www.hardwarezone.com.sg


www.hardwarezone.com.sg (/)
-   Money Mind (https://forums.hardwarezone.com.sg/money-mind-210/)
-   -   *Official* BBCWatcher club (https://forums.hardwarezone.com.sg/money-mind-210/%2Aofficial%2A-bbcwatcher-club-5855578.html)

BBCWatcher 22-01-2019 06:01 PM

January 2019 Deadline Reminder for CPF Top Ups
 
As a reminder, we're approaching the deadline for making CPF top ups that'll be credited this month (January, 2019) and that'll start earning interest from February 1, 2019. January is a very important month for CPF top ups, the first month in the new calendar year when you get another opportunity to max out applicable limits (such as tax relief limits) or at least to take a whack at them.

It takes a couple or a few business days for CPF to credit top ups depending on what channel you use. The absolute deadline for this month is Thursday, January 31, 2019, and only if you physically visit a CPF office and hand over a paper check before 10:00 a.m.

You earn a lot more interest when you make a top up in January instead of December. You get an extra 11 months of interest, in fact, and that extra interest compounds over the years. You get an extra $256.67 of interest (11/12ths of 4%) in 2019 alone (credited on December 31, 2019) when you top up your Special or Retirement Account by $7,000, as an example -- even more than that if you still qualify for bonus interest.

aaaaarrrgghhh 22-01-2019 08:20 PM

Hi,
Back again after been stumped on google search. Currently invested in Irish domiciled funds on LSE. If i'm looking to do some options buying/selling to complement the portfolio decisions - is that possible in UK? I couldn't find any info on whether there are Options on ETFs on LSE. And the IBKR trading permissions screen doesn't list Options under UK either. But sounds unbelievable that there is no options trading in UK on ETFs?!

BBCWatcher 22-01-2019 08:45 PM

Quote:

Originally Posted by aaaaarrrgghhh (Post 118776459)
If i'm looking to do some options buying/selling to complement the portfolio decisions - is that possible in UK?

No, I don't think so. The trading volumes on these Irish domiciled ETFs are likely too limited to support a viable options market. Conceivably if you want to place a really, really big bet you could find a willing counterparty if you insist.

You can head to the U.S. options/futures markets and find effective, very close substitutes to these missing options. There are no dividends with options, so there's no U.S. dividend withholding tax to be concerned about. I don't think options and futures contracts are subject to the U.S. estate tax either, but please double check that if that factor matters.

The tax information I'm providing assumes you're not a U.S. person.

JuniorLion 22-01-2019 08:52 PM

Quote:

Originally Posted by BBCWatcher (Post 118774481)
As a reminder, we're approaching the deadline for making CPF top ups that'll be credited this month (January, 2019) and that'll start earning interest from February 1, 2019. January is a very important month for CPF top ups, the first month in the new calendar year when you get another opportunity to max out applicable limits (such as tax relief limits) or at least to take a whack at them.

It takes a couple or a few business days for CPF to credit top ups depending on what channel you use. The absolute deadline for this month is Thursday, January 31, 2019, and only if you physically visit a CPF office and hand over a paper check before 10:00 a.m.

You earn a lot more interest when you make a top up in January instead of December. You get an extra 11 months of interest, in fact, and that extra interest compounds over the years. You get an extra $256.67 of interest (11/12ths of 4%) in 2019 alone (credited on December 31, 2019) when you top up your Special or Retirement Account by $7,000, as an example -- even more than that if you still qualify for bonus interest.

E-banking takes 2 business days to get the money to appear in your CPF.

aaaaarrrgghhh 22-01-2019 08:52 PM

thanks..I've just started understanding options, but considering that i will be exercising puts to buy the underlying - i guess it means that I will need to buy the US listed ETFs? or is it possible to have options on LSE-listed ETFs in US?!
Options are considered securities, futures are not as per US rules, so estate tax applies.

BBCWatcher 22-01-2019 09:09 PM

Quote:

Originally Posted by aaaaarrrgghhh (Post 118776943)
thanks..I've just started understanding options, but considering that i will be exercising puts to buy the underlying - i guess it means that I will need to buy the US listed ETFs?

Let's back up a couple steps here. What are you trying to accomplish?

Quote:

Options are considered securities, futures are not as per US rules, so estate tax applies.
Any source(s)?

aaaaarrrgghhh 22-01-2019 09:44 PM

Apparently, if I'm long in my portfolio and investing for long term, then selling puts might not be a bad idea, since I'm looking to buy the underlying ETF anyway. This is just one example, but there seem to be more strategies around this - with reduced risk since I'm never taking naked positions, and willing to buy for long term.

I can't find the exact article in my google history, but here is one that I'd read, which
basically says options are treated just like the underlying is treated.
https://www.forbes.com/sites/greatsp.../#13c38b614df6

BBCWatcher 23-01-2019 12:11 AM

OK, got it.

This topic comes up from time to time in this forum, and Shiny Things has fairly strong opinions about it. I don’t think he likes this idea. And you’re not going to be able to do it with IWDA, VWRD, or other Irish domiciled ETFs directly. There just isn’t a functioning options market for that sort of thing.

However, if you really want to do something like this, find a really super popular U.S. ETF with lots of open options interest that closely tracks your Irish ETF. As a possible example, VT (Vanguard’s Total World Stock ETF) should closely track VWRD, at least between VT’s dividend distributions. (You have to watch out for VT’s and VWRD’s respective ex-dividend dates since there could be some divergence there.) Then sell put options on VT. If somebody exercises their option, no problem, turn around and sell the VT you bought then use the proceeds to buy VWRD. You might even be able to set this all up as automatic trading if you’re a bit of a geek with Interactive Brokers’ tools.

Let me take a quick look to see how much options interest there is in VT.... OK, it looks a little weak to me. But maybe you can make it work or find some other U.S. listed ETF that has a close Irish ETF analog. For example, I’m sure CSPX would work since there’s plenty of options interest in the S&P 500 (“Spiders”) in U.S. markets.

There are no particular U.S. tax issues with the approach I’ve outlined. The puts you sell won’t be worth very much at fair market value (unless you’re a really big whale, and then you might have other problems) one would think, so they should slide under your US$60,000 estate tax exemption unless you’ve got other U.S. estate taxable assets. And you won’t be holding the U.S. listed ETF more than a second or two (ideally) if you’re required to buy it, because you’ll swap it out immediately for its Irish counterpart. (I’m assuming IB allows you to do this. You’ll need a margin account certainly, and you’ll need to stay above US$25,000 to avoid possible Pattern Day Trading restrictions.) Yes, you’ll pay some extra broker commissions to make this swap.

One of many possible problems is that London and New York aren’t open at the same time, so you could very well get stuck holding the U.S. ETF while it’s still moving, without the ability to swap it until London opens. You could probably hedge that risk with some more options, but now we’re getting really silly, aren’t we?

You could just bite the bullet, live with U.S. dividend and estate taxes, and do everything in the U.S. markets. The U.S. financial markets are pretty darn amazing.

Hashketh 23-01-2019 09:49 AM

Hi BBCW,

I am very grateful for the vast amount of inputs you have done here in this thread and I am awe struck of the financial knowledge that you possess (especially about the CPF portion).

I am seeking your advice on my current situation.

Currently I contributing 900 of my monthly income to investment, specifically 100 to STI through POSB RSP and the rest to a stock. Come later this June I will be able to raise the investment amount to 1500.

Current Holdings
REITs : 35K
Cash: 40K (20K To be spent on wedding related expenses soon)
STI : 3K

HDB Loan Balance of around 300K
OA : 8k
SA : 20K
MA : 25K

My initial aim is going for a lifestyle supported by passive income through REITS and dividend yielding stocks. I do know the importance of holding an ETF for diversification (persauded by your comments on Japan's economy as well as a book) so I think going for a global ETF would be a good idea (after saving enough for the 100K minimum account amount to avoid the monthly inactivity fees for IB). The STI is going to be used to fund my 2nd child's university fee (projected to be around 46K in 27 years time). We also aim to reduce our HDB loan every year by contributing 5k in total annually. Please give me your thoughts on my situation and if there is anything I can improve on. Much appreciated.

aaaaarrrgghhh 23-01-2019 10:09 AM

Quote:

Originally Posted by BBCWatcher (Post 118780192)
However, if you really want to do something like this, find a really super popular U.S. ETF with lots of open options interest that closely tracks your Irish ETF. As a possible example, VT (Vanguard’s Total World Stock ETF) should closely track VWRD, at least between VT’s dividend distributions. (You have to watch out for VT’s and VWRD’s respective ex-dividend dates since there could be some divergence there.) Then sell put options on VT. If somebody exercises their option, no problem, turn around and sell the VT you bought then use the proceeds to buy VWRD. You might even be able to set this all up as automatic trading if you’re a bit of a geek with Interactive Brokers’ tools.

Yes - this is exactly the workaround i'm considering right now- If I choose based on index been tracked, and the same fund company as far as possible, it should theoretically work.

Quote:

You could just bite the bullet, live with U.S. dividend and estate taxes, and do everything in the U.S. markets. The U.S. financial markets are pretty darn amazing.
You know I'm seriously considering this now. The income from the options should certainly fund a sizeable term life policy...
However,it does seem like a hassle to get the funds back after taxes- not sure if I want the family to have to go through all that, so need to see how that portion can simplified first.
Thanks for your help!

BBCWatcher 23-01-2019 12:23 PM

Quote:

Originally Posted by aaaaarrrgghhh (Post 118783754)
You know I'm seriously considering this now. The income from the options should certainly fund a sizeable term life policy...
However,it does seem like a hassle to get the funds back after taxes- not sure if I want the family to have to go through all that, so need to see how that portion can simplified first.

No, not actually. The broker is responsible for withholding U.S. dividend tax, but the broker is not responsible for withholding U.S. estate tax, absent some extraordinary compliance-related or international sanctions-related event (which isn't estate tax specific). The U.S. estate tax is owed 9 months after the decedent's death and the executor has the legal duty to pay it. But that's plenty of time for a life insurance payout to be processed and received, and it's not as if your survivor(s) ought to be liquidating the inherited IB account assets any time soon anyway. Total, rapid liquidation could be the worst thing to do from an investment point of view, and there's no forced sale required, at least neither a quick nor a complete one. The smartest move may be simply for the executor to arrange for IB to transfer the account to a new account in your survivor's name, settle the estate tax about 8 months after you die (from life insurance proceeds), then gradually, gently reorient the portfolio to a posture that's more appropriate for your survivor's needs -- maybe more conservative (more bonds, fewer stocks) -- if that's even necessary.

Quote:

Originally Posted by Hashketh (Post 118783372)
Currently I contributing 900 of my monthly income to investment, specifically 100 to STI through POSB RSP and the rest to a stock.

Which stock?

Quote:

Come later this June I will be able to raise the investment amount to 1500.
OK, before I beat up on you gently -- and please take it as minor quibbles really -- the big part is "Congratulations." Overall you're chugging along nicely, it appears. I'd tweak a few things (my opinions), and let's get to that now....

Quote:

Current Holdings
REITs : 35K
I'm not a big fan. When you buy ES3 or G3B (Straits Times Index funds), and of course your home, you're already heavily investing in Singapore real estate. The STI includes stocks like Ascendas and CapitaLand that are REITs. It's pretty insane, really. One of these days I expect the cup of coffee I sometimes buy at 7-11 to come with a sticker on the side of the cup that says "Here's your 0.001 share certificate in XYZ REIT."

You're not in any danger of being underweighted in Singapore real estate. The bigger danger is being overweighted. Anyway, for your Singapore leg of your portfolio, just keep it simple and buy ES3 or G3B. And the real estate part takes care of itself, automatically.

Quote:

Cash: 40K (20K To be spent on wedding related expenses soon)
Am I invited? :D You could tuck the wedding money away in a Singapore Savings Bond if "soon" is "a few months from now" or more.

Quote:

HDB Loan Balance of around 300K
OA : 8k
SA : 20K
MA : 25K
How do your spouse's/partner's CPF balances look?

With respect to CPF, one important point is that you haven't yet maxed out your bonus interest, which applies to the first $60,000 (you're at $53,000). And there's a tax relief opportunity, too. So if you can make a top up for tax relief this month, that'd be nice. A 5% interest rate plus tax relief is tough to beat. That could be a top up to MediSave (if you expect to have room below the CPF Annual Limit this year), to your Special Account (up to $7,000 is eligible for tax relief there), or some of both.

Quote:

My initial aim is going for a lifestyle supported by passive income through REITS and dividend yielding stocks.
Why?

I get a little upset with this "passive income" fetish, so let me vent briefly. You're working, earning an income, and saving from that income, presumably. So why do you need income distributed from your investments? You don't. Total returns net of costs are what matter, and that's the combination of capital gains, dividends, and interest. If you invest in something tomorrow, and it doubles in value next week, keeps doubling every 5 years, and never pays any dividends, would that upset you? I hope not.

The second point is that there's actually often a higher cost, including a higher tax, when a stock or other investment distributes dividends versus reinvesting in the company or even just buying back its own stock through share repurchases. So if you're actively seeking dividends, you're also in a very real sense actively seeking investments that have higher cost structures and that pay higher taxes. I'm all in favor of that if you're the one doing it since I like many government-provided goods and services that taxes support, so thank you for being so generous to me that way. But, if I were you, I wouldn't volunteer to pay higher direct or indirect taxes when investing.

Anyway, focus on age appropriate, prudent, long-term investing that strives for total returns net of costs. And if those total returns are in the form of capital gains (which are generally more tax efficient, at least to non-U.S. persons resident in Singapore), fantastic!

Quote:

I do know the importance of holding an ETF for diversification (persauded by your comments on Japan's economy as well as a book) so I think going for a global ETF would be a good idea (after saving enough for the 100K minimum account amount to avoid the monthly inactivity fees for IB).
No, that's not a problem (IB's monthly minimum commission). You have to pay some level of broker commissions anywhere and everywhere when you're buying a global stock fund such as IWDA or VWRD, and IB charges a minimum of US$120/year (US$10/month) for total account values between US$2,000 and US$100,000. But US$120 is also the maximum commission if you're a typical (or even somewhat atypical) long-term investor accumulating one global ETF such as IWDA or VWRD. And US$120/year is a very competitive commission, so attractive that it still beats everyone else under reasonable assumptions.

Quote:

The STI is going to be used to fund my 2nd child's university fee (projected to be around 46K in 27 years time).
That's planning ahead! The key assumption is that your second child will attend university in Singapore and pay a tuition bill in Singapore dollars, because the STI is somewhat correlated with Singapore dollars. That's not a given, though, is it? If your second child attends Harvard or Oxford or the University of Tokyo (as examples), it's a different story.

Since this bill (in whatever currency) is 27 years out, I think I'd just roll it into your overall savings/investing plan, and your allocations/mix of local versus global and stocks versus bonds wouldn't be much different, really. As you get closer to "T-Date" (tuition date), you could gradually ease into some investment grade or government bonds in the expected currency.

Quote:

We also aim to reduce our HDB loan every year by contributing 5k in total annually.
$5K extra, I assume you mean (or about $400/month extra). Well, I'm not enthusiastic about that idea when your HDB loan is at 2.6% and those dollars would probably be working harder and generating more medium-term and long-term wealth elsewhere. I consider 2.6% to be comparatively somewhat cheap money in today's environment, and that 2.6% is not going to budge unless and until market interest rates move upward a lot -- whereupon your CPF interest rates will ratchet up, too. And you always have the future option of refinancing with a bank loan if/when interest rates fall back to historically low levels -- not now, since the HDB loan at 2.6% is reasonably attractive, I'd say.

Anyway, to net it out, that's cheap money, really. Maybe getting cheaper in the coming months and years as it stays fixed but bank mortgage interest rates creep up. (We'll see.) I would just continue paying that mortgage at normal, scheduled pace -- and continue accumulating wealth that's working harder for you, meaning I'm not giving you permission to go buy 3 iPhones instead of saving/investing that $5,000 extra.

Hashketh 23-01-2019 02:03 PM

Quote:

Originally Posted by BBCWatcher (Post 118786582)
Which stock?

They are the REITs that I have been buying namely Capitamall Trust , Mapletree Industrial Trust, Mapletree Commercial Trust, Parkway Life Real Estate Investment Trust, Frasers Centrepoint Trust, Ascendas Real Estate Inv Trust and others

Quote:

Originally Posted by BBCWatcher (Post 118786582)
How do your spouse's/partner's CPF balances look?

I'm not entirely sure but I suspect her's look healthier than mine as she is earning more

Quote:

Originally Posted by BBCWatcher (Post 118786582)
With respect to CPF, one important point is that you haven't yet maxed out your bonus interest, which applies to the first $60,000 (you're at $53,000). And there's a tax relief opportunity, too. So if you can make a top up for tax relief this month, that'd be nice. A 5% interest rate plus tax relief is tough to beat. That could be a top up to MediSave (if you expect to have room below the CPF Annual Limit this year), to your Special Account (up to $7,000 is eligible for tax relief there), or some of both.

Noted, i will look into this.

Quote:

Originally Posted by BBCWatcher (Post 118786582)
Anyway, focus on age appropriate, prudent, long-term investing that strives for total returns net of costs. And if those total returns are in the form of capital gains (which are generally more tax efficient, at least to non-U.S. persons resident in Singapore), fantastic!

I plan to do a global ETF (Iwda Eimi Vwrd) that is being thrown around in this forum. I think I'll go with the consensus of a 20/80 (thereabouts) portfolio of local/global etf.

Quote:

Originally Posted by BBCWatcher (Post 118786582)
That's not a given, though, is it? If your second child attends Harvard or Oxford or the University of Tokyo (as examples), it's a different story.

Ya, I am only prepared for this amount. Anything beyond that, then my kid will have to settle the rest of it by him/herself.

Quote:

Originally Posted by BBCWatcher (Post 118786582)
$5K extra, I assume you mean (or about $400/month extra). Well, I'm not enthusiastic about that idea when your HDB loan is at 2.6% and those dollars would probably be working harder and generating more medium-term and long-term wealth elsewhere. I consider 2.6% to be comparatively somewhat cheap money in today's environment, and that 2.6% is not going to budge unless and until market interest rates move upward a lot -- whereupon your CPF interest rates will ratchet up, too. And you always have the future option of refinancing with a bank loan if/when interest rates fall back to historically low levels -- not now, since the HDB loan at 2.6% is reasonably attractive, I'd say.

Thanks for your advice BBCW!

BBCWatcher 23-01-2019 05:24 PM

Quote:

Originally Posted by Hashketh (Post 118788395)
They are the REITs that I have been buying namely Capitamall Trust , Mapletree Industrial Trust, Mapletree Commercial Trust, Parkway Life Real Estate Investment Trust, Frasers Centrepoint Trust, Ascendas Real Estate Inv Trust and others

At least a couple of those are already in your STI fund (CapitaMall Trust, Ascendas) and a couple more you don't have also are, so you're doubling down on real estate (and with lots of broker commission costs), which is already quite heavily represented in the STI. I think it's completely unnecessary to do that.

It's much like buying an index fund of the largest Swiss stocks, and then saying, "Hmmmm, you know, what I think I really need is some more chocolate, wristwatch, and bank stocks!" It's kind of silly, and it's certainly more expensive to do that.

Quote:

I think I'll go with the consensus of a 20/80 (thereabouts) portfolio of local/global etf.
There's some disagreement on this point, but I'm comfortable with that, assuming you have a right of abode in Singapore, you're planning to retire in Singapore, and you're at least 7 years away from drawdown age. Starting at 7 years away (or perhaps a little earlier if you're ultra conservative) I would start gradually adjusting this ratio, also while shifting the bond/stock mix more toward bonds.

Quote:

Ya, I am only prepared for this amount. Anything beyond that, then my kid will have to settle the rest of it by him/herself.
Fair enough, but I'm merely suggesting that it's way too soon to lock in the tuition currency. And if your child is admitted to Harvard, you and Harvard will figure it out, I'm sure. :D Harvard's pricing is need-based, calculated on total costs including airfare to/from, financially blind (students are considered for admission without any regard to their ability to pay), and very generous. Currently, parents with incomes of US$65,000/year or less pay nothing for their child. Literally nothing -- it's a total free ride, airfare included. And for family incomes above that, it's a very gentle parental contribution slope.

BBCWatcher 25-01-2019 09:14 PM

Elizabeth Warren Proposes Wealth Tax
 
Elizabeth Warren, the prominent Senator from the U.S. state of Massachusetts and a member of the Democratic Party, is one of several candidates running for President of the United States — yes, the 2020 U.S. election cycle has started already. She is proposing a rather novel idea for the United States: a wealth tax. This opinion piece in the Washington Post explains how it would work, but briefly it’d involve an annual tax of 2% of net worth (total global wealth minus total global debt) for the amount of wealth above US$50 million and an additional 1% (3% rate) for wealth above US$1 billion. Over 10 years this wealth tax would raise an estimated US$2.75 trillion from approximately 75,000 U.S. households.

Oddly enough, in 1999 a U.S. presidential candidate proposed a one-time wealth tax of about 14% on the ultra wealthy, which would have raised enough funds to retire all U.S. federal government debt in full. That presidential candidate’s name was...Donald Trump.

BBCWatcher 03-02-2019 09:05 PM

The U.S. unemployment report for January, 2019, was much stronger than expected, although U.S. dollar inflation remains well subdued, or even too subdued. Some people were getting concerned that there’s not enough slack in the U.S. labor market, but that doesn’t seem to be a problem yet based on the January report and the revisions in previous months. The U.S. Federal Reserve has now taken a dovish stance and will probably hold off on further interest rate hikes for a while, waiting until later in 2019 to revisit that possibility.

All of that is good news for those of you with mortgages in Singapore, for now anyway, since Singapore tends to “import” its monetary policy from several other countries, including especially the United States. This might be a good time to refinance if you spot a good deal on a 3 year locked and SIBOR-linked mortgage, and assuming there’s no prepayment penalty at least after the lock.


All times are GMT +8. The time now is 06:20 AM.

Powered by vBulletin® Version 3.8.7
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
Copyright © SPH Magazines Pte Ltd. All rights reserved.