the ability to give away lots of money.

Could you fly an airplane in an arc, so that you climb to altitude then start descending right away, slowly, without any level cruise phase? You could. That's effectively what the "110-age" rule does. But I prefer the climb, level cruise, then descent flightpath. It's somewhat more efficient, and it happens to be simpler.

Thanks BBCW for the detailed and elegant explanation. Great metaphor! I'm probably jumping the gun a little as I've got some years yet before I hit 55, but what are the factors to consider in determining fund allocation within the bonds bucket? I.e. the mix between say A35, MBH, SSBs(although you can only have max 100k worth of these), etc.?

BBCWatcher 29-09-2018 09:13 AM

Quote:

Originally Posted by wannabelazy (Post 116759129)
I.e. the mix between say A35, MBH, SSBs(although you can only have max 100k worth of these), etc.?

There are a lot of bond and bond-like choices that rank ahead of A35 in terms of deserving a place in your portfolio. Examples:

* SSBs (up to $100K per individual/$200K per couple)
* MBH (a reasonably safe SGD bond fund with agency and corporate bonds)
* CORP (if you want a good quality bond fund with global currency diversification — to support your overseas vacations and effectively to defend against sustained downturns in the Singapore dollar relative to other currencies)
* “All three” CPF top-ups starting at about age 50 (limited to $37,740/year, the CPF Annual Limit, less compulsory and voluntary Medisave contributions), a.k.a. the “CPF Piggybank.” Assumes your (future) Retirement Account and Medisave Account are already well provisioned. If they aren’t, directed Special Account, Retirement Account, and/or Medisave Account top-ups are more important.
* Repayment of OA funds used for housing. This’ll earn 2.5%, which might even beat A35 a little, and without the principal variability. CPF also has the advantage of being shielded from creditors and court rulings.
* Direct holding of Singapore Government Securities

Prior to the introduction of MBH there was a bigger role for A35, but I think MBH now fills that role for most people.

sweetbearfire 30-09-2018 07:07 PM

Not sure if this is valid but should the health and estimated longevity of the CPF LIFE holder be considered a factor in topping up to FRS/ERS?

Quote:

Originally Posted by BBCWatcher (Post 116719643)
That’s correct. It’s very, very hard to beat liquid funds earning Singapore government guaranteed 4% interest, which is what he has. That’s a lovely high balance savings account, really. So cash is best for the RA top-up, if spare cash is available.

There’s a CPF “hack” which we’ve nicknamed the “Special Account Shield” (SA shield). That involves investing Special Account funds via the CPF Investment Scheme for a very short period of time, transferring the funds into RA, making any other desired withdrawal, then lowering the shield to return shielded funds back into SA. There’s a cost to execute that maneuver, though. Spare cash still works better, if it’s available, and that 2.5% interest Ordinary Account is still also an excellent “on demand” savings account.


BBCWatcher 30-09-2018 09:37 PM

Quote:

Originally Posted by sweetbearfire (Post 116787358)
Not sure if this is valid but should the health and estimated longevity of the CPF LIFE holder be considered a factor in topping up to FRS/ERS?

To some degree, along with several other factors.

Careful, though. Doctors originally thought Stephen Hawking would be dead by age 23. He beat that estimate by 53 years. ;)

wannabelazy 01-10-2018 04:02 PM

Quote:

Originally Posted by BBCWatcher (Post 116738304)
It's somewhat more efficient, and it happens to be simpler.

The simplicity part I get, but can I ask what you mean by "efficient" here please? Thanks!

BBCWatcher 01-10-2018 05:23 PM

Quote:

Originally Posted by wannabelazy (Post 116801186)
The simplicity part I get, but can I ask what you mean by "efficient" here please?

You'll probably incur some additional trading costs (commissions) with a climb/descent investment pattern compared to a climb/cruise/descent pattern. The latter is also likely to generate a bit better yield.

Shyshy 01-10-2018 05:27 PM

Hi,

I have a question. To be able to get the tax treaty, a stock need to be domicile in Ireland right? Does it need to be in the London stock exchange or does it apply to other stock exchange as well?

BBCWatcher 01-10-2018 05:38 PM

Quote:

Originally Posted by Shyshy (Post 116802725)
To be able to get the tax treaty, a stock need to be domicile in Ireland right?

Ireland has a 15% treaty rate for the U.S. dividend tax, so a stock fund domiciled in Ireland holding U.S. stocks can benefit from that treaty. Ireland doesn't add its own tax, so if you're neither a U.S. person nor a tax resident of Ireland this all works. But Ireland isn't unique in this way. Luxembourg-domiciled funds also apparently enjoy exactly the same benefit.

Quote:

Does it need to be in the London stock exchange or does it apply to other stock exchange as well like?
It doesn't necessarily have to be London, but the London Stock Exchange is where the vast majority of Irish domiciled ETFs are listed and traded.

Shyshy 01-10-2018 05:41 PM

Okay, got it. Thanks for the quick reply. :)

Quote:

Originally Posted by BBCWatcher (Post 116802951)
Ireland has a 15% treaty rate for the U.S. dividend tax, so a stock fund domiciled in Ireland holding U.S. stocks can benefit from that treaty. Ireland doesn't add its own tax, so if you're neither a U.S. person nor a tax resident of Ireland this all works. But Ireland isn't unique in this way. Luxembourg-domiciled funds also apparently enjoy exactly the same benefit.


It doesn't necessarily have to be London, but the London Stock Exchange is where the vast majority of Irish domiciled ETFs are listed and traded.


kingboonz 01-10-2018 10:26 PM

Hi BBCW, do you consider CPF funds to make up the bond portion of your portfolio?

Also is it possible to lend ETFs shares on IB for extra profit? Advisable to do so?


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